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7/26/2019 Greven McKinsey 201109 http://slidepdf.com/reader/full/greven-mckinsey-201109 1/17 November 19, 2009 This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from McKinsey & Company, Inc. This material was used by McKinsey & Company, Inc., during an oral presentation; it is not a complete record of the discussion. Macroeconomic Macroeconomic Consequences of Consequences of Climate Change Climate Change Discussion Forum: Germany and Poland in Europe

Greven McKinsey 201109

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    November 19, 2009

    This report is solely for the use of client personnel. No part of it may be circulated, quoted, orreproduced for distribution outside the client organization without prior written approval fromMcKinsey & Company, Inc. This material was used by McKinsey & Company, Inc., during an oral

    presentation; it is not a complete record of the discussion.

    MacroeconomicMacroeconomicConsequences ofConsequences of

    Climate ChangeClimate ChangeDiscussion Forum: Germany and Poland in Europe

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    1

    The science suggests we need to "decarbonise" our

    economy by around 90% long term to stabilize the climate

    Requires a

    radical changetowardsa low carboneconomy!

    "Business as usual" GHG emissions

    Global emissions

    GtCO2e

    Natural GHGabsorption rate

    85

    70

    40-90%

    205020302002

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    2

    35 Gt of reductions below Business as Usual in 2030 arerequired for a 450 ppm, 2C pathway

    Referencepathway"Business asUsual"

    450 ppm pathway(with overshoot)

    Change relative to 1990Percent

    +17% -7%

    Current proposals1

    811 Gt abate-ment in 2020

    50

    55

    60

    65

    70

    75

    1990 2000 2010 2020 2030

    0

    40

    45

    52

    61

    70

    50

    55

    60

    65

    70

    75

    1990 2000 2010 2020 2030

    0

    40

    45

    4435

    -17

    Global GHG emissions, Gt CO2e per year

    1 US: 1728% below 2005 level by 2020; EU: 2030% from 1990 level by 2020; China: Reduce energy consumption per national income by 20%between 200510; Russia: stabilise emissions at ~30% below 1990; Brazil: Reduce deforestation rates by 70% by 2017, equivalent to 4.8b tons lessCO2 emitted cumulatively; Japan: Reduce 80% by 2050 from current levels; Canada: 20% reduction from 2006 level by 2020; Mexico: Reduceemissions from 2002 levels by 50% by 2050, plus proposals from 12 smaller Annex 1 countries. Assumptions have been made on timeline and

    pathway to calculate abatement in 2020

    SOURCE: McKinsey Global GHG Abatement Cost Curve v2.0; Houghton; IEA; US EPA; den Elzen, van Vuuren;Project Catalyst analysis

    -35

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    3

    What could we could afford if we had to live on 6 kilos of

    co2e a day?

    * Based on 20 Gt/year sustainable emissions and future population of 9 billion people.

    Source: McKinsey analysis

    Per-capita annual emissions, 2005

    TCO2e

    21.5United States

    15.9Russia

    9.6EU-27

    5.7China

    1.7India

    2.2World sustainableaverage*

    Correspondingto 6 kg of CO2eper day

    Emission budget for a day (alternatives)

    Travel 2040 km car ride

    Stay home 1020 hours air conditioning

    Shop 2 new T-shirts

    Eat 2 meals a day of 300 gmeat, 200 g fries, tap

    water

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    4

    McKinsey has quantified global greenhouse gas

    abatement opportunities

    Source: McKinsey

    Scope: 6 sectors, 6regions, 3 time-

    frames ('10, '20, '30)

    Involvement: Morethan 300 clients,industry experts and

    more than 10,000customers

    Academic review:More than 50 leading

    academics

    AbatementGt CO2e/year

    Cost of abatement

    EUR/tCO2e

    Each bar is one measure, or group ofmeasures (e.g., "solar")

    Width: Amount of CO2 equivalents that canbe reduced by implementing the measure

    (reasonably aggressive potential) Height: Cost to avoid a ton of CO2

    equivalent by the measure (as comparedto business as usual)

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    5

    30 35 38

    40

    -100

    10

    10

    30

    25

    -50

    20

    60

    -20

    -10

    Solar PVOn-shore wind

    15

    Solar conc.Degraded forest reforestation

    Co-generation - New build

    Nuclear

    Retrofit building envelope, residential

    20

    Recycling new waste

    Consumer electronics, residential-86.35

    Coal CCS new built

    -60

    0

    -70

    -30

    -40

    Grassland management

    Reduced deforestation fromslash & burn agriculture

    Coal CCS retrofit

    Reduced deforestation frompastureland conversion

    Off-shore wind

    -80

    -90

    50

    5

    Energy efficiency other Industry

    Abatement cost1 per tCO2e, 2030

    Abatement potentialGtCO2e per year

    SOURCE: McKinsey Global GHG Abatement Cost Curve v2.0

    Achieving 35 Gt in reductions will require capturing more than 90percent of the worlds economic reduction opportunities

    1 Up to costs of 60/t, excluding transaction costs, 4% discount rate

    Breakdown by geographiclocation

    12 Gt in developed countrygeographies

    26 Gt in developing countrygeographies

    Breakdown by abatementtype: 8 Gt for forestry 14 Gt for energy efficiency 12 Gt for low carbon energy

    supply 4 Gt for agriculture

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    6

    The cost curve can be broken down into three main

    abatement categories Average costEUR / t

    Abatement potentialin 2030Gt CO2e

    Low carbonenergy

    supply

    Land use

    Energyefficiency

    SOURCE: McKinsey Global GHG Cost Curve V2.0

    -32

    -9

    -7

    1

    8

    11

    14

    45

    Industrial and waste 6.6

    Transport 3.2

    Agriculture 4.6

    Reducing Emissions fromDeforestation/Forest Degradation

    5.1

    Afforestation/Reforestation 2.7

    Renewables, nuclearand other clean energy

    9.9

    CCS 2.2

    Buildings 3.5

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    7SOURCE: Global Insight; World Industry Monitor, February 2009; McKinsey

