The consultants McKinsey & Co have produced a number of reports that analyse the life cycle cost effectiveness and capital investment required for a wide range of technologies and practices capable of reducing the emissions of greenhouse gases.
Details of a global assessment which considers costs over the next twenty years (to 2030) can be retrieved from the web link below and those for other countries including the United States, from the following web page. The global assessment concludes that opportunities can be grouped into three categories of response:
- measures to improve energy efficiency (both demand and supply side)
- utilisation of low–carbon energy supplies, and
- sequestration of gases by technical means
Results presented in a summary curve (see below) show the estimated cost per metric ton of carbon dioxide equivalent abated for the technologies and practices considered. The width of each bar represents the potential to reduce GHG gases compared to a business as usual (BAU) case. In general, those to the left and below the x-axis represent changes that are efficiency measures and where life cycle savings outweigh the cost of implementation. Higher cost technologies are represented to the right side of the graph and include a number of carbon capture and storage (CCS) options.
Global GHG Abatement Cost Curve, v2.0
Source: WRI, Stabilization Wedges: Technologies and Practices for
Climate Stabilization Transition Plan. After McKinsey & Co,
Pathways to a Low-Carbon Economy, 2009.
Right click on image to create a new tab and access a larger copy of the curve
The report also shows estimated abatement costs versus capital intensity for a number of sectors - see the figure below. This way of looking at the data reveals that initially it may be cheaper to invest in technologies capable of reducing the emissions of carbon dioxide from a power plant than say, construct new buildings that are energy efficient. However over the long term, the life cycle cost of a new building will be substantially lower than that of a technology such as carbon capture and storage because of the energy savings that can be achieved. This is likely to complicate the decision process for policy makers who in seeking to prioritise low carbon options on the basis of their cost-effectiveness will be constrained by available budgets. The creation of an effective market where the future price to be paid for GHG emissions could be anticipated with certainty (though this is something of an oxymoron) would obviously assist the decision process.
Exhibit 9 : Capital Intensity and Abatement Cost
Source: Pathways to a Low-Carbon Economy, v2.0. McKinsey & Co, 2009 (location sited)
Right click on image to create a new tab and access a larger copy of the curve
A good review of the original McKinsey report is presented in a May 2008 posting on the Lightbucket blog. The posting entitled: the cost of carbon abatement includes comments and links to related reports. One of the points raised is that McKinsey do not explain clearly how their abatement costs have been developed. Another discussion on energy efficiency published by the Center for American Progress argues that the methodology used may have under-estimated the capital intensity of power plant technology and over-looked the fact that investment in additional power plants can be avoided when energy efficiency options are pursued.
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