Betting on biofuels

Billions of dollars, euros, pounds, and reais are pouring into biofuels. High fuel prices and generous regulatory support have given the industry healthy margins and relatively short investment payback times. Meanwhile, the triumphs of the first movers and dreams of future growth are enticing companies in industries from petroleum and agribusiness to biotechnology, chemicals, engineering, and financial services. And of course, the allure of a greener future has raised the expectations of investors and bystanders who hope that biofuels will help meet the world’s energy needs while lowering greenhouse gas emissions.

Can biofuels deliver? The answer appears contingent on fuel prices as well as three other variables that directly influence the profitability and environmental impact of biofuels: the cost and availability of feedstock, government regulation, and conversion technologies. All are in flux, so an investment today is a bet on how these interrelated factors will evolve. Feedstock costs vary tremendously by region and could change significantly in the years ahead. Governments may alter the industry’s ground rules to match changing priorities in climate change, energy security, and economic development. The energy, cost, and carbon efficiency of various biofuels are already quite different, and new conversion technologies could make them...

http://www.mckinseyquarterly.com/Betting_on_biofuels_1992

A cost curve for greenhouse gas reduction

The debate about greenhouse gases is heating up. Across a wide spectrum, some voices argue that emissions and climate aren’t linked, while others urge immediate concerted global action to reduce the flow of emissions into the atmosphere. Even the advocates of action disagree about timing, goals, and means. Despite the controversy, one thing is certain: any form of intensified regulation would have profound implications for business.

Our contribution on this topic is not to evaluate the science of climate change or to address the question of whether and how countries around the world should act to reduce emissions. In this article we aim instead to give policy makers, if they choose to act, an understanding of the significance and cost of each possible method of reducing emissions and of the relative importance of different regions and sectors. To that end, we have developed an integrated fact base and related cost curves showing the significance and cost of each available approach, globally and by region and sector. Our other purpose is to help business leaders understand the implications of potential regulatory actions for companies and industries. Indeed, regulation is already on the minds of many executives. A recent survey indicates that half of all companies in Europe’s energy-intensive industries regard the European Union’s Emissions Trading Scheme (EU ETS) as one of the primary factors affecting their long-term investment decisions.

As the baseline for our study, we used the “business-as-usual” projections for emissions growth from the International Energy Agency (IEA) and the US Environmental Protection Agency (EPA). We then analyzed the significance and cost of each available method of reducing, or “abating,” emissions relative to these business-as-usual projections. Our study covers power generation, manufacturing industry (with a focus on steel and cement), transportation, residential and commercial buildings, forestry, and agriculture and waste disposal, in six regions: North America, Western Europe, Eastern Europe (including Russia), other developed countries, China, and other developing nations. It spans three time horizons—2010, 2020, and 2030—and focuses on abatement measures that we estimate would cost 40 euros per ton or less in 2030. Others have conducted more detailed studies on specific industries and geographies. But to our knowledge, this is the first microeconomic investigation of its kind to cover all relevant greenhouse gases, sectors, and regions.

Reading the cost curves

The cost curves we developed show estimates of the prospective annual abatement cost in euros per ton of avoided emissions of greenhouse gases, as well as the abatement potential of these approaches in gigatons of emissions. The abatement cost for wind power, for example, should be understood as the additional cost of producing electricity with this zero-emission technology instead of the cheaper fossil fuel-based power production it would replace. The abatement potential of wind power is our estimate of the feasible volume of emissions it could eliminate at a cost of 40 euros a ton or less. Looked at another way, these costs can be understood as the price—ultimately, to the global economy—of making any approach to abatement cost competitive or otherwise viable through policy decisions. A wide range of assumptions about the future cost and feasible deployment rates of available abatement measures underlie the estimates of their cost and significance. For example, the significance of wind power assumes that actions to abate greenhouse gases will have already begun across regions by 2008. The volumes in our model (and this article) should be seen as potential abatement, not as forecasts.

Our model for the “supply” of abatement can be compared with any politically determined target (“demand”) for abatement in the years 2010, 2020, and 2030. The science of climate change is beyond the scope of our study and our expertise, however. We thus compare, for illustrative purposes, our findings on supply with three emissions targets discussed in the debate—targets that would, respectively, cap the long-term concentration of greenhouse gases in the atmosphere at 550, 450, or 400 parts per million (a measure of the share of greenhouse gas molecules in the atmosphere). The goal of each target, according to its advocates, is to prevent the average global temperature from rising by more than 2 degrees Celsius. Any of these emissions targets would be challenging to reach by 2030, for they would all require at least a 50 percent improvement in the global economy’s greenhouse gas efficiency (its volume of emissions relative to the size of GDP) compared with business-as-usual trends.