    100% =

    Energy industry

    IT and IT services

    Mechanical and plant engineering

    Energy-intensive industries

    Building technologies andconstruction industry

    Transportation and logistics

    36,500

    8,760

    1,1101,710

    9,830

    7,440

    7,650

    Energy is a critical strategic factor for 40 percent of theglobal economyGlobal revenues 2008, EUR billions

    60% 40%

    100% = 90,750

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    In Germany, the share of industries where energy is of strategicimportance is higher than in most industrialized nations

    SOURCE: Global Insight; World Industry Monitor, February 2009

    2008, percent

    5,380 7,460 3,640 4,170 4,370 21,070Total marketEUR billions p.a.

    Revenues ofrelevant sectorsEUR billions p.a. 2,380 3,210 1,420 1,460 1,360 6,320

    UK

    31

    France

    35

    Italy

    39

    Japan

    30

    Germany

    Transportation andlogistics

    44

    Building technologiesand constructionindustry

    Energy-intensiveindustries

    43

    Mechanical andplant engineering

    IT and IT services

    Energy industry

    World: 40%

    USA

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    9

    Growth centers offer business opportunities of more thanEUR 2 trillion

    SOURCE: McKinsey

    29%

    8%

    16%

    13%

    6%

    Total, selected andother growth centers Development of selected growth centers within the relevant sectors

    EUR billions p.a.

    13% p.a.

    2020

    500

    2008

    2,140

    Annual

    growth rate

    79

    5

    49

    87

    15

    345

    30

    120

    180

    325

    Energy industry

    IT and IT services

    Mechanical andplant engineering

    Building technologies

    Transportation andlogistics: passenger cars

    2008

    2020

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    10

    2

    13

    20

    35

    270

    110

    30

    360

    Plug-in hybrid2 and

    electric vehicles

    < 1

    Components of optimizedcombustion engines

    Hybrid vehicles1

    Energy-efficient cars global market potential in growthcenters

    SOURCE: McKinsey

    29%

    3

    27%

    Development in growth centers

    EUR billions p.a.

    2008

    2020, scenario: USD 60/barrel2020, scenario: USD 110/barrel

    31%

    25%

    3

    Energy-efficient cars:total, growth centers

    29% p.a.

    1 Largely "mild hybrids" in which the electric motor simply supports the combustion engine2 Full hybrids that can be operated purely on electricity3 Market currently too small to calculate the growth rate

    Annual growth

    rate

    15

    2008 2020

    325

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    7

    16

    23

    40

    10

    20

    35

    40

    75

    Smart homesolutions < 5

    < 1

    Decentral CHP< 1

    Heating technology

    Lighting

    Building insulation

    White goods

    Efficient building technologies global market potential ingrowth centers

    SOURCE: McKinsey

    Development in growth centers

    2008

    2020

    5%

    5%

    7%

    9%

    1

    1

    6% p.a.

    1 Market currently too small to calculate the growth rate

    Efficient buildingtechnologies: total,growth centers

    Annual growth

    rate

    87

    2008 2020

    180

    EUR billions p.a.

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    12

    5

    1

    16

    17

    10

    10

    15

    25

    30

    40

    Efficient motorsystems

    Efficient IT

    Heat recovery

    Automation andcontrol

    Industry-specificsolutions

    Efficient technologies in mechanical and plant engineering global market potential in growth centers

    SOURCE: McKinsey

    12%

    5%

    4%

    25%

    6%

    EUR billions p.a.

    8% p.a.

    49

    2008 2020

    120

    Mechanical and plantengineering: total,growth centers

    Annual growth

    rate

    Development in growth centers

    2008

    2020

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    1

    1

    3

    5

    10

    15

    Traffic management

    systems

    Smart gridsolutions

    IT in energymanagement

    Innovative IT systems in energy management globalmarket potential in growth centers

    SOURCE: McKinsey

    Development in growth centers

    20082020

    14%

    14%

    21%

    16% p.a.

    EUR billions p.a.

    Innovative IT systemsin energy management:total, growth centers

    Annual growthrate

    30

    5

    2008 2020

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    Low-emission technologies in the energy industry globalmarket potential in growth centers

    SOURCE: McKinsey

    15%

    10%

    14%

    10%

    1

    13% p.a.

    EUR billions p.a.

    Development in growth centers

    1 Market currently too small to calculate the growth rate

    Annual growthrate

    Low-emissiontechnologies in theenergy industry: total,growth centers

    79

    2008

    345

    2020

    0

    11

    13

    23

    32

    10

    35

    60

    75

    165

    Carbon captureand storage

    Biomass power

    Nuclear power

    Solar power

    Wind power

    2008

    2020

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    15

    Energy efficiency measures to Germany would reduceenergy consumption by roughly 20 percent until 2020

    SOURCE: McKinsey

    Energy consumption in Germany, TWh p.a.

    13

    Energy cost savingsEUR billions p.a. 21 7 41

    9

    Additional savings ofGerman companies abroad 0 3 12

    Total savingspotential in 2020:EUR 53 billion

    1 The same usage patterns and economic performance as in 2007 were assumed to give a better illustration of the savings potential

    250

    680

    1.000

    720 1,900

    520

    750

    20201Industrialproduction

    630

    Trans-portation

    Industrialproduction

    Buildings

    2.40090

    160

    BuildingsTrans-portation

    2007

    -21%

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    You can find studies and more aboutMcKinseys Climate Change SpecialInitiative here:

    http://www.mckinsey.com/clientservice/ccsi