11
Pathways to a Sustainable Future

Achieving an energy regime that meets human demands while protecting the global environment will require changing the relationship between energy use and economic activity. As several speakers at the summit pointed out, these two measures are correlated (Figure 11.1). However, the correlation is not invariant.

From 1977 to 1985, the U.S. economy grew 27 percent while the nation’s use of oil fell 17 percent. Oil imports fell by half, and imports from the Persian Gulf dropped by 87 percent. “It broke OPEC’s pricing power for a decade, because we customers, especially in America, … found that we could save oil faster than OPEC could conveniently sell less oil,” said Amory Lovins.

As Lovins pointed out, economic theorists have assumed that energy intensity in the world will fall by about 1 percent a year because of increasing efficiency. “If we could make that about 2 percent a year, it would stabilize carbon emissions with economic projections. If we could make that more like 3 percent per year, carbon emissions would fall and stabilize the climate fairly quickly.”

Reductions in energy intensity of 3 percent a year may seem high, but they are not uncommon, Lovins said. The United States has cut its energy intensity by that much or more in many recent years, including 4 percent in 2006. California’s energy intensity typically has dropped a percentage point faster than the U.S. average. China cut its intensity by more than 5 percent a year for a quarter of a century, although it recently “came off the rails” as it began using more energy-intensive basic materials. But if China were to make energy intensity a priority, as it is now beginning to do, the country could have 20 times the gross domestic product that it does today while emitting no



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11 Pathways to a Sustainable Future A chieving an energy regime that meets human demands while protecting the global environment will require changing the relationship between energy use and economic activity. As several speakers at the summit pointed out, these two measures are correlated (Figure 11.1). However, the correlation is not invariant. From 1977 to 1985, the U.S. economy grew 27 percent while the nation’s use of oil fell 17 percent. Oil imports fell by half, and imports from the Persian Gulf dropped by 87 percent. “It broke OPEC’s pricing power for a decade, because we customers, especially in America, . . . found that we could save oil faster than OPEC could conveniently sell less oil,” said Amory Lovins. As Lovins pointed out, economic theorists have assumed that energy inten- sity in the world will fall by about 1 percent a year because of increasing effi- ciency. “If we could make that about 2 percent a year, it would stabilize carbon emissions with economic projections. If we could make that more like 3 percent per year, carbon emissions would fall and stabilize the climate fairly quickly.” Reductions in energy intensity of 3 percent a year may seem high, but they are not uncommon, Lovins said. The United States has cut its energy intensity by that much or more in many recent years, including 4 percent in 2006. California’s energy intensity typically has dropped a percentage point faster than the U.S. average. China cut its intensity by more than 5 percent a year for a quarter of a century, although it recently “came off the rails” as it began using more energy-intensive basic materials. But if China were to make energy intensity a priority, as it is now beginning to do, the country could have 20 times the gross domestic product that it does today while emitting no 

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 THE NATIONAL ACADEMIES SUMMIT ON AMERICA’S ENERGY FUTURE 1.0 Netherlands Canada US UK Australia Spain Italy Japan 0.9 GermanyFrance Chile Poland South Korea 0.8 Mexico Kazakhstan Russia Central and South America Saudi Arabia 0.7 Developing Asia Human Development Index China Ukraine South Africa Industrialized countries Indonesia Egypt Africa 0.6 Iraq Middle East India Eastern Europe and former USSR Pakistan 0.5 Congo (Kinshasa) 0.4 Human Development Index, a measure of 0.3 Ethiopia human well-being, reaches its maximum plateau at about 4,000 kWh of annual electricity use per capita. 0.2 60 nations are plotted, representing 90% of Earth’s population. 0.1 0.0 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 Annual Per Capita Electricity Use (kWh) FIGURE 11.1 Annual per capita electricity use rises with the human development in- dex to a maximum at about 4,000 kilowatt-hours. SOURCE: Adapted from Pasternak (2000). Figure 11-1.eps redrawn more carbon, according to Lovins. Many companies have been cutting energy intensity—and in some cases absolute emission levels—by 6 to 9 percent a year. “They all make money on it,” Lovins said. Even Japan, which has less than half the energy intensity of the United States, is finding ways in official studies to triple energy productivity To solve the energy problem, the United States must increase its energy efficiency four- to fivefold, while the developing world grows in such a way that its energy intensity does not increase dramatically, said Steven Chu (Figure 11.2). “The real question is whether the developing countries will follow in the footsteps of the United States, Australia, and Canada,” said Chu. Or will they “leapfrog past the mistakes of the developed world”? The developed world has an obligation to lead the way and to help other nations follow, Chu said. “It is not our birthright to say that we should enjoy a high standard of living and the developing countries should not.” Several speakers pointed out that stabilizing the amount of carbon diox- ide in the atmosphere will require that carbon emissions be cut to a very low

