GeSI SMARTer 2020: The Role of ICT in Driving a Sustainable Future GeSI SMARTer 2020 2 GeSI SMARTer 2020 The Role of ICT in Driving a Sustainable Future
Independent review by • John A. “Skip” Laitner, Senior Fellow, American Council for an Energy-Efficient Economy • Mike Berners-Lee, Director & Principal Consultant, Small World Consulting
The following materials were prepared exclusively for the Global e-Sustainability Initiative by a leading strategy consultant, The Boston Consulting Group (BCG). Neither the Global e-Sustainability Initiative nor BCG makes any representations or warranties to any third party with respect to the information contained in this report. While reasonable steps have been taken to ensure that the information in this report is correct, neither the Global e-Sustainability Initiative nor BCG give any warranty or make any representation as to its accuracy and accepts any liability for any errors or omissions. The study should not be used or relied upon by anyone without independent investigation and analysis and neither the Global e-Sustainability Initiative nor BCG assumes any liability for any such use or reliance by third parties.
Acknowledgements: thanks to the many experts engaged throughout the duration of this effort for graciously providing their time, insights, and feedback to strengthen the quality of this report.
Contact information Sponsors Luis Neves, GeSI Chairman • [email protected] Major Supporting Joan Krajewski, SMARTer 2020 Steering Committee Chair • [email protected] Deutsche Telekom Alcatel-Lucent Philipp Jung, Partner and Managing Director at BCG • [email protected] Ericsson AT&T Dr. M. Bockemuehl, Partner and Managing Director at BCG • [email protected] Microsoft Bell Nokia BT © 12/2012 Global e-Sustainability Initiative aisbl and The Boston Consulting Group, Inc. HP Sprint Telenor Group Verizon 3 GeSI SMARTer 2020
carbon societies. Also in 2008, GeSI published Foreword the SMART 2020 report. ICT companies and policy makers alike were inspired by the Luis Neves ground-breaking role of ICT to respond to the & Joan Krajewski challenge of climate change. To build on the momentum, we launched an assessment Luis Neves When we began our careers many years ago, it methodology report on how to quantify ICT’s GeSI Chairman was the industry’s role to enhance our enabling capacities. At the same time, policy communications and productivity, bringing makers sought clarification of our findings. people together and enabling business to be more efficient. Here, in this 2012 SMARTer 2020 report, we provide enhanced data, analysis and breadth Fast forward, past astounding developments in on end-use sectors as well as change levers. information and communication technology This report demonstrates how ICT is a must (ICT), we see an even more critical role for the have solution on an even wider scale than Joan Krajewski industry–one we didn’t imagine and yet, every previously known. This report is not only a SMARTer 2020 Steering Committee Chair year becomes even more imperative. resource, but an essential toolkit.
Why is ICT so critical? It provides intelligence For policy makers, the report is a lens for how to manage, even lessen the impact of the most ICT can be a key determinant of low-carbon imminent threat to our existence: climate economies, which in turn empowers regional change. Rising temperatures are recognized as political, market, human and social capital. We a national security issue, destructive force, and have shown the efficiencies ICT can provide at threat to national economies. The window of selected regional levels as well as within end- opportunity to address the predicted use sectors. The benefits are known – but have devastation associated with our warming yet to be fully realized. planet continues to close. Accepted is that ICT is key to achieving a low carbon economy. Global economic conditions require policy frameworks that leverage ICT to achieve We need the speed that only ICT can offer. sustained growth and long-term societal After each climate change related natural benefits. An enabling policy environment is the disaster, we reflect and ask ourselves tough foundation upon which we can achieve an ICT- questions. Without change to mitigate these enabled low carbon environment. The ICT issues, the questions and pressures will certainly industry has demonstrated its commitment intensify. But more importantly, the dimension through operational and other changes and of the impacts and disasters will increase and provided multiple innovative solutions to abate destroy the quality of lives around us. GHG emissions. Without support from governments to ensure adoption of these When GeSI was founded in 2001 as a United solutions and support behavioural change, it Nations Initiative, it was to contribute towards may not be possible to realize ICT’s ability to a better world and referred to the United decrease the projected growth of GHG emissions. Nations MDGs as a starting point. Bringing together key players in the ICT sector with To our readers who are genuinely concerned international organizations, GeSI embarked on about climate change, we believe you will be a mission to demonstrate the positive potential enlightened. We encourage all key stakeholders, of ICT to address societal challenges. By 2008, especially policy-makers, to use the report’s GeSI became an independent legal entity, a findings, which quantify ICT’s potential, and strategic partnership dedicated to provide thought work towards the greater deployment of ICT leadership and practical tools that demonstrate solutions. the sector’s potential for ICT-enabled low- Evaluating the carbon-reducing impacts of ICT An assessment methodology
Evaluating the carbon-reducing impacts of ICT An assessment methodology
GeSI Forewords 3
Forewords
Over the past couple of years, the Global e-Sustainability Initiative (GeSI) has been participating in the global dialogue on effects” of ICT—the extent to which ICT climate change. Evidence shows that the technologies and systems can reduce or Information and Communication avoid the carbon emissions associated with Technology (ICT) industry has tremendous traditional manual, mechanical, or physical potential to increase energy efficiency and activities. The report supplements the curb carbon emissions. However, in order to evidence documented in the SMART 2020 realize this promise, merely implementing report of the important role that ICT, ICT solutions will not be sufficient—being through its enabling effect, can play in able to assess their impact more precisely is reducing global carbon emissions. also critical. The report recognizes the response of One of the GeSI missions in this respect GeSI’s members to calls for action. Now is is to develop methodology and standards the time to build on this support and to measure and cut the carbon footprint of generate further momentum. GeSI the ICT sector and other industries through members have understood the magnitude innovative technology. This report fulfils of both the challenges and the this mission by proposing a methodology opportunities and, together, they will help for identifying and quantifying the impacts speed up the process of moving to a low- of ICT adoption. carbon economy. Aware of the need to move from By establishing a consistent methodology and roadmap for measuring About GeSI discussion to action, GeSI continues to Evaluating the carbon-reducing impacts of ICT GeSI (www.gesi.org) is an international develop and implement solutions that willAn assessment ICT’s methodologylow-carbon enablement capacity, this strategic partnership of ICT companies drive the world toward a low-carbon report represents an important step toward and industry associations committed to GeSI Forewords creating and promoting technologies society—something that is essential if GeSIwe SMARTerrealizing 2020 our sector’s potential contribution4 4 and practices that foster economic, are to make the world more The Role ofin ICT the in fightDriving againsta Sustainable climate Future change. environmental and social sustainability and drive economic growth and productivity. environmentally sustainable. It is therefore our responsibility to Evaluating the carbon-reducing impacts of ICT Formed in 2001, GeSI fosters global and GeSI’s message has not yet been heard promote the methodology, to engage An assessment methodology open cooperation, informs the public or fully understood by the decision makers others, and to ensure that the ICT industry of its members’ voluntary actions to improve their sustainability performance who can make a difference. Yet the risks of as a whole adopts it and implements it fully. and promotes technologies that foster not taking action are too serious to be At the same time, we must cooperate with sustainable development. It partners with ignored. However, given the growing Thisappropriate report stakeholders marks another worldwide to two UN organizations: Environment ProgrammeUnited (UNEP) Nations recognition of GeSI’s work—including itsmilestone guarantee reached that the methodology by the Global is tools for use by enterprises, government which hosts GeSI’s Secretariat and the influential SMART 2020 report and We wouldrecognized like to and express widely our embraced gratitude so tothat the The SMARTer 2020 report presents a vision for International Telecommunications e-Sustainability Initiative (GeSI) and ICT officials, planners and policy makers to Union (ITU) subsequent regional reports—policy the industry can move toward alignment in . These partners help shape direct contributions of working group a sustainable world through responsible, ICT– our global vision regarding the evolution makers and indeed, the ICT industry, are industryits assessment toward and building communication a global of the low enable more informed decision making. of the telecommunications sector and taking note. It is now time to build and carbonrepresentativespositive economy. benefits of the ofThe companiesICT. sponsoring enabled transformation. Be innovative and how we can best meet the challenges of generate further momentum - GeSI the report, GeSI, and industry experts. This inspired with Aus; low only carbonthrough working economy together encourages sustainable development. series of Istudies believe that initially GeSI’s ICTSMART identified Enablement 2020 the members have well understood “the size ofmulti-disciplinary Methodology willand be recognizedcollaborative as a team can weinnovation build a sustainable and efficiency, economy while and preserves the opportunity” and together, we will key rolelandmark that initiative ICT can and play that GeSI, in abating its our environment. GeSI and its member speed up the process of driving the low climatededicatedmember change. many organizations, hours Cited of expertiseand at otherlength ICTto ensure by overcoming the greatest threat to our present carbon economy agenda. thatindustry the report companies contains and the stakeholdersmost accurate will data and future.companies are committed to the Now, with the launch of this report—governments,andbring credible us closer assumptions policy to actualizing inmakers the the most low and objective carbon thoughtful and sustainable realization Evaluating the carbon-reducing impacts of promise of ICT through its implementation. academia,manner possible. these studies concluded that of this vision. ICT: An assessment methodology ICT can deliver critical energy savings and has produced a powerful tool with—GeSI which to mitigate the risks that lie ahead. support the sustainable development of In addition to the direct carbon buildings, emissions associated with the development infrastructure and operations and use of ICT solutions, this methodologyin developed and developing countries. assesses what are known as the “enabling LuisLuisThis Neves Neves report contributes to realizing Joan Krajewski ICT’sGeSIGeSI promise Chairman Chairman through the SMARTerJoan 2020 Krajewski, Steering Committee Microsoft Chair establishment of a consistent ICT Enablement Study Team, Chair methodology and roadmap for assessingSMARTer ICT’s 2020 teamlow carbon enablement capacity.Alcatel-Lucent The ICT Thomas Enablement A. Okrasinski & Katrina Destrée SteeringCochran Committee MethodologyAT&T Roman Smithproposed & John Schulz in this report providesBell Ian immediate Turpin, Daniel guidanceGagne & Benoit on Sicotte the BT Gabrielle Ginér, Mark Shackleton & Glyn Stacey Richard Goode, Alcatel-Lucent processDeutsche of identifying Telekom Andreas and Kröhling quantifying Roman A. Smith, AT&T the effectsEricsson Pernillaof implementing Bergmark, Jens Malmodin,an ICT Dinesh ChandDaniel Sharma, Gagné, Bell solution.Manka WithMishra its & Matilda focus Gennvi on simplifying Gustafsson GeSI Alice Valvodova Gabrielle Ginér, BT plc assessmentHP Christopher via a Wellise generally-applicable Darrel Stickler, Cisco approach,Microsoft diverse Joan Krajewski members of the ICT Chi Pak, Deutsche Telekom industry,Nokia businesses Markus Terho, andPetteri policy Alinikula, makers David Conrad, ElaineKulsoom Weidman-Grunewald,Ally, Ericsson shouldChen find Min, thisHelena methodology Castren & Pranshu a Singhalpractical Sprint Amy Hargroves & Darren Beck Denis Guibard, France Telecom - Orange guideTelenor for tackling Group Jan the Kristensen assessment Gabriel Solomon, GSMA process.Verizon Moreover, Larry Plumb, through Alan Scott &the Christopher Lloyd Nancy Keith Kelly, HP widespreadBCG Philipp adoption Jung, Dr. Melanie of the Bockemuehl, proposed Heikki Henttu,Anders Andrae, Huawei approachDr. Manuj to assessment, Garg, Dr. Thomas the Baker, industry Colton Staab & DongKeri Cui Carkeek, Intel will move toward greater alignment in Saara Rounaja, Nokia Siemens Networks its evaluations and communications of John Smiciklas, RIM the positive benefits of ICT. Amy Hargroves, Sprint In establishing SMART buildings, Christopher T. Lloyd, Verizon grids, logistics and transportation (as Nicki Woodhead, Vodafone describedAbout by GeSI the (Global e-SustainabilitySMART Initiative) 2020 what are the next steps for industry series) and The Global e-Sustainability Initiative (GeSI) is a strategic partnership of the Information and Communication Technology (ICT) governmentsector and toorganisations enable committed the intelligent to creating and promoting technologies and practices that foster economic, environmental and social sustainability. Formed in 2001, GeSI’s vision is a sustainable world through responsible, ICT-enabled transformation. integrationGeSI fosters of ICT?global and We open propose cooperation, informs that the the public of its members’ voluntary actions to improve their sustainability next phaseperformance, is to apply and promotes the technologies recommended that foster sustainable development. GeSI has 32 members representing leading companies and associations from the ICT sector. GeSI also partners with two UN organizations - the United Nations Environment methodologyProgram (UNEP) to establish and the International a body Telecommunications of Union (ITU) - as well as a range of international stakeholders relevantcommitted knowledge to ICT sustainability and further objectives. These refine partnerships help shape GeSI’s global vision regarding the evolution of actual ICTthe applicationsICT sector, and how it can and best netmeet the challenges of sustainable development. beneficialFor moreimpacts information, through see www.gesi.org. case studies. With this additional input, we can create GeSI SMARTer 2020 6 The Role of ICT in Driving a Sustainable Future
Contents
1 Executive Summary 9
2 Introduction 15 2.1 Global context 15 2.2 The role of ICT 17
2.3 ICT abatement potential: 9.1 GtCO2e or seven times ICT direct emissions 19 3 The ICT industry’s GHG emissions 21 3.1 Overview of key emissions trends 21 3.2 End-user devices 22 3.3 Telecommunication Networks 23 3.4 Data centers 25 3.5 Benefits from data centers and cloud computing 26 3.6 Comparison between estimates in SMART 2020 and this report 26
4 Emissions abatement potential of ICT-enabled solutions 29 4.1 Abatement levers and end-use sectors 29 4.2 Abatement calculation by change lever and end-use sector 32 4.2.1 Abatement in the Power sector 33 4.2.2 Abatement in the Transportation sector 33 4.2.3 Abatement in the Manufacturing sector 42 4.2.4 Abatement in the Agricultural sector 43 4.2.5 Abatement in the Building sector 47 4.2.6 Abatement in the Service and Consumer sector 50 4.3 Differences in this report and the original SMART 2020 report 52 4.4 Important considerations for estimates 54
5 Framework for ICT-enabled emissions reduction 56 5.1 Understanding the business case in relation to the role of policy 59
6 Cross country deep-dive comparison 62
7 United Kingdom 65 7.1 Context in the U.K. 65 7.2 High-level impact of ICT on GHG emissions in the U.K. 67 7.3 Abatement potential in buildings and service and consumer end-use sectors 68
8 Brazil 84 8.1 Context in Brazil 84 8.2 High-level impact of ICT on GHG emissions in Brazil 86 8.3 Abatement potential in agriculture and land use and transportation end-use sectors 88
9 China 106 9.1 Context in China 106 9.2 High-level impact of ICT on GHG emissions in China 108 9.3 Abatement potential in power and manufacturing end-use sectors 109 7 GeSI SMARTer 2020 The Role of ICT in Driving a Sustainable Future
10 United States 122 10.1 Context in the US 122 10.2 High-level impact of ICT on GHG emissions in U.S. 124 10.3 Abatement potential in power and manufacturing end-use sectors 125
11 Germany 140 11.1 Context in Germany 140 11.2 High-level impact of ICT on GHG emmisions in Germany 142 11.3 Abatement potential in power and manufacturing end-use sectors 143
12 Canada 157 12.1 Context in Canada 157 12.2 High-level impact of ICT on GHG emissions in Canada 158 12.3 Abatement potential in transportation and buidlings end-use sectors 160
