Energy & Technology
Earth Day – it’s the perfect day to start your energy diet. It’s great to hug a tree, (in fact, that’s how you measure the carbon it sequesters) but for most of us, it’s even better to wrap our arms around that tangle of charger cords and pull the plug. Reducing your energy consumption is the very best way to honor Mother Earth – and save money – this year and every year.
Since I am perpetually on a diet, let me share some of the best strategies for getting started:
A group of nearly 50 companies and organizations, including the Center, sent President Obama a letter this month asking the Administration to lead the way to providing all consumers access to their energy information. The April 5 letter calls for giving consumers access to this information via devices such as computers and phones; making it easier for them to monitor and manage their energy use.
With timely and actionable information on energy consumption, households and businesses can avoid inefficiencies that drive up consumer costs and greenhouse gas emissions. Through its Make an Impact program, we also works to weave sustainability and energy efficiency into the fabric of its partners’ corporate culture. The program provides accessible information to employees and their communities on ways to reduce energy use, lower their carbon footprint, and save money. These savings can be significant: If every U.S. household saved 15% on its energy use by 2020, GHG savings would be equivalent to taking 35 million cars off the road and would save consumers $46 billion on their energy bills each year.
We recently released a report that describes the petroleum sector from production to consumption and examines options for including greenhouse gas (GHG) emissions from petroleum use under climate policy (e.g., GHG cap and trade). Currently, policymakers are considering multiple approaches for coverage of petroleum under comprehensive climate and energy legislation. In deciding how to address a sector of the economy or a particular fuel, policymakers must balance the goals of ensuring maximum coverage of emissions, minimizing administrative complexity and burden, avoiding creating perverse incentives or market distortions, and promoting emission reductions.
While the details of the Kerry-Graham-Lieberman climate and energy proposal in the Senate are yet to be released, press reports indicate that the trio is likely to adopt a new approach to covering transportation fuels—the so-called “linked fee.” Unlike other proposals in the House or Senate, the Kerry-Graham-Lieberman approach would reportedly levy a “carbon fee” on transportation fuels with the fee amount linked to the carbon price from a GHG cap-and-trade program covering at least electric utilities. The forthcoming details of how the “carbon fee” is linked to the cap-and-trade market will determine whether such an approach can lead to significant emissions reductions from transportation and whether such an approach can yield the economy-wide emissions reductions needed to protect the climate.
Our new report includes information relevant to the linked-fee approach. For example, the report calculates that about 80 percent of combustion emissions from petroleum use are attributable to transportation fuels that are already subject to federal fuel excise taxes. Untaxed transportation fuels and large and small stationary combustion sources account for the remainder of emissions from petroleum use. This means that a linked fee could be implemented at least in part by covering the same entities that currently pay the fuel tax.
Another Senate proposal, the Cantwell-Collins Carbon Limits and Energy for America's Renewal (CLEAR) Act, creates an economy-wide cap-and-trade program—in this case just covering CO2 emissions from fossil fuel use. The CLEAR Act adopts an entirely “upstream” point of regulation that would make “first sellers” (i.e., coal mine and natural gas and oil well owners) responsible for surrendering cap-and-trade allowances for end-use emissions from the fossil fuels they sell. As the new Pew Center report explains, there are about a half million oil wells in the United States. Of the nearly 14,000 domestic well operators tracked by the U.S. Energy Information Administration (EIA), the 10 largest (e.g., BP, Chevron) account for about half of total production, and the 670 largest account for about 90 percent of production.
The House-passed comprehensive climate and energy bill (H.R. 2454, the Waxman-Markey American Clean Energy and Security Act of 2009) also included an economy-wide GHG cap-and-trade program. Waxman-Markey, however, would require petroleum refiners and importers to surrender cap-and-trade allowances equal to the GHG emissions from the final end use of their products (e.g., tailpipe emissions from vehicles). This point of regulation for petroleum would achieve complete coverage of combustion emissions and regulate a small number of entities and facilities (about 150 refiners with 67 different owners and a larger number of importers and points of entry). Of note, Waxman-Markey adopted different points of regulation for different emission sources--including large sources (e.g., coal and natural gas power plants and industrial sources) and local natural gas distribution companies (residential, commercial, and small industrial natural gas users).