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 PATHWAYS TO A SUSTAINABLE FUTURE 25 USA CO2 emissions per capita (metric tons) 20 Australia 15 Russia Ireland UK 10 S. Korea Japan Malaysia Greece France 5 China Mexico Brazil India 0 0 10,000 20,000 30,000 40,000 50,000 GDP per capita (PPP, constant 2005 international $) FIGURE 11.2 As the per capita gross domestic product of the developing countries increases, carbon dioxide emissions can either rise 10-20-08 level of the most energy- to the 11-2 new intensive developed countries (upper curve) or remain at the level (lower curve and dashed straight line) that the developed world needs to reach to avoid dangerous climate change. PPP, purchasing power parity. SOURCE: Based on EIA and UN data plotted by members of the Office of the Chief Scientist, BP plc. GDP per capita data from the World Bank World Development Indicators 2008 database. level—or eliminated entirely—in the United States and many other countries. “Zero [emissions] is the answer,” said Robert Marlay. “Zero is a very inspiring technological goal, which has permeated all the thinking in the R&D agencies. This is what we need to imagine is possible. This is what we need to craft our vision and our programs to do. This is what we are going after.” As John Holdren said, “If you look at how long carbon dioxide stays in the atmosphere, we’re going to have to be very near zero by the end of this century or shortly thereafter if we want the impacts of climate change to be manageable. And we’re not going to avoid all of the impacts. I often say that in the climate challenge, we have only three choices—mitigation, adaptation, and suffering—and we’re already doing some of each. What’s up for grabs is the mix. If we want the suffering to be minimized, we’re going to have to do a whole lot of mitigation and a whole lot of adaptation.”

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 THE NATIONAL ACADEMIES SUMMIT ON AMERICA’S ENERGY FUTURE Several speakers at the summit described plans that would substantially reduce U.S. emissions of carbon dioxide. This chapter describes two of those plans. Steven Specker presented an analysis done by the Electric Power Research Institute (EPRI) that would reduce carbon dioxide emissions to levels below those for 1990 by the year 2030. Jon Creyts and Ken Ostrowski summarized a McKinsey & Company analysis (2007) that looked at more than 200 options for reducing carbon dioxide emissions. Although neither plan would reduce carbon emissions to anywhere near zero, both would “bend the curve” of U.S. emissions so that they begin to decline rather than continuing to increase. ELECTRICITY TECHNOLOGY IN A CARBON-CONSTRAINED FUTURE In plotting the future of electricity technologies given future constraints on carbon dioxide emissions, EPRI set out to answer three questions: 1. What is the technical potential for reducing U.S. electric sector carbon dioxide emissions? 2. What are the economic impacts of different technology strategies for reducing U.S. electric sector carbon dioxide emissions? 3. What are the key technology challenges for reducing electric sector carbon dioxide emissions? The EPRI analysis focused on the period between now and 2030, since that is the period when technologies will have to be deployed to bend the curve of growing carbon dioxide emissions, Specker said. Using projections from the EIA of carbon dioxide emissions over that period—which were recently modified to reflect the impact of the 2007 energy legislation—the EPRI study looked at the potential of seven technology areas to reduce emissions (Figure 11.3). The first area is efficiency. EPRI set a target of 0.75 percent growth for consumption in the electricity sector until 2030. That target is “aggressive but doable,” said Specker. “If we can do better, that’ll be fantastic, but we think that’s a significant technical challenge.” The best thing about efficiency improvements is that they can be started immediately. “You don’t have to pour concrete. You don’t have to build . . . new plants. There’s a lot we can do with efficiency right now.” The second area EPRI considered is renewable sources of energy. The EIA has forecast that 60 gigawatts of such power would be available by 2030. The technology challenge set by EPRI is for 100 gigawatts. Together, efficiency improvements and additional sources of renewable energy “get pretty close, at least for a while, to flattening out carbon dioxide emissions in the electricity sector if we can achieve these targets.”

