CBI climate change report underestimates consumers

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CBI climate change report underestimates consumers

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The CBI climate change task force published its report
yesterday. In an change of direction, it promises full commitment to
the targets in the Climate Bill and explores how business can be
incentivised to make its contribution. Consumers, being responsible for
60% of the UK’s emissions through their lifestyles and shopping, are
identified as the drivers of investment in clean technology.

Proposals in the report are based on research into the cost of
abating greenhouse gas emissions, which is summarised in a UK version
of McKinsey’s cost curve (see diagram). The research is based on
current lifestyles. It asks the question: if we continue behaving as we
are now, how can we implement energy efficient technologies so that
greenhouse gas emissions are reduced by 60% in 2050?

As most of the technologies are available but not commercially
viable, the answer is that we will have to pay up to EUR90 per ton of
carbon-dioxide equivalent in 2020, stabilising at around EUR40 in 2030
when the technologies are more tested (EUAs closed yesterday on ECX at EUR23.92). This would be passed on to customers at a cost of £100 per household per year, on average, by 2030.

The CBI identifies consumers as the drivers of investment and
assumes that they will only behave as they are now and simply pay more
for low carbon goods and services. What would the cost curve look like
if we decide to consume less instead? It would look the same, but the
y-axis (which shows the cost or savings of different abatement
technologies per unit of emissions) would contract. To keep the carbon
price high and maintain investment in clean technology, the supply of
carbon credits would have to be reduced.

A possible reason why the CBI task force did not consider this type
of scenario is that a world where targets are met through lower
consumption is not particularly exciting for big business.

via In Balance