13 India 177 12.1 Context in India 177 12.2 High-level impact of ICT on GHG emissions in India 179 12.3 Abatement potential in power and transportation end-use sectors 181
14 Conclusion 199
15 Appendix 200 15.1 Definition of greehouse gases 200 15.2 UNFCCC categories and sector segmentation 201 15.3 Description of sublevers by change-lever 202 15.4 Details for estimation of global ICT direct emissions 206 15.4.1 Scope 206 15.4.2 End-user devices 208 15.4.3 Networks 209 15.4.4 Data centers 211 15.5 Details for estimation of ICT direct emissions by country 212 15.6 Details for global abatement potential by sublever 220 15.7 Details of abatement calculation by country 224 15.7.1 United Kingdom 224 15.7.2 China 226 15.7.3 Brazil 227 15.7.4 United States 229 15.7.5 Germany 230 15.7.6 Canada 231 15.7.7 India 233 15.8 Experts consulted and/or interviewed 236 15.9 Comparison of report with original SMART 2020 237 15.10 Glossary 239 GeSI1 SMARTer 2020 8 9 GeSI SMARTer 2020 1: Executive summary
an increasingly integral part of the global 1 economy. It has continuously contributed to economic growth, resulting in an improved Executive summary quality of life for people around the world. ICT has the possibility to address many of the Climate change is one of the most significant problems in our society, including the threat challenges, if not the most important of climate change. challenge, facing our world today.1 With the beginning of the Industrial Revolution, For instance, consider the use of ICT-enabled anthropogenic climate change has been GHG abatement solutions in transportation. driven by large increases in the atmospheric Through the use of eco-driving, real-time concentration of greenhouse gases.2 Rising traffic alerts, and the proliferation of ICT- sea levels, extremes in temperature and enabled logistics systems, ICT stands to reduce precipitation, species extinction, acidification total mileage and the amount of fuel required of natural water bodies, and other byproducts to transport people and goods. Online maps of climate change stand to threaten the world’s are excellent examples: by synthesizing maps prosperity and safety. In recent decades, with real-time traffic data and making this greenhouse gas (GHG) available on mobile devices these tools enable emissions have accelerated users to optimize routing decisions, reduce ICT-enabled solutions offer as developing economies, fuel consumption, and lower emissions. the potential to reduce GHG particularly Brazil, China Furthermore, with the adoption of emissions by 16.5%, create and India have begun the telecommuting and video conferencing, in process of modernization certain circumstances ICT can eliminate 29.5 million jobs and yield while developed nations, transportation needs altogether. All of these USD 1.9 trillion in savings such as the Australia, contribute to reductions in energy use and, Canada and the United accordingly, reductions in GHG emissions. States, have struggled to curb their own emissions. If nothing is done to These reductions in emissions are not limited stem the rise of emissions, these trends are to the transportation sector, but can be applied likely to continue: in 2011, annual GHG across the economy. In addition to emissions were 49 GtCO e and are projected transportation, this report considers five other 2 end-use sectors: agriculture and land use, to increase 12 percent to 55 GtCO2e by 2020 and by 63 percent over current levels to buildings, manufacturing, power, and 80 GtCO e by 2050.3 consumer and service. ICT-enabled solutions 2 offer the potential to reduce annual emissions
As was explored in the SMART 2020 report, by an estimated 9.1 GtCO2e by 2020, the rise of information and communications representing 16.5 percent of the projected technology (ICT) has been one of the most total in that year, an abatement potential transformative developments of the last more than 16% higher than previously several decades. But the world has changed calculated in the SMART 2020 report. since the publication of that report, and SMARTer 2020 seeks to take a fresh look at the role ICT can play in GHG abatement by considering recent trends, incorporating 1. “America’s Climate Choices”, updated data, and looking a broader use of National Academy of Sciences ICT in other industries. From tablets and 2. “Anthropogenic climate change: Revisiting the facts,” Stefan Rahmstorf increased use of broadband networks to cloud 3. EDGAR Database; OECD, computing and smartphones, ICT has become “Environmental Outlook to 2050” GeSI SMARTerSMART 2020 2020 10 1: Executive summary
Power Buildings
ICT adoption in the power sector could yield ICT can abate 1.6 GtCO2e (18% of total) in this
2.0 GtCO2e in abatement (or 22% of total sector by providing occupants with the systems estimated abatement total) by playing a critical required to support the generation of renewable role in the creation of a more dynamic power energy and incorporate it into the building’s market with supply and pricing responding to power supply. Smart design can reduce lighting changes in demand. This more dynamic and heating, ventilation, and air conditioning market is vital for effectively integrating needs while building management systems renewable energy into the power supply. ensure that those systems are used efficiently.
Transportation Manufacturing Emissions reductions in transportation could reach ICT-enabled efficiency in factories and other
1.9 GtCO2e (21% of total). Increased efficiency manufacturing applications could allow for in cargo transit through improved logistics 1.2 GtCO2e (13% of total) in abatement from networks and fleet management represents a the manufacturing sector. Through solutions significant abatement opportunity. Telecommuting that, for example, better control a motor and increased use of video conferencing can system to better match its power usage to a reduce transportation needs and emissions. required output, there are many opportunities for ICT to make manufacturing more efficient. Agriculture and land use Emissions reductions from this sector could reach Consumer and service
1.6 GtCO2e (18% of total). As the inputs required to Emissions reductions through ICT in the grow crops emit large quantities of emissions, ICT consumer and service sector could reach that allows farmers to accurately assess how much 0.7 GtCO2e (8% of total). ICT connects consumers to irrigate and fertilize their crops will lead to to merchants via the Internet and enables emissions abatement. Systems that reduce the them to purchase goods online rather than amount of land required to raise livestock and physically traveling to the store. ICT-enabled reduce their methane emissions also have software can also develop packaging that significant abatement potential. Also, monitoring generates less waste and conserves resources. equipment can help governments prevent the destruction of rainforests that act as carbon sinks.
Abatement potential (GtCO2e) 10 0.7 9.1 1.3 Summary of estimated 8 abatement potential by sector 1.6 Source: BCG analysis
6 1.6
1.9 4
2.0 2
0 Consumer Power Transportation Agriculture Building Manufacturing & Service Total 11 GeSIGeSI SMARTer SMART 2020 1: Executive summary
Not only will ICT-enabled abatement solutions to reach consensus on a global GHG emission address climate change, but also present an program. Thus, while an international opportunity to drive sustainable economic growth. framework for climate change continues to be This is of particular importance given the important, it is clear that effective policies at emphasis placed on raising incomes and living the national and local level, for example cities standards by policy makers, particularly those and states, are needed at the same time. in the developing world. It is estimated that National governments are best positioned to full utilization of the sublevers we have identified drive GHG reductions, and enacting policies could yield USD 1.9 trillion in savings that accelerate the use of ICT-enabled for consumers and businesses and that 29.5 solutions is an effective way to facilitate the million jobs would be created worldwide as a transition to a low-carbon economy. National result. policies will have even greater impact if they are supported by a global framework to limit It is important to note that the projections and emissions, for instance by creation of a market estimates of the abatement potential of the that establishes a price on CO to improve the above sublevers and the economic impact are 2 economics of many of the ICT solutions. subject to data and methodological limitations, which have been identified and expounded on And while ICT will continue to play an important in the report. role in GHG abatement, it is important to recognize that the sector contributes to For many of the ICT-enabled climate change as well. Widespread adoption abatement solutions, the While an international of ICT devices has led to a rise in their market will drive further framework for climate change associated GHG emissions; from 2002 to 2011 uptake. To use Canada as emissions rose from 0.53 GtCO e to 0.91 continues to be important, an example, leveraging ICT 2 GtCO e and are projected to rise to 1.27 effective policies at the to design and to manage 2 GtCO e by 2020. This represents an increase new buildings to be more 2 national and local level are in ICT’s share of total global emissions, energy efficient will occur increasing from 1.3 percent of global emissions needed at the same time without policy intervention. in 2002 to 2.3 percent in 2020. Though these Given current energy prices emissions cannot be ignored, ICT provides and the low upfront cost associated with significant leverage in addressing climate altering building design and management, change; the estimated ICT-enabled abatement developers will find it economically favorable potential of 9.1 GtCO e for the sectors and to incorporate efficient design into their 2 sublevers identified by this report is seven buildings. The incorporation of renewable times the size of the sector’s direct emissions. energy, however, has a weaker business case Considering only the sector’s direct emissions because of the availability of inexpensive fails to reflect its importance as a GHG- electricity generated by hydro and fossil fuel abatement tool. Moreover, the industry continues sources. Driving higher uptake of renewable to work toward increasing the energy energy integration will require the efficiency of its own devices to stem the rise in intervention of policy makers to make emissions as ICT proliferates. Even since the renewable energy generation economically publication of the previous SMART 2020 competitive with other sources. report, we have seen significant adoption of The most significant challenge facing many energy-saving solutions within the ICT ICT-enabled abatement solutions is the lack of industry and increases in the role of ICT in robust policies to address climate change. other industries, leading to more than a 16% International policy makers have been unable increase in the estimated abatement potential. GeSI SMART 2020 12 1: Executive Summary
When we compare the estimates in this study enabled solutions in the following seven with the results from the SMART 2020 report, countries: Brazil, Canada, China, Germany, we see an encouraging trend, as the abatement India, the United Kingdom, and the United potential has increased while the direct States. In Brazil, the government has expressed emissions figure is lower. The increase in a desire to decrease emissions and has passed abatement potential is due to the innovation some policies to fight deforestation, but a lack of new sublevers, as unforeseen technology of resources and high has been introduced and has been shown to demand for Brazilian play an important role in abatement. The agricultural products and While ICT’s own footprint decrease in the ICT industry’s own emissions population increase has is projected to rise to is driven by several factors; we have seen the driven emissions higher. 1.27 GtCO e by 2020, innovation and adoption of smart mobile Canadian emissions have 2 devices like phones and tablets, which have remained relatively flat its abatement potential started to cannibalize or reduce the use of since 2000 due to increases is 7 times higher more energy-intensive computing equipment in energy efficiency, but the like PCs. Additionally, the increased use of extraction of tar sands and virtualization and more efficient use of cloud economic expansion threaten to push computing reduces estimates. Finally, the emissions higher. China has become the economic slowdown, especially the impact on world’s largest GHG emitter and ICT-enabled developing markets, has decreased estimates solutions, if implemented and scaled up, can on the use of devices in these countries. decelerate current emissions growth trends. In Germany, emissions have fallen since To highlight opportunities and illustrate the reunification, but reductions have slowed over differences across countries through a the last decade. Given the proposed phase out standardized framework, the report provides of nuclear energy, Germany may find it guidance to policy makers on actions that can challenging to meet its emissions targets. In accelerate the abatement benefits of ICT-
SMART SMARTer 2020 2020 Total estimated abatement Abatement Potential 2020 potential compared with 7.8 9.1 (GtCO2e) estimate of direct emissions from the industry. Results 5.5x 7.2x compared also with original ICT industry’s emissions 2020 1.4 1.3 SMART 2020 report (GtCO2e) 2.6% of 2.3% of 1. On a base of 55 Gt CO2e GHG global emissions1 global emissions1 emissions (IEA) Source: SMART 2020, IEA, BCG analysis 13 GeSI SMARTer 2020 1: Executive summary
India, rapid economic growth caused use of natural gas in power generation and emissions to more than double between 1994 efficiency gains, the unfavorable political and 2007 and emissions growth is exacerbated environment surrounding GHG abatement by poor power and transportation must change if U.S. emissions are to decline infrastructure and high reliance on fossil significantly.4 fuels. The U.K. has managed to decouple Reducing emissions while maintaining economic growth from emissions growth, but economic growth and improving quality of life the adoption of new levers is essential to is one of the fundamental challenges of the ensure the trend continues. And in the U.S., twenty-first century; ICT offers the opportunity emissions have grew slowly but steadily until to address the threat of climate change while 2008 and the onset of the global financial sustainably growing the world’s economies. 4. EIA crisis. While emissions declined 1.7% in 2011 from 2010 levels in part due to the increased
1.6 Building 1.6 Agriculture 60 .07 Consumer & service Abatement potential in 1.2 Manufacturing 2020 plotted with the direct 1.9 Transportation 50 2.0 Power emissions from the ICT Business as usual growth in emissions industry and total global 40 ICT enabled GHG emissions 30 abatement (-9.1 GtCO e) All other GHG emissions 2 Source: IEA, BCG analysis 20 (44.6 GtCO2e)
10
0 2000
ICT footprint
2011 (1.3 GtCO2e) 2020 GeSI2 SMARTer 2020 14 15 GeSI SMARTer 2020 2: Introduction
2 For more information on the difference between CO2 and CO2e and the reporting methodology used, please see section 14.1 of Introduction the appendix. 2.1 Global context Little has changed since the previous SMART 2020 report in terms of the science Global warming is one of the most pressing related to global warming or the scale of problems facing society in the twenty-first the potential impact from global warming. century. Since the previous SMART 2020 If anything, estimates of the cost have report in 2008, the growth of greenhouse gas increased and the scientific evidence regarding (GHG) emissions as a result of human activity the role of human activity on global warming has increased along with the potential damage has strengthened. This statement from the that could occur due to global warming. previous report remains very true today: “Warming of the climate system is unequivocal, Global warming is the consequence of the as is now evident from observations of release of carbon dioxide and other GHGs into increases in global average air and ocean the atmosphere as a result of human activity, temperatures, widespread melting of snow namely the burning of fossil fuels. These and ice and rising global average sea level.”5 GHGs create a warming effect by absorbing radiation reflected from the Earth that would While the global recession decreased the growth
otherwise escape back into space. While CO2 of GHG emissions in 2008 and 2009, especially is the main gas responsible for global warming, in developed economies, growth from developing 5. IPCC 2007 Synthesis Report; Pachauri, R.K. and A Reisinger other GHGs include methane, nitrous oxide, countries has exceeded expectations and is (eds.) (2007) Climate Change 2007: and fluorocarbons, among others. These gases, becoming an increasingly larger share of the Synthesis Report, Contribution of Working Groups I, II, and III to the while often emitted in lower concentrations global total. Figure 1 illustrates the historic and
Fourth Assessment Report of the than CO2, have a much higher warming effect projected growth of GHG emissions. Without Intergovernmental Panel on Climate per molecule and can also be a major contributor any changes to current trends or major efforts Change, IPCC, Geneva, Switzerland to warming. In this report, we refer to both to reduce emissions, the total annual GHG 6. Please note that Gt equals a billion (109) metric tons; OECD, http:// CO emissions and GHG emissions. GHG 2 emissions could rise to over 55 GtCO2e in 2020 www.oecd-ilibrary.org/environment/ 6 emissions include CO2 and all other GHGs and and exceed 80 GtCO e in 2050. oecd-environmental-outlook-to- 2 2050_9789264122246-en are referred to as its CO2-equivalent (CO2e).