With different proposals in play, our new report can inform policymakers and others considering options for reducing GHG emissions from petroleum use and help advance approaches that balance the goals of emissions coverage, administrative ease, and cost-effective and significant emission reductions.
Steve Caldwell is a Technology and Policy Fellow
The federal government took the opportunity on April Fool’s Day to show the world the United States is not joking about its commitment to reducing greenhouse gas (GHG) emissions. The U.S. EPA and U.S. DOT have jointly produced a standard that will reduce CO2 emissions by 1 billion metric tons over the lifetime of vehicles covered and on average save consumers around $3,000 in fuel costs over the life of each vehicle purchased in 2016. The new rule requires the corporate average fuel economy (CAFE) for new passenger cars and light-duty trucks to be 35.5 miles per gallon by 2016. It will also limit carbon dioxide emitted from those vehicles to 250 grams per mile on average. The vehicle emissions rule shows how one policy can achieve multiple goals – reduce our dependence on foreign oil and reduce our nation’s GHG emissions.
The implementation of this regulation is a nod to complementary policies that combat climate change. As an organization that has long pushed for a comprehensive market-based mechanism, we are acutely aware of the importance of pricing carbon. However, putting a modest price on carbon, by itself, would not significantly reduce greenhouse gas emissions from this sector. For example, EPA’s analysis of the House-passed climate and energy bill found that the bill would cause the price of a gallon of gasoline to only rise by $0.13 in 2015, $0.25 in 2030, and $0.69 in 2050. The rule finalized Thursday addresses this problem directly by setting an increasingly more stringent standard for reducing GHG emissions but allowing vehicle manufacturers the flexibility to find the most cost-effective technologies to achieve those standards.
In evaluating regulations like these, one important factor to consider is coverage. The new vehicle rule covers over 60 percent of greenhouse gas emissions from the transportation sector. Other sources of emissions in transportation such as aviation, ships, and heavy-duty trucks will require additional actions (see our paper on aviation and marine transportation). EPA has announced its intent to propose GHG standards for heavy duty trucks in June of this year.
Another important factor to consider when evaluating regulations is cost. In order to meet the new standards, vehicle manufacturers will have to make fuel efficiency (as opposed to increased engine horsepower) one of their primary areas of focus for research and development. In doing so, future vehicles will cost more than they would without this rule. However, fuel savings over time will more than make up for that additional upfront cost.
The program is estimated to conserve 1.8 billion barrels of oil over the lifetime of vehicles covered under the rule. Reducing our overall oil consumption can reduce our reliance on foreign oil, which can translate into cost savings. A study by the U.S. EPA and the Oak Ridge National Laboratory estimated that a reduction of U.S. imported oil results in a total energy security benefit of $12.38 per barrel of oil, in part by reducing defense spending. Co-benefits like these are an important part of determining the worthiness of a policy. In the case of the new vehicle rule, the U.S. has taken a big step towards reducing its oil dependency and increasing its energy security.
Nick Nigro is a Solutions Fellow
The Obama Administration made some important announcements about offshore drilling last week. And in the near and medium term, we believe increasing U.S. oil production is compatible with successful efforts to significantly reduce U.S. greenhouse gas (GHG) emissions.
Offshore drilling has been much talked about lately. Expanding offshore drilling in the federal outer continental shelf (OCS) areas and increasing oil and gas revenue sharing for nearby coastal states is part of the package of climate and energy policies being negotiated by Senators Kerry, Graham, and Lieberman.
Prepared for the Pew Center on Global Climate Change
The petroleum sector, which includes the production, import, processing, transportation, and distribution of crude oil and refined products such as gasoline, heating oil, diesel, propane, and jet fuel, is a significant source of U.S. greenhouse gas (GHG) emissions. Recent GHG cap-and-trade proposals have covered petroleum-related emissions by placing the point of regulation at the petroleum refinery or point of import of refined products.
Consumption of most finished petroleum products is already subject to a fuel tax. One alternative to regulating GHG emissions from petroleum at the refiners and importers is to regulate the same entities currently responsible for paying taxes on petroleum products and to apply other measures for regulating emissions from fuels not already subject to a tax. Another option for the point of regulation for this sector is upstream at the producer and importer level.
