The consulting firm estimates that €530 billion will need to be invested across the world by 2020 to reduce emissions to 70% below "business as usual" and avoid dangerous levels of global warming. Overall, €810 billion would need to be invested by 2030 to to avoid such a scenario, the report adds.
It nevertheless stresses that immediate, cross-sector action is a prerequisite for achieving the necessary reductions, because every year of delay will both increase emissions and lock the economy into a high-carbon path for the future.
The report puts together a global cost curve for greenhouse gas abatement, comparing the options for moving to a low-carbon economy at a cost below €60 per tonne of carbon emissions. It identifies three main sectors where emissions can be reduced most cost-effectively.
The biggest reductions, 14 gigatonnes (Gt) or some 40% of global potential, can be achieved by designing vehicles, electrical appliances and buildings that consume less energy, according to McKinsey. Here, investment is most likely to be recouped over time, the report says.
The power sector could contribute a further third (12 Gt) by moving to green, renewable energies such as wind, solar and biofuels, and by fitting coal-powered stations with carbon capture and storage technologies (CCS; see EurActiv LinksDossier), the report argues. Moreover, savings of a similar scale can be made by halting deforestation in developing countries and boosting natural carbon absorption by reforestation activities, it claims.
Compared to 2006's influential Stern report, which estimated the cost of inaction to be between five and 20% of global GDP, McKinsey believe investing in the shift to a low-carbon economy is significantly cheaper, and potentially as low as 0.5%, according to the report's most optimistic scenario.
Moreover, the study identifies further significant opportunities for emission savings in sectors that were nevertheless deemed too expensive to implement. These include CCS outside the power generation sector and less energy-intensive manufacturing processes. Another area of major potential is lifestyle change, including eating less meat or driving smaller cars. Both steps can significantly reduce emissions, argue McKinsey, before conceding that such assertions are more difficult to quantify.
The report refrains from giving policy recommendations on the basis of its findings, but representatives of the contributing businesses and NGOs present at its launch agreed that they provide a strong basis for an international climate deal. The study underlines the urgency of action in all countries and all sectors, while participants argued that reaching a global agreement this year is imperative.
