Beyond Kyoto

John Browne

From Foreign Affairs, July/August 2004

Summary:  Global warming is real and needs to be addressed now. Rather than bash or mourn the defunct Kyoto Protocol, we should start taking the small steps to reduce carbon dioxide emissions today that can make a big difference down the road. The private sector already understands this, and its efforts will be crucial in improving fossil fuel efficiency and developing alternative sources of energy. To harness business potential, however, governments in the developed world must create incentives, improve scientific research, and forge international partnerships.

Lord Browne of Madingley is Group Chief Executive of BP plc.

Both the exact level of the peak in global carbon dioxide emissions over time and the subsequent decline are unknown. We can safely assume, however, that emissions from developing countries will keep rising as economic activity and incomes grow, as shown in Figure 1. This means that leadership must come from the industrialized world.

In the short term, the developed world can use energy much more efficiently and profitably. With a clear impetus for change, business could put new technologies and services to use: cautiously at first, but more aggressively as the best systems are identified and put into practice with the normal turnover of capital.

Business has already found that it is possible to reduce emissions from its operations. Counterintuitively, BP found that it was able to reach its initial target of reducing emissions by 10 percent below its 1990 levels without cost. Indeed, the company added around $650 million of shareholder value, because the bulk of the reductions came from the elimination of leaks and waste. Other firms -- such as electricity generator Entergy, car manufacturer Toyota, and mining giant Rio Tinto -- are having similar experiences. The overwhelming message from these experiments is that efficiency can both pay dividends and reduce emissions.

Yet reducing emissions by the gray area in Figure 2 -- a reduction that amounts to around 25 billion tons per year in 2050 -- will require more than just efficiency improvements. Given the world's rising demand for energy, we must also transform the energy system itself, making fuller use of low-carbon fuels as well as carbon-free energy systems. Paradigm shifts must occur across the economy: transportation accounts for 20 percent of total emissions, industry contributes another 20 percent, the domestic and commercial sectors emit around 25 percent, and power-generation accounts for another 35 percent. A wide-ranging set of policies is thus called for.

In power generation, options include switching from coal to less-carbon-intensive natural gas. For example, 400 new gas plants, each generating 1,000 megawatts, would reduce emissions by one billion tons per year. Such a reduction would be difficult within the parameters of today's electricity systems -- 400,000 megawatts is roughly equal to all of China's electric power capacity, or half the installed capacity in the United States. Zero-carbon fuels would also help reduce emissions. If 200,000 megawatts of coal-generated power were to be replaced with nuclear power, carbon dioxide emissions would be reduced by one billion tons per year. Progress on the nuclear front will demand investment in new technologies, as well as a viable plan for locating reactors that ensures that radioactive materials are kept out of the environment and beyond terrorists' reach.

Coal, too, could be made carbon-free, using advanced power plants that gasify the fuel and then generate power while stripping away the carbon for sequestration underground. Coal gasification could become a huge growth industry. China is among the top investors in this technology, not just because these plants are much cleaner, but also because they could be keystones in a program to synthesize clean liquid fuels for transportation needs.

More efficient buildings would also result in large energy savings, since over one-third of today's energy is used indoors. Given that electrification is a central feature of industrial and postindustrial societies, innovators must tap the potential for ultra-efficient electrical appliances. Investment in a digitally controlled power grid could aid this effort by allowing major appliances to "talk" directly with power generators so that the whole system operates closer to its optimum potential. Such a "smart grid" would reduce losses in electricity transmission while also allowing fuller use of waste heat from power generators in factories and homes.

There are efficiency savings to be made in transportation too. Given the massive advantages of gasoline over rival fuels -- both in terms of its power density and its ease of storage -- transport is unlikely to switch to new fuels in the near future. More promising approaches will focus on making transportation more efficient, while meeting the ever-stricter limits on other emissions that cause air pollution. For example, running 600 million diesel or gasoline cars at 60 miles per gallon (mpg) instead of 30 mpg would result in a billion fewer tons of carbon dioxide per year. Advanced ultra-efficient diesel engines, meanwhile, are so clean that even the strictest regulatory body in the world -- the California Air Resources Board -- is taking a second look. Advanced techniques for gasoline injection also hold promise, as do hybrid electric-gasoline cars already on the road. Such vehicles have the potential to get more than twice the mileage per gallon of their conventional counterparts. Given the increasing consumer demand for speed and flexibility in air travel, policymakers should also focus on the opportunities for cutting emissions from aircraft.

All of these efforts will require major investments. Some will also require new infrastructures. But we must begin to build and test such systems. Only with evidence from actual experience can we decide how best to direct our efforts.