Global Emissions (GtCO e) Figure 1 Global Emissions (GtCO22e) 90 Global annual CO2 and GHG 81 emissions, historic and projected 80 GHG business as usual assuming 70 no significant efforts to reduce 58 emissions 60 55 COCO22 48 50 Source: EDGAR Database; OECD, 40 “Environmental Outlook to 2050” 40 31 30
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10
00 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 GeSI SMARTer 2020 16 2: Introduction
Impact of global warming7 Estimates on the economic impact vary widely as models are refined and improved, but it is It is difficult to fully model the exact effect clear that there is potentially a catastrophic that increases in GHG emissions will have on cost to our society. According to the Stern global temperatures and correspondingly the Review, written by former World Bank Chief effect on our society. But it is understood that Economist Lord Stern, without action the there are many significant problems that overall costs and risks of could occur. Many of these have a positive climate change could be the feedback effect, i.e., they get worse or release equivalent to losing at least Global warming additional GHGs as warming occurs: 5 percent of the global gross could potentially have Cutoff of thermohaline circulation (THC) domestic product (GDP) a catastrophic cost 8 THC is large-scale ocean circulation that is each year. Other estimates on our society driven by global density gradients created by from the Intergovernmental surface heat and freshwater fluxes. Potential Panel on Climate Change changes to the thermohaline circulation are (IPCC) are in line with the Stern report and thought to have significant impact on the have been revised as more sophisticated and Earth’s radiation budget and also play an accurate models have been built. 9 important role in determining the concentration The costs of reducing GHG emissions to an of carbon dioxide in the atmosphere. Warming acceptable level can be manageable. The increases freshwater inflow in the North Atlantic Stern report estimated a cost of approximately thus weakening THC and further increasing 1 percent of global GDP each year, resulting in a warming in the North Atlantic Ocean region. sufficient payback if implemented. In its most Amazon rainforest dieback recent report, Energy Technology Perspectives A large fraction of rainforest precipitation is 2012: Pathways to a Clean Energy System, the recycled, but global warming disrupts this International Energy Agency (IEA) estimated recycling, causing rainforest dieback, which that investment in clean energy needs to then leads to further dieback. double by 2020 to avoid the worst effects of global warming. This would be a total cost of Permafrost melting USD 36 trillion between today and 2050. Atmospheric warming leads to permafrost melting, releasing large amounts of methane However, it is important to point out that the and further increasing warming. total investment is not the same as net spending and that there are significant savings Disintegration of from investing in renewables and energy West Antarctic ice sheet efficiency. By 2025, the fuel savings realized Melting leads to ground-line retreat, potentially by reducing GHG emissions would outweigh leading to ocean water undercutting the ice investment and by 2050, the fuel savings sheet and more rapid disintegration. would amount to more than USD 100 trillion. Even if these potential future savings are 7. Timothy M. Lenton and Hans Disruption of Indian monsoon Joachim Schellnhuber, “Tipping discounted at 10 percent, there would be a Warming disrupts complex self-sustained the scales,” Nature Reports Climate USD 5 trillion net saving between now and Change, 2007 moisture circulation of the Indian monsoon. 8. Stern, N. (2008) Key Elements of 2050. Regardless of the exact numbers, it is a Global Deal on Climate Change, Melting of Greenland ice sheet clear that the economic costs of global London School of Economics and Warming leads to melt water residues left on warming are significant and that there is a Political Science 9. Jeffrey D. Sachs and Shiv Someshwar, the ice sheet surface or exposure of land, which major savings potential from early intervention. Green Growth and Equity in the increases surface temperature and leads to Context of Climate Change: Some Considerations, ADBI, (2012) http:// further melting. www.adbi.org/files/2012.07.13.wp371. green.growth.climate.change.pdf 17 GeSI SMARTer 2020 2: Introduction
Scale of abatement reduction international community, these 10 countries stand to have the largest impact on reaching It is difficult to determine the exact amount emissions abatement targets. The information of CO abatement needed. The scenario set 2 and communication technologies sector has a forth by the IEA report discussed above would significant role to play in achieving the desired require reducing CO emissions in 2050 to 2 abatement, as will be seen in the following under 20 GtCO . Compared to the “business- 2 chapters. as-usual” case outlined in Figure 1, this would
require an abatement of around 40 GtCO2, which is approximately two-thirds of total expected CO emissions in that year. The Stern 2 2.2 The role of ICT report identified the need to reduce GHG emissions to equivalent levels. This implies The ICT industry plays a vital role in the global significant changes in the use of energy economy and is a major driver of growth and around the world. development. It has an important role to play in supporting growth in the slowing economies To give some perspective of what this would of developed nations, while serving to leap- entail, Table 1 illustrates the 2008 GHG frog and modernize developing nations. emissions by the top 10 countries: Several of the most transformative economic These top 10 countries contribute a total of trends (e.g., social media, big data, multi- channel retail, etc.) involve the use of ICT. The approximately 29 GtCO2e of emissions and collectively emit approximately 62 percent of indispensible role that ICT plays in the world the world’s total emissions. Though climate economy is only projected to grow for the change will need to be addressed across the foreseeable future.
2008 Per capita GHG emissions emissions
Country (GtCO2e) (tCO2e/person) Table 1 China 9.9 7.6 List of the top 10 countries by GHG emissions in 2008 United States 6.6 21.7
Note: Emissions from land change make Russia 2.6 18.2 up a large part of emissions in Indonesia, Brazil and Democratic Republic of Congo India 2.4 2.0 Indonesia 2.0 8.8 Brazil 1.4 7.5 Japan 1.3 10.4 Democratic Republic of Congo 1.0 16.0 Germany 1.0 12.3 Canada 0.7 22.0 29 Total (~62% of global total) GeSI SMARTer 2020 18 2: Introduction
As we consider the overall implications of ICT emissions. The total embodied emissions GHG emissions, we see that they are strongly of many end-use devices have significantly correlated with economic growth. The growth decreased, networks have become more of emissions temporarily slowed in 2008 and energy efficient, and trends within the sector, 2009 as a result of the global recession, but such as virtualization and dematerialization, has quickly rebounded and continued to grow will continue to make it more efficient. in the last three years. Ideally, countries would As for the environmental impact of the ICT seek solutions that decouple emission growth sector, not only should we consider the direct from economic growth to create wealth and impact of the ICT industry but also its indirect improve standards of living without the impact, which is when its products and corresponding increase in emissions. network services are used by other sectors, ICT has an important role to play in the especially for solutions that reduce emissions. development of environmentally sustainable The previous SMART 2020 report and this economic growth. Previous analysis shows that update seek to address four key questions the ICT industry contributed 16 percent to around the role of the industry and climate overall GDP growth from 2002 to 2007, with the change: sector growing from 5.8 to 7.3 percent of the 1 What is the direct GHG footprint total economy. The sector’s contribution to of the ICT sector? worldwide growth is expected to remain high at 8.7 percent of worldwide GDP growth by 2020.10 2 What are the quantifiable emission ICT’s contribution to economic growth is not a reductions that can be enabled recent development; historically, the sector has through ICT applications in other played an indispensible role in growth. As sectors of the economy? much as one-third of all economic growth in 3 What are the new market the Organization for Economic Cooperation opportunities for ICT and other and Development (OECD) countries between sectors associated with realizing 1970 and 1990 was due to access to fixed-line these reductions? telecom networks alone.11 Assuming full 4 What policy measures are required utilization of the sublevers we have assessed, to realize the full GHG abatement the economic impact of ICT-enabled GHG potential of ICT? abatement will be significant. If 9.1 GtCO2e of abatement is realized, the sublevers have the In the following sections of the report, we will potential to save USD 1.86 trillion and could first explore ICT’s impact on GHG emissions. create as many as 29.5 million jobs by 2020. We will investigate the impact of the trends identified above and discuss the areas in In addition to its positive implications for which the industry can seek to reduce emissions. economic growth, ICT’s GHG abatement We will present a detailed model that potential must also be considered. The ICT estimates the industry’s total emissions this industry accounted for 1.9 percent of total year and projected emissions through 2020. In global GHG emissions in 2011, which is the second section, we will explore the broader significantly less than its overall contribution impact of ICT on industries and quantify the to GDP. Nonetheless, this is a significant abatement potential by the role of ICT (called amount of emissions that the industry must change levers) and by the end-use sector. 10. Global insight, SMART 2020 report address, especially as we expect even faster 11. Roeller, Lars H. and adoption of ICT in the future. However, in the Leonard Waverman, (2001), last several years there have been promising ‘Telecommunications Infrastructure and Economic Growth: A Simultaneous strides toward decreasing the growth rate of Approach’, American Economic Review, Volume 91, Number 4, pp. 909-23 19 GeSI SMARTer 2020 2: Introduction
2.3 ICT abatement potential: the ICT-enabled abatement potential for the sublevers htat have been identified. We 9.1 GtCO2e or seven times estimate that the total emissions in 2011 were 0.9 GtCO e (1.9 percent of all global GHG ICT direct emissions 2 emissions) and that by 2020, total emissions
Current estimates from the IEA and others for will be 1.3 GtCO2e, or 2.3 percent of global their “business-as-usual” case (BAU) have the emissions. Though this number was based on total annual GHG emissions growing to around conservative estimates for efficiency upgrades, it illustrates the need for additional efforts to 55 GtCO2e by 2020. In this report we estimate that ICT can have a significant impact on become more efficient within the industry. reducing this amount, as Figure 2 below Nonetheless, it is clear that the ICT sector can illustrates. We estimate the total abatement make a significant impact on emissions abatement, contributing emissions abatement potential from ICT solutions to be 9.1 GtCO2e, or 16.5 percent of the total BAU amount. of seven times the industry’s direct emissions. This makes a strong case for the role of ICT in As indicated by Figure 2, the total emissions our society and illustrates how ICT can aid from the ICT industry have been estimated in economic growth and increasing the quality this report. The industry makes up a small of life while at the same time reducing the percentage of the worldwide emissions total impact of GHG in climate change. and its emissions are substantially lowerthan
Figure 2 Abatement potential in 2020 plotted with the direct emissions from the ICT industry and total global GHG emissions 1.6 Building 1.6 Agriculture Future projections and estimates on 60 .07 Consumer & service the total emissions and abatement come 1.2 Manufacturing 1.9 with inherent inaccuracies because of Transportation 50 2.0 Power the difficulty of such estimations. In fact, Business as usual growth in emissions both the BAU case and the abatement 40 potential scenarios serve as only one ICT enabled scenario of many that could occur in 30 abatement the future. The calculated abatement (-9.1 GtCO e) potential as drawn in the figure is All other GHG emissions 2 e) subtracted from the 2020 BAU case. 20 (44.6 GtCO2 The BAU case contains some intrinsic improvement in technology based 10 on historic trends. This may overlap with some of the abatement potential 0 identified in this report. Combined with the uncertainty in the BAU 2000 estimate, we caution against trying to interpret the absolute GHG emissions ICT footprint from the analysis, but instead encourage 2011 (1.3 GtCO2e) the reader to focus on the scale of impact that ICT can make regardless
of what GHG scenario we expect in 2020 the future. GeSI3 SMARTer 2020 20 21 GeSI SMARTer 2020 3: The ICT industry’s GHG emissions
2.3 percent per year between 2011 and 2020. 3 Since this category accounts for 60 percent of all ICT emissions, a deceleration will have a The ICT industry’s big impact on the growth rate of total ICT emissions. The primary driver for this decline GHG emissions is the expected efficiency gains and a shift from PCs to laptops and tablets. 3.1 Overview of key emissions trends Despite the lower growth rate, the ICT industry’s footprint is projected to increase The growth in GHG emissions from the at a faster rate than the total global footprint ICT industry12—end-user devices,13 between 2011 and 2020. According to data telecommunication networks, and data from the International Energy Agency, centers—is expected to decrease in the next global GHG emissions are expected to rise at decade. While the growth rate from 2002 to 1.5 percent per year between 2011 and 2020. 2011 was 6.1 percent per year, the growth rate This is lower than the 3.8 percent projected for 2011 to 2020 is expected to slow to growth in ICT emissions. It is, however, 3.8 percent per year (see Figure 3). This section important to recognize that the total global discusses the factors driving this decrease in GHG abatement potential enabled by these 12. The scope defined here differs growth. technologies is several times larger than ICT’s from that used by OECD (see appendix for details) by taking a more equipment own footprint. The next chapter delves into The decrease in ICT emissions growth will be based approach: this study considers this subject in detail. only the main ICT equipment due to a significantly reduced rate of growth categories in emissions by end-user devices. From a In 2011, the ICT industry’s total footprint 13. PCs (desktops and laptops), growth rate of 6.1 percent per year in GHG amounted to 0.9 GtCO e, or 1.9 percent of monitors, tablets, smartphones, 2 other mobile phones, printers, and emissions between 2002 and 2011, end-user the global emissions. The technologies peripherals (IPTV boxes, modems, device emissions are expected to decrease to from the industry form the fabric of the routers, etc.)
