McKinsey Report Finds 47% Reduction in Global Automotive Emissions Feasible by 2030; Timely Action By All Stakeholders Required
|Global passenger vehicle CO2 emissions and abatement potential under three primary scenarios. Source: McKinsey. Click to enlarge.|
A new study by management consultants McKinsey & Company estimates that an integrated approach to carbon abatement in the automotive sector, much of it using proven technologies, could reduce global passenger vehicle greenhouse gas emissions in 2030 by 47% (2.2 gigatons) relative to a ‘do nothing’ scenario, even in the context of ongoing growth in the global vehicle parc.
Without action, carbon emissions from the use of passenger vehicles are projected to increase by 54% (1.8 gigatons) between 2006 and 2030, fueled by a growing number of cars on the road (from 730 million to 1.3 billion).
Under the parameters of our analyses—which reflect theoretical economic and resource factors, not political realities—the rise in emissions could be halted within the next decade, with a continued decline of 11 to 22 percent below 2006 levels by 2030. In 2020, more than 50 percent of CO2 abatement potential could come from the combined impact of second-generation biofuel, traffic flow, shifts to public transportation, and eco-driving measures.
Such measures are essential for near-term abatement because of the potentially shorter time and relatively lower incremental cost associated with their implementation, as well as their applicability to the entire fleet, not just new vehicles. In 2020, technical improvements to enhance the fuel efficiency of vehicles would account for the remainder—slightly less than half—of the identified abatement potential. By 2030, however, improvements to vehicle fuel efficiency could account for more than 70 percent of the total reduction potential, making such improvements key to long-term abatement in the automotive sector.—Roads toward a low-carbon future
The McKinsey team analyzed more than 25 discrete abatement measures across five regions, calculating their abatement potential and resource costs. It also analyzed three paths along which the automotive sector might proceed, based on the types of technology that might be employed. The three paths differ according to the propulsion technology they emphasize:
- Hybrid and electric technologies;
- Internal combustion engine technologies; and
- Mixture of hybrid, electric and internal combustion engine technologies.
McKinsey analyzed the abatement potential of each scenario relative to two reference points: projected future automotive sector emissions (assuming no action is taken to reduce emissions) and 2006 emissions figures. Calculations of well-to-wheel emissions from the electrification of vehicles assume an aggressive reduction in the carbon intensity of electricity generation, from approximately 600 to 250 tonnes CO2e per gigawatt-hour.
The scenarios share the same assumptions for abatement using other important measures, specifically biofuel, traffic flow, a shift to public transportation, and eco-driving. Many of these additional measures could begin to have meaningful impact relatively quickly, the McKinsey team writes, causing emissions from the use of passenger vehicles to begin declining within the next decade.
Summary findings from the three scenarios include:
Hybrid-and-electric scenario: 49% reduction relative to the no-action emissions baseline; a 22% reduction relative to 2006 emissions levels. This represents a relatively aggressive scenario, assuming a rapid transition toward a world of electricity-based vehicle propulsion systems. All remaining ICE-powered vehicles would be optimized for greater carbon efficiency. Average well-to-wheel emissions from new vehicles worldwide in this scenario would decline from 270 grams of CO2 per kilometer traveled in 2006 to 130 grams of CO2 per kilometer in 2030. Almost 60% of the abatement potential in this scenario depends on the availability of low-carbon sources of electricity generation and assumes an infrastructure will be in place to support the electrified vehicle fleet.
ICE scenario: 42% reduction relative to the baseline; 11% reduction relative to 2006 emissions. This scenario assumes automakers optimize the fuel efficiency of vehicles powered by internal combustion engines, but the sector does not witness any meaningful global penetration of hybrid or electric vehicles. Average well-to-wheel emissions from new vehicles would decline to 170 grams of CO2 per kilometer travelled in 2030.
Mixed-technology scenario: 47% reduction relative to the baseline; 18% reduction relative to 2006 emissions. This scenario assumes a more balanced mix of technological solutions reach the market, including optimized ICEs, hybrids, plug-in hybrids, and battery-electric vehicles. Average well-to-wheel emissions from new vehicles in this scenario would fall to 150 grams of CO2 per kilometer travelled in 2030.