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3000 1 EIA Reference Case 2008 (03/08) 2 2500 3 4 2000 5 EIA 2008 Reference Case Technology Target (03/08) 6&7 Efficiency Load Growth ~ +1.05%/yr Load Growth ~ +0.75%/yr 1 1500 Renewables 55 GWe by 2030 100 GWe by 2030 2 Nuclear Generation 15 GWe by 2030 64 GWe by 2030 3 No Heat Rate Improvement 1-3% Heat Rate Improvement for U.S. Electric Sector 1000 for Existing Plants 130 GWe Existing Plants Advanced Coal 4 Generation 40% New Plant Efficiency 46% New Plant Efficiency by 2020–2030 by 2020; 49% in 2030 CO 2 Emissions (million metric tons) CCS None Widely Deployed After 2020 5 500 10% of New Light-Duty Vehicle PHEV None 6 Sales by 2017; 33% by 2030 DER <0.1% of Base Load in 2030 5% of Base Load in 2030 7 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 FIGURE 11.3 Emissions of carbon dioxide by the U.S. electric generation sector could drop below 1990 levels by 2030 through the use of Figure 11-3.eps seven categories of technologies. NOTE: CCS, carbon capture and sequestration; PHEV, plug-in hybrid electric vehicle; DER, distributed energy resources. SOURCE: Energy Technology Assessment Center of the Electric Power Research Institute. broadside 

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0 THE NATIONAL ACADEMIES SUMMIT ON AMERICA’S ENERGY FUTURE The third technology challenge is greater use of nuclear energy. Compared with the EIA forecast of 20 gigawatts of new nuclear capacity by 2030, EPRI has set a target of 64 gigawatts of new nuclear power by then. The first new advanced light-water reactors would come on line in 2016. Creating 64 giga- watts of new capacity would require 40 to 45 new advanced light-water reactors by 2030. When new nuclear capacity is added to efficiency and renewables, the curve of carbon dioxide emission starts to bend downward. Advanced coal generation without carbon capture and sequestration is the fourth area. Two opportunities exist in this area. About half of the existing coal plants in the United States have the potential for efficiency improvements of 1 to 3 percent. That’s the “quickest, easiest way to get carbon dioxide reduc- tions in the existing installed base,” Specker said. The second opportunity is to improve the technology of plants through higher temperatures and pressures to get efficiencies as high as 49 percent by 2030. This goal poses “lots of materi- als challenges,” said Specker, but it is an important component of the overall plan. The EIA reference case does not assume any carbon capture and seques- tration because it is based on existing laws and regulations without a price on carbon. EPRI has set a goal of wide-scale deployment of advanced coal with carbon capture and sequestration by 2020—its fifth technological focus—that would require all new coal plants coming on line after 2020 to have up to 90 percent carbon capture and storage. This is “a very daunting technology chal- lenge,” said Specker, “but we think [it is] absolutely essential.” The sixth area is the widespread use of plug-in hybrid electric vehicles, an area in which EPRI has focused considerable attention in recent years. And the seventh and final area is the use of distributed energy resources, mostly solar photovoltaic energy, which could expand significantly in the latter part of the period EPRI considered. With these areas of emphasis, carbon dioxide emissions can be reduced below 1990 levels by 2030, and the curve of increasing emissions can start to bend in the 2012 to 2015 time period, according to the EPRI analysis. “It’s all about efficiency and renewables in these early years,” Specker said. “But that’s not going to be enough to do what we need to do long-term.” The EPRI analysis took a second approach to considering carbon dioxide emissions. It assumed that emissions would be limited in the future and asked how electricity production would have to change given those limits. The sce- nario considered most thoroughly by EPRI assumed that emissions would be capped from now until 2020 and then be required to decline at 3 percent per year starting in 2020, which would produce a 50 percent reduction in emissions by 2050. It also considered two possible technology scenarios: a full portfolio in which all of the technologies considered earlier meet their assumed targets, and a limited portfolio in which carbon capture plus sequestration does not occur and nuclear capacity remains what it is today (Table 11.1). These are “arbitrary

