U.S. Can Halve Emissions Without ‘Big Changes In Consumer Lifestyles’

November 30, 2007

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The U.S. could reduce projected 2030 emissions of greenhouse gases by between one-third to one-half at manageable costs to the economy and without requiring big changes in consumer lifestyles, according to “Reducing US Greenhouse Gas Emissions: How Much at What Cost?” a report (summary, PDF) published by McKinsey & Company and The Conference Board and produced in association with DTE Energy, Environmental Defense, Honeywell, National Grid, Natural Resources Defense Council, PG&E and Shell.

On the present path, annual U.S. greenhouse gas emissions will increase by 35 percent to reach 9.7 gigatons of carbon dioxide equivalent in 2030, according to an analysis of government forecasts. At this level, emissions would overshoot by 3.5 to 5.2 gigatons the targets implied by economy-wide climate change bills introduced in Congress.

The report says that a reduction of 3.0 to 4.5 gigatons in 2030 is achievable at manageable cost using proven and emerging high-potential technologies – but only if the U.S. pursues a wide array of options and moves quickly to capture gains from energy efficiency.

Almost 40 percent of the opportunity for greenhouse gas reduction identified comes from options that more than pay for themselves over their lifetimes, thereby creating net savings for the economy. For example, the report finds that improving energy efficiency in buildings, appliances and industry could yield net savings while offsetting some 85 percent of the projected incremental demand for electricity in 2030.

However, the report warns that private sector innovation and policy support will be necessary to unlock these and other opportunities.

Among the main findings:

- Opportunities to reduce greenhouse gas emissions are highly fragmented and widely spread across the economy. The largest single option – carbon capture and storage 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.

-Five clusters of initiatives, pursued in unison, could create substantial progress towards the targets implied by bills currently before Congress. From least to highest average cost, they are: Improving energy efficiency in buildings and appliances (710 to 870 megatons); Increasing fuel efficiency in vehicles and reducing carbon intensity of transportation fuels (340 to 660 megatons); Pursing various options across energy-intensive portions of the industrial sector (620 to 770 megatons); Expanding and enhancing carbon sinks, such as forests (440 to 590 megatons); Reducing the carbon intensity of electric power production (800 to 1,570 megatons.)