This paper provides an overview of the petroleum sector, identifying the key entities and associated facilities in the petroleum supply chain. There is also information on GHG emissions from the petroleum sector, a summary of which emission sources are currently subject to a fuel tax and which are not, and an evaluation of the implications of adopting an alternative point of regulation for GHG emissions from petroleum.
Click here to learn more about coverage of the natural gas sector in climate policy.
From factory floors to corporate boardrooms, energy efficiency is top of mind for a growing number of businesses and their employees. Leading companies are pioneering new energy efficiency strategies that result in greater productivity, robust financial savings, and a lower carbon footprint. Today, we released a major study that examines key practices of a diverse collection of corporations at the vanguard of innovative energy efficiency solutions.
The report, From Shop Floor to Top Floor: Best Business Practices in Energy Efficiency, features insights from detailed research and analysis collected over nearly two years. The study represents the centerpiece of our Corporate Energy Efficiency Conference next week in Chicago.
- The global marine shipping sector is responsible for approximately 1.5 percent of global greenhouse gas emissions from anthropogenic sources.
- Under “business-as-usual” conditions, emissions from the global shipping fleet are expected to double by 2050.
- Shipping’s greenhouse gas emissions could be curtailed through changes in operational practices, improving the fuel efficiency of ships, and burning lower-carbon fuels. Combined together, these changes could reduce shipping emissions by 62 percent below “business-as-usual” projections in 2050, which would mean emissions would stay at roughly current levels despite very large increases in shipping volume by mid-century.
- The international dimension of global shipping complicates policy efforts to reduce emissions. Working with and through transnational actors will be an essential step to forging meaningful, global regulations.
Marine shipping—both domestic and international—plays a vital part in the globalized world, moving goods both within and between countries. Demand for global shipping has steadily risen to transport goods between markets as international trade has increased. From 2000 to 2007, the volume (in tons) of world merchandise exports increased an average of 5.5 percent per year (nearly twice as fast as world GDP), with over 80 percent of that trade volume moved via ship., Figure 1shows the composition of world seaborne trade in terms of ton-miles of shipping. While low-value, high-volume merchandise categories dominate the seaborne trade in terms of volume, the World Trade Organization (WTO) estimates that manufactured goods account for more than 70 percent of the total value of world merchandise trade.
Figure 1: World seaborne trade by type as a percent of total ton-miles.
Greenhouse gas (GHG) emissions from shipping have increased in tandem with this rise in demand. While information about global shipping is less readily available than for other transport sectors, it is estimated that shipping accounts for 1.5 percent of global anthropogenic GHG emissions each year. International shipping—movement of goods between countries—comprises nearly 85 percent of these emissions. The remaining share of emissions results from domestic activities, such as recreational boating, and movement of goods within a country’s own borders.
There are a number of strategies that could help address GHG emissions from marine shipping. Shipping-related GHG emissions can be mitigated by increasing efficiency (i.e., decreasing fuel consumption per ton-mile) and using less GHG-intensive fuels or power sources. Operational measures, such as speed reduction, offer a large and near-term mitigation option, while improving the energy efficiency of new ships and switching to alternative fuels present longer-term options. Despite the emission reduction options available, demand for shipping is growing so rapidly that even aggressive action to exploit all available mitigation strategies is likely only to slow the growth in GHG emissions from the global shipping fleet, perhaps limiting absolute emissions from shipping to roughly current levels despite very large increases in ton-miles of shipping.
The global nature of marine shipping complicates efforts to mitigate emissions from the sector. Ownership of the international shipping fleet is especially complex—a ship owned by a company incorporated in Greece could be registered to fly a Panamanian flag, yet move goods from India to Italy. These political realities greatly complicate assignment of responsibility for GHG emissions from international shipping and must be taken into account when designing policies to address emissions from international shipping. Figure 2below illustrates the differences between marine vessel ownership, vessel registration, and the value of trade shipments.
Figure 2: Comparison of International Trade (Percent of Global Value of Merchandise Trade), Vessel Flag (Percent of Global Deadweight Tons, DWTs), and Vessel Owner (Percent of Global DWTs) by Country
Source: DOT (2006). “Fleet Statistics (10,000 Deadweight Tons or Greater).” U.S. Department of Transportation. Retrieved from http://www.marad.dot.gov/library_landing_page/data_and_statistics/Data_and_Statistics.htm; World Bank (2007). “Trade Statistics.” Retrieved February 26, 2009, from http://go.worldbank.org.