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 PATHWAYS TO A SUSTAINABLE FUTURE TABLE 11.1 Comparison of Two Possible Technology Scenarios Full Portfolio Limited Portfolio Supply Side Carbon capture and storage Available Unavailable New nuclear Production can expand Existing production levels ~100 GW Renewables Costs decline Costs decline more slowly New coal and gas Improvements Improvements Demand Side Plug-in hybrid electric vehicles Available Unavailable End-use efficiency Accelerated improvements Improvements NOTE: The full technology portfolio assumes that all technologies meet their development objec- tives, while a limited portfolio assumes slower progress. SOURCE: Energy Technology Assessment Center of the Electric Power Research Institute. assumptions,” said Specker, designed to “understand the role of nuclear and coal with and without those resources in the future.” In the full technology portfolio, coal without carbon capture and sequestra- tion phases out by 2040 and is replaced by coal with carbon capture and seques- tration (Figure 11.4). Natural gas is used more to meet peak electricity demands than as a baseload source of energy. Consumption is reduced somewhat due to higher prices (as shown by the cross-hatched area at the top of the graph). By 2040, according to this plan, the electricity sector is basically decarbonized, according to Specker. “By 2040 we will have caught up with France in the electricity sector,” Specker said, since France already gets most of its electricity from nuclear power and renewable energy sources. “That’s always something to keep in mind as we talk about the daunting challenge of decarbonizing the electricity sector—at least one industrialized country has done it.” The situation is very different with the limited technology portfolio (Fig- ure 11.5). According to EPRI’s model, to meet the same constraints on carbon dioxide emissions, coal has to be largely phased out by 2040. Reliance on natural gas is much increased. Hydroelectric power, wind power, and other renewables play a much larger role. And the consumption of electricity must be significantly decreased. “You basically are forced to reduce electricity demand because you cannot generate electricity in a low-carbon way.” One consequence of such a scenario is that electricity is likely to be much more expensive to dampen demand. Electricity prices could go up an estimated 260 percent to drive down the use of electricity, compared to a 50 percent increase for the full technology portfolio (Figure 11.6). The cost to the U.S. economy of adopting carbon constraints depends on which technologies are developed (Figure 11.7). With the limited technology portfolio (the left-hand bar on Figure 11.7), the cost of the policy, discounted

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2 THE NATIONAL ACADEMIES SUMMIT ON AMERICA’S ENERGY FUTURE 8 Demand with No Policy 7 Demand Reduction Wind 6 Hydro 5 Trillion kWh/yr Nuclear 4 3 Gas 2 Coal with CCS 1 Coal 0 2000 2010 2020 2030 2040 2050 FIGURE 11.4 The full technology portfolio results in the decarbonization of most of the electricity sector by 2040. SOURCE: Energy Technology Assessment Center of the Electric Power Research Institute. Figure 11-5.eps bitmap images low resolution through 2050, is about a trillion and a half dollars, according to the EPRI model’s estimates. With the full technology portfolio (the right-hand bar), the cost is about a half trillion dollars. “If we have a carbon dioxide policy in the next few years, which we very likely will, how we then implement that policy with technology is the trillion-dollar question,” Specker said. “Technology is critical to managing the cost of a carbon dioxide policy.” For each of the major areas considered in its analysis, EPRI laid out the key technologies that need to be developed to reduce carbon dioxide emissions. These technologies fell into four categories (Figure 11.8). EPRI has created development and deployment roadmaps for each of these technologies showing what is going on now and what will need to be done at various points in the future, “Everyone is very focused about getting things done,” said Specker. “We have to get on with [meeting] these challenges.” Funding will have to come from the private as well as the public sector. “We’re trying to keep the ball in play and keep it moving forward. That’s the pragmatic approach.”

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 PATHWAYS TO A SUSTAINABLE FUTURE 8 7 Demand with No Policy 6 Demand Reduction 5 Trillion kWh/yr Biomass 4 Wind Hydro 3 Nuclear 2 Gas 1 Coal 0 2000 2010 2020 2030 2040 2050 FIGURE 11.5 The limited technology portfolio would require a substantial decrease in electricity use below the business-as-usual scenario. SOURCE: Energy Technology Assessment Center of the Electric Power Research Institute. Figure 11-6.eps bitmap image low resolution REDUCING U.S. GREENHOUSE GAS EMISSIONS McKinsey & Company, a business consultancy firm that advises corpora- tions and governments, recently conducted a comprehensive analysis of options to reduce greenhouse gas emissions (McKinsey & Company, 2007). The analysis considered both proven, commercialized technologies and four emerging tech- nologies: carbon capture and sequestration, cellulosic biofuels, plug-in hybrids, and LED lighting. It did not examine more speculative technologies in detail. “It’s not because we don’t believe those will happen,” said Ken Ostrowski. “In fact, we’re quite encouraged, and we know that as the United States and other economies begin to focus on this task more seriously, there will undoubtedly be important breakthroughs. But we focused our analysis only on those that were proven or the four that I mentioned that were emerging.” The project covered seven sectors of the economy: buildings, power, trans- portation, industry, waste, agriculture, and forestry. Researchers conducted interviews with more than 100 leading authorities and companies. They also