Figure 3 Global ICTICT emissions emissions (GtCO (GtCO2e) 2e) ICT emissions growth expected 2.02.0 to decrease from 6.1 percent Estimates cover GHG protocol to 3.8 percent Estimates cover + 3.8% scopesGHG protocol 1, 2 and 3 1.51.5 CAGRCAGR % CAGRCAGR % scopes 1, 2, and 3 2002-2011 2011-2020 1. Data for 2010, 1.271.27 2002-2011 2011-2020 8.6% 7.1% Source: Gartner; Forrester; + 6.1% 0.290.29 DataData centerscenters 8.6 7.1 U.S. Census Bureau; IEA; Greentouch; 1.01.0 0.910.91 VoiceVoice and & Data Data 4.7% 4.6% CEET; CDP; Ovum; GSMA; CERN; Cisco; 0.160.16 0.300.30 4.7 4.6 CEET; SMART 2020: Enabling the low NetworksNetworks 0.20 carbon economy in the information age; 0.530.53 0.20 academic publications; industry experts; 0.50.5 0.07 0.130.13 academic experts; manufacturer 0.670.67 End-userEnd-user devices 6.1% 2.3% 0.55 websites; BCG analysis 0.55 devices 6.1 2.3 0.320.32 0.00 20022002 20112011 20202020 (SMARTer(SMART2020)( 2020) (SMARTerSMARTer2020) 2020) (SMARTer(SMARTer2020) 2020) ICT as % global GHG percentage of 1.3%1.3 1.9%1.9 2.3%2.3 emissionsglobal emissions Global GHG 40 481 55 emissionsGlobal GHG (GtCO 2e) emissions 40 481 55
(GtCO2e) GeSI SMARTer 2020 22 3: The ICT industry’s GHG emissions
modern global economy, and will see a Furthermore, as noted earlier, this study uses a continued increase in penetration over the specific definition of ICT. Different scope and next 10 years. The growth in usage, however, definitions of ICT would yield different comes at the cost of higher emissions. Despite estimates. All of the estimates of ICT emissions expected efficiency gains, the ICT industry’s in this chapter are based on lifecycle emissions, footprint is projected to rise to 1.3 GtCO2e or and include scopes 1, 2, and 3 of the GHG 2.3 percent of global emissions by 2020. protocol, subject to data limitations.15
The emissions from all three ICT categories— end-user devices, telecommunication networks, and data centers—are expected to increase. 3.2 End-user devices However, the data center footprint is expected End-user devices’ footprint was the largest of to increase most rapidly, at 7.1 percent per the three categories in 2011. These devices year, followed by networks at 4.6 percent and accounted for 0.55 GtCO e, or 59 percent of end-user devices at 2.3 percent. 2 total ICT emissions. Within the end-user It is important to note that these estimates are devices, PCs had the biggest share, at 60 based on several projections and assumptions, percent. The large PC footprint is driven by all of which are stated in the appendix. It is the substantially bigger embodied and usage likely that actual realization of ICT emissions emissions compared with other devices. in 2020 may be quite different. Several Printers and peripherals make up most of the trends—slower or faster global economic remainder of end-user devices’ emissions, growth, sourcing of rare-earth minerals from at 18 percent and 13 percent respectively. 14. Japan and India have begun countries other than China,14 recycling of ICT Low global penetration of smartphones exploring the potential of sea-bed mining for rare-earth minerals devices in western Africa in an environmentally (approximately 10 percent) and tablets (www.scidev.net/en/agriculture-and- detrimental fashion, and others—could impact (approximately 1 percent) in 2011, and lower environment/earth-science/features/ india-backs-exploration-of-rare-earths- ICT emissions in a significant way. Since it is per device footprint compared with other in-deep-sea-1.html ) hard to forecast these trends, this study does devices resulted in their small total footprint. 15. Greenhouse Gas Protocol: www. not include their impact in the estimates. ghgprotocol.org/calculation-tools/faq
Global end-user devices Globalemissions end-user (GtCO devices2e) emissions (GtCO e) 2 Figure 4 0.80.8 % growth Growth in end-user devices contribution + 2% 0.670.67 from 2011-2020 emissions expected to slow 1 OtherOther 4 down from 6 percent to 2 percent 0.60.6 TVs 42 0.550.55 TVs + 6% 1. Only TV usage emissions related PrintersPrinters 0 to IPTV included 0.060.06 TabletsTablets 431 Note: Industry trend used to extrapolate 0.40.4 SmartphonesSmartphones 201 2020 installed base and shipments 0.01 0.320.32 MobileMobile Phones Phones -3 Source: Gartner; Forrester; U.S. Census Bureau; IEA; Greentouch; CEET; CDP; Ovum; GSMA; CERN; Cisco; CEET; Jonathan Koomey; SMART 2020; 0.20.2 0.37 PCsPCs 30 0.33 BCG analysis 0.250.25
0.00 2002 2011 2020 23 GeSI SMARTer 2020 3: The ICT industry’s GHG emissions
It is estimated that the footprint of end-user According to data from Gartner, the current devices will grow at 2.3 percent per year to share of laptops in the PC market is around 45
reach 0.67 GtCO2e in 2020. This growth rate, percent and is expected to increase to more however, is significantly lower than the growth than 70 percent by 2020. Since laptops have a rate of 6.1 percent per year between 2002 and lower GHG footprint than desktops, this will 2011. Due to this slower growth rate, the share lower the overall PC footprint. Second, there of end-user devices in total ICT emissions will will be a growing tablet device base. Since a drop to approximately 50 percent in 2020. tablet’s GHG footprint is less than 25 percent of that of an average PC, 17 this will also help Robust sales growth of end-user devices over with GHG abatement. And last, continued the next decade will drive the higher level of energy efficiency improvements in devices, absolute emissions. The installed base of PCs especially PCs, will also be important. Standby is expected to double to approximately 3 energy use reduction in devices will likely be billion by 2020.16 Much of this will be driven the biggest contributor to increased energy by growing markets such as China and India. efficiency. A complete phase out of cathode Tablet penetration is expected to increase ray tube monitors with liquid crystal display rapidly as many different vendors enter the monitors will also be an important contributor. market, thus increasing competition in the tablet market and lowering prices. Smartphone penetration will also increase, although it is 3.3 Telecommunication likely to cannibalize some of the current regular mobile phone market. Overall, though, networks 16. Given the recent economic mobile penetration will increase substantially slowdown, and the consequent Telecommunication networks’ GHG emission by 2020. downward revision of economic growth footprint was 0.20 GtCO e in 2011. This forecasts, this study uses a more 2 conservative estimate of the 2020 Three important technology trends will, amounted to 22 percent of the total ICT footprint installed base than the 4 billion used in however, reduce the emissions growth in this in 2011. Wireless networks and wireline “SMART 2020: Enabling the low carbon global economy in the information age.” category (see Figure 4). First, laptops will capture networks accounted for an equal share of the
17. Average of desktop and laptop an increasingly larger share of the PC market. footprint at 0.10 GtCO2e (see Figure 5).
Global Voice and Data
Figure 5 GlobalNetworks Voice emissions and Data (GtCO Networks2e) emissions (GtCO2e) Mobile network emissions 0.4 expected to grow faster than fixed networks emissions % CAGR 0.300.30 2002-2020 0.3 0.3 + 5% Source: Gartner; Forrester; U.S. Census Bureau; IEA; Greentouch; CEET; CDP; Ovum; GSMA; CERN; Cisco; CEET; Jonathan Koomey; SMART 2020; 0.200.20 0.160.16 WirelessWireless +5%5 0.2 BCG analysis 0.2
0.130.13 0.100.10
0.1 0.070.07 0.140.14 WiredWired+ 4%4 0.100.10 0.070.07 0.00 2002 2011 20202020 GeSI SMARTer 2020 24 3: The ICT industry’s GHG emissions
Wireless networks emissions due to the remarkably large traffic volume increases. To quantify the impact of these Mobile network operators will face an explosion trends, this study models the evolution of wireless in the mobile data and voice traffic: the estimates network emissions as a function of traffic growth. for the total traffic growth vary from a 33 times Taking into account the expected efficiency increase18 to a 70-times increase.19 This is a major improvements, the wireless network emissions technical, operational, and financial challenge are expected to be 164 MtCO e with the assumed for mobile telecom operators all over the world. 2 data growth of 50 times the level in 2011. 23 Several factors contribute to the explosion of wireless data traffic. In 2011, there were 6 billion mobile subscriptions; this number is expected to double by 2020.20 In addition to more users, data usage per user is also expected to increase as data-intensive services While the industry continues to make significant strides in improving the energy efficiency of its communication and data networks, network equipment and applications—such as streaming video and management of these networks, more dramatic and faster improvements and music—are adopted by a larger share of are necessary. Therefore, the industry has begun to expand upon fundamental smartphone and tablet users. The rapid as well as disruptive research to handle the traffic growth in a sustainable way. TM increase in traffic volume will necessitate The GreenTouch consortium, for example, was formed to increase network energy efficiency by a factor of 1,000 compared to 2010 levels. As a global wireless network capacity upgrades and adoption research consortium with leading industry, academia and research of fourth-generation (4G) LTE networks. institutes, it currently has over 25 research projects and activities, including the Large Scale Antenna System (LSAS) and the Bit-Interleaved This will increase usage emissions and the Passive Optical Network (Bi-PON) projects, which are already beginning embodied emissions associated with these to demonstrate how innovative technologies can continue to increase data infrastructure upgrades. Efficiency improvements, network efficiency. The consortium’s mission is to deliver architectures, however, are expected to lower the energy solutions, and specifications by 2015, and to demonstrate key technologies necessary to improve network energy efficiency by a factor of 1,000 consumed per unit of mobile traffic. The expected compared to 2010 levels, which represents several orders of phase-out of older networks and network magnitude compared to the efficiency of networks in use today. equipment in favor of more modern technology; The work done by GreenTouchTM is representative of the initiatives improvements in the network spectrum efficiency that need to be pursued by the industry to ensure that the and in base station power amplifiers and antennas; emissions of future wireless, wireline, and optical networks optimization of network cell size; and the available can meet the estimated projections used in this study. unused capacity of the existing networks will all compensate for data traffic growth and help moderate wireless network emissions growth.21
Furthermore, the adoption of greener sources of energy for cell towers and base stations is also expected. For instance, well over half of the Wireline networks cell towers in India run on diesel, leading to an 18. UMTS Forum Wireline networks will also face an increase in estimated 10 Mt of CO emissions each year.22 19. GreentouchTM 2 the amount of data they will carry. According Currently, pilot programs are under way to use 20. GreentouchTM, Ovum, ITU TM to GreenTouch estimates, fixed Internet IP 21. Source: Expert interviews renewable energy, especially solar, to power these traffic in 2020 will be eight times the level in 22. TRAI: http://trai1.gov.in/ towers. If successful, scaling up these solutions WriteReadData/ConsultationPaper/ 2011. However, an increase in IP traffic is less to cover the maximum number of cell towers Document/TEMA.pdf likely to impact wireline networks than the could have a huge impact on reducing emissions 23. This holds true as long as data anticipated impact on wireless networks.23 growth stays within the capacity limits. in India’s mobile network infrastructure. However, once capacity limits are Additionally, a move to fiber optic networks exceeded, additional equipment will Nevertheless, these kinds of emissions reductions from copper networks will significantly lower be needed. If data growth exceeds installed capacity, it would weaken this are unlikely to keep pace with the growth in the energy use of these networks. The total conclusion 25 GeSI SMARTer 2020 3: The ICT industry’s GHG emissions
number of users is also expected to stay fairly growth in data. The appendix lays out the stable until 2020 as the increase in broadband assumptions made in this study regarding the subscribers will be compensated by a decline in impact of each of these levers. Plain Old Telephone Service (POTS) subscribers. Other technologies are being tested today that Overall, wireline emissions are estimated to have the potential to substantially reduce the grow at a CAGR of 4 percent from 2011 to 2020 energy use of data centers, and in turn their 25 to reach 0.14 GtCO2e. However, as identified GHG emissions. However, it is difficult to assess by the previous research, abatement potential which, if any, of these technologies will be proven enabled by broadband technologies is and reach a large enough scale by 2020 to have significant.24 a material impact on data centers’ GHG emissions. Therefore, these technologies are not considered in the analysis in this study. As a result, this 3.4 Data centers study likely underestimates the impact of technological innovation over the next 10 years. Data centers’ footprint was the smallest of the three categories in 2011. Data centers accounted
for 0.16 GtCO2e or 17 percent of total ICT emissions (see Figure 6). Data center emissions 3.5 Benefits from data are expected to increase most rapidly. A growth centers and cloud computing rate of 7.1 percent until 2020 will lead to the Energy use of data centers is expected to rise, footprint reaching 0.29 GtCO2e in 2020. Significant growth in demand for data storage but it is crucial to remember that they, along 24. “Measuring the Energy Reduction Impact of Selected Broadband-Enabled will be the primary driver of emissions growth. with other ICTs, are a crucial enabling Activities Within Households” – ACEE- However, several technological developments technology: they create economic value and Yankee-GeSI —such as virtualization of servers, efficiency enable GHG abatement. Data centers have the 25. E.g. running data centers at higher temperatures, using natural improvement in servers; and improvement in potential to lower barriers to entry for small cooling, stripping equipment from cooling technologies, which will lower the businesses, allow businesses to increase servers to lower energy requirements, submerging servers in mineral oils to Power Usage Effectiveness (PUE) of data operational efficiency, and reduce time to reduce heat generated centers—will help lower the impact of the market. (being tested by Intel)
Figure 6 Global data data centers centers emissions emissions (GtCO (GtCO2e) 2e) Data center emissions 0.4 growth expected to decrease to 7 percent per year
0.3 0.290.29 Source: Gartner; Forrester; U.S. Census + 7% Bureau; IEA; Greentouch; CEET; CDP; Ovum; GSMA; CERN; Cisco; CEET; Koomey 2011; SMART 2020; BCG analysis 0.2 +9% 0.160.16
0.1 0.07
0.00 20022002 2011 20202020 GeSI SMARTer 2020 26 3: The ICT industry’s GHG emissions
While technological innovation will improve 3.6 Comparison between the energy efficiency of data centers, these facilities will continue to consume a substantial estimates in SMART 2020 amount of electricity. However, this energy and this report use pales in significance when compared with the benefits that the global economy derives The first SMART 2020 study estimated that from them. Web search, email, social the ICT industry contributed 2.0 percent of the networking, and online access to documents, global GHG emissions in 2007, and 2.6 percent music, and video are only some of the services in 2020. Given the business and consumers use daily and rely on. implied trend, the ICT Data centers are the footprint should have Further, data centers and cloud computing well-exceeded 2 percent fastest growing category enable the use of “big data.” Gartner defines by 2011. However, the of ICT emissions big data as the “high-volume, -velocity and – present study estimates variety information assets that demand cost- that the ICT footprint in 2011 was slightly lower effective, innovative forms of information at 1.9 percent of the global GHG emissions. 27 processing for enhanced insight and decision- making”. Big data technologies underlie many The difference between the results of this and of the commonly used services today such as the previous study is primarily driven by a more real-time traffic maps, social networking, precise estimate of the telecommunications real-time business analytics and decision- networks footprint. Availability of more accurate making tools, and smart metering, to name a data and new developments in the sector has few. Big data technologies are increasingly led to a lower emissions estimate. Recent important tools in generating economic value. studies, provide a more accurate view of the emissions from mobile networks,28 which are Much of the energy use comes from small and now considered to be substantially lower than medium-sized data centers. As the move had been previously estimated. This study toward cloud computing gains momentum, uses these more precise data as inputs for the increase in overall energy use will slow estimating the emissions of mobile networks. down as more efficient large data centers become the norm. A recent study by the The 2020 estimate in the current study Carbon Disclosure Project shows that by 2020, (2.3 percent of global emissions) is also lower than U.S. businesses with revenues over USD1 in the previous SMART 2020 study (2.8 percent billion could realize energy cost savings of up of global emissions).29 There are three primary to USD12.3 billion and annual CO2 emissions drivers of the lower 2020 estimate in this study. reduction of 85.7 Mt by spending 69 percent of First, there is the emergence and rapid adoption infrastructure, platform, and software budgets of smart devices such as tablets and smartphones. on cloud services.25 These devices are expected to replace desktop based computing and have significantly lower It is important to realize that data centers are emissions. Second, there is expected to be a an essential part of the necessary technological faster realization of efficiency gains across the infrastructure that enables many of the industry than had been previously thought 26. “Cloud Computing: abatement sublevers cutting across all sectors The IT Solution for the 21st Century” possible. Trends such as virtualization of servers, – Carbon Disclosure Project (2011) and geographies. Without the enabling effect stand-by mode efficiency gains in devices and 27. Both the current and previous of data centers, many of these sublevers would expected proliferation of energy efficient network study estimated full lifecycle device not be implementable nor their GHG GHG emissions, not just in-use phase infrastructure are some examples. Last, the emissions abatement potential realizable. global economic slowdown in 2008 and 2009 28. ”Mobile’s Green Manifesto” – GSMA 2011 has led to lower projections of ICT adoption 29. Using global GHG emissions
worldwide than had been previously expected. of 55 GtCO2e in 2020 27 GeSI SMARTer 2020 3: The ICT industry’s GHG emissions
Case Study Abatement potential of moving CRM, email, A recent study conducted by researchers at the Harvard Business School, University and groupware to the cloud of Reading, and the Think Play Do Group sought to quantify the GHG emissions reductions potential from businesses in 11 countries if they were to move certain Source: “The Greenhouse Gas Abatement Potential of Enterprise functions from local to cloud servers. The study assumes an adoption rate of 80 Cloud Computing” -- Daniel R Williams, percent across small, medium and large businesses of cloud computing for Customer Peter Thomond, Ian Mackenzie Relationship Management (CRM), email and groupware functions. Businesses were chosen for consideration because they are the most likely to switch from using localized servers and terminals to using cloud servers. Email, CRM and groupware were chosen as the applications for consideration because they are already readily available cloud computing applications and are believed to be a first step toward broader utilization of cloud computing applications. Finally, the 11 countries (China, Germany, the UK, Poland, Brazil, Indonesia, the Czech Republic, France, Portugal, Canada, and Sweden) were selected because they are roughly representative of the mix of economies globally as well as carbon intensity of electricity production.