Strategies for reducing GHG emissions from global marine shipping can be broken down into three categories: operational changes that reduce fuel consumption, technological advances that improve ship fuel efficiency, and alternative fuels with lower net lifecycle GHG emissions. These three avenues to mitigating emissions are discussed below.
Modifying operational practices of the global shipping fleet could reduce emissions across the entire sector. Immediate reductions in GHG emissions are available from all ships by reducing speed. For example, decreasing speed by 3 knots (3.5 miles per hour) for a typical container ship at average speed reduces the resistance of the ship’s hull against the water by 50 percent, thus requiring less energy (and thus less fuel consumption and associated GHG emissions) to propel the ship. However, reducing speed would also reduce shipping capacity since any given vessel would supply fewer ton-miles of transport service since it could cover fewer miles in a given period of time. To maintain current shipping supply with reduced average speeds, more frequent trips or increased ship utilization (i.e. load factors) would be required. Despite this, most studies conclude the net effect of decreasing speed could reduce GHG emissions. Other operational strategies can mitigate reduced shipping capacity from slower speeds; these include increased port efficiency and faster loading techniques, improved routing, decreased turnaround times, and streamlined maintenance.
- Ship Efficiency
Technological options for more efficient new ships include larger ship sizes, hull and propeller optimization, more efficient engines, and novel low-resistance hull coatings. For example, a single large ship with the same cargo capacity as two smaller ships not only weighs less in total, but also has less hull-area in contact with the water, thereby reducing resistance and lowering the energy required for propulsion. As such, building larger ships could increase the fuel efficiency of the global fleet; however, some practical limitations to increasing ship size exist, including, for example, canal sizes, harbor depths, and port cargo handling equipment. Further gains can be made by optimizing hull and engine design. Currently ships use diesel engines that operate efficiently within a narrow range of speeds. Replacing those engines with a series of smaller diesel-electric engines would allow for more efficient engine operation at a greater range of speeds. Ships could also make use of combined-cycle diesel engines that transform waste heat into useable energy. The most advanced efficiency technologies involve novel hull coatings (such as special polymers or air bubbles) that reduce hull resistance against the water.
- Alternative Fuels
Currently, ships generally burn an inexpensive, carbon-intensive fuel known as heavy, or residual, fuel oil. Replacing heavy fuel oil with less carbon-intensive marine diesel oil or liquefied natural gas could result in GHG reductions in the near to medium term. Other options include alternative energy sources, such as wind power (from sails) or biofuels. Longer-term opportunities include powering ships with solar photovoltaic cells and hydrogen fuel cells.
Environmental Benefit / Emission Reduction Potential
Applying the full range of mitigation strategies described above could reduce GHG emissions from global shipping by as much as 62 percent below “business-as-usual” (BAU) projections in 2050, which would mean global marine shipping emissions would be at roughly today’s level at mid-century despite an expected doubling in shipping volume. Without intervention, analysts project emissions from global shipping to more than double by 2050. Table 1and Figure 3summarize the emission reduction potential for the global shipping sector.
Operational changes, such as reducing ship speeds, optimizing ship turnaround times by streamlining port logistics, and tailoring shipping routes to real-time weather and ocean current conditions are already expected to produce significant efficiency gains under “business as usual” due to non-climate-related factors, such as rising fuel prices. With additional support through policy interventions, incremental operational changes could reduce GHG emissions by an estimated 27 percent below BAU projections by 2025.
Advances in shipping technology hold the potential for additional GHG reductions. Larger ships are more efficient than smaller ones. For example, doubling the size of a vessel could increase energy efficiency by as much 30 percent. Such changes in ship design and propulsion could further reduce GHG emissions by 17 percent below BAU projections for mid-century.
Only a small degree of switching to alternative fuels is projected under “business as usual.” Replacing heavy fuel oil with modified diesel oil, a slightly less carbon-intensive fuel, could reduce CO2 emissions by 4 to 5 percent. Shifting to liquefied natural gas could reduce GHG emissions by as much as 15 percent. When combined with other alternative fuel sources, such as wind power (sails) or biofuels, switching to alternative fuels could yield reductions of 38 percent below BAU GHG emissions projections by 2050.
