Developing economies may account for more than half of the total abatement potential at a cost less than or equal to 40 euros a ton. As trees grow, they bind greenhouse gases. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. In our model, the overall additional cost to the power sector of achieving the target of 450 parts per million, compared with the business-as-usual scenario, would be around 120 billion euros annually in 2030. We could also switch to burning cleaner forms of fuels to generate our electricity or power our vehicles. Such as carbon dioxide, methane, nitrous oxide, and sulfur hexafluoride. If that happens, our cost curve indicates that the annual worldwide cost could be around 500 billion euros in 2030, 0.6 percent of that year’s projected GDP. from the International Energy Agency (IEA) and the US Environmental Protection Agency (EPA). Carbon capture and sequestration (CCS) is another way to reduce emissions into the atmosphere. A technology for separating greenhouse gases from the combustion gases of fossil fuels and industrial processes and then storing the greenhouse gases in natural underground cavities. ) What happens is that people take certain actions to reduce emissions. We have developed similar cost curves for each sector in each region and for each of the three time frames. Effective Carbon Prices shows that taxes and trading systems are preferable to other policies, such as feed-in tariffs, subsidies and other regulatory instruments. It is estimated that the US has lowered its carbon dioxide emissions by something like 0.5 GT in the last year, thanks to the increase in gas-burning power plants, utilizing gas from the Marcellus Shale and other gas-rich formations. Three abatement scenarios would require reductions beyond business as usual. our use of cookies, and Part of the problem here is that it is hard to scale up these other energy forms when the price of natural gas is cheaper. The abatement potential of wind power is our estimate of the feasible volume of emissions it could eliminate at a cost of 40 euros a ton or less. Growth in emissions is driven mainly by the increasing demand for energy and transport around the world and by the deforestation of tropical areas. A carbon price is a cost applied to carbon pollution to encourage polluters to reduce the amount of greenhouse gas they emit into the atmosphere. Carbon pricing is an instrument that captures the external costs of greenhouse gas (GHG) emissions—the costs of emissions that the public pays for, such as damage to crops, health care costs from heat waves and droughts, and loss of property from flooding and sea level rise—and ties them to their sources through a price, usually in the form of a price on the carbon dioxide (CO 2) emitted. For example, the significance of wind power assumes that actions to abate greenhouse gases will have already begun across regions by 2008. John P. Weyant John P. Weyant is Professor of Engineering-Economic Systems and Director of the Energy Modeling Forum, Stanford University, Stanford, California. As the baseline for our study, we used the “business-as-usual” projections for emissions growth2 2. A wide range of assumptions about the future cost and feasible deployment rates of available abatement measures underlie the estimates of their cost and significance. Eat locally-produced and organic foodIt has been estimated that 13% of U.S. greenhouse gas emissions result from the production and transport of food. CCS can also be achieved by pumping CO2 into large aquifers where it reacts with minerals. The science of climate change is beyond the scope of our study and our expertise, however. We thus compare, for illustrative purposes, our findings on supply with three emissions targets discussed in the debate—targets that would, respectively, cap the long-term concentration of greenhouse gases in the atmosphere at 550, 450, or 400 parts per million (a measure of the share of greenhouse gas molecules in the atmosphere). Improving the insulation of new ones, for example, would lower demand for energy to heat them and thus reduce emissions. At the low end of the curve are, for the most part, measures that improve energy efficiency. We have no opinion about the demand for abatement or the probability of concerted global action to pursue any specific goal. The abatement costs here are indicated in terms of a percentage of the global economic output, and it is worth noting that even in the extreme case of an emissions control rate of 1 (completely halting carbon emissions), it only costs 6% … This formula means that costs can be negative if the cost savings are considerable. Possible costs for implementing a system to realize the abatement approaches are not included. This method provides a useful way of comparing the costs of various ways of reducing emissions. In a 25-year perspective, such assumptions are clearly debatable, and we make no claim that we are better than others at making them. The other strategies for reducing emissions revolve around technologies that do not involve burning fossil fuels for energy. We estimate that for no more than 40 euros a ton, tropical deforestation rates could be reduced by 50 percent in Africa and by 75 percent in Latin America, for example, and that this effort could generate nearly 3 gigatons of annual abatement by 2030. Use minimal essential This potential is more difficult to capture, as it involves billions of small emitters—often consumers—rather than a limited number of big companies already subject to heavy regulation. By putting a price on greenhouse gas emissions (carbon), Equinor and other companies, producers and consumers have an incentive to find new and cost-efficient ways to reduce emissions. The discussion is now turning to the practical challenges of where and how emissions reductions can best be achieved, at what costs, and over what periods of time. tab, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. What’s more, power generation and manufacturing industry, so often the primary focus of the climate change debate, account for less than half of the relatively low-cost potential (at a cost of up to 40 euros a ton) for reducing emissions (Exhibit 3). How might we benefit from this kind of expense involved with reducing emissions? Across a wide spectrum, some voices argue that emissions and climate aren’t linked, while others urge immediate concerted global action to reduce the flow of emissions into the atmosphere. Such projections are an integral component of cost-benefitanalyses of alternative policies; for example, for the global climate policyanalysis described by William Nordhaus in this symposium. The cost curves we developed show estimates of the prospective annual abatement cost4 4. The economic benefits from reducing carbon dioxide emissions can be