The Real Costs of Saving the Planet

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Cost-Saving Steps

The report was "born of the frustration that there are no solid facts out there about the costs of reducing greenhouse gas emissions," explains McKinsey director Jack Stephenson. So Stephenson and his team plunged ahead. They got support for the effort from Royal Dutch Shell (RDSa), Pacific Gas & Electric (PCG), Honeywell International (HON), DTE Energy (DTE), and a couple of environmental groups. They analyzed 250 possible steps, from more fuel-efficient cars and buildings to all types of cleaner energy. And they assumed people wouldn't change anything about their lifestyles, driving just as much and not lowering their thermostats.

The results are surprising. The report concludes that the U.S. can cut its greenhouse emissions in half from projected levels in 2030 at minimal cost. None of the steps would cost more than $50 per ton of carbon dioxide emissions avoided. Plus, 40% of the reductions would actually save money. That puts the overall cost at just a few dollars per ton of carbon dioxide—or in the tens of billions of dollars overall.

Moreover, it doesn't take any breakthroughs in technology. "Eighty percent of the reductions come from technology that exists today at the commercial scale," says Stephenson. And the remaining 20% comes from ideas already well along in development, such as hybrid cars that plug into electrical outlets and have batteries big enough to go 30 or 40 miles on electric power alone and biofuels made from cellulose (such as prairie grass) rather than foodstuffs like corn.

Waste Not

The overall price tag is so low because there are many simple ways the country can use energy more efficiently, Stephenson explains. "The U.S. wastes a huge amount of energy," he says. The vast majority of the power used by VCRs and DVD players occurs when they're not even turned on, for instance. Electronics equipment, buildings, lighting, water heaters, and autos are just some of the many products and facilities that could be far more efficient. Improving efficiency in this way would save money, not cost money, McKinsey figures.

Overall, the McKinsey report paints a far more encouraging picture than the figures from the U.S. Chamber of Commerce. "It's the difference between a business consultant who sees opportunities for business, and a hired-gun economist," says Dan Lashof, science director of the Climate Center at the Natural Resources Defense Council.

Until the U.S. actually tries to reduce its greenhouse gas emissions, we won't know who's right. But it does seem clear that the economy wouldn't be crippled. "The common perception of high costs is just so radically wrong," concludes Stanford's Schneider.

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Carey is a senior correspondent for BusinessWeek in Washington .