Some facts

After wading through pools of diplomatic guff, it was a relief to sit down and be presented with numbers. Better yet, tables and charts.

This evening I attended a presentation by consultants McKinsey on their work on calculating the costs and potential to cut greenhouse gas emissions in different countries.

Germany was used as the example – indeed we wrote up this study not long ago – but the company has carried out similar studies for the US (only just completed last week!) the UK and the Netherlands. Others are underway, such as for Sweden, or planned, such as for Italy. Not all are made public.

Curious insights are emerging from this work. One is the minimal impact expected from the EU emission trading scheme, at least in Germany and the UK. In the former, McKinsey predicts this will only cut emissions by 14m tonnes by 2020, a mere sliver of what other measures are forecast to offer.

It assumes a carbon price of €20 per tonne, although upping this to €30 would have little impact a consultant told me.

By far the biggest potential to cut emissions lies in opportunities with so-called negative cost, meaning the emission cuts would pay for themselves over a product’s lifetime, for example 30-40 years for a power station.

McKinsey says on average 35-45 per cent of abatement opportunities are of this type. Why is no one acting on them? The reason is a range of non-economic barriers – the decision may make macroeconomic sense but other considerations preclude it.

For example, why would a landlord invest in housing insulation if it is his tenant who benefits through a lower energy bill? Pass on the costs in rent you might say, but in Germany there are rent ceilings. Similarly, a lady of 80 may decide against an investment that comes with a 15-year payback period. A young couple may wish to invest but lack the upfront cash. Or, people may simply be unaware.

McKinsey calculates that Germany could cut its emissions by 127m tonnes or 25 per cent by 2020, relative to 1990 levels, purely by tackling these barriers. This would be tremendous. It is up to policymakers to make it happen.

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