Giving a Green Light to Greenhouse Gas Savings

The hullabaloo in Washington is great fun to watch, but the fact is that many, many companies will not be directly regulated under any new climate bill that gets passed.  So why should companies care?  Well, from 30,000 feet, here’s one reason:

McKinsey Graphic 1

It’s from a McKinsey report that shows the estimated cost for CO2 abatement using various technologies.  The vertical axis shows cost per ton of emission reductions.  And all the blocks hanging below the horizon represent things we can do now that have “negative cost” – in other words, we save more money than we spend.  Notice that virtually every one of them involves energy and fuel efficiency.  We can get four or five gigatons of emissions savings – that’s four or five billion tons of emissions reductions – while saving money!  So the opportunity is huge.

But at ground level it may feel more like this:

McKinsey 2

In these lean economic times, we’re all under enormous pressure to cut costs.  At the same time, companies are feeling new demands from investors as shareholders, banks and even private equity funds are asking their holdings to at least to report on greenhouse gas emissions.  And if you’re in the middle of the supply chain, you’re probably already seeing demands related to the sustainability of your products and operations.  Add to that the need to stabilize your own supply chain – if you’re in a sector such as agriculture or hospitality where seasonality and weather play a big role, then you may already have had to adjust to climate-related changes.

So while new regulations could impact the degree to which you feel any of those things, the pressure to act is here now.

In my next two posts, I will showcase innovations that address the two biggest pieces of the “low hanging” emissions from the McKinsey graphic: commercial building energy efficiency and fuel efficiency.

The real question is why aren’t these “low hanging” emissions being addressed more widely?  Because there’s a disconnect between what we believe and what really is.  Think about how many times you’ve heard people say that it costs too much to do something about climate change or that there’s no point in acting now since we don’t know what the regulations will be or that the latest technology – solar, ethanol, fuel cells, you fill in the blank – is not commercially ready yet.

But we have the technology now to solve a pretty big part of the problem, and it’s affordable.  I’ll give you a couple of examples in my next two posts, but there are thousands more.

McKinsey 3

I believe that what’s holding us back are other kinds of market failures like poor access to information about energy and fuel efficiency, inconsistent metrics (or lack of metrics altogether) for measuring and managing environmental footprints, organizational barriers that separate energy use from energy costs and even our corporate compensation systems, which generally don’t acknowledge innovation around energy efficiency.  Do you agree?

Tell us what you’re doing to overcome these barriers at your own company, and what organizations like EDF could do to help.