THE CHALLENGE: DOING MORE WITH LESS (OLD ENERGY)

The great Paul MacCready’s single most important insight was a very simple one: Do more with less. It is how he created, when nobody else could figure out how to, human-powered flight. It is why he and his company, Aerovironment, were leaders in New Energy innovation for 3 decades at the end of the last century.

If the U.S. and the world are to meet the McKinsey Global Institute’s challenge of curbing global climate change while sustaining current economic growth, they will have to heed Paul’s advice and do much more with much less traditional energy. That will mean building a New Energy infrastructure and being much more efficient with all energy.

The carbon productivity challenge: Curbing climate change and sustaining economic growth, the McKinsey research team’s report, introduces the concept of “carbon productivity” – the ratio of Gross Domestic Product (GDP) to the greenhouse gas emissions (measured in units of carbon dioxide equivalents, CO2e) generated.

The study finds it will be necessary for the world to develop a ten times better carbon productivity in order to sustain its current 3.1% level of economic growth. To do so will require a lot of decisions about phasing out energy that generates emissions, a lot of investment in clean New Energy and a lot of choices about how and when to use energy.

The Founding Fathers created a system responsive to change. It is time to change.

The carbon productivity challenge slide show.

From the report. (click to enlarge)

The carbon productivity challenge: Curbing climate change and sustaining economic growth
Beinhocker et. al., June 2008 (McKinsey Global Institute’s Climate Change Initiative)
and
Press release: The carbon productivity challenge
June 25, 2008 (McKinsey Global Institute)

WHO
McKinsey Global Institute (MGI); Project eaders (Eric Beinhocker, Senior Fellow, MGI-London & Jeremy Oppenheim, director, MGI-London) Report participants (Ben Irons, Makreeta Lahti, Diana Farrell, Scott Nyquist, Jaana Remes, Tomas Naucler, Per-Anders Enkvist)

From the report. (click to enlarge)

WHAT
In The carbon productivity challenge: Curbing climate change and sustaining economic growth, researchers from MGI explain how a “carbon revolution” can be achieved in 1/3 the time of the industrial revolution so as to head off the worst impacts of global climate change without suffering a debilitating loss of economic productivity.

WHEN
- By 2050, the world’s present “carbon productivity” of $740 of Gross Domestic Product (GDP) per ton of greenhouse gas emissions (measured in carbon dioxide equivalent, CO2e) must rise to $7,300 per ton of CO2e in order to sustain present levels of economic well-being without aggravating the conditions causing global climate change.
- By 2030, emissions abatements identified in the MGI report can be achieved at a cost of less than 40 euros/ton. A quarter of the needed abatement can be economically profitable.

From the report. (click to enlarge)

WHERE
- The 10-fold improvement in “carbon productivity” can be expected to keep atmospheric levels of CO2e below the 500 parts per million by volume (ppmv) recommended by the International Panel on Climate Change (IPCC).
- MGI and the Vattenfall Institute of Economic Research have developed a map of the world’s emissions abatement opportunities and identified 27 gigatons of yearly abatement that will keep atmospheric levels in the 500 ppmv range.
- The five areas on which abatement efforts should focus: (1) cost-effective increased efficiency; (2) Decarbonizing the electric generation and oil & gas sectors; (3) Speed the deployment of low-carbon technologies like New Energy; (4) Change business and consumer behavior; (5) Preserve and expand carbon sinks, especially forests.

WHY
- Policies, regulatory frameworks and institutions must (1) creative market-based incentives to stimulate carbon productivity; (2) fix market failures that keep abatement efforts from being profitable; (3) oversee fair allocation between developing and developed nation peoples and between industrial and economic sectors; (4) speed and focus progress.
- Both the industrial and information technology revolutions show that the right incentives and institutions can drive economic innovation and change, growth, improved living standards and opportunity.
- The tenfold increase in carbon productivity from $740 per ton of CO2e to $7,300 per ton of CO2e is similar to the level of labor productivity achieved in the U.S. from 1830 to 1955 as a result of the industrial revolution. The proposed carbon productivity increase must happen in 1/3 the time.
- Like the industrial revolution, the carbon revolution will depend on new technologies.
- Industry and power represent less than half of the total abatement potential.
- 35% to 45% of industrialized nation abatements are cutting costs.
- The developing world excluding China is more than 40% of all abatement opportunities.
- 70% of abatement opportunities do not rely on new technologies.
- Achieving an atmospheric CO2e level of 450 ppmv could cost as little as 0.6% of world GDP if low cost opportunities are used well.

From the report. (click to enlarge)

QUOTES
- Report: “There is growing consensus on what the broad outlines of the world’s response to climate change should be…We are now entering what will be the most challenging phase of the debate – answering the specific questions of how to achieve this end. Any successful program of action would need to meet two conditions…First, such a program would have to be effective in stabilizing the levels of CO2e in the atmosphere at a level and within a timeframe that minimizes likely temperature rises…Second, any solution must recognize that the world both has a right to, and a need for, continued economic growth…If we accept these two imperatives…we have only one choice. We must dramatically increase the level of “carbon productivity” in the economy…”
- Report: “The microeconomic changes that this paper describes will create massive shifts in economic rents…The transition to a low-carbon economy will inevitably create stranded assets and stranded people…There are also significant allocation and fairness issues between the developed and developing world…Regulation and institutions will need to address some fo these shifts for ethical and economic reasons…”
- Report: “Lastly, we need active and urgent intervention to ensure that we take account of critical timing issues. One key area of action is seizing the “window of opportunity” presented by the rapid infrastructure build-out under way in developing countries, particularly China and India…”