Efficiency best policy says study

Financial Times, 3 December 2009 - Governments around the world could make rapid, substantial and relatively cheap cuts to carbon emissions by pursuing energy efficiency in place of more ambitious, but expensive, technological solutions, says a new study.

The analysis, based on data provided to the Financial Times by McKinsey, the consultancy, identifies more energy-efficient cars, lighting and buildings as the “low-hanging fruit” in the global warming battle.

The findings are particularly relevant in the US, the world's second-largest emitter of greenhouse gases, as Washington prepares to join international efforts to fight global warming at a UN conference beginning in Copenhagen next week.

The McKinsey analysis says that for the US the initial upfront expense of buying an electric or hybrid car would be rapidly offset by lower fuel costs, which result in lower emissions per vehicle. It estimates a saving of €79 for every tonne of carbon dioxide mitigated by 2030 through greater vehicle efficiency. For lighting the saving is €50 and €44 for buildings.

The analysis says the upfront expense of buying an electric or hybrid car would be rapidly offset by lower fuel costs

Carbon capture and storage, a much touted technology to reduce emissions, is likely to remain much more expensive. The initial cost of taking a tonne of carbon dioxide out of the atmosphere this way would be €76 in the US in 2015, before falling to €39 a tonne by 2030.

US companies should also invest in energy efficiency before they turn to buying carbon offsets overseas, if they wish to get the most “bang for the buck”.

This contrasts with the view of many US businesses which believe they will need to buy cheap carbon credits from abroad if they are to reduce emission mitigation costs under a federal cap-and-trade system under consideration in the Senate.

For companies looking to invest in renewables, the most cost-effective place to do so through the UN carbon trading scheme, is likely to be South Africa – which currently offers generous feed-in tariffs – according to a study by the Technical University of Braunschweig in Germany,

Smaller hydroelectric power plants, which are among the most popular small projects registered under the UN system, are also highly cost-effective, according to the study.

These costs contrast sharply with other forms of renewable energy that have a higher profile. Solar power, for instance, would cost €34 per tonne of carbon dioxide avoided in India in 2015, while in China the cost would be €43 per tonne. Wind turbines are lower cost but still relatively expensive. In China, McKinsey calculates that wind turbines would cost €8 per tonne of carbon avoided in 2015, and €15 in India.

Making renewable energy investments in developed countries is far more expensive, according to the data.

This reflects one of the founding philosophies of the UN's Clean Development Mechanism – that it would help rich countries achieve their obligations to cut emissions under the 1997 Kyoto protocol by allowing them to invest in lower cost projects in the developing world. Poor nations meanwhile could gain access to low-carbon technology which they could not otherwise afford.

But the scheme has fallen short of expectations, prompting calls for its overhaul at the Copenhagen conference. The greatest single reducer of emissions under the CDM, is the elimination of certain industrial gases – such as hydrofluorocarbons, a by-product of refrigerants.

But while this should in theory be one of the cheapest methods of cutting emissions – at an estimated $1 per tonne of carbon dioxide equivalent destroyed, according to Point Carbon, a carbon consultancy – the international community ends up paying much more.

Yvo de Boer, the UN's top climate change official, said Copenhagen must produce “mechanisms that will allow for prompt action on emissions, to deploy new technologies, and to build capacity in developing countries”.

Author Fiona Harvey, Cynthia O’Murchu and Simon Briscoe Publication Date 3 Dec 2009 Document Type News articles Issue/Topic Energy & Climate Mobility Source Financial Times Include In RSS Business & Sustainable Development News Energy & Climate News Sustainable Mobility News