Given these parameters, the study finds that the shift toward cloud computing by
businesses in those countries today would yield a 4.5 MtCO2e reduction in emissions annually. When these findings are extended to encompass the rest of the world, as well as to include public sector and personal adoption, the emissions reduction potential is amplified. Though the emissions reductions figure is sensitive to changes in the assumptions, it is nonetheless clear that cloud computing leads to emissions reductions compared to using traditional local servers. To achieve these energy savings and emissions reductions, the study recommends close cooperation among academics, policy makers, and industry to ensure that the right infrastructure and economic incentives are in place to drive high uptake of cloud computing. GeSI4 SMARTer 2020 28
29 GeSI SMARTer 2020 4: Abatement potential of ICT
we have developed what we call change levers, 4 that categorize the different ways in which ICT can reduce emissions. The four change Emissions abatement levers we have identified are: potential of ICT 1 Digitalization and dematerialization Substituting or eliminating the need -enabled solutions for an emissions-intensive product 4.1 Abatement levers or process 2 Data collection and communication and end-use sectors Real-time data analysis and communication, feedback, and learning In the following sections we will discuss the to enable better decision-making broader role of ICT in reducing GHG emissions in other industries. In this report we estimate 3 System integration that ICT’s total abatement potential by 2020 is Managing the use of resources
9.1 GtCO2e, or 16.5 percent of total emissions, 4 Process, activity, and functional which is approximately seven times the optimization expected direct emissions from the ICT industry. Improving efficiency through simulation, automation, redesign or control To help illustrate the role of ICT, it is important to first understand the fundamental ways in These change levers are described in more which ICT can reduce emissions. To do that detail in the table below.
Table 2 Description of change-levers
Change-lever Description Examples
Substituting or eliminating the need Videoconferencing, telecommuting, e-commerce for an emissions-intensive product, material, Digitalization and • See global telepresence case study (page 39) process, or service. Also the reuse/multiple dematerialization use of information sources, media, etc. via ICT.
Providing real-time data and analysis Demand management, eco-driving, weather Data collection that allows for better decision making, forecasting, building audit and benchmarking and communication identifies a need for change, or • See eco-driving case study (page 38) encourages more efficient behaviors.
Managing the use of resources Virtual power plant, building management System integraion and integrating lower-emissions system, renewables integration intensive processes. • See fleet management case study (page 41)
Process, activity, Intelligent simulation, automation, Reduction of transmission and distribution losses, and functional redesign, or control to optimize a centralized distribution centers, building design process, activity, function, or service. optimization • See minimization of packaging case study (page 81) GeSI SMARTer 2020 30 4: Abatement potential of ICT
Within each change lever we have identified a them by end-use sector. End-use sectors set of sublevers, which are specific technologies describe the general industry to which the or a group of technologies that depend on the sublever applies. We have selected a total of use of ICT and reduce GHG emissions during six sectors: Power, Transportation, their use. An entire list of sublevers and their Manufacturing, Service and Consumer, description is supplied in the appendix. Agriculture and Land Use, and Building. The following table describes in more detail To further categorize our sublevers and help each of the end-use sectors. us understand the role of policy, we have split
Change-lever Description Examples Table 3 GHG emissions from energy sourcing activities • Coal-fired power plant Description of Power (e.g. generation, distribution, and storage), • Natural gas-fired end-use sectors including fuel combustion and fugitive emissions power plant
GHG emissions from transportation activities, • Fossil-fuel emissions Transportation including fuel combustion from jet fuel and gasoline
GHG emissions (e.g., from by-products and • Cement production Manufacturing fugitive sources) from industrial processes • Chemical production
• Retail space lighting Service and GHG emissions from commercial and • Data center use Consumer residential services and consumer activities • Residential cooking
Anthropogenic GHG emissions from Agriculture • Forest clearing for agricultural activities, forest management, and land Use palm oil production land use activities, or land use change
GHG emissions from the use • HVAC Buildings and management of buildings • Lighting
2008 2020 BAUC
End-use sector (GtCO2e) (GtCO2e) Table 4 Power 10.0 11.8 Current and future Transportation 6.6 7.9 emissions by end-use sector
Manufacturing 14.8 17.4 Source: EDGAR a. includes waste disposal Service and and fossil fuel processing 4.8 5.7 Consumer b. EDGAR data includes building emissions in manufacturing and Agriculture service and consumer sector 10.6 12.4 and Land Use c. Based on total GHG forecast from OECD; with the same sector breakdown Buildings N/A b N/A b as 2008
Total 46.8 55.2 31 GeSI SMARTer 2020 4: Abatement potential of ICT
To provide better context around the importance To summarize, the role of ICT in GHG of each of these sectors and the role of ICT, the abatement has been organized by change 30. There are other technologies that table provides the total and future global GHG levers and end-use sectors. The figure below may in the future offer some abatement potential, such as 3-D printing, which emissions by each of our end-use sectors. The gives a full break down of sublevers by the have not been included in this report appendix provides additional details behind change levers (vertical axis) and end-use since it is difficult to estimate their 30 feasibility and impact in the future. the assumptions used in this table. sectors (horizontal axis).
Figure 7 Sublevers arranged by change lever and end-use sector
Sources of emissions by economic end-use sectors
Service & Agriculture Power Transportation Manufacturing consumer & land use Buildings
• Videoconferencing • E-commerce Digitalization & • Telecommuting • E-paper dematerialization • Online media
• Demand • Eco-driving • Public safety/ • Soil monitoring/ management • Real-time traffic disaster Weather management forecasting • Time-of-day alerts Data collection pricing • Apps for intermodal • Smart water • Smart water & communication transportation • Livestock • Asset sharing/crowd management sourcing
• Integration • Integration of EVs • Integration of renewables of renewables • Intelligent traffic Change levers Change • Virtual power management • Building System plant management • Fleet management integration • Integration system & telematics of off-grid renewables & storage
• Power-load • Optimization of • Optimization • Minimization • Smart farming • Building design Process, activity balancing truck route planning of variable-speed of packaging • Voltage motor systems & functional • Power grid • Optimization of • Reduction optimization optimization optimization logistics network • Automation of in inventory industrial processes GeSI SMARTer 2020 32 4: Abatement potential of ICT
4.2 Abatement calculation by change lever and end-use sector
We estimate that the total abatement potential of ICT across all of the listed sublevers is
9.1 GtCO2e. The two figures below split out the potential by change lever and end-use sector.
2
Abatement potential (GtCO2e) 10 4.1 9.1 Figure 8 8 ICT abatement potential by change lever
6 Source: EDGAR, BCG analysis 2.3
4
2.3
2
0.5 0 Process, activity, Digitalization & Data collection & System Total & functional dematerialization communication integration optimization
Abatement potential (GtCO2e) 10 0.7 9.1 1.3 Figure 9 8 ICT abatement potential 1.6 by end-use sector
6 1.6 Source: EDGAR, BCG analysis
1.9 4
2.0 2
0 Consumer Power Transportation Agriculture Building Manufacturing & Service Total 33 GeSI SMARTer 2020 4: Abatement potential of ICT
4.2.1 Abatement delivery of power to the end-user. While efforts are being made to improve the in the power sector efficiency of electricity generation and replace the use of fossil fuels with clean energy The power sector represents one of the largest sources, such as renewables or nuclear, much end-use sectors and totals over 21 percent of progress is needed. all global GHG emissions. Emissions in this sector are ICT can reduce the inefficiencies of the power The power sector emits driven by the combustion of sector and the dependence on fossil fuels. We over 21 percent of the fossil fuels that result in the estimate that the abatement potential by 2020 release of CO and other is 2.0 GtCO e. The separate sublevers in the world’s GHG emissions 2 2 GHG gases. Coal, the fuel power sector and calculated abatement that produces the most GHG potential are shown in the table. emissions per unit of energy created, is the The sublevers in the power sector can generally largest of all fuel sources used, accounting for be grouped into two major categories: up to 41 percent of the global electricity generation in 2009.30 Fossil fuels account for 1 those that help facilitate the 67 percent (16,218 TWh) of all electricity integration of renewables, and generated. 2 those that enable the smart grid
Capturing the chemical energy trapped in The renewables-related sublevers include fossil fuels and converting it first to mechanical integration of renewables in power energy in a turbine and then electricity energy is generation, virtual power plant, and inherently inefficient, with only approximately integration of off-grid renewables and 35 to 40 percent of the chemical energy storage. These combine for a total of 1.09 31 actually converting into useable electricity. GtCO2e. ICT can be instrumental in integrating Even once converted into electricity, there are electricity into the grid, managing intermittent additional transmission and distribution losses electricity production, monitoring and ranging from 5 to 10 percent that occur in the optimizing the performance of the generation, and helping to predict the impact of the weather on generation, as well as in many Abatement other applications. potential
Sublever (GtCO2e) ICT is essential in the area of virtual power Table 6 plants (VPP). VPP is an emerging technology Abatement potential by Demand management 0.01 that combines a cluster of distributed sublever within power end-use Time-of-day pricing 0.21 generation installations (such as rooftop solar, sector microCHP, micro-wind, small scale storage, Power-load balancing 0.38 etc.), typically at the neighborhood/local level, and runs them collectively. Doing so allows for Power grid optimization 0.33 the integration of renewables and provides Integration of renewables higher efficiency and more flexibility with 0.85 in power generation peak load and fluctuations. VPPs are highly complex and ICT helps manage complex Virtual power plant 0.04 optimization, control, and communication. Integration of off-grid 0.20 renewables and storage ICT is also vital for off-grid renewables and 31. IEA storage. These applications are important in 32. International Energy Agency, “2008 Energy Balance for World”, 2011 Total 2.02 areas in which there is no possibility of grid GeSI SMARTer 2020 34 4: Abatement potential of ICT
connection or the grid connection is difficult Full deployment and expensive. Off-grid applications target a System integration is vital and technology population of 2.5 billion people without access must be fully deployed or the entire system to a reliable electricity supply.32 Those without cannot fully capture the benefits (e.g., smart reliable power often use dirty diesel generators meters). It may be possible to create deterrents as a substitute. ICT can be used to manage the for those that fail to adopt. This could be complex connection of both the renewables similar to the alternative compliance payments and the storage needed to ensure that the used by U.S. states for those utilities that fail system is dependable and running at all times. to adopt their renewable portfolio standards. It is also important to build a complete policy ICT is the technology on which a smart grid support that covers an entire range of is based. A smart grid is an electrical grid technologies. that uses information and communications technology to gather and act on information, Aligned incentives such as data on the behaviors of suppliers and It can be very difficult to align incentives consumers, in an automated fashion to improve within the power industry. There are several the efficiency, reliability, economics, and factors that cause this: there is at least some sustainability of the production and distribution government intervention in nearly every power of electricity.33 Reducing inefficiencies in the industry, the grid is an incredibly large piece grid is a particularly important element of of infrastructure that is owned and managed smart grid utilization, especially in countries by many different stakeholders, there is such as India, where a large portion of power inefficient regulation/decoupling, etc. Aligned generated is lost during transmission. Overall, incentives also affect consumers who are the abatement potential in the power sector is unwilling to change ingrained behaviors. In major regions where electricity has such a low quite significant at 0.9 GtCO2e. price, it is hard to encourage consumers to Major barriers to the adoption of ICT care about their energy use. technologies in the power sector do exist. This list is not exhaustive, and exact barriers will depend on the country or local area, but the following are some barriers that impede the 4.2.2 Abatement in adoption of ICT and reduce emissions in this the transportation sector sector: Personal transportation and shipment of Economics goods has become a major component of our Certain technologies and sublevers do not modern society. The need for transportation have a positive net present value. For example, happens at nearly all scales, from the local depending on the availability of natural (most of us commute to work) to the resources and the price of electricity in the international (an increasingly more global region, renewables can have difficulties world means people travel and goods are competing with traditional sources of energy. produced and shipped from all over the world). Other technologies may be NPV positive but The significant energy needed to power our have too long of a payback period for adoption current infrastructure comes in the form of 33. IEA “2010 Electricity Access or the capital requirements may be too large. fossil fuels, and thus releases significant GHG. Database” and “World Energy Outlook 2010”, UN Secretary General Advisory Policy could be enacted to promote Even transportation using electricity can emit Group on Energy and Climate Change technological innovation through R&D funding a significant amount of emissions, when the – “Energy for a sustainable future – Report and Recommendations” and programs. source of electricity is fossil fuels. New York, 28 April 2010 34. U.S. Department of Energy. “Smart Grid / Department of Energy” 35 GeSI SMARTer 2020 4: Abatement potential of ICT
Case study Griffin, GA Empowers Residents with Smart Grid Electric Meters The city of Griffin’s Electric Department wanted to give its customers the power to (AT&T) monitor their electric usage to help them manage utility costs. It also sought a more precise way to measure residents’ power usage to ensure accurate billing and a way Source: AT&T Case-study: “City of Griffin Empowers Residents to simplify routine processes. Griffin Electric officials began researching smart grid with Smart Grid Electric Meters systems that give customers the ability to closely monitor energy use and cut back when the demand for electricity is highest.