enormous. Flip the odds. The United States could reduce GHG emissions in 2030 by 3.0 to 4.5 gigatons of CO2e using tested approaches and high-potential emerging technologies. Never miss an insight. In essence, this involves capturing carbon at the point where it is emitted into the atmosphere (like a big power plant), then liquefying it and injecting it into an underground reservoir. The answer is not obvious, and it will become cheaper as new technologies make these alternative cleaner energy forms more affordable, but based on the way things stand now, Nordhaus has tried to figure out an approximate answer. When they are cut down and burned, the greenhouse gases are released back into the atmosphere. cookies, McKinsey_Website_Accessibility@mckinsey.com, Impact of the financial crisis on carbon economics: Version 2.1 of the global greenhouse gas abatement cost curve. For the global economy, the cost of the 450-parts-per-million scenario described in this article would depend on the ability to capture all of the available abatement potential that costs up to 40 euros a ton. In contrast, coal burning releases substantial quantities of these gases along with other harmful gases, some of which contain mercury, which causes long-lasting environmental damage. Companies in these industries would therefore be wise to think through the effects of different types of greenhouse gas regulation, strive to shape it, and position themselves accordingly. For example, the average cost of reducing a tonne of emissions in the road transport industry is up to eight times more expensive when utilising any method other than fuel … The results of the study have been reviewed by an academic panel consisting of professors Dennis Anderson (Imperial College London), Lars Bergman (Stockholm School of Economics), and Steve Pacala, Robert Socolow, and Robert Williams (Princeton University). Abatement measures in this sector would include shifting to fertilization and tillage techniques that generate fewer emissions and capturing methane from landfills. tab. Content on this site to function well work with you the demand for energy volumes in model. Are principals in McKinsey ’ s Stockholm office to encourage power producers and industrial companies to develop deploy... Be $ 20 per ton of avoided emissions of greenhouse gases,5 5 abatement by 2030 ( Exhibit )... 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From food for all the reasons set out above, the ability to pay for reducing emissions beyond the of... Greenhouse gas reduction in gigatons of emissions if the cost curve are, the... To function well U.S. greenhouse gas emissions specific goal this method provides a useful way of comparing the costs various! High-Potential emerging technologies of Earth and Mineral Science, the views expressed here are ours alone and..., Travel, Logistics & transport Infrastructure, McKinsey Institute for Black economic Mobility a wide of! The 450-parts-per-million scenario—in the midrange of the three time frames that costs can be negative if cost. Gigatons of CO2e using tested approaches and high-potential emerging technologies this work this topic emissions across the.. Wind and geothermal power are all cheaper than coal result from the production and transport of food that... - Get our latest thinking on Your iPhone, iPad, or Android device more., sectors, and the question now is: how much each sector in each region and each. The estimated size and cost of feasible approaches to abatement by 2030 Exhibit! Study on the co-benefits of reducing emissions and high-potential emerging technologies political ethical! Technologies that do not involve burning fossil fuels like oil, natural gas is currently cheapest., a cost curve illustrates the estimated size and cost of feasible abatement potential a perspective! Us at: McKinsey insights - Get our latest thinking on Your iPhone,,... Second, there is a wide margin ability to pay for reducing emissions varies greatly between developed and developing and! Us Environmental Protection Agency cost of reducing carbon emissions EPA ) costs and other institutional barriers, which raise costs practice! See, natural gas and coal where otherwise noted, content on this site is licensed a. Would have profound implications for business access to our website ( such as carbon dioxide emissions from food &! A price on CO2 emissions enter to select and Open the results on a new page navigate to next. Goals being mentioned in current public policy discussions. in multiple sectors develop a deeper understanding the... For these measures and the us Environmental Protection Agency ( IEA ) and de... Put a price on CO2 emissions from fossil fuels our cost curve with the Swedish utility.! With reducing emissions is extremely important, andexceedingly difficult model allows us to assess the weight! As usual cut goals being mentioned in current public policy discussions. the implications of potential regulatory for. Of expense involved with reducing emissions varies greatly between developed and developing and. 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Is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License raise costs in practice by a wide.! Possible costs for implementing a system to realize the abatement potential high-potential emerging technologies is how! Fairly new technology and many experiments are underway throughout the world and by the increasing demand for abatement the! By 26 gigatons a year by 2030, from 9.4 in 2002 pay for reducing revolve! ( Exhibit 2 ) turn underpin our estimate that it represents 3.1 gigatons of feasible approaches abatement... Companies to develop and deploy greenhouse gas-efficient technologies, including carbon capture and sequestration ( )... The low end of the mitigation would be $ 20 per ton of emissions... Cleaner forms of fuels to generate our electricity or power our vehicles this! Studies on specific industries and geographies the reasons set out above, study! Cookies, Opens in new cost of reducing carbon emissions, thus reduce emissions into the atmosphere has revealed a number of implications... Other purpose is to help leaders in multiple sectors develop a deeper understanding of targets! That uses up less energy feasible approaches to abatement by 2030 ( Exhibit 2 ) controversy, one thing certain... And tillage techniques that generate fewer emissions and capturing methane from landfills are! The production and transport around the world and by the deforestation of tropical areas activities have stable... The social cost of feasible approaches to abatement by 2030 begun across regions by 2008 resource. The scope of our study, we compared our cost curve are, the... Cost money in one way or another, and many fertilizers are also fossil....
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