Table 1: Global GHG Emissions Abatement for Marine Shipping Sector
Reductions from “Business as Usual” in 2050 (%)
Speed reduction, optimized routing, reduced port time
Ship Design and Propulsion
Novel hull coatings, propellers, fuel efficiency optimization, combined cycle operation, multiple engines
Marine diesel oil (MDO), liquefied natural gas (LNG), mind power (sails)
Total Reduction from BAU Emissions in 2050
** These reductions could be met by 2025
Figure 3: Global GHG Mitigation Potential from the Marine Shipping Sector
Source: McCollum, David, Gregory Gould, and David Greene, Greenhouse Gas Emissions from Aviation and Marine Transportation: Mitigation Potential and Policies, 2009.
The costs of achieving GHG reductions from marine transportation through the options described above are uncertain in many cases. One study estimated that a price on carbon of $36 to $200 per metric ton of CO2 would be needed to induce ships to reduce travel speed; other researchers have calculated that prices in a narrower range of $50 to $100 per ton may induce such behavioral change. The costs of researching and developing novel shipping technologies or implementing optimized routing schemes are highly uncertain.
There is also little known about the cost of switching ships to lower-carbon fuel. Currently, ships can buy fuel from anywhere around the world, bunker it in their holds, and thereby circumvent reporting requirements on how much or what type of fuel they use. On average, heavy fuel oil costs $0.95 per gallon. This low price makes it difficult for other fuels to compete against heavy fuel oil. Liquefied natural gas, modified diesel oil and biodiesel, for example, are 20, 70 and 480 percent more expensive, respectively.
Current Status of Shipping Emissions Mitigation Efforts
The global shipping sector has been slow to mitigate its GHG emissions. As mandated by the Kyoto Protocol, the International Maritime Organization (IMO) has formed a working group to address emissions from global shipping. To date, the organization has introduced a number of voluntary initiatives—such as the Energy Efficiency Design Index –which aim to improve the fuel efficiency of newly built ships.
Technological advances in the sector have also been slow to take hold. One study found that shipping fuel efficiency has undergone little overall change in the past 20 to 30 years. Against this backdrop, there exist a few success stories. For example, a small number of ships operate using hydrogen fuel cell technology. While limitations exist, it has been argued that fuel cells are best suited for a few large vehicles that are operated by a small but highly trained crew of workers—such as those vehicles used in international shipping.
Obstacles to Further Deployment of Shipping Emissions Mitigation Strategies
- International Jurisdiction
The international dimension of global shipping complicates the mitigation of emissions from the sector. To date, no paradigm exists for assigning the emissions from a transnational voyage to an individual country. Countries that engage in relatively little international trade (e.g., Panama) own and flag the majority of the international shipping fleet. In addition, international vessels enjoy a great deal of flexibility regarding the country in which they register and thus which nation’s flag they fly onboard, and the flag a vessel flies often determines the regulations it faces. Currently ships choose flags in large part in order to minimize fuel and regulatory compliance costs. Effective GHG emission reduction efforts must avoid creating incentives for vessels to adopt certain flags in an attempt to escape GHG reduction policies.
- Lack of Basic Sector Information
Policymakers require a better understanding of the mechanics of international shipping. Effectively regulating GHG emissions from the sector requires better knowledge of current practices—such as fuel use, costs, and technological advancements. Current policymaking is limited by a lack of primary information about the activities of the global shipping fleet.
Policy Options to Promote Shipping Emissions Mitigation Strategies
- Carbon Price
Coordinated policies to ensure that international shipping firms face a carbon price associated with their GHG emissions would spur operational changes to reduce emissions and investments in more fuel-efficient vessels/engines and alternative fuels. In addition, a carbon price linked to the carbon price(s) applied to other economic sectors would promote GHG emission reductions from marine transport to the extent that they are cost-effective compared to equivalent emission reductions from other economic sectors.
- Assignment of Emissions to Home and Destination Port Nations
Overcoming the intricacies of ship ownership and flagging practices to regulate emissions could be accomplished by assigning responsibility for shipping emissions between origin and destination ports. Thus, the emissions from a ship moving goods from China to the United States would be the joint responsibility of those two trading nations, not the ship owner or flag state. Provisions would be needed to account for multi-stop trips and to incorporate the principle of common but differentiated responsibilities of developed and developing nations to mitigate GHG emissions. This would allow nations to address their share of emissions from marine transportation appropriately.
