Once we recognise that our language and financial metrics are (or were) lacking, action becomes not only clearer, but in my view, easier than many people think.
To read the first part of this article, click here.
How can this be?
First is the observation that not only is sustaining the planet good for us in the long-term but there are many other positive returns on wasting less and in polluting less.
One of the most important lessons of the rapidly-expanding mix of energy efficiency, solar, wind, biofuels and other low-carbon technologies is that the costs of deployment are lower than many forecasts, and at the same time, the benefits are larger than expected.
This seeming ‘win-win’ claim deserves examination, and continued verification, of course.
Over the past decade, the solar and wind energy markets have been growing at rates over 30 per cent per year, and in the last several years growth rates of over 50 per cent per year have taken place in the solar energy sector.
This explosive and sustained growth has meant that costs have fallen steadily, and that an increasingly diverse set of innovative technologies and companies have been formed. Government policies in an increasing number of cities, states, and nations are finding creative and cost-effective ways to build these markets still further.
At the same time that a diverse set of low-carbon technologies are finding their way to the market, energy efficiency technologies (smart windows, energy efficient lighting and heating/ventilation systems, weatherisation products, and efficient appliances) and practices are all in increasingly widespread deployment. Many of these energy efficiency innovations demonstrate negative costs over time, meaning that when the full range of benefits (including improved quality of energy services, improved health, and worker productivity) are tabulated, some energy efficiency investments are vehicles for net creation of social benefits over time.
Carbon abatement curves have become famous since the Swedish power company Vattenfall collaborated with the McKinsey Company to develop a set of estimates on the costs to deploy and operate a range of energy efficiency, land use, and energy generation technologies.
These costs of conserved carbon curves depict the costs (or savings, in the case of a number of ‘negative cost’ options such as building efficiency) as well as the magnitude (in gigatonnes) of abatement potential at a projected future time.
A World Bank-supported low-carbon development study shows that Mexico can reduce carbon emissions by 42 per cent more than its target of 1,137 metric tons by 2030 – 477 million tons, to be precise – by decisive action on multiple fronts. It can achieve this by moving in key areas such as improving bus systems, road and rail freight logistics, fuel economy standards, and vehicle inspection at the border, among others.
This is exciting news. It shows that significant – even dramatic – carbon reductions can be achieved by adjusting use of existing technologies. Such adjustments can reduce costs too. These conclusions emerged from calculations based on a marginal abatement cost curve, or MAC, an analytical tool developed in 2008 by McKinsey & Company, and used by a team of experts studying Mexico’s climate challenges headed by the World Bank.
The study in which this methodology was used, Low-Carbon Development for Mexico by Johnson, Alatorre, Romo and Liu , is one of a series of such studies financed by the Energy Sector Management Assistance Program (ESMAP) that also includes Brazil and Nigeria.
This same MAC tool has now been applied, with promising results, to two tiny communities of 1,100 people on Nicaragua’s Atlantic coast. Results of a study published November 26 in Science Magazine demonstrate that low-carbon rural energy services can be delivered at cost savings in cases where communities utilise diesel-powered, isolated, electricity grids.
The study, on which I was working with Christian Casillas before I joined the World Bank in September, will hopefully spur efforts elsewhere to build similar community-level carbon abatement and energy service tools. This could mean that communities often ignored or lumped together as ‘those billions without modern energy’ can create their own locally-appropriate development goals, and groups working with them can develop energy solutions at a price lower than the one they’re paying now.
In 2009, the rural Nicaraguan communities of Orinoco and Marshall Point, which share a diesel micro-grid, partnered with the national government and an NGO to implement energy efficiency measures including metering, which prompted residents to reduce wasteful use of electricity. Compact fluorescent light bulbs were also introduced, as well as more efficient outdoor lighting, and replacement of part of the diesel power with biogas from dung.
After the government installed meters, energy use dropped by 28 per cent, and people’s electric bills dropped proportionately. The non-governmental organisation, Blue Energy, based in San Francisco, which offered the compact fluorescent light bulbs was able thereby to cut household energy use by another 17 per cent.
The net result was reduced burning of diesel, even allowing for the fact that the community’s reduced energy needs allowed the local energy supplier to run its generators two extra hours each day, providing longer service to customers. In the month after the conservation campaign, energy costs per household had dropped by 37 per cent.
That the MAC curve can be used to analyse energy use in the community and pinpoint areas where investments would save the most energy and the most money for homeowners is something of a breakthrough. Until now, the model has been used mostly on a global or country-wide scale to target areas for carbon abatement. But now it has gone local. That means some of the world’s poorest communities can reduce their energy costs by local action which, multiplied worldwide, could produce global change in reduced carbon emissions.
These curves illustrate the range of low-carbon options that exist, and that if we can continue to build a menu of options that have been tested, vetted, and implemented, a new paradigm of clean energy development has a very solid economic footing in a wide range of national, city, and community environments.
Finally, let me conclude with a brief note on building the business model for clean energy.
This is a piece of the story that gets left behind in many discussions: creating a new energy economy cannot be a battle between environmentalists saying we must ‘go green’ and the business community saying we ‘cannot go green’ today, or not that rapidly.
In fact there is a great deal of emerging data – such as these marginal abatement curves – that if one manages the process of innovation and implementation well, we can find ways to both growth the economy and make it dramatically greener. The German experience in wind and solar and sound urban and agricultural planning is a great example of doing both well. In fact, Germany is finding that export earnings, job creation, and a stable economy in a time of oil and gas shocks can be found in this emerging green economy as well.