A simplified version of the global cost curve shows our estimates of the significance and cost of feasible abatement measures in 2030—the end year of a period long enough for us to draw meaningful conclusions but short enough to let us make reasonably factual assumptions. We have developed similar cost curves for each sector in each region and for each of the three time frames.

http://www.mckinseyquarterly.com/A_cost_curve_for_greenhouse_gas_reduction_1911

Data centers: How to cut carbon emissions and costs

The modern corporation runs on data. Data centers house the thousands of servers that power applications, provide information, and automate a range of processes. There has been no letup in the demand for data center capacity, and the power consumed as thousands of servers churn away is responsible for rising operating costs and steady growth in worldwide greenhouse gases.

Our work suggests that companies can double the energy efficiency of their data centers through more disciplined management, reducing both costs and greenhouse gas emissions. In particular, companies need to manage technology assets more aggressively so existing servers can work at much higher utilization levels; they also need to improve forecasting of how business demand drives application, server, and data center–facility capacity so they can curb unnecessary capital and operating spending.

Data center efficiency is a strategic issue. Building and operating these centers consumes ever-larger portions of corporate IT budgets, leaving less available for high-priority technology projects. Data center build programs are board level decisions. At the same time, regulators and external stakeholders are taking keen interest in how companies manage their carbon footprints.

http://www.mckinseyquarterly.com/Energy_Resources_Materials/Environment/Data_centers_How_to_cut_carbon_emissions_and_costs_2255#

GO GREEN IN ICT:

Strategies for Green Computing
Rising energy costs, an economic slowdown and environmental awareness have introduced serious strategic challenges to enterprises worldwide, prompting searches for efficiency and cost reductions across the board, including in IT. Enterprises that don't alter their ways and challenge their IT organizations to operate in more ecological-friendly ways will miss key opportunities to increase IT efficiencies and reduce costs via the implementation of greener IT solutions.There are a variety of new and existing technologies available that aid in green IT, such as virtualization and more efficient hardware that demand less power and cooling. However, changes in processes and current infrastructure can also improve efficiency that leverages existing infrastructure and culminate in not only a greener environment, but an
improved bottom line. Developing an overall green IT strategy that identifies opportunitiesfor greater efficiency and areas that would benefit from new technology or improved processes can be difficult without visibility and transparency into the state of the existing IT infrastructure. This article will discuss how organizations can develop a green IT strategy through visibility into
existing IT assets and state of the overall IT environment.
Why Green ICT?
Information and Communication Technology systems (ICT) should be a core element of any organization’s green strategy. However, they are often not explicitly recognized or incorporated into most sustainability plans. There is significant opportunity to capture value by designing and implementing a sensible green element within the ICT realm. ICT systems typically account for about 25 percent of direct electricity use in commercial office buildings, and in energy inefficient buildings or locations with a high density of IT gear, that figure may be as high as 60 percent to 70 percent.

On a global scale, some analyst reports have calculated that ICT represents 2 percent to 2.5 percent of the total global carbon emissions, equivalent to the global aviation industry. But, for the more advanced and technologically-centered economies of the US, Japan and Europe, the number is more likely on the order of 5 percent to 6 percent and growing at double-digit rates. The ICT industry’s carbon footprint is expected to triple during the period from 2002 to 2020. Japan’s METI has forecasted that by 2025 ICT will consume 20 percent of all electricity in Japan. Achieving the greening of ICT is a very viable and high-value first step in any green strategy.