Griffin replaced aging mechanical meters with smart meters that use the AT&T wireless network to transmit customers’ power use to the city electric department. The Griffin City Commission authorized an installation of 16,000 smart meters, making Griffin one of the first municipal utilities to deploy a comprehensive smart metering system utilizing a public wireless network as its communications backbone.
Griffin also has the ability to connect and disconnect electric service remotely, so customers who move no longer have to wait around for the utility company—the electric department can now turn service on or off from any Internet-connected computer. When the digital meters were first installed and crews were testing them, Griffin’s city manager came home one night to find his power out. “He called me while I was at a restaurant,” Bosch said, “but I was able to use my smartphone to restore his service immediately.”
The city has already boosted its revenues because the digital meters capture electric usage more accurately than the 40-year-old mechanical meters. Griffin also saves money since it no longer has to pay contractors to read its meters.
The smart grid solution gives customers better control over how much electricity they use and makes it easy for the city to read meters and connect or disconnect service remotely. As a result, customers are better served and the city can more accurately predict its power needs to lower the cost of its electric purchases. GeSI SMARTer 2020 36 4: Abatement potential of ICT
There is a steady expected growth in Location-based fleet management transportation emissions: by 2020, the total Networkfleet - Provides a wide range of GPS sector is estimated to emit over 7.9 GtCO2e of and other monitoring-related services that can GHG, or approximately 14 percent of all provide the location, speed, and fuel efficiency emissions under the BAU scenario. While of an entire fleet of vehicles. Information can some transportation is unavoidable, there is be used to optimize routing and lower carbon much inherent inefficiency in our current emissions.37 transportation system: automobiles idle in In addition to the examples above, there are traffic, delivery trucks carry little to nothing several ways that ICT can improve the on return journeys in their routes, or people efficiency of logistics. The table below lists the choose to use inefficient travel when faster sublevers identified in the transportation end- and more environmentally friendly public use sector and the corresponding abatement transit exists. For this reason, we estimate a potential. ICT is key to enabling the sending, large opportunity for ICT to reduce emissions, receiving, and storing of information, with the with a total abatement potential of 1.9 GtCO e 2 ability to affect the control on remote objects. by 2020.
In recent years there has been strong adoption of ICT technologies in transportation, which has been driven by many factors: Abatement potential • Reducing price Sublever (GtCO2e) • Reducing size and weight of equipment Table 7 • Rapid emergence of smartphones Eco-driving 0.25 Abatement potential by • Cloud and other services for data analysis sublever within transportation Real-time traffic alerts 0.07 end-use sector Technology is becoming more common in Apps for intermodal travel/ several ways: 0.07 public transportation Consumer-based telematics Honda’s Fit electric vehicle (EV) used ICT to Asset sharing 0.14 enhance the EV experience. Telematics may Videoconferencing 0.08 not be as useful for the average passenger car, but for electric vehicles, apps and other Telecommuting 0.26 telematics take on a new importance to help Optimization of drivers manage their range anxiety and 0.19 truck route planning charging schedule. 35 Optimization 0.57 Wireless fleet management of logistics network BigBelly limits the need for unnecessary pickup of waste by monitoring the amount of Integration of EVs 0.20 35. Greentechmedia.com trash in each waste container and sending a “Can the Right Telematics Win Intelligent traffic 0.03 EV Drivers?” wireless signal when a container is getting management full. Software can then optimize the pick-up 36. BSR “Wireless and the Environment” ; Fleet management route and significantly reduce transportation 0.08 http://bigbellysolar.com/overview and telematics emissions.36 37. www.networkfleet.com Total 1.94 37 GeSI SMARTer 2020 4: Abatement potential of ICT
This enables, for example, the fleet Economics management, telematics, and optimization of Many of the sublevers in the transportation logistics network sublevers, which combine for end-use sector are NPV-positive and have a a total 0.65 GtCO2e abatement potential. This short payback period; however, there are allows the constant monitoring of trucks while several categories, such as “asset sharing” and other ICT also enables the analysis of “integration of EVs,” in which there are still geospatial data through GPS technology. some situations with room for improvements in the business case. Communication also plays an important role in enabling gains in efficiency in transportation. Regulatory environment Sublevers like real-time traffic alerts, To support telecommuting many countries intelligent traffic management, video- need to update the insurance and working conferencing, and telecommuting all require regulatory environment. Furthermore, the sophisticated real-time transfer of data, sound, government needs to lead by example and use or video that are not possible without ICT. collaborative tools to show the potential and help change local and national culture. Finally, we see some of the recent ICT mega- trends of social media and mobile apps make an important impact. “Apps for intermodal travel/public transportation” and “asset sharing” combine for a total of 0.21 GtCO2e of abatement potential.
It is important to consider the general hurdles to adoption and the role of policy on the sublevers listed above. This list is not exhaustive, and exact barriers will depend on the country or local area, but it does provide some guidelines for improving the rate of ICT adoption and reducing emissions:
Infrastructure It is difficult for ICT to play a role in intermodal travel if proper public transit infrastructure is not in place. This can be difficult for areas in which there is a low population density, but cities are prime locations for increased investment.
Behavior and habits People typically have strong habits when it comes to transportation. For example, public transportation can be perceived as inconvenient, slow, or dirty. Some countries, like the U.S., have a culture around car ownership and use. Work is needed to incentivize behavior change. This can often be achieved through education and making sure the consumer experience is of high quality. GeSI SMARTer 2020 38 4: Abatement potential of ICT
Case study Eco-driving: Customers’ Eco-driving provides opportunities for ICT to reduce emissions by encouraging a willingness to pay for eco-driving driving style, through the use of alerts and other technology, which will improve the (Nokia) overall efficiency of the vehicle. Specific examples of solutions in the eco-driving Source: Green Street Survey, sublever include: Navteq, September 2010 1 When selecting a route to travel between two places on a GPS, offering a optimized route for low emissions combined with the fastest and shortest route (see figure 10) 2 Creating an alert when driving in a non-environmentally friendly way (e.g., excessive acceleration and breaking) 3 Adapting cruise control to hills, speed limits, traffic jams, etc.
Navteq recently performed a study in France, Germany, and the U.K. on whether consumers would be willing to pay extra for eco-driving features on their automobile and found that a fuel savings between 6 and 10 percent would convince more than half of the drivers to use the service. The anticipated frequency of usage of the features is relatively high, with a majority of users reporting that they would use eco-driving features on a weekly basis. There were some differences in what people preferred; for example, in Germany, respondents would prefer to receive fuel consumption savings at the end of the route; in France, fuel consumption and fuel efficiency savings; in the U.K., fuel efficiency and monetary savings. ICT also has a role in providing communication, as it was found that in order to better understand the benefits associated with the features, respondents would prefer to receive average savings per trip. In general, these are very promising results that show that, with the proper ICT technology in place, there is real opportunity for adoption.
Figure 10 Navigator software illustrating the choice for selecting the most efficient route 39 GeSI SMARTer 2020 4: Abatement potential of ICT
Case study Global Telepresence (BT) Business travel is a major source of transportation emissions. Air travel (versus train or Source: BT case study; SMART 2020; other public transportation) results in a large amount of emissions andinternational Greenhouse Gas Protocol Product Standard; Cisco http://www.cisco.com/ business travel has grown as a result of greater global interconnectedness. en/US/products/ps7060/index.html ; Draft Recommendation ITU-T BT carried out work to calculate both the carbon footprint and the carbon benefits Methodology resulting from a Global Telepresence solution. Telepresence is a type of high- definition videoconferencing system that is often deployed in custom-fitted rooms, with multiple monitors and tuned acoustics. The technology depends on advanced network equipment and other ICT technologies. This system was deployed by one of BT’s large multinational customers.
The videoconferencing system was launched internationally, comprising 36 systems/ locations across 17 countries at a large multinational customer. BT used a Life Cycle Assessment (LCA) approach to guide the assessment of changes to the business- as-usual system resulting from the adoption of the videoconferencing system. The framework methodology consists of three major steps:
1 defining the goal and scope of the study, 2 limiting the life-cycle processes of relevant components identified in Step 1, and 3 assessing and interpreting the net enabling effect
The final result of the study was a total of 9,850 tons CO2e of GHG abatement, which is the equivalent to an 83 percent reduction to the business-as-usual scenario (i.e., flying to meetings).
This case study illustrated that when deployed on a global basis within a large multinational company, ICT-enabled videoconferencing can have a significant impact on carbon emissions. GeSI SMARTer 2020 40 41 GeSI SMARTer 2020 4: Abatement potential of ICT
Case Study Networkfleet and increasing truck fleet efficiency (Verizon) As its consumers began to use less water, the Eastern Municipal Water District (EMWD) in Riverside, CA needed to reduce its operating costs while maintaining Source: Verizon case study the same level of service. To achieve these cost reductions, the EMWD focused on increasing the efficiency of its 350-vehicle fleet. After reviewing a host of fleet management products, EMWD selected Networkfleet, a Verizon company, because of its plug-and-play installation capabilities and 24/7 roadside assistance.
Networkfleet provides a wireless fleet management solution that connects directly to a vehicle engine’s onboard diagnostic unit, enabling fleet managers to remotely monitor engine diagnostics, fault codes, and emission control status. Networkfleet’s systems provide the opportunity to reduce GHG emissions while simultaneously cutting energy and operating costs.
EMWD focused initially on reducing idling time and driving speed, which ultimately had a significant impact on emissions reductions and fuel usage. Any time drivers exceeded a particular speed limit or idled for too long, their supervisor would receive a notification from Networkfleet. The supervisor would then communicate with the driver to alter inefficient behaviors. EMWD was also able to leverage the GPS capabilities of the trucks to reduce the number of miles driven. When unexpected problems arose, the fleet manager used GPS tracking to reroute the trucks closest to the problem rather than guessing which was closest. Within the first six months of operation, Networkfleet helped EMWD reduce its miles driven by 165,000 miles. The combination of higher fuel efficiency and driving fewer miles reduced the fleet’s overall GHG emissions and cut fuel costs by $79,000 in the first six months of installation.
Aside from fuel cost reductions, Networkfleet helped EMWD cut costs in several other ways. Higher productivity of resources helped EMWD cut labor costs by USD354,000, as its drivers spent fewer hours on the road. The vehicle diagnostics capabilities also ensured that trucks received required maintenance and spent less time being repaired for more serious problems. Enforcing adherence to speed limits reduced the number of accidents and led to reduced insurance premiums.