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 THE NATIONAL ACADEMIES SUMMIT ON AMERICA’S ENERGY FUTURE 180 4.0 160 Index Relative to Year 2000 3.5 140 In the full technology portfolio the price of electricity 3.0 has a low CO 2 cost component and increases less 120 2.5 $/MWh* 100 Limited 2.0 80 1.5 Full 60 1.0 40 0.5 20 0 0.0 2000 2010 2020 2030 2040 2050 Year *Real (inflation-adjusted) 2000$ FIGURE 11.6 With the full technology portfolio, the wholesale price of electricity Figure 11-7.eps would be much less than with the limited technology portfolio. SOURCE: Energy Tech- broadside nology Assessment Center of the Electric Power Research Institute. 0.0 Full Portfolio Limited Portfolio enewables Only + CCS Only Nuclear Only + PHEV Only Efficiency Only + PHEV Only + CCS Only + + RenewablesOnly + + EfficiencyOnly ++ NuclearOnly Full Por tfolio Li mited Por tfolio Change in GDP Discounted Through 2050 t t Cost of Policy -0.5 E ($Trillions) Re $1 Trillion Reduction in $1 Tri llion Policy Cost -1.0 10 with Advanced Technology -1.5 Value of Advanced Technolog ies Figure 11-8.eps FIGURE 11.7 The change in gross domestic product through 2050 owing to adoption broadside of carbon dioxide reduction policies becomes substantially smaller as more new energy technologies become available. SOURCE: Energy Technology Assessment Center of the Electric Power Research Institute.

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 PATHWAYS TO A SUSTAINABLE FUTURE 1 • Enabling Efficiency, PHEVs, DER via the Smart Distribution Grid • Enabling Intermittent Renewables 2 via Advanced Transmission Grids 3 4 • Expanded Advanced Light-Water 5 Reactor Deployment 6&7 • Advanced Coal Plants with CO2 Capture and Storage FIGURE 11.8 Reducing carbon dioxide emissions will require technological advances in the four key areas shown on theFigure seven categories of contributing technolo- right. The 11-8.eps gies (left) are those shown in Figure 11.3. SOURCE: Energy Technology Assessment partially fixed image low resolution Center of the Electric Power Research Institute. took advantage of the internal expertise available at the company. An academic panel provided support and guidance, and the overall project was sponsored by seven corporate and environmental organizations, although the report remains an independent report put together by McKinsey & Company. “Essentially, we talked to anybody who had expertise and was open to talk with us,” said Ostrowski. “We tried to make this a very extensive, comprehensive assessment of the state of knowledge.” Using data from the EIA and other organizations, the McKinsey analysts constructed an emissions reference base from the present to the year 2030. In 2005, the United States emitted approximately 7.2 billion metric tons of carbon dioxide. Under a business-as-usual scenariowith an expanding population, a growing economy, and larger homes and businesses containing more appli- ances—the expected growth to 2030 was 2.5 billion metric tons, to a total of 9.7 billion metric tons in 2030, a 35 percent increase in emissions. This projec- tion is unlikely to be completely accurate, Ostrowski noted. But it provided a defensible baseline against which to measure emissions reductions. Based on that projection, the McKinsey project considered three sce- narios. In the low-range case, carbon dioxide emissions are 1.3 billion metric tons less in 2030 than in the baseline case. This figure represents a relatively “uncoordinated response to the challenge that the nation faces,” Ostrowski said. “Some might say that’s the path we’re on today, but this essentially says there are incremental improvements over the course that we would have been on otherwise.” The mid-range case, which would result in a 3-billion-metric-ton reduc- tion in emissions, represents a more concerted and coordinated response. This would be “a fairly aggressive response,” according to Ostrowski, “but still