The impact of a greener ICT is multi-fold:
• Smaller physical footprint (e.g. smaller and more modern
data centers)
• Lower carbon footprint (updated devices)
• Lower heating/cooling costs
• Compliance with government regulations
• Good marketing
We should note that from a holistic view, “greening” IT is not just about reducing direct power consumption. With a personal computer, for example, 60 to 80 percent or more of the lifecycle carbon footprint of the device comes in fact from the manufacturing of the device. IT equipment and consumer electronics are very energy and materials intensive in manufacturing, have short life spans and become toxic ewaste at the end of their useful lives. Achieving “true green” a methodical, process driven approach to avoid “robbing Peter to pay Paul” and resulting in higher, rather than lower, costs and greater emissions. The optimization of green ICT resources requires thinking about the ITC e-Newsletter Feature Article Go Green in ICT process from end-to-end and ensuring that value capture opportunities are identified in every phase of their lifecycle.
How to Go Green in ICT
The greening of ICT systems can be achieved in many different
ways, including:
• Improving usage of what you already have: maximizing
utilization of current IT assets and putting in place
disciplined asset management policies;
• Consolidating servers, data centers, storage into more
efficient physical plants and hardware;
• Using new technologies such as virtualization to improve
use of all hardware assets.
Generally, a combination of all the above is required to achieve comprehensive results. This entails putting in place a plan that identifies the sources of opportunities, defines the critical challenges and success factors and tracks measurable progress toward the defined goal in a timely fashion. Typically, such plans require a “top down” approach and the executive leadership and sponsorship of senior executives. The first step generally involves the least amount of effort and spend and can achieve a substantial outcome in a short time period and can be frequently driven from within IT itself, with minimal big-bang oversight.
Zeroing In: Improve Asset Utilization
Improving asset utilization involves a multi-step process.
• Step 1: Establish baseline inventory of all existing assets.
• Step 2: Analyze current asset infrastructure and
utilization, including:
• Power consumption ratings for servers, storage, etc.
• Physical age of existing assets (i.e. older assets are
less energy efficient)
• Total utilization load of current servers
• Power management setting policies for PCs and
monitors (e.g. are they on 24x7?)
• Printer availability and printing policies (e.g. singlesided
vs. dual-sided printing)
• Step 3: Develop optimization goals and approaches for
each of the categories, including:
• Load consolidation on fewer servers; retirement of
older servers
• Power management guidelines for desktops and laptops
• Upgrading of existing equipment to extend lifecycle
• Printing resource guidelines
• Print device consolidation
• Data center operations, cooling and power supply
• Step 4: Implement new policies through:
• Definition
• Communication
• Execution
• Tracking
• Enforcement
• Step 5: Monitor results and adapt objectives and policies
based on outcomes.
Case in Point: City and County of San Francisco Green
ICT Program
In 2007, the Department of Technology of the city and county of San Francisco launched a green ICT project to support the city’s ambitious eco-responsibility goals, such as reducing greenhouse gas emissions 80 percent by 2050, reducing municipal energy use 10 percent by 2012, becoming a “zero-waste” city with 100 percent landfill diversion by 2020 and implementing the “Precautionary Principal” adopted by the city for potential exposure to toxic substances. The city’s initial baseline analysis indicated that desktop computers and printer resources were the best initial opportunities for achieving significant environmental and financial paybacks. This year, the CIO and Department of Technology developed a systematic plan for achieving specific near-term goals for those systems, as well as longer-term goals for data
center energy efficiency. For example, the IT operations San Francisco is planning to implement desktop power management for PC’s, consolidate resources, purchase only EPEAT certified new PC’s, cut data center power consumption and extend the lives of existing equipment. San Francisco also plans to make use of the IT to enable eco-benefits through other programs such as Urban telemedicine, telework, efficient building management, and the city’s unique EcoMap project.

In summary, the greening of ICT has diverse benefits that can create substantial value. The “low hanging fruit” involves assessing current IT resources and their utilization and optimizing
asset efficiency. Richard Hodges is the founder and CEO of GreenIT. Since the early 1970s he has had a personal commitment to environmental responsibility, development of appropriate technologies, and the evolution to a sustainable built environment. In 2004, Mr. Hodges established GreenIT as the first consultancy to combine those strands into a systemic, systematic, and strategic approach to sustainability for Information and Communications Technology Systems. Walker White is vice president of technology for BDNA. He is responsible for providing guidance to customers on utilizing BDNA's solutions to improve efficiency in their IT environment and for ensuring that customer feedback is incorporated into our products. Prior to his arrival at BDNA, he was a 12 year veteran of Oracle Corporation. During his tenure at Oracle, he served several positions, including vice president of Applications Technology and also chief technologist of Oracle Service Industries.

What countries can do about cutting carbon emissions

Greenhouse gas emissions can be cut significantly—and, surprisingly, without huge disruption.

Reports published in 2007 by the Intergovernmental Panel on Climate Change (IPCC) reflect a broad scientific consensus about the link between global warming and greenhouse gas emissions resulting from human activity. The report, while acknowledging that there is still uncertainty in the scientific estimates, calls for a reduction in annual emissions from just under 50 billion tons of greenhouse gases today to 5 billion to 10 billion or less by 2050, so that the planet warms by no more than two degrees centigrade. This report and similar reports from the scientific community have spurred political leaders around the world to action. The European Union has set targets to reduce its greenhouse gas emissions by 20 to 30 percent of the 1990 level as of 2020. Political leaders elsewhere are discussing similar goals. Some countries even say that they wish to become carbon neutral by 2050.

What will a significant reduction in the level of greenhouse gases entail? Which approaches will be most effective? How much will it cost to achieve this goal, both in money and in lifestyle changes? Who will bear that cost?

These questions lie at the center of heated debate among policy makers and stakeholders in many...