I have to admit, when I first read that analysts at McKinsey & Co were making global warming predictions, I was taken aback. Management consultants may be very smart, but most of them are not climate scientists by training…
After closer inspection, though, it became clear that the report mentioned in the headline was not about climate science. It was rather a broad, sweeping look at all of the different technologies out there that could potential reduce carbon dioxide emissions over the next 20 years, and the relative costs and benefits of each.
In other words, this report gives a very realistic answer to the questions we’ve all been asking: 1. Can we keep CO2 emissions below dangerous levels? 2. What do we do? and 3. How much will it cost?
The short answer is: 1. Yes, 2. Improve energy efficiency, develop low carbon energy and conserve/replant forests, and 3. Between 500 and 800 billion Euros.
(To read either the executive summary or the full report, scroll to the bottom of this link)
For a bit more detail, keep reading…
There are many such reports out there. What makes McKinsey’s any different?
McKinsey is one of the top (if not THE top) management consulting firms in the world. What management consultants are trained to do (and presumably, the folks over at McKinsey do this very well) is look at enormous quantities of data, analyze it, draw meaningful conclusions, and propose courses of action.
Granted, there are lots of people out there from all kinds of disciplines trying to do the same thing. There are academics, entrepreneurs, journalists, scientists and politicians who are all proposing different ways to address the issues, and all provide arguments in defense of their proposals. But when it comes to translating costs and benefits into cold, hard numbers – consultants are the professionals. They get paid the big bucks to advise not only Fortune 500 companies, but national governments and agencies as well, and for good reason.
Not to mention the fact that McKinsey has already conducted 10 separate greenhouse gas reduction studies over the past couple years. This report isn’t their first stab at the issue; data has improved and models have been refined. Nothing is oversimplified, yet the conclusions and direction is quite clear.
What does the report say that we don’t already know?
Well, like all big plans we hear about, be it from Google founders, Al Gore, President Obama, etc., there are always elements that seem obvious to EcoGeeks like us. For example, it’s obvious that we need to push and invest in renewable energy sources. It’s also obvious that there is a lot of energy efficiency improvements that could easily be made. And it’s obvious (at least to some of the more realistic EcoGeeks) that no matter how much you try to scare or guilt people, they will ultimately do what they like. Businesses will continue to try and make money rather than serve the common good. So any solution has to factor in basic economic principles and factor out behavioral changes (as it turns out, the McKinsey report quantifies the amount of carbon reduction that could happen if people made behavioral changes, but a) separates it from the other figures and b) shows that it is insignificant compared to the amount of carbon reduction that businesses could accomplish).
Without further ado, here are some of the highlights that I found interesting, although I encourage everyone to read the executive summary.
The magic number is 480
Based on what they have been told by the IPCC, they have concluded that if we can reduce GHG emissions by 35-40% by 2030, then CO2 levels should peak around 480 ppm. That should, in turn, stem global warming at about a 2 degrees Celcius increase.
It goes without saying that there is a lot of debate about these numbers in the scientific community. Some people might say that those 480 ppm aren’t as dangerous as that, while the New York Times just published an article saying that such a CO2 concentration might be even more dangerous than originally thought.
Either way, the point is that 480 ppm is the number McKinsey chose – expect to see it come up in future discussions.
Energy efficiency is easy, cheap and effective
The report refers to energy efficiency technologies as “low hanging fruit”. Although they won’t reduce as many tons of CO2 emissions as, say, carbon capture or renewable energy, they have negative costs – a fancy way of saying they are money-making technologies. These include more efficient manufacturing, more efficient car engines and more efficient building.
One interesting point about efficiency measures is that sometimes the people making the decision to be inefficient are not affected by that decision, which makes it difficult to incentivize. For example, building a house with superior insulation is a no-brainer; the money it saves far outweighs the cost. But those benefits only affect the homeowner, not the builder and it is the builder who must decide to put in that insulation.
All told, if we adopt the efficiency measures proposed by McKinsey we could abate 14 gigatons of CO2 a year by 2030.
We need to shift from fossil fuels to low carbon fuels
Obviously, this is the part where we EcoGeeks go “duh”. But it’s important to know numbers. Although solar, wind, biofuels and CCS have potential to reduce emissions by the greatest amount, they also have the highest up-front costs. In other words, we could reduce tons of emissions if we blanket the desert with solar panels, but given the cost of solar, that isn’t realistic.
What is realistic? About 12 gigatons of CO2 less per year by 2030. Notice how that is less than the amount we could reduce just by improving efficiency.
Trees are a cheap way to reduce emissions, but the politics are messy
We all know in the back of our head that it is important to have trees and forests, but it’s easy to forget about forests and focus only on power plants and automobiles. I personally didn’t realize the potential reductions that could come about if we preserve and replant forests. Another 12 gigatons.
That means that the forests that are getting destroyed (plus forests that could be replanted) are as powerful gobal-warming-fighters as ALL THE SOLAR PANELS WE COULD FEASIBLY BUILD IN THE NEXT 20 YEARS. Great news, right?
Well, the bad news is that most (over 90%) of these forests are located in the developing world. What that means is that the costs of preserving them are extremely high. You’d have to have a pretty hefty price tag on carbon in order for it to make economic sense for a citizen of such a country to choose to keep trees standing rather than cut them down and plant a lucrative farm. And these consultants don’t expect for a second that goodwill will prevail over those kinds of economics.
A few scenarios
The report suggests a few possible scenarios for 2030. In “Green world”, all of the abatement opportunities are followed, and emissions peak at 480 and settle down around 400. In the worst case scenario (“Least common denominator”), we reduce emissions somewhat, but CO2 levels are still way up in the 600 ppm range. The two in-between scenarios are “Developed world in the lead”, where only players like the US and the EU improve technologies, and “Global action”, where everyone chips in, but doesn’t reach the full potential of “Green world”. In the former, CO2 peaks at 550 and stabilizes there, while in the latter it peaks at 510 and settles down at 450.
I highly encourage anyone interested to read the report. Hopefully these numbers should spark discussions – not just among EcoGeeks, but among policymakers.
Via Green Inc
written by Fred, January 28, 2009
written by Chris, January 28, 2009
written by Ekaterina Tsvetkova, January 29, 2009
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