- Targeted Government Sponsored Research and Development and Technology Transfer
The slow speed of technological advancement in global shipping could be enhanced through government support of research and development (R&D). While the United States does not manufacture a large number of ships, many component parts originate in the United States. Combining those improvements with increased international collaboration and technology transfer could help facilitate R&D across multiple countries.
- Increased Government Spending on Infrastructure
Enhancing port efficiency has the same impact as expanding global shipping capacity, thereby decreasing the number of trips needed to move the same volume of goods. Accommodating larger, more efficient ships would require expanding ports via dredging. Government spending could also focus on improving cargo-handling technology in order to enable faster loading and unloading times. Better integrating ports with land transportation networks could also help alleviate delays.
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Climate TechBook Biofuels Overview
McCollum, David, Gregory Gould, and David Greene, Greenhouse Gas Emissions from Aviation and Marine Transportation: Mitigation Potential and Policies, 2009.
Further Reading / Additional Resources
International Marine Organization (IMO), Prevention of Air Pollution from Ships - Second IMO GHG Study 2009 - Update of the 2000 IMO GHG Study- Final report covering Phase 1 and Phase 2, 2009.
MARINTEK (2000). Study of Greenhouse Gas Emissions from Ships. Final Report to the International Maritime Organization. Trondheim, Norway, Performed by Norwegian Marine Technology Research Institute (MARINTEK) for the International Maritime Organization.
Eyring, V., H. W. Köhler, et al. (2005). “Emissions from international shipping: 2. Impact of future
technologies on scenarios until 2050.” J. Geophys. Res. 110.
 World Trade Organization (WTO), International Trade Statistics 2008.
 McCollum, David, Gregory Gould, and David Greene, Greenhouse Gas Emissions from Aviation and Marine Transportation: Mitigation Potential and Policies, 2009. Unless otherwise noted, all facts, tables, and figures in this document are drawn from this report.
 The rise of alternative modes of transport, such as trucking and rail, has curtailed the use of domestic shipping to transport goods within country. See McCollum et al. 2009, page 4.
 A ton-mile is a standard unit used to describe shipping volumes; it refers to the transport of one ton of cargo one mile.
 International Maritime Organization (IMO), Updated Study on Greenhouse Gas Emissions from Ships, 2008.
 MARINTEK, Study of Greenhouse Gas Emissions from Ships: Final Report to the International Maritime Organization, 2000. Performed by Norwegian Marine Technology Research Institute (MARINTEK) for the International Maritime Organization.
 Oak Ridge National Laboratory and Lawrence Berkeley National Laboratory Interlaboratory Working Group, Scenarios for a Clean Energy Future, 2000.
 MARINTEK, 2000.
 IMO, 2008.
 Corbett, J., H. Wang, et al., “The Impacts of Speed Reductions on Vessel-Based Emissions for International Shipping,” Proceedings of the 88th Annual Meeting of the Transportation Research Board, 2009.
 McCollum et al. 2009.
 Faber, J., B. Boon, et al., Aviation and Maritime Transport in a Post 2012 Climate Policy Regime, Netherlands Environmental Assessment Agency, 2007.
 Eyring, V., H. W. Köhler, et al., “Emissions from International Shipping: 2. Impact of Future Technologies on Scenarios until 2050,” Journal of Geophysical Research, 2005.
 Farrell, A. E., D. W. Keith, et al., “A Strategy for Introducing Hydrogen into Transportation,” Energy Policy 31(13): 1357-1367, 2003.
Prepared for the Pew Center on Global Climate Change
Guodong Sun, Energy Technology Innovation Policy Group, Kennedy School of Government, Harvard University, Cambridge, MA
China’s energy-development pathway has increasingly become a topic of international attention, particularly as China has become the largest national source of annual greenhouse gas emissions. At the forefront of this pathway is a reliance on coal that has spanned many decades. In a world faced with increasing environmental pressures, China must develop ways to utilize coal more efficiently and more cleanly. Its ability to do so will be crucial for its domestic energy security, for its local environment and the well-being of its population, and for the future of the global climate.