In this scenario, worldwide new car sales in 2030 would consist of 3% electric vehicles (EVs) (~3 million per year), 16% plug-in hybrid-electric vehicles (PHEVs) (~14 million per year), and 23% hybrid vehicles (~21 million per year).
|Global CO2 abatement curve for passenger vehicles under the mixed-technology scenario. Source: McKinsey. Click to enlarge.|
The report, “Roads toward a low-carbon future: Reducing CO2 emissions from passenger vehicles in the global road transportation system”, focuses on the mixed-technology scenario “because it envisions a moderately paced transition away from ICEs and depends less on improvements to the carbon intensity of the energy supply.”
In this scenario, with the average price of oil assumed to be $60 per barrel,the global automotive sector could reduce its annual emissions by 2.2 Gt CO2e with an average annualized savings of €27 (~$36) per-tonne CO2e. It is important to note, however, that fuel savings and incremental costs are measured over the lifetime of the vehicle, without regard for who makes the initial investment and who receives the benefit of the fuel savings.—Roads toward a low-carbon future
Increasing the fuel efficiency of new vehicles accounts for 72% of the potential for emissions reduction in 2030 identified by the McKinsey research. To achieve this, vehicle manufacturers and suppliers will need to focus on improving powertrain (engine and transmission) efficiency, aerodynamics, and rolling resistance (weight reduction).
Increasing the proportion of bioethanol blended with gasoline accounts for 17% of the abatement potential in 2030. The economic attractiveness of biofuels will be driven by some combination of increased production efficiency, feedstock costs, subsidies, a tax on carbon, and the long-term price of oil.
Improving driving behavior, traffic flow, and reducing distances driven could contribute 11% of abatement potential in 2030. Due to the relatively short time needed for implementation, these measures could provide over 21% of the abatement potential in 2020.
If the industry pursues a range of propulsion technologies (i.e., internal combustion, hybrid gasoline-electric, and fully electric) to achieve such levels of abatement, the annual incremental investment for enhanced vehicle content to improve fuel efficiency—across all regions and all propulsion systems—would exceed US$230 billion in 2030. This amount would represent roughly 14% of total expected industry spend on passenger vehicles that year.
The additional industry spend in 2030 on fuel efficiency measures ($230 billion) would be on top of annual cost reductions averaging 3.0 to 3.5% through 2030 by the industry on this vehicle content. To put these figures in perspective, automakers and suppliers have historically reduced the overall cost of vehicles by about 2.5% annually, though such cost reductions have typically been offset by content enhancements for safety, comfort, power, or other attributes.
The need for radical, environmentally inspired innovation around fuel efficiency—and purposeful collaboration among automakers and their suppliers, energy providers, consumers, and policymakers that drives an integrated approach to reducing carbon emissions—represents a huge opportunity to reinvigorate the worldwide automotive industry, McKinsey says.
However, the report also notes that timely action by all stakeholders—including consumers—is essential.
If society wants to reduce CO2 emissions to levels that would have a high probability of achieving global abatement thresholds as set out by the IPCC, time is of the essence. Action in the automotive sector is needed to prevent many more additional years’ worth of CO2 emissions growth and—more importantly—to prevent a high-carbon infrastructure from being locked in for years to come.
...In fact, delaying implementation of all levers by 10 years, from 2010 to 2020, would reduce the 2030 abatement potential in the mixed-technology scenario by 38 percent (~800 Mt), with the cumulative lost abatement opportunity reaching 15 Gt. To put this in perspective, 15 Gt is greater than total annual emissions across all economic sectors in North America.
...For the world to have a vibrant automotive sector in the 21st century—one that produces affordable vehicles with high carbon productivity and offers other features that appeal to consumers in a timely way—automakers and their suppliers, consumers, fuel and energy providers, and policymakers will all need to take action in mutually productive ways.
...With a back-drop of global recession, the automotive industry has come to a defining moment in its history. Though action is needed to avoid immediate collapse, this alone will not be enough: without fundamental reform, the industry will not have an attractive long-term future. Recovery can only come through radical product innovation. Policymakers will play a critical role in this transition, but they too will require a new approach. If changes are made, then recovery can follow, and with it a renewed and thriving automotive sector, restored to its place as a creator of substantial value for the global economy.—Roads toward a low-carbon future
(A hat-tip to Bob!)