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 THE NATIONAL ACADEMIES SUMMIT ON AMERICA’S ENERGY FUTURE we would stop shy . . . of saying we took every single option to its maximum economic potential.” The high-range case—leading to a reduction of 4.5 billion metric tons— represents a fully committed response. As Ostrowski described it, this case would imply that “we are absolutely serious about carbon, and we’re going to hit every single option that we can to its maximum potential.” The McKinsey report focuses primarily on the mid-range and high-range cases, or a potential abatement of 3 billion to 4.5 billion metric tons. This level is on the order of the reductions called for by various bills that are being dis- cussed in the U.S. Congress. “Only as we get well past our mid-range case and into the aggressive territory do we begin to match the levels that are currently being called for.” The authors of the McKinsey report examined 250 different options for reducing carbon dioxide emissions. They asked how each technology or approach would be developed and commercialized over time, and what level of abatement it could provide. They then aggregated the 250 options into 83 categories and calculated how much abatement each category could provide and the cost of the abatement. The result was a widely reproduced chart (Figure 11.9). The width of each bar on the chart represents the potential abatement attributable to that option in billions of metric tons, with the sum of all the bars about 3 billion metric tons of reduced emissions. “This represents essentially three times the total level of emissions by Germany,” Ostrowski said. “Still, even at this level, we would be short of the levels that are being called for today.” The height of each bar represents the cost of that option, with “cost” being the incremental capital, operating, and maintenance costs relative to what would have been spent under the baseline scenario. “If we decide to build an incremental nuclear plant, we would compare the incremental capital, operat- ing, and maintenance costs of that additional nuclear plant relative to what it displaced, which was likely some combination of a supercritical coal plant and a combined-cycle gas plant.” One obvious aspect of the chart is that the set of abatement options is highly fragmented. The widest band represents about 10 percent of the total abatement. “There is no silver bullet,” Ostrowski said, “and if one of these options does not deliver the full potential, it does not mean that we cannot achieve near the levels that are projected here.” The second obvious aspect of the chart is that some of the bars extend below the line. These represent options that have a positive net impact on the economy. The incremental capital costs are more than offset by the operat- ing and maintenance savings that are realized over the lifetime of that action. For example, a compact fluorescent bulb has a higher initial cost, but the lifetime and energy efficiency of that bulb are so much greater that use of the bulb results in a net savings. Furthermore, when all the options are con- sidered together, the total savings are approximately equal to the total costs.

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Abatement costs <$50/ metric ton Cost Residential Commercial Real 2005 dollars per metric ton CO2e Low-, mid- buildings – buildings – 100 penetration HVAC HVAC Nuclear 90 onshore wind equipment equipment new-build 80 efficiency efficiency Fuel economy Coal Industrial 70 Distributed packages – process mining – 60 solar PV Light trucks improve- Methane 50 Residential Active forest ments mgmt electronics 40 management 30 Residential buildings - 20 Lighting 10 0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 -10 -20 Potential billion metric -30 Industry – Biomass tons/year CCS new -40 power – Industry – builds on Cofiring Combined -50 Manufac- carbon- heat and -60 turing – intensive Car power HFCs -70 processes hybridi- mgmt -80 zation Coal power Cellulosic -90 plants – CCS new biofuels -100 builds with EOR Natural Coal-to- -110 Commercial gas and gas shift – Conservation Commercial electronics -120 Winter petroleum Dispatch of tillage buildings – cover crops systems existing plants New shell mgmt improvements Reforestation -230 Fuel economy Afforestation of packages – Cars pastureland FIGURE 11.9 Eighty-three options for reducing carbon dioxide emissions could result in almost 3 billion metric tons of emissions reductions Figure 11-9.eps with net economic benefits (bars below the line) about equal to net costs (bars above the line). SOURCE: McKinsey & Company (2007).  broadside