Networkfleet had a positive environmental impact while improving EMWD’s bottom line. The Networkfleet system cut driving-related emissions from EMWD’s
trucks by 90.7t of CO2 in its first six months of operation and will continue to yield GHG abatement over the vehicle’s lifetime. Additionally, Networkfleet will help extend the lifespan of EMWD’s vehicle fleet, which will lead to further emissions reductions in the form of fewer embodied emissions. GeSI SMARTer 2020 42 4: Abatement potential of ICT
4.2.3 Abatement in Abatement the manufacturing sector potential Sublever (GtCO2e) Manufacturing is the most significant Table 8 Automation of industrial contributor to climate change of any of the 0.72 Abatement potential by processes end- use sectors, with worldwide manufacturing sublever within manufacturing emissions at 14.8 GtCO e in 2008, 31.4 percent end-use sector 2 Optimization of variable 0.53 of the global emissions total. These emissions speed motor systems are projected to remain constant as a percentage of the world total as manufacturing Total 1.25 emissions climb to 17.4 GtCO2e by 2020. High rates of manufacturing growth in the There are two sublevers in the manufacturing developing world, where emissions targets are sector: often lax or nonexistent, are pushing emissions 1 the automation of industrial processes, and rates higher. Increased demand for manufactured 2 the optimization of variable speed goods is overcoming any process efficiency motor systems gains. Moreover, the increasing competitiveness of the manufacturing sector globally and a Automating industrial processes involves lack of economic incentives to abate GHG modernizing plants and has a worldwide emissions have made emissions reductions abatement potential of 0.72 GtCO2e. Plants 38 challenging for many manufacturers. As would be marked by a decreased utilization of countries fight to keep their manufacturing personnel resources and greater use of rates competitive, investing in emissions machines controlled by ICT devices. Higher savings technologies has in many instances levels of monitoring and control of equipment not occurred. will help to reduce and optimize energy use for particular manufacturing processes. ICT is ICT can play a significant role in helping the required to control and monitor the automated manufacturing sector reduce its contribution processes and ICT companies would also be to climate change by reducing the amount of involved in the maintenance and upkeep of electricity wasted through inefficient the manufacturing equipment. processes. ICT can also be an important part of a circular economy: an industrial system The optimization of variable speed motor that is restorative or regenerative by intention systems has an abatement potential of 0.53 and design by replacing “end-of-life” concept GtCO2e worldwide, with abatement potential with restoration. It facilitates the shift toward highest in developing economies such as the use of renewable energy; eliminates the China. Motor systems are at the heart of the use of toxic chemicals, which impair reuse; industrial activity and consume the majority and aims for the elimination of waste through of electricity used by manufacturers worldwide. the superior design of materials, products, and Traditional motor systems are designed to 39 systems. operate at a continuous rate and do not account for the strain placed on them by Through the adoption of ICT-enabled emissions varying loads. As load capacity affects the reduction solutions, the manufacturing sector 38. “The Future of Manufacturing: ability of the machine to perform a constant can reduce its emissions by 1.3 GtCO e, a total Opportunities to drive economic 2 rate of work, having motors operate at a growth” World Economic Forum reduction of 8.4 percent. 39. “Towards the Circular Economy: constant speed is inefficient and wastes Economic and Business Rationale electricity. The introduction of variable speed for an Accelerated Transition”, Ellen Macarthur Foundation 43 GeSI SMARTer 2020 4: Abatement potential of ICT
Case study China Motor Systems Energy Conservation Program and The China Motor Systems Energy Conservation Program, a collaboration among Variable Motor System the U.S. Department of Energy, the Energy Foundation, UNIDO, and the Chinese Optimization government, conducted a series of energy audits in Chinese firms to improve the efficiency of their energy systems. The program evaluated 41 plants and, in most Source: “Energy efficiency in electric motor systems: Technical potentials cases, investments in system optimization were made. The energy savings were and policy approaches for developing between 7 and 50 percent of the systems’ electricity consumption and the payback countries”, UN Industrial Development period was 1.4 years on average (although some projects revealed a payback period Organization, 13-14 as long as 5 years).
One of the plants audited was a Chinese pharmaceutical company and it was quickly discovered that the plant’s water cooling system consumed over 2 million kWh/ year, 13 percent of the plant’s total electricity consumption. Cleaning the ductwork and installing two new pumps that incorporated variable speed control was an investment of $145,000, but the investment was quickly recouped. The payback period was 1.8 years and the electricity demand by the water cooling system was 49 percent. The results were even more dramatic for a Chinese petrochemical company. The installation of 34 variable speed drives led to the reduction of electricity from 8,016 to 5,766 kWh/t crude oil refined, with a payback time of only 0.5 years.
Optimization of variable motor speed systems have been proven cost effective in factories around the world, in advanced and developing economies alike. The strong business case for the introduction of these systems means that take-up rates should be high due to its economic attractiveness. The high-level of economic attractiveness will drive GHG abatement and energy savings in similar factories around the world. GeSI SMARTer 2020 44 4: Abatement potential of ICT
motor systems allows machines to sense the this requirement would then be possible. strain under which they are working and Procurement policies can incentivize companies adjust output accordingly. This ensures that to adopt these policies in order to win business. they are working hard and expending Policy makers should also highlight best electricity only when necessary. ICT can practices within the manufacturing industry provide information to businesses about how and encourage other companies to voluntarily much electricity they are saving and allow adopt these practices. machines to communicate with one another Slow adoption to increase overall plant efficiency. Because reducing GHG emissions remains a While not explicitly listed as a sublever, it is secondary concern for most governments, there worth mentioning the potential role of 3D is not a sense of urgency to cut emissions quickly. manufacturing (also called 3D printing). 3D As a result, manufacturers do not feel compelled printing is achieved using additive processes; to invest in energy-saving devices, even if they an object is created by laying down successive provide a positive net present value return. layers of raw material. 3D printing is Accordingly, governments should begin to considered different from traditional emphasize investing in energy savings machining techniques (subtractive processes) technology. Concrete measures they can take which mostly rely on the removal of material include providing subsidies or tax breaks for by drilling, cutting etc.40 3D printing has the energy-saving technologies as well as mandating potential to be disruptive to the entire that energy efficiency be included as a key manufacturing process and could reduce performance indicator for manufacturers. emissions by reducing the amount of raw materials to create a product and removing the need for transport of end-products. 4.2.4 Abatement in Barriers the agricultural sector Though barriers to technology adoption are The emissions from agriculture are so significant not the same across all countries, there are that it was second only to the manufacturing several that are the most prevalent across the sector in terms of its contribution to GHG globe. Understanding these barriers can help emissions in 2008. In 2008, agriculture emitted illuminate the types of policies that need to be 10.6 GtCO e, which represented over 21 broadly pursued to ensure high penetration of 2 percent of the world’s total. Under the BAU these technologies. scenario, emissions from the agriculture
Monitoring and enforcement sector are projected to reach 12.4 GtCO2e, or In many countries, particularly those still 22.4 percent of the world’s total emissions in developing, there is a lack of data surrounding 2020.41 Livestock emissions alone are so emissions and efficiency standards are non- substantial that they exceed emissions from 40. “A Third Industrial Revolution” 42 existent for many technologies. As a result, it the entire global transportation industry and The Economist www.economist. is difficult for manufacturers to understand irrigation accounts for approximately 80 comnode/21552901 their efficiency performance relative to other percent of all fresh water use in the U.S.43 The 41. Michael Pollan, Omnivore’s Dilemma: A Natural History of Four companies and improve their emissions if need to feed growing numbers of people is Meals, Penguin Press, 2006, p. 198 necessary. Policy makers should create a expected to push global food production 70 42. UN, FAO, “Livestock’s Long Shadow” methodology for monitoring and evaluating percent higher than current levels; the 43. US Dept. of Agriculture, efficiency in manufacturing. The creation and increased demand for food will drive both “Irrigation and Water Use” enforcement of industry-wide best practices energy use and emissions from the agricultural 44. Food and Agriculture Organization of the UN (FOA), “How to feed the 44 that ensure all manufacturers are meeting sector higher. world in 2050” 45 GeSI SMARTer 2020 4: Abatement potential of ICT
If agriculture were made more efficient, the Livestock management, the first sublever, magnitude of emissions reductions would be centers primarily on reducing enteric methane significant. In the last decade we have seen an emissions through monitoring. The last three explosion of the use of ICT technologies to sublevers focus on reducing the amount of make farming more efficient and reduce inputs required to grow crops. emissions. The revolution in Because livestock release large quantities of agriculturally focused ICT methane, which is a potent GHG, controlling Approximately 21 percent puts farmers in the livestock emissions is critical to alleviating the of all GHG emissions developing world on a more effects of climate change. Monitoring via ICT- level playing field with their produced by human activity enabled methane monitors is a key component counterparts in advanced are attributable to agriculture to decreasing emissions. ICT can also reduce economies. Unlike the costly, the amount of space required to raise cattle by bulky, and energy-intensive preventing eating patterns that lead to over- or equipment that was formerly required, ICT under-grazing of fields. RFID monitors can applications in agriculture are relatively check the health of cattle and prevent sickness inexpensive, adaptable, and accessible.45 Many and premature death, which represents a of farming’s most essential questions, such as significant waste of resources. how to increase yields, how much input is required to produce a healthy crop, and how to Smart farming utilizes information generated adapt to weather conditions, can be answered through satellite imagery to control crop via ICT. These investments can increase yield, inputs. Satellites have the capacity to measure increase input efficiency, and, most importantly the temperature and health of individual for farmers, increase profitability. plants on the ground by analyzing the type of
light they reflect and can then communicate These increases in efficiency are not only this information to farmers through beneficial for individual farmers but are also smartphones or computers. Based on this critical in reducing agricultural emissions. ICT information, farmers can adjust the amount of allows for more careful calibration of inputs, fertilizers, pesticides, and water used. and higher resource efficiency means lower emissions as a byproduct. Through four means Smart water applications allow farmers to of abatement, ICT can reduce emissions from remotely control irrigation systems and channels. agriculture by 1.6 GtCO2e worldwide. Many irrigation systems have their own timing systems and begin when scheduled, regardless of whether more water is actually needed. Abatement Smart water systems give the farmer greater potential control over water use. If smart water technology could yield a 5 percent reduction in Sublever (GtCO2e) the amount of water used for irrigation over a Table 9 year, this would yield 1.5 trillion gallons in Abatement potential by sublever Livestock managment 0.70 water savings.46 Since a significant amount of within agriculture and land use Smart farming 0.25 end-use sector energy is needed to treat, pump, and transport Smart water 0.03 water, reducing the amount of water needed can play an important role in reducing Soil monitoring/Weather 0.62 emissions. forcasting Of the input-precision sublevers, soil monitoring 45. ICT in Agriculture e-Sourcebook, 3 Total 1.60 and weather forecasting offer the most abatement 46. BSR Wireless and potential. Farmers rely on educated guesswork the Environment 43 GeSI SMARTer 2020 46 4: Abatement potential of ICT
Case Study Wireless Wine in Hoot Owl Creek/Alexander Valley Vineyards in Northern California wanted to more Sonoma County, CA accurately control the water and nutrient inputs that it was providing to its plants. Source: BSR Wireless As a result, the grower placed soil monitors across 300 acres of land to monitor and the Environment conditions such as moisture, temperature, humidity, methane and hydrogen sulfide levels. The monitors fit easily under plants and wirelessly transmit information to a data management website and can be accessed via the Internet at any time.
The monitors were a success, helping the vineyard reduce its water input by over 60 percent and cut its overall GHG emissions. By reducing water requirements, emissions are abated by cutting water processing needs and electricity needs from water pumps. These results were typical of the savings seen across Northern California. Victor Hugo Vineyards realized water savings of between 50 and 60 percent. The owner of the vineyard explains that the vineyard was able to switch from one long, intensive irrigation cycle to two lighter cycles, allowing for far lower water usage.
One study estimated that if all vineyards across the region were to use wireless soil monitoring technology, up to 16,713 acre-feet of water could be saved and energy costs could be lowered by USD1.8 million. In total, these savings would yield 7,411
MtCO2e in reductions. Having been shown to be effective in Sonoma vineyards, this technology could be more broadly deployed to vineyards and other types of farming operations to reduce energy costs, water waste, and GHG emissions around the world. 47 GeSI SMARTer 2020 4: Abatement potential of ICT
to decide how much fertilizer and pesticides transmit information from sensors and data to use on a field. ICT-enabled soil monitors centers to farmers on the ground. Though the can give a much more accurate picture as to required infrastructure is largely in place in what level of inputs is required to maximize developed nations, the ICT infrastructure may yield. The information provided by these be lacking in many developing economies, monitors, combined with weather forecasting particularly in rural areas where farmers live. data, can tell a farmer exactly how much fertilizer, Data network construction in developing rural pesticides, and water should be applied. areas should be incentivized in countries where this is a concern. Despite the benefits of ICT technologies in agriculture, there are several major barriers to widespread adoption. Overcoming these barriers 4.2.5 Abatement is essential to ensuring that these emissions- reducing technologies become commonplace. in the buildings sector
Economics Energy use in buildings is a major source of Though many ICT technologies are less emissions, but there are several factors that expensive than traditional capital investments, should drive strong uptake of ICT-enabled such as tractors and combines, they are still abatement solutions in this sector. There more expensive than other investments, such should be significant incentives for reducing as genetically modified (GM) seed. GM seeds the energy costs of buildings. Commercial that are resistant to herbicides and insecticides buildings offer particularly good opportunity can sometimes yield internal rate of returns of to reduce energy costs because of their size, over 350 percent, making them very attractive their long-term occupants, and their typically for investment.47 As a result, investments in more sophisticated building managers. ICT may become deprioritized. Policy makers Furthermore, their energy costs can be high, could use subsidies and tax incentives to make increasing the magnitude of financial incentives emissions-reducing ICT technology more to make emission reduction upgrades. In the economically attractive to farmers. U.S. alone, the total commercial energy costs are USD179 billion (approximately USD 1.50/ft2). Education We expect energy consumption in a typical Many farmers may simply be unaware of the commercial building in a developed economy benefits of using ICT technology to increase to be approximately 40 percent HVAC yield. In the United States, for instance, only 8 (heating, ventilation, and air conditioning), percent of farmers utilize soil monitoring and 30 percent lighting, 15 percent appliances, and weather forecasting technology despite the 15 percent water heating and cooking.49 increase in crop yield that technology adoption would allow.48 Many farmers are unaware Most buildings, including older buildings and that such ICT solutions are available to them; new constructions, have not leveraged policy makers could encourage ICT uptake by opportunities to increase their energy efficiency. mandating that information on emissions- Energy waste is high due to inefficient heating reducing technology be included with and cooling, lighting, and other power systems. purchases of other farm equipment (such as ICT could be instrumental in the use of seed and fertilizer) and could directly abatement technologies that address these distribute educational materials to farmers. energy consumption inefficiencies. The total 47. www.seedtoday.com/info/ST_ articles.html?ID=121894 abatement potential is 1.68 GtCO e. The table Lack of infrastructure 2 48. BSR Wireless and lists the abatement potential by sublever. the Environment 40 The sublevers that have been identified are all 49. “Commercial Buildings Energy highly reliant upon high-speed data networks to Consumption Survey”, EIA GeSI SMARTer 2020 48 4: Abatement potential of ICT
An important sublever to reducing emissions is building management systems (0.39 GtCO2e). These ICT-dependent computer-based systems Abatement control and monitor buildings’ mechanical potential and electrical equipment including ventilation, Sublever (GtCO2e) lighting, power systems, fire systems, and Table 10 security systems. These systems were developed Building design 0.45 Abatement potential by sublever within buildings as a result of advances in software, sensor, and Building management 0.39 control technologies and serve as the connection system end-use sector point for other decentralized applications (photovoltaic, combined heat and power, etc.). Integration of renewables in commercial and 0.50 Voltage optimization (0.24 MtCO2e) is an residential buildings electricity-saving system that, when used in Voltage optimization 0.24 tandem with the main electricity supply, provides a reduced supply voltage for a Total 1.58 building’s equipment. Voltage optimization can reduce energy waste by balancing phase voltages and filtering harmonics and transients from the supply.
