POWER UP A WINNER - Plant Services

from the editor
paul studebaker, cmrp
Who Will Pay
How to win the carbon game
Ongoing climate-change treaty negotiations in preparation
for the November 2009 United Nations Climate Conference
have focused a lot of attention on the costs of carbon
emissions. President Obama has pledged to put the United
States on a path to cut emissions to 1990 levels by 2020 (with
an additional 80% reduction by 2050).
The current Kyoto Protocol covers only about 30% of
global emissions, mainly because the United States and
China didn’t ratify it, and the rest of the world is unlikely to
go forward without us. So, the world’s leading greenhouse
gas emitters are grappling to determine which country will
lose more ground as a consequence of cleaning up our acts.
U.S. Energy Secretary David Chu recently suggested that the
United States might use tariffs against trading partners who
don’t reduce greenhouse gas emissions. “If other countries don’t
impose a cost on carbon, then we would be at a disadvantage,”
Chu told the House Science and Technology Committee. Import
duties could be used to offset that competitive advantage.
The next day, China climate change negotiator Xie Zhenhua
responded, “I oppose using climate change as an excuse to
practice protectionism on trade.” A dust-up ensued over who
should shoulder the cost of cutting emissions for goods produced
overseas. If a product manufactured in China is sold in
the United States, who’s responsible for its carbon footprint
Li Gao, director of China’s Department of Climate Change,
says countries that buy Chinese goods should be held responsible
for the carbon dioxide emitted during manufacturing.
“About 15% to 25% of China’s emissions come from the
products which we make for the world, which should not be
taken by us,” Gao said at a forum sponsored by the Pew Center
on Global Climate Change. “This share of emission should be
taken by the consumers, not the producers.”
Principles are important, but what’s a ton of CO 2
actually
worth on the global market Numbers commonly bandied
about range from about $10 per ton to $40 per ton, equivalent
to about 10 cents to 40 cents for the 20-odd pounds
generated by combusting a gallon of a fuel like gasoline. This
cost isn’t trivial, but it’s not large compared to the variations
in the cost of the fuel itself during the past year (from about
$2 per gallon to $4 per gallon) brought on by vagaries of
supply, demand and speculation.
People tend to focus on the cost of carbon credits, how
they’ll affect prices of fuel and electricity, who will have to
pay, and whether the government will get the money. But for
a broad range of carbon-emission-reducing activities, the
price is negative – more than offset by lower energy costs. In
effect, a market in greenhouse gas emissions credits offers
smart people a lot of opportunity to improve their competitive
positions and bottom lines.
McKinsey and Co. analyzed more than 250 sources of
U.S. carbon dioxide emissions and the per-ton costs to
For a broad range of carbonemission-reducing
activities,
the price is negative – more than
offset by lOWer energy costs.
reduce them. (See the full report at www.mckinsey.com/
clientservice/ccsi/pdf/Greenhouse_Gas_Emissions_Execu
tive_Summary.pdf.) They found that the United States could
reduce greenhouse gas emissions by about 3 gigatons CO 2
equivalent by 2030, using tested approaches and high-potential
emerging technologies, at marginal costs of less than
$50 per ton. The total outlay between now and 2030 would
average $50 billion a year, a total of about $1 trillion.
That’s chump change at AIG, but more interesting are
McKinsey’s calculations of measures that offer sizeable paybacks
for CO 2
-equivalent reductions. These include:
• Higher-efficiency commercial and residential electronics:
$90 per ton
• Residential and commercial lighting: $80 to $90 per ton
• Combined heat and power: $15 to $40 per ton
• Industrial process improvements: $15 per ton
Bear in mind, these measures pay back whether or not a
value is attached to those tons of greenhouse gases. Any significant
U.S. market for carbon credits will add the prevailing
per-ton price to those returns.
While Chu, Zhenhua and Gao brandish words about who
should get stuck with the bill for greenhouse gas emissions,
the smart money is lining up behind the people who understand
how avoid them in the first place.
Paul STUDEBAKer, CMRP, Editor In Chief
pstudebaker@putman.net, (630) 467-1300 ext. 433
www.PLANTSERVICES.com APRIL 2009 7