Not Sky-High

Changes such as these involve no lifestyle loss to consumers—they still get clean clothes. Meanwhile, as carbon productivity increases, GDP goes up (detergent sales continue to grow) while emissions go down. But such changes do require re-education, as consumers need to be convinced that detergent in a smaller bottle works just as well as detergent in a big bottle. This is one small example, but if businesses start seriously taking carbon into account in the design, packaging, supply chains and logistics of their products, the impact could be enormous.

Since 1990, carbon productivity has been increasing at 1.2 percent per year as technologies have improved and awareness of environmental issues has grown. But at this rate, it will take almost 200 years to get the tenfold improvement we need—far too late. The deep changes required across the global economy will not happen without new incentives and policies at the national and international level. In particular, we need to put a price on the carbon we emit—something the European Union has done through its cap-and-trade system. We also need stronger energy-efficiency standards, transition incentives for renewables, expanded funding for research and development and a way to reflect the true value of the world's forests. These policies must also include significant funding and support for developing countries, where many of the lowest cost-abatement opportunities lie, but whose citizens have fewer resources to capture those opportunities and less historic responsibility for the carbon emitted to date.

Economic growth and a healthy climate need not be opposing goals. By dramatically increasing carbon productivity, just as we have increased labor and capital productivity in the past, we can have both. Investments in new clean-energy infrastructure and technologies can provide a boost to the global economy just when it is needed. We have had agricultural, industrial and information revolutions—now it is time for a clean-energy revolution.

Oppenheim leads McKinsey’s Climate Change Special Initiative, Beinhocker is a senior fellow at the McKinsey Global Institute and Farrell is the director of the institute.

© 2008