April 12, 2010
By Eileen Claussen
This article originally appeared in Reuters.
While policymakers in Washington debate the best path forward for dealing with climate change, a growing number of U.S. businesses have discovered a simple technique that can lower costs, increase productivity, and slash greenhouse gas emissions. What’s more, it can work for any business no matter what they make—whether it’s potato chips or computer chips.
It’s called energy efficiency, and a growing number of U.S. businesses are starting to get it.
What does it mean to be efficient? Seven habits of highly efficient companies as identified in the Pew Center’s new report From Shop Floor to Top Floor: Best Business Practices in Energy Efficiency, lists designating full-time staff to be accountable for energy performance, communicating externally the company’s successes in reducing energy costs and emissions and – perhaps most importantly – integrating sustainability as a core part of corporate strategic planning and risk assessment.
The results of this two-year study, featured this week at our Corporate Energy Efficiency Conference in Chicago attended by 260 representatives from 120 companies and universities, speak for themselves.
Dow Chemical, which purchases as much energy in a year as Australia, estimates that its efficiency efforts have saved the company $8.6 billion since 1994 while avoiding about 86 million tons of carbon dioxide emissions. The retailer Best Buy says that in 2008 its sales of certified ENERGY STAR products saved customers over $90 million in electric bills.
Why are they doing it? For starters, higher and more volatile energy prices.
Energy experts at Toyota think of it as a treasure hunt for low-cost efficiency gains that equate to big cost savings. Like other innovative companies, Toyota empowers its employees to uncover and correct inefficient energy practices at their own plants and, in some cases, for their suppliers. These efforts are in line with Toyota’s goal to reduce energy use per vehicle produced by 30 percent in 2011.
But concern about climate change, and growing customer and employee support for action on energy and environmental issues also matter, according to our corporate energy efficiency report. In many cases, CEOs are personally spearheading efficiency efforts at their companies, reflecting the priority now given to energy saving measures.
“The most inexpensive items are generally improvements in energy efficiency, some of which are economic even without a price on carbon,” said Exelon CEO John Rowe at the conference. Exelon, one of the country’s largest electric utilities, cut energy use at its corporate headquarters by 50 percent by retrofitting it to meet LEED Platinum standards.
The most effective companies are also looking outside their own walls to tap into even greater efficiency opportunities. This means working with suppliers to adopt energy efficient practices, and designing products that allow consumers to share in energy savings.
Earlier this year, Wal-Mart announced a goal to reduce carbon emissions from its global supply chain by 20 million tons, which is the equivalent shuttering six average-sized coal plants or taking 3.8 million cars off the road for a year. United Technologies recently announced a goal to improve the energy efficiency of its products by at least 10 percent by 2010.
Energy efficiency also drives broader innovation, and the benefits go beyond dollars saved and emissions reduced. A focus on energy efficiency can lead to reevaluating business practices, often turning up improvements that increase productivity and enhance quality.
Ambitious energy-savings targets forced Frito Lay to reexamine the way it bakes tortilla chips. By installing new draft controls on ovens that reduced heat loss and evened out heat distribution, the quality of the chips improved. At IBM, a focus on efficiency led to equipment upgrades that reduce energy use and improve reliability in semiconductor manufacturing processes.
It is encouraging to see so many leading companies embrace energy efficiency as a win-win solution. But energy efficiency isn’t just for businesses.
We can all cut energy use, lower greenhouse gas emissions, and save money by taking simple steps like turning off the lights when we leave the room, adding insulation in our homes, and taking shorter showers.
But I’ve been around long enough to know that we can’t rely exclusively on voluntary action to achieve our environmental goals.
We need a comprehensive national clean energy policy that puts a price on carbon. Legislation that establishes such a price would unleash hundreds of millions of investment dollars, deliver an adrenaline shot to our nation’s manufacturing sector, and create thousands of well-paying jobs. Energy efficiency sits atop the list of low-carbon choices poised to deliver immediate results in a clean energy economy.
Leading corporations have shown us what is possible. It is time we follow in their footsteps and embrace energy efficiency as something we can do right now to help create a safer, more prosperous future.
Eileen Claussen is President of the Pew Center on Global Climate Change.
Eileen Claussen is President of the Pew Center on Global Climate Change