Cut carbon, increase productivity

U.S. businesses that commit to cutting carbon emissions by 3 percent annually through 2020 could reap as much as $190 billion from reduced energy bills, increased productivity and innovation, and the tapping of new clean energy sources such as solar, a new report from the World Wildlife Fund and CDP has found.

But with the atmospheric concentrations of carbon touching 400 ppm, the window of opportunity is closing fast, and failure to begin curbing emissions of carbon dioxide and other greenhouse gases by the end of this decade will make it much harder to meet carbon reduction goals over the long term, according to the report.

In real numbers, that means U.S. businesses must shave 1.2 billion tons (1.2 gigatons), or 25 percent, from their current annual emissions levels of 4.2 billion tons of CO2 equivalent by 2020, according to the report. The glide path for meeting such a target would require a roughly 3 percent reduction in the U.S. business sector's CO2 every year for the next six years.

"Increasing the global average temperature more than 2°C above pre-industrial levels -- a path we are now on -- would cross a threshold beyond which climate change is expected to have long term, irreversible, and dangerous effects," states the report, titled "The 3% Solution."

"It's a big goal. It's a tough goal. But we think it's achievable, and we think it can be done profitably," said Steve Swartz, a partner with McKinsey & Co. and lead author of the report. Paul Simpson, chief executive officer of London-based CDP, formerly the Carbon Disclosure Project, said the new report points to specific financial opportunities that U.S. corporations can seize to drive down carbon emissions while enhancing other measures of business productivity, including profit margins.
The report, based on an analysis by McKinsey, makes clear that the old business paradigm that held that profit and environmental protection objectives run counter to each other no longer holds true. In fact, many U.S. businesses, including numerous Standard & Poor's 500 index firms, have reported a higher rate of return on investments in carbon-reduction technologies than on overall corporate capital investments.
McKinsey also found that nearly 80 percent of S&P 500 companies that report emissions to CDP see bigger financial returns on their carbon reduction investments than their overall capital investments, making reallocation of their capital expenditures a sound business decision.
Yet to unlock the billions of dollars in cost savings, the U.S. corporate sector would need to invest on average 3 to 4 percent of total capital expenditures each year on low-risk, profitable carbon reduction projects.