Major Multi-Interest Report On GHG Reduction Options

Nov 29: McKinsey & Company and The Conference Board released a major study on the options for reducing emissions of greenhouse gases (GHG) in the United States. Published on the eve of the thirteenth session of the Conference of the Parties to the UN Framework Convention on Climate Change (COP-13), December 3-14, 2007, in Bali, Indonesia, the report is based on in-depth analysis of more than 250 abatement options covering the main greenhouse gas emitting sectors of the economy.

McKinsey indicates that for the first time, the report gives business leaders and policy makers a comprehensive framework for assessing the costs and benefits associated with alternate paths towards greenhouse gas abatement. The analysis suggests that the United States can make substantial progress towards lowering emissions at manageable costs to the economy, if early action is taken. The report was produced in association with DTE Energy, Environmental Defense, Honeywell, National Grid, Natural Resources Defense Council (NRDC), PG&E, and Shell.

The Conference Board, the world's preeminent business membership and research organization, best known for the Consumer Confidence Index and the Leading Economic Indicators, said it hopes the report will "stimulate an important national dialogue, one that is based on facts, analysis and quantitative metrics. And we will need to be prepared for an enduring dialogue fueled by continuing research, because the issues and choices we face are complex."

McKinsey & Company notes in the Executive Summary, "the costs and benefits of greenhouse gas abatement will for some period of time be shared unequally among stakeholders, and this will likely cause a great deal of contention." The Conference Board said it does not advocate any particular policy direction, nor does it suggest ways in which these contentious choices can be resolved. But, they said, "we do argue -- forcefully -- that creating a common base of facts and a clear analytical framework will help better inform the business community, policy makers and the public at large to make better choices. We look forward to helping achieve this goal."

McKinsey & Company indicates that over the past 2 years, it has worked with leading institutions and experts to develop a framework and fact base to understand the costs and potentials of different options for reducing greenhouse gas (GHG) emissions – first at a global level, then through country-specific analyses for major GHG-emitting nations. In February 2007, we launched the U.S. Greenhouse Gas Abatement Mapping Initiative (US GHG AMI) in collaboration with leading U.S.-based companies and environmental nongovernmental organizations (NGOs). Our effort examined opportunities to reduce GHG emissions from human activity within U.S. borders using tested approaches and high-potential emerging technologies. This report is the product of that work.

Among the main findings of the report, Reducing US Greenhouse Gas Emissions: How Much at What Cost?, are:

• Opportunities to reduce greenhouse gas emissions are highly fragmented and widely spread across the economy. The largest single option -- carbon capture and storage (CCS) for coal-fired power plants -- offers less than 11 percent of total potential identified. The largest sector, power generation, accounts for less than one third of the total.
  
• Reducing emissions by 3 gigatons of CO2e in 2030 would require $1.1 trillion of additional capital spending, or roughly 1.5 percent of the $77 trillion in real investment the U.S. economy is expected to make over this period.
  
• Investment would need to be higher in the early years, in order to capture energy efficiency gains at lowest overall costs and accelerate the development of key technologies, and would be highly concentrated in the power and transportation sectors.
  
• If pursued, such investment would likely put upward pressure on electricity prices and vehicle costs. Policymakers would need to weigh these added costs against the energy efficiency savings, opportunities for technological advances, and other societal benefits.

The report identifies what it calls the "Central Conclusion Of This Report" as: "The United States could reduce greenhouse gas emissions in 2030 by 3.0 to 4.5 gigatons of CO2e using tested approaches and high-potential emerging technologies. These reductions would involve pursuing a wide array of abatement options available at marginal costs less than $50 per ton, with the average net cost to the economy being far lower if the nation can capture sizable gains from energy efficiency. Achieving these reductions at the lowest cost to the economy, however, will require strong, coordinated, economy-wide action that begins in the near future."

NRDC issued a release saying the report offers the most comprehensive assessment to date of the options and opportunities for cutting U.S. global warming emissions to levels that experts say are needed to avert costly and dangerous environmental damages. Using detailed pricing and technological analyses for more than 250 different measures, the study concludes that the needed results are achievable at little or no net cost to the economy, provided we act now. NRDC said the report strongly emphasizes that policy, rather than technology itself, is the key to moving cleaner, more efficient solutions off the shelves, out of the labs, and into the marketplace.

Environmental Defense issued a statement saying, "The independent analysis drew on actual industrial experience, assumed that consumer behavior and preferences would remain in line with current trends, and did not assume major technological breakthroughs... [and] found that emissions reductions along the lines of climate change legislation pending in Congress can be achieved by 2030 with proven and emerging technologies, and that nearly 40 percent of 250 potential emissions reductions opportunities would more than pay for themselves and create net savings for the economy."

National Grid, the company that delivers electricity to approximately 3.3 million customers in Massachusetts, New Hampshire, New York and Rhode Island, and manages the electricity network on Long Island under an agreement with the Long Island Power Authority issued a release saying, "We are pleased to have sponsored this important and thorough analysis. It is vital that corporations and policymakers immediately start working together to tackle the challenge of global warming. Doing nothing is no longer an option - greenhouse gas emissions will continue to rise, resulting in more damage to the environment and even greater costs when we inevitably come to address the problem. We believe energy efficiency programs are the best way to reduce the greenhouse gas emissions. The report gives business leaders and policy makers the first comprehensive framework for prioritizing the most cost effective options to cut greenhouse gas emissions. By covering the main GHG emitting sectors, this report gives decision makers the information they need to craft cost effective policy initiatives. The analysis suggests that the U.S. can substantially cut emissions at a manageable cost to the economy and that energy efficiency has an important part to play. Many efficiency options will pay for themselves, significantly reducing CO2 emissions at no cost to the economy."

Access an announcement from The Conference Board (click here). Access a link to the complete 107-page report (click here), registration requested). Access a release from NRDC (click here). Access a release from Environmental Defense (click here). Access the release from the National Grid (click here). Access The Conference Board Center for Corporate Citizenship & Sustainability for additional information (click here). [Note: Other companies including: DTE Energy, Honeywell, PG&E, and Shell has not issued press statements or releases at press time.] [*Climate]