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 THE NATIONAL ACADEMIES SUMMIT ON AMERICA’S ENERGY FUTURE “We would achieve 3 billion metric tons of abatement without incremental costs,” Ostrowski said. Jon Creyts pointed to some of the detailed aspects of the opportunity pro- file. For example, energy efficiency, which is shown primarily on the left side of Figure 11.9, accounts for roughly 40 percent of the total abatement potential. “Once you change out a light bulb, once you change to a different automobile, once you increase the insulation thickness or put on a reflective roof coating, you have essentially created a durable form of energy efficiency that you can count on,” Creyts said. There are a variety of reasons why the options with positive economic ben- efit are not necessarily easy to implement. For example, a landlord and a tenant may have competing interests, as may a builder and an owner. Automobile own- ership is another issue. The average person owns an automobile for between 4 and 5 years and so does not benefit from the full 14- to 15-year lifespan of a typical automobile. A lack of information also may disrupt or prevent capture of some of the benefits. “Often, our work has been taken out of context, and people use it as a way to push forward the notion that this is cheap and easy to do,” Creyts said. “We have said clearly—and we maintain quite clearly—that energy efficiency is very difficult to achieve.” However, Creyts added, compared with the challenge of liquefying carbon dioxide gas coming out of the back end of a power plant, pumping it underground, and keeping it there for thousands of years, efficiency improvements deserve special attention. Ostrowski and Creyts also noted that in many cases policies have to change to enable implementation of emissions-reducing options, and the McKinsey study did not factor in the costs of those policies. “We did not want to prescribe what the policy solution should be,” said Ostrowski. “There are many ways to address this issue, and we’ll leave that up to the policymakers.” The McKinsey study looked at several categories of technologies with substantial abatement potential (Figure 11.10). In each case, it evaluated the potential under the low-range, mid-range, and high-range cases. For example, with carbon capture and sequestration, the projections started at zero in 2005, with succeedingly higher adoption in each case. In addition, within these cat- egories substantial potential exists for emissions reductions with net benefits to the economy (Figures 11.11 through 11.15). Ostrowski and Creyts noted that where an option falls on the curve—thus representing its net cost—often depends on the sequencing of events. For example, the rate at which the electric grid or transportation are decarbon- ized influences a variety of energy efficiency options, such as the use of plug- in hybrids. Also, efficiency improvements could postpone the need to build additional generating capacity until more efficient power plants are developed. If plant construction was delayed, as much as $300 billion of additional invest- ment in generating capacity could be avoided. “If we aren’t able to capture that energy efficiency early, we may very well wind up building that additional $300 billion and then idling that capacity in the longer run,” said Creyts.

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 PATHWAYS TO A SUSTAINABLE FUTURE Low-range Mid-range High-range 2005 case case case Coal with CCS • 0 22 55 83 (gigawatts) Nuclear • 100 113 129 153 (gigawatts) • Renewables Wind – 10 70 116 164 • Solar – <1 38 80 228 (gigawatts) Cellulosic biofuels • 0 5 14 51 (billion gallons) Light-duty vehicle • 25 mpg 30 40 44 performance (mpg) Efficient new • 8% 15% 70% 75% residential lighting 1.3 3.0 4.5 Abatement potential below $50/metric ton, in billions of metric tons FIGURE 11.10 Six categories of advanced technologies could produce low-, medium-, and high-range emissions reductions. SOURCE: McKinsey & Company (2007). Figure 11-10.eps For the mid-range case, the McKinsey study estimates that the up-front capital costs to the economy would be about $1.4 trillion. This amount is only about 1.8 percent of the total real capital investment in the economy over this period, Creyts noted. But it is concentrated in certain sectors of the economy. For example, $560 billion of that investment is within the power sector, which represents “a massive recapitalization of the power sector.” Similarly, transpor- tation will have to undergo a significant recapitalization. Investments in emissions-reducing technologies would have substantial impacts on the energy-producing sector, Creyts observed. Conventional coal- powered energy production would decline substantially, with an increase in carbon capture and sequestration. Energy from renewable sources would increase. Counterintuitively, the use of natural gas declines quite significantly from its current role, which creates a catch 22 for the electricity industry. “If we are unable to capture energy efficiency in the near term, we would wind up building out that gas asset base and wind up essentially idling it in the long- term because gas would compete fundamentally at the margin with renewable power,” said Creyts. “That could lead to a large amount of stranded assets here in the United States.”

