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McKinsey: options for a low-carbon economy

McKinsey & Company has mapped out a couple of conceivable scenarios that would put humanity on a pathway to stabilize greenhouse gas concentrations well below 550 parts per million, an oft-cited and somewhat arbitrary target that increases the odds of avoiding a temperature increase of more than 2 degrees Celsius. Whether or not such action would actually guarantee said result is a different matter, but McKinsey suggests it’s possible to come in at 480 ppm, which leaves a little room for error.

To see one of the leading global business consultancies putting out such a document (download requires free registration) is encouraging, but conceivable does not mean easy, let alone likely. And to be clear, “Pathways to a Low-Carbon Economy,” now in its second draft, is not so much a plan of action as an analysis of the options. McKinsey calls it a “greenhouse gas abatement database.” They attempt to quantify relative potential and costs of each approach, focusing on abatement schemes that are likely to ring in under 60 euros per ton of carbon dioxide. The company then round things out with a few scenarios illustrating what it would take to reduce global emissions by 35-40 percent below 1990 levels by 2030.

Reading the report, you get a sense that you are looking at a menu. I’ll take an order of new insulation for old buildings as an appetizer, and then move on to wind, nuclear, and plug-in hybrids. How about some rice management for desert? As it happens, McKinsey projects that the insulation and rice will pay for themselves, but there are barriers to even the most logical choices: In many cases, the approaches that are the most cost effective over the long-term also require the most up-front capital, which isn’t exactly plentiful at the moment.

The McKinsey time-line starts in 2010, and by their calculations, each year of delay locks in the equivalent of 1.8 billion tonnes of annual carbon dioxide emissions as countries build up their infrastructure. For perspective, that number is on par with what the Kyoto Protocol might achieve by 2012. A delay of 10 years makes the whole endeavour all but impossible, even if we are willing to spend more money down the road.

But what really brings things home are the scenarios. McKinsey modelled a few potential outcomes, including business as usual, lacklustre performance on all counts and one seemingly optimistic world in which industrialized countries capture 90 percent of the potential reductions and developing countries capture 50 percent. Seems like a pretty good performance, but it’s not enough. Only two of McKinsey’s scenarios achieve the stated goal: “Global Action” involves capturing 90 percent of the opportunities in all sectors, everywhere; and “Green World” is an idealized scenario that assumes success on all fronts.

To take the restaurant metaphor a step further, making our selections should be easy. We need to order pretty much everything on the menu.

McKinsey does not offer up a price tag, but the World Economic Forum, which is currently holding its annual meeting in Davos, Switzerland, just put out a new report on green investing that provides a nice recap of the estimates by various organizations. Suffice it to say that the question seems to be over how many hundreds of billions of dollars need to be invested each year.


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    Peter McEvoy said:

    I liked your last line best- we should fill our bellies with this stuff!

    It is unfortunate that the up-front cost is so high…especially since over the lifetime of many technologies it is more cost effective!

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    Chris McGrath said:

    Stabilization at 550 ppm CO2-eq is expected to lead to a rise of 3 degrees Celsius, not 2 degrees, according to the IPCC’s “best guess” in its Fourth Assessment Report.

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