We have a problem and the solution is quickly slipping away from us. If we continued to act the way we have in recent years, or “business-as-usual” (BAU) as McKinsey and Company calls it, greenhouse gas emissions (GHG) will continue to increase. According to the Intergovernmental Panel on Climate Change (IPCC), this could lead directly to an increase in global average temperature (global warming) of over two degrees Celsius compared with pre-Industrial time. Although it is impossible to predict exact results, a change above two degrees Celsius is an increase in temperature that the IPCC expects will cause extremely negative planetary consequences. By altering the planet’s average temperature, we may cause irreversible damages to our biosphere and its ability to support life as we know it.
In order to prevent this potential future, we must reduce GHG emissions. But where do we start? And how much will it cost? To answer these questions, McKinsey and Company, working with multiple partners including the Swedish utility Vattenfall, developed a global greenhouse gas abatement cost curve. The development of the curve showed a listing of emission abatement options, along with time-sensitive costs, leading to a total reduction of 38 GtCO2e emissions by 2030. Adoption of these techniques, along with a small set of more expensive technical measures and behavioral changes, makes the case that it is possible to reduce green house gas emissions to 35% below 1990 levels by 2030. At this reduction rate, according to the IPCC, there is a good chance of preventing global warming from increasing two degrees Celsius or more.
Source: McKinsey & Company’s Pathways to a Low Carbon Economy
The cost curve above shows what McKinsey believes is an abatement potential of 38 global tonnes of CO2 equivalent (GtCO2e) emissions by the year 2030. It sets the different options along the horizontal line while displaying costs in Euro per tonne of CO2 equivalents along the vertical. The negative costs are due to savings incurred over the life of the abatement investment. McKinsey only used techniques remaining below 60 Euro per tonne that existed at the time of the report or were likely to exist within the time frame of the report (2005 – 2030).
McKinsey then displayed three separate pathways relative to different peaks of atmospheric concentrations of GHGs. In order to keep average global temperatures below two degrees Celsius, the optimal path with a peak at 480 ppm must be taken.
Source: McKinsey & Company’s Pathways to a Low Carbon Economy
To remain along this path, abatements of 38 GtCO2e must be met as described in the GHG abatement cost curve. Additionally, technical measures abatement and behavioral changes abatement must also be achieved to ensure CO2e emissions remain low enough to stay on the optimal path. These technical opportunities come at a cost of between 60 and 100 Euro per tonne of CO2 equivalent but were not a focus point of the McKinsey report. Behavioral changes, also not a focus of the study, include such items as personal travel or sustainable lifestyle changes. Adoption of these abatement techniques will depend on future incentives given to individuals by controlling parties to adopt these changes in behavior.
McKinsey’s Pathways to a Low-Carbon Economy provides a starting point to begin seriously looking at ways to reduce green house gas emissions and avoid dangerous global average temperature increases. This report can be used to assist governments, companies, and organizations in making decisions based on cost and appropriate techniques. This report will continue to improve as future measures are completed and pathways become more clear.
