Fortune
 by Marc Gunther
November 30 2007: 10:02 AM EST
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How to save Mother Earth without breaking the bank

New study outlines ways that the United States can reduce greenhouse emissions by up to 50 percent, without crippling the economy.

By Marc Gunther, Fortune senior writer

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McKinsey says the United States can cut greenhouse gas emissions by up to 50 percent.

(Fortune) -- The United States could reduce its projected greenhouse gas emissions by up to half in the next 20 or so years at a "manageable cost" to the economy, according to the most comprehensive report to date of the steps needed to curb global warming.

What's more, according to the study released Thursday by management consulting firm McKinsey & Company, people will not necessarily have to change their lifestyles by taking public transport, driving compact cars or living in smaller homes.

But consumers, and businesses, will have to adopt other energy-efficient measures - a task that will be much harder than it sounds.

Beyond that, the report concluded, taking meaningful action to combat climate change will require multi-billion dollar investments in nuclear energy, capturing and storing carbon dioxide emissions from burning coal, tapping renewable energy sources like solar and wind power and redesigning the automobile.

"There is no silver bullet," acknowledged Jack Stephenson, a McKinsey consultant who worked on the report. "The opportunities, many at low cost, are widely distributed across the economy. Everybody's got to chip in if this is going to work."

The 83-page report comes as Congress is moving closer towards regulating carbon emissions, and as 10,000 officials from governments, business and nonprofit groups head to Indonesia next week for another global conference on climate change.

McKinsey didn't endorse any legislation or policy changes. Its authors, however, said that forceful, coordinate action from government and businesses will be necessary for the United States -- which has 5% of the world's population and generates about 20% of its greenhouse gases -- to stop its current growth in emissions.

If aggressive steps are taken now, McKinsey researchers predicted that the country could cut its projected greenhouse gas emissions by 30 to 50% by 2030.

But if business proceeds as usual, U.S. emissions are projected to surge 35 percent, an increase that climate scientists say would be catastrophic for the planet. The report was sponsored by five companies -- DTE Energy (Charts, Fortune 500), Honeywell (Charts, Fortune 500), National Grid, PG&E (Charts, Fortune 500) and Shell -- and by two environmental groups, Environmental Defense and the Natural Resources Defense Council.

The report looked at what actions would be required to reduce emissions by 3.0 to 4.5 gigatons by 2030, an amount that's the rough equivalent of the reductions mandated by bills moving through Congress. Perhaps the biggest surprise is the finding that about 40 percent of those reductions could be achieved in ways that actually save money - by saving energy. "The U.S. wastes a whole lot of energy that we don't need to waste," Stephenson said.

Investments in energy-efficient homes and buildings, lighting and appliances, and cars and trucks would all generate savings that would outweigh their costs over their lifetimes. The trouble is, consumers and businesses today buy or rent homes, cars, buildings and other goods without taking long-term energy costs into account.

Cars and trucks, the report stated, could be made more efficient by using lighter weight materials and improving the design of the drive train, air conditioning and rolling resistance. But sticker prices would go up and the energy savings could take a decade or more to be realized.

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The McKinsey consultants said higher energy prices alone - which are a certain outcome of any carbon regulation - will not provide enough of an incentive to curb waste. Other politics, such as government efficiency standards or tax incentives, will probably be needed.

Other sponsors of the report seized on its findings to urge regulators to do more to promote energy efficiency. "With the right measures now, we can unlock tremendous savings through the economy," said Frances Beinecke, NRDC's president.

Rick Duke, a former McKinsey consultant who now works for the NRDC, said the government should mandate "performance-based standards" for vehicles, appliances and buildings since it's clear that such standards would benefit the economy over time. He also said that consumer products like plasma TVs and video cassette recorders are often wasteful, and will remain so unless the government steps in.

"When you buy a TiVo, whether or not it's an energy hog is simply not part of the calculus," said Duke.

Honeywell said that nearly 50% of its products are now linked to energy efficiency, touting such offerings as spray foam insulation and programmable thermostats for homes, and high-tech energy management systems for commercial and industrial energy users.

There's lot's more in the report -- in fact, it analyzes the costs of more than 250 specific actions that could be taken to reduce greenhouse gas emissions. It can be downloaded hereTo top of page

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