This paper presents a novel sum of absolute difference (SAD) scheme that significantly reduces the energy consumption of the motion estimation kernel in video coders. The proposed scheme exploits the facts that most of the absolute difference (AD) calculations result in small values, and most of the large AD values do not contribute to the SAD values of the blocks that are selected. Thus the large AD values can be approximated, resulting in lower critical path delay and lower energy consumption of the SAD unit. In addition, the proposed scheme truncates one lower order bit and variants of this scheme implement sub-sampling to further reduce the energy consumption. Performance of the proposed technique is evaluated using the H.264 video encoding framework. Simulation results show 37.5% reduction in energy consumption at nominal voltage and 68% energy reduction for iso-throughput compared to the conventional implementation with only 0.06% drop in PSNR and 1.8% increase in compressed data rate. With an additional sub-sampling, the proposed scheme achieves 90% reduction in energy consumption with 0.6% reduction in PSNR and 6.5% increase in compressed data rate.