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Market News

 July 30, 2009
China's green opportunity

 China can and must achieve sustainable growth. Although the country has already charted an ambitious course to improve its energy efficiency and environment, a McKinsey study finds opportunities to do even more.

By Martin Joerss, Jonathan R. Woetzel, and Haimeng Zhang, McKinsey Quarterly, Climate Change Special Initiative (May 2009) 

China’s rapid development over the past three decades has lifted hundreds of millions of people out of poverty and catapulted the country into the ranks of the world’s largest economies. Over the next several decades, as China’s economy continues to grow and the pace of urbanization accelerates, the country must not only ensure that it has sufficient and secure energy resources but also mitigate the impact such growth will have on the environment.

China must address these issues without compromising its growth or the living standards of its people. But the population’s huge size and the scale of the economy have created a uniquely challenging problem. To deal with it, China’s policy makers have developed an extensive body of regulations and policies to raise the energy efficiency of many sectors and thereby reduce growth’s environmental consequences, including carbon emissions.

To help policy makers and business leaders identify and prioritize additional opportunities to raise energy efficiency in China and make its growth more sustainable, we undertook a study of technologies, measuring their impact on greenhouse gas emissions. We looked only at approaches that are technically feasible and likely to be commercially available no later than 2030.

Our findings indicate that by that year, the aggressive deployment of a range of new technologies-for instance, electric vehicles and new waste-management approaches-would allow China to reduce its demand for imported oil by an additional 30 to 40 percent over the energy efficiency goals already identified. The country also could stabilize coal demand at current levels. This approach would substantially improve China’s already significant plans to improve energy security and reduce carbon emissions. However, these goals will require considerable capital investment.

For the next two decades, China would need to spend €150 billion to €200 billion a year-on top of currently planned spending on energy efficiency-to realize the full potential of the technologies. What’s more, several barriers stand in their way, including social costs (such as layoffs) and retraining. And the window of opportunity for capturing benefits is short: every building or power plant constructed without these technologies subtracts from the total energy efficiency gains they could deliver.

Adopting them will require nothing less than a "green revolution" in the generation of power, the fueling of vehicles, the management of waste, the design of buildings and cities, and the nurturing of forests and agriculture. Policy makers will have to make the decisions, but to do so they must understand the opportunities and trade-offs.

Read the full article and the business opportunities related thereto

Source: McKinsey & Company