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00 THE NATIONAL ACADEMIES SUMMIT ON AMERICA’S ENERGY FUTURE Options less than $50/metric ton CO2e Average cost Potential million Description $(2005 real)/metric ton CO2e metric tons CO2e • Substitution of advanced lighting technologies -87 240 Lighting • Electronic Greater in-use efficiency and reduced 120 -93 equipment stand-by losses stand by • More efficient equipment for initial installation HVAC 45 100 and retrofits equipment • Performance tuning for existing systems • Combined heat Increased use with office buildings -36 70 and power >100,000 sq. ft. hospitals and universities • Improved new-build shells and retrofits from -42 60 Building shell better insulation, air tightening, reflective roof coatings • Improved efficiency units and switch to alternative Residential -8 50 fuel/technologies water heaters • Building controls 70 Other • Residential and commercial appliances • Commercial water heaters FIGURE 11.11 Improvements Figure 11-11.eps in buildings and appliances offer many options with net benefits to the economy. SOURCE:broadside & Company (2007). McKinsey Options less than $50/metric ton CO2e Average cost Potential million $(2005 real)/metric ton CO2e metric tons CO2e • Commercialization with various Cellulosic 100 -18 feedstocks and conversion processes biofuels Fuel economy – -81 95 • Various technology upgrades to improve cars fuel efficiency • Greater use of alternative propulsion Fuel economy – systems (diesel) -69 70 light trucks Fuel economy • Technology upgrades to improve fuel 30 -8 – medium/ efficiency heavy trucks y Light-duty • Plug-in capability in addition to basic 15 20 plug-in hybrids hybridization • Hybridization of medium and heavy trucks y y • 25 Other Aircraft fuel efficiency from design and operations • Reduced leakage from air conditioning systems Figure 11-12.eps FIGURE 11.12 Vehicle fuel economy and lower-carbon fuels will be essential to reduce broadside transportation emissions. SOURCE: McKinsey & Company (2007).

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0 PATHWAYS TO A SUSTAINABLE FUTURE Options less than $50/metric ton CO2e Average cost Potential million $(2005 real)/metric ton CO2e metric tons CO2e Description • Methane in mining, fossil-fuel system , waste Recovery / • HFCs/PFCs in manufacturing 3 destruction of 255 • N2O in chemical processes non-CO2 GHGs • Carbon-intensive processes like coal-to-liquids Carbon capture 49 • 9 95 Co-generation sites with CCS new-builds and storage • For primary metals, food, refining, chemicals, Combined heat pulp and paper processes -15 • 80 and p power Medium and large turbine applications (>5 MW) • Measures on fired and steam systems, process controls, energy recovery, maintenance Energy efficiency 6 75 • Electric motor upgrades and specific system improvements Process • Greater use of advanced processes, recycling -33 and product 70 and product recovery, product reformulation and innovations commercial use of emerging technologies • Composting C • 45 Capping and restoration layers in landfills Other • Small-scale electric generation projects Figure 11-13.eps FIGURE 11.13 Options in industry broadside and the waste sector are highly fragmented. SOURCE: McKinsey & Company (2007). Options less than $50/metric ton CO2e Average cost Potential million Description $(2005 real)/metric ton CO2e metric tons CO2e • Afforestation – New trees primarily on marginal or idle land 130 18 pastureland where erosion is high and/or productivity is low • Active – thinning, stand improvement Forest 110 23 • Passive – restricted grazing, natural regeneration management • Restoration of degraded forests Afforestation – • New trees primarily on marginal or idle land 39 80 cropland where erosion is high and/or productivity is low Conservation • Planting crops amid previous crop’s residue, 80 -7 tillage e.g., using ridge tillage and no-till farming • Planting harvested cropland with grass or Winter cover 27 40 legume cover crop during winter crops • Elimination of summer fallow i ti Other <5 Figure 11-14.eps FIGURE 11.14 Terrestrial carbonbroadside substantial abatement potential at moder- sinks offer ate cost. SOURCE: McKinsey & Company (2007).

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02 THE NATIONAL ACADEMIES SUMMIT ON AMERICA’S ENERGY FUTURE Options less than $50/metric ton CO2e Average cost Potential million $(2005 real)/metric ton CO2e metric tons CO2e Description • Rebuilds of pulverized coal plants with CCS, f Carbon capture 44 290 plus CCS new-builds and storage • Includes injection to enhance oil recovery • Class 5-7 onshore winds with economic Wind 20 120 grid integration costs • Nuclear power plant new-builds 9 • Nuclear 70 Up-rates for existing nuclear plants • Reactivations • Conversion Improved heat rates of base-load pulverized 60 -15 efficiency coal power plants • Residential and commercial distributed power 29 Solar PV 50 generation with solar photovoltaics • Low-class on-shore and offshore wind (90) • Concentrating solar power (50) Other 210 • Biomass co-firing (50) • Geothermal power (10) • Small hydroelectric power (10) FIGURE 11.15 Electric powerFigure 11-15.epslarge but higher-cost abatement poten- generation offers broadside tial. SOURCE: McKinsey & Company (2007).