OpportunitiesOpportunities abound for innovative emissions-cutters
Jiri Maly, From Monday's Globe and Mail
Reducing greenhouse gas emissions is one of the most urgent social and business issues of this new century, amid an emerging consensus that these emissions - mostly in the form of CO{-2} from burning fossil fuel - are causing serious damage to the environment. There are vastly diverging perspectives about how to confront the problem, with the debate fuelled by a poor understanding of the full range of options and their economic cost.
Clarifying the available options' costs and benefits, McKinsey & Company last week published the latest in a series of studies on the issue, examining more than 250 ways to prevent or reduce GHG emissions in the United States. The study was conducted in co-operation with a number of leading companies and environmental groups, and it received extensive input from government agencies, industry experts, and the academic community.
Emissions of CO{-2} could be reduced in the U.S. by 30 to 45 per cent by 2030, relying on existing or high-potential emerging technologies, the study found, with no impact on consumer lifestyle or comfort level and at a cost below $50 (U.S.) per ton - an economic threshold often linked to the cost of capturing and storing CO{-2} from coal-fired power plants. That cost is roughly equal to 12 cents per litre added to the cost of gasoline.
The study made three critical observations. First, there are no silver bullets: Reducing emissions requires capturing a large number of opportunities widely dispersed throughout society and the economy.
Second, 40 per cent of the achievable reductions would be economically positive, resulting in savings rather than cost.
Third, whereas the focus for identifying emission reductions tends to be on emitters, the economically most attractive savings are often found on the consumer.
Many of these opportunities, however, will not be captured without significant investment and substantial changes in government policy. They fall into five clusters, from lowest to highest cost: Improving energy efficiency of buildings and appliances. Increasing fuel efficiency in vehicles and reducing the carbon intensity of transportation fuels. Pursuing various options across energy-intensive portions of the industrial sector. Expanding and enhancing carbon sinks Reducing the carbon intensity of electric power production.
Improving electricity production is the biggest opportunity, accounting for roughly one-third of the abatement potential, with the other four clusters roughly equal to each other. Quick action is necessary, because choices being made today - such as investments in new buildings and power plants - will affect the level of emissions for decades.
Businesses can take advantage of these opportunities in many ways. Since lighting accounts for 19 per cent of emissions associated with buildings, switching to compact fluorescent lights will reduce this source of emissions by two-thirds while providing significant long-term savings (despite higher upfront cost). Other opportunities include more efficient heating and air conditioning systems, tighter building shells, and less wasteful operation of electronic equipment.
In the area of transportation, fuel-economy packages for trucks add to the cost of the vehicle but will result in significant fuel savings over its lifetime. Increased use of biofuels will also reduce emissions but will require low-cost commercialization of cellulosic biofuels.
In industrial settings the McKinsey report considered more than 75 options. The biggest opportunity involves recovering and/or destroying non-CO{-2} GHGs, mostly methane from petroleum and natural gas systems, underground coal mines, and landfills. Additional improvements are available from greater use of Combined Heat and Power systems, better energy efficiency, and a wide array of process and product innovations.
Barriers to progress include low awareness of available options and a lack of information about how to pursue them. Another barrier is the hesitation to make upfront investments that strengthen long-term efficiencies. For example, in many businesses the individual paying the energy bill may not control the amount of energy consumed and ultimately is not responsible for improving efficiency. In such cases management can help overcome these barriers and capture the benefit for the business over all.
These cost savings ideas can be viewed as new business opportunities in their own right. For instance, companies involved in the manufacture, sale, and financing of more energy-efficient machinery, equipment and vehicles could look for creative ways to make the long-term benefits more transparent. They could also bundle them with service or fuel contracts that allow them to capture a portion of the savings while mitigating the upfront cost to the operator.
Like previous transformations of our economy, the shift to a lower-carbon-emitting world will create many opportunities to generate new profits - especially for firms that move quickly to innovate.