The list below, though not exhaustive, presents Behavior/Education some of the major barriers to the adoption of Due to the complexity of contracting, financing, the building sublevers: and execution, customers are often ill- informed and hesitate to start projects because Financing of a lack of familiarity. The role of policy and This is likely the most important barrier, as governments is to ensure access to information private and public customers often do not needed to make informed decisions and use have the capital to cover high-up front costs. case studies and examples to build credibility As a result, financing and contracting are and make benefits more clear. likely to become an essential part of the customer offering. This barrier is especially Landlord-tenant problem important in developing economies as cost of Most frequently, the tenant pays for their capital is much higher than developed energy costs, but cannot convince the landlord economies. to install energy efficiency upgrades. Even if the tenant has control to make upgrades, it Economics may not make economic sense as they cannot Certain technology and sublevers are not ensure that they will live in the building long NPV-positive, e.g. building management enough cover the initial cost of the investment. systems for home owners. Some technologies The situation can be even more challenging may be NPV-positive, but the payback period for commercial spaces in which there may be is too long for private adoption. An important many stakeholders involved within the same role of the ICT sector is to lower prices or building (i.e., the tenant, the building manager, provide higher performance at current prices. a real estate intermediary, the official building Policy makers should consider rebates for ICT- owner, etc.). Policy has a role through enabled upgrades and solutions and, more regulation to align incentives to encourage the controversially, should institute a CO e tax or 2 purchase of energy efficiency upgrades. permit system to encourage more green technologies. 49 GeSI SMARTer 2020 4: Abatement potential of ICT
Case Study Energy Management System by Johnson Controls in the A tenant energy management system developed by Johnson Controls provides Empire State Building tenants at the Empire State Building with an online micro-website and dashboard that enables them to track and manage their energy use. The system includes Source: Press releases from Johnson information collected from on-site electricity meters and sensors in the office space. Controls; BCG analysis; Neal Elliott, Maggie Molina, and Dan Trombley, The information is used to calculate and display key performance indicators and “A Defining Framework for Intelligent metrics for tenants. The system also supports benchmarking of energy performance Efficiency, June 201 to inform and encourage energy-saving behavior from tenants. Johnson Controls made several other improvements to the building including fitted new windows, radiator insulation, HVAC, and other high-tech controls.
Customers enter into a performance contract with Johnson Controls. These contracts often cover the upfront costs of all of the upgrades and guarantee a lower energy bill at a set price. This saves the customer money and shields them from the risk of volatile energy prices, in addition to significantly reducing emissions.
In this specific case study, Johnson Controls guaranteed annual savings of USD4.4million. The initial investment in the upgrades gave a three-year payback and there was a 38 percent reduction in energy use. GeSI SMARTer 2020 50 4: Abatement potential of ICT
4.2.6 Abatement in the bank and reduce the need for physical banking infrastructure. service and consumer sector Interactive online stores Today the ICT emissions in the service and IKEA created a fully interactive online store consumer sector are 4.8 GtCO2e. Though it is that is similar to the experience of flipping one of the smaller sectors in terms of emissions, through a catalog, but more interactive and ICT is already used in the sector and will play dynamic. The user can click on the icons next an increasingly important role in reducing to certain products to get a closer look or view GHG emissions. hidden features, change views to look around the room, or skip the room view and look at a The adoption of ICT in the service and simple grid of products.54 consumer sector is driven by increasing broadband penetration, the growing number ICT-enabled solutions for retailers help reduce of mobile devices, the presence of online their emissions footprint. Through the buying platforms, and an equally enthusiastic sublevers identified below, we estimate the uptake by businesses and consumers as they total abatement potential in this end-use find it a more efficient method for shopping sector to be 0.7 GtCO2e. The table below and doing business. Global e-commerce sales describes the abatement potential by each are expected to increase from approximately sublever. USD 600 billion to USD900 billion in 2013, a E-commerce, e-paper and online media growth rate of 19 percent.50 By 2020, it is represent emissions reductions through estimated that 14 percent of global retail dematerialization. Rather than having to spending will have moved online, surpassing travel to a brick-and-mortar store or buy a USD 3 trillion in revenue.51 physical product, e-commerce allows Today, there are many innovative examples consumers to buy goods online and have them in which ICT technology is being deployed: shipped to their homes and, in certain cases, can allow for the digitization of a product Virtual supermarkets Tesco created the ability to order groceries while in public, allowing users to shop using their smartphones via QR2 codes and web Abatement transactions. Billboards display images of potential products and their codes, consumers scan the Sublever (GtCO2e) code and the product is delivered to their Table 11 home within a day.52 E-Commerce 0.09 Abatement potential by Mobile payment solutions E-paper 0.06 sublever within the service Square is an electronic payment service that and consumer end-use sector Minimization of packaging 0.22 allows users in the United States to accept credit cards through their mobile phones, Online media 0.02 50. Forrester: Mobile Commerce Forecast either by swiping the card on the Square Public safety/disaster 51. Goldman Sachs: device or by manually entering the details on 0.03 managment dotCommerce: Social networks 53 the phone. This technology is particularly 52. Guardian, August 6, 2012, www. important in areas in which the availability of Reduction in inventory 0.18 guardian.co.uk/business/2012/aug/07/ tesco-virtual-supermarket-gatwick- ATMs and banks are low, especially in airport Smart water 0.13 developing countries. Mobile payment systems allow consumers to make fewer trips to the Total 0.73 53. https://squareup.com 54. www.ikea.com 51 GeSI SMARTer 2020 4: Abatement potential of ICT
DRAFT
Case study Mobile money in Kenya (Ericsson) Banking infrastructure is very limited in rural areas in developing economies. Individuals are forced to travel from rural areas to more central villages and bank Source: The World Bank. 2009. Poor People Using Mobile Financial Services: offices in cities in order to make payments and carry out other bank transactions. Observations on Customer Usage and Large amounts of emissions are generated as a result of unnecessary travel. This Impacts from M-PESA. https:// openknowledge.worldbank.org/ includes emissions from the use of private and public transportation and, in the handle/10986/9492; Greenhouse gas long run, additional road infrastructure, more public vehicles, and increased (GHG) Protocol initiative http://www. ghgprotocol.org/; IEA, international banking infrastructure requirements. ICT could provide millions with better access energy agency IEA. 2008. Key world to banking services, which would significantly improve their standard of living and energy statistics 2008. Paris: reduce banking-associated emissions. International Energy Agency. Http:// www.iea.org; Koomey, J.G. 2007a. Estimating Total Power Consumption Mobile money can eliminate travel in other ways as well. Physical travel by migrant by Servers in the U.S. and the World. workers to ensure the safe arrival of remittances could also be reduced. Mobile Lawrence Berkeley National laboratory and Stanford University; Koomey, J.G. money represents a safer, quicker way to send money long distances to family 2007b. Estimating regional power members than either physical travel or through a postal system. Mobile money consumption by servers: a technical note. Lawrence Berkeley National can also reduce travel needs within communities by allowing for direct mobile bill laboratory and Stanford University; payment. For instance, the electric company can charge consumers directly via US EPA. 2007. Report to Congress on their mobile devices, eliminating the need for the customer to travel to the company server and data center energy efficiency, Public Law 109-431. EPA ENERGY STAR physically to pay the bill. Program. www.energystar.gov. Accessed September 2009.; World Desk Reference, ICT companies (mobile network providers, in particular) can also play an active http://dev.prenhall.com/divisions/hss/ worldreference role in fostering the adoption of mobile money. Though some developing country mobile phone users, particularly in much of Africa, are wary of using banking services through their phones, mobile network providers are in an excellent position to assuage these concerns. As network providers tend to be more accessible than banks, they can serve as locations where consumers can turn cash into mobile money. They can also address concerns surrounding financial security and lost and stolen phones.
To use Kenya as an example, there are 6.5 million subscribers who currently carry out 10 million banking transactions per day, with an average value of USD 20. The
calculated environmental impact is 22 kgCO2 per subscriber per year. The primary enabling effect of the mobile money service is lower transportation emissions; secondary enabling effects include reduction in the number of buses needed, less road construction, fewer road repairs, lower hard cash needs, and diminished bank- related infrastructure needs. If this level of mobile money penetration and emissions reductions in Kenya holds for the rest of the continent, mobile money would reach
161.3 million consumers and would yield 3.55 Mt in CO2e emissions reductions in Africa alone. If broadened to encompass consumers in Asia, the Middle East and Latin America, the emissions reduction potential would be even more substantial. GeSI SMARTer 2020 52 4: Abatement potential of ICT
(i.e. buying an MP3 file instead of a CD). The 4.3 Differences delivery of catalogs and brochures on computers, tablets, and phones also makes between this report delivering paper copies unnecessary. and the SMART 2020 report By leveraging ICT-enabled software, producers In 2008, GeSI published the SMART 2020 of consumer goods can minimize the amount of report. It was one of the first publications to materials that are necessary to protect a good fully explore the impact of ICT in reducing while in transport. ICT can also help producers emissions. While the conclusions published in of consumer goods design their products more that report hold true (and, as we will argue, efficiently and choose more eco-friendly they have in fact become even more materials. This can yield significant materials important), recent trends and events in the savings and prevent 0.22 GtCO e in emissions. 2 last several years have significantly changed Further, other ICT-enabled solutions can help the ICT industry and its role in society. No one optimize retailers’ inventory levels, representing could have predicted the impact of the global economic recession or the explosion in the a 0.18 GtCO2e abatement potential. The ability to keep lower inventory levels reduces retailers’ adoption of drastically new ICT technologies emissions associated with storage and can help and devices (e.g., 4G networks, smartphones, decrease the logistical or transportation emissions. cloud computing, etc.). In this section, we take a closer look at how some of these events and Barriers in the service and consumer sector trends have affected this current update of the include: previous SMART 2020 report.
Behavior It is clear from the trends published in previous Because products and services offered in this chapters and many of the other materials we sector are an important part of people’s lives, have reviewed that ICT has an even bigger there can be significant reluctance to adopt impact in society than in the past. From new technologies or change old habits. Even in disaster management to social network/crowd situations in which the new technology offers sourcing to smart agriculture, ICT has many additional benefits, there still can be a penetrated nearly every corner of society. To hesitation to switch. A classic example is the reflect these changes, we have slightly changed preference by some for vinyl records, paper the organization of sublevers from the books, or other physical media, even though previous report. The fact that ICT can capture viable alternatives exist. Other changes, like such a wide spectrum of abatement is the the explosion of social media in the retail reason we decided to organize the abatement space, can create legitimate concerns (e.g., by both end-use sector and change levers. We privacy concerns) and thus future use of ICT have re-written the change levers needs to be properly managed. (Digitalization and dematerialization; Data Awareness and information collection and communication; System integration; Process, activity, and functional Addressing this barrier is vital for giving optimization) to be very explicit about the individuals and companies the information to actionable ways in which ICT can make an make the most efficient decisions. Often impact. We have tried to consider every consumers and the retailers that serve them possible role when attempting to create a are unaware of the benefit from adopting complete list. In addition to organizing by the green solutions. There is insufficient role of ICT, we felt it was very important to availability of information to make green organize by the end-use sectors (Power; choices. Transportation; Manufacturing; Service and 53 GeSI SMARTer 2020 4: Abatement potential of ICT
Consumer; Agriculture and Land Use; A principal goal of this report is the Buildings). This was done because of the transparency of our methodology and our interplay among many of the sublevers within assumptions; we encourage the reader to find a sector (e.g., the smart grid in the power more specific details on our assumptions and sector is a combination of many of our calculations in the appendix. The figure below sublevers). As a result, policy is most often summarizes the updated estimations.
drafted at a sector level (in addition to the When we compare the estimates in this study targets set to cover the entire economy, i.e., with the results from the SMART 2020 report, GHG and CO targets) and thus our policy and 2 we see an encouraging trend, as the abatement other analysis was designed to reflect this. potential has increased while direct emissions In addition to the changes in how we organized have decreased. the sublevers, there have been modifications The increase in abatement potential is due to to the sublevers themselves. We have added the innovation of new sublevers, as unforeseen several sublevers to reflect the increased role technology has been introduced and has been of ICT, but have also removed sublevers for shown to play an important role in abatement. which we felt the abatement had already been Additionally the values used in also reflect realized or there was overlap with other further improvements in data quality and use sublevers. Please see the appendix for a full of more up-to-date product information. breakdown of the changes to the sublevers. Higher abatement projections are also simply Given the current trends and updates in the due to a growing baseline, as estimated data, we have also updated the analysis for emissions for 2020 from the IEA and IPCC and estimating the abatement potential. While we others have been revised up since publication leveraged the results for sublevers for which of the last report. In general, we have revised we could confirm there were few changes, in upward the estimates due to recent encouraging many other sublevers we updated the analysis. trends in uptake and penetration of ICT.
SMART SMARTer 2020 2020
Figure 11 Abatement Potential 2020 Emissions versus 7.8 9.1 (GtCO2e) abatement potential 5.5x 7.2x
1. On a base of 55 Gt CO2e ICT industry’s emissions 2020 GHG emissions 1.4 1.3 (GtCO2e) Source: SMART 2020, IEA, 2.6% of 2.3% of BCG analysis global emissions1 global emissions1 GeSI SMARTer 2020 54 4: Abatement potential of ICT
4.4 Important sublever to that attributable to ICT, we included the entire abatement potential to considerations for estimates provide the most accurate and clear result.
In this section we describe some of the Finally, the last important consideration for important details about the estimations abatement estimates is the consideration of published in the report. rebound effects. A “rebound effect” occurs when a new technology is introduced (in our It is important to point out that all of the forward case a solution that uses less energy than the looking estimates are based on forecasts. previous technology) but results in an increase These forecasts depend on several unknowable in energy or resource use. Examples include factors: evolution of technology and the ability the modern light bulb, which is many more of the ICT industry to deliver solutions, role of times efficient in output of light per unit of governments in supporting policy, future emissions created, but has increased the energy prices and impact on business cases, demand in lighting, resulting in a large net etc. Sensitivity analysis of the forecasts was increase in lighting emissions. Another beyond the scope of this study. We took special example is video conferencing which can help care to source the most up-to-date and credible replace flights, but may strengthen estimates and analysis, but naturally any of relationships to the point where there is the forecasted numbers are estimates and appetite for face to face contact. A third should be treated as such. Furthermore, the example involves traffic optimization. If estimated abatement represents the total traffic times go down, the efficiency gains will potential of the ICT industry in the broader induce more commuters to use private economy. It assumes that policy and other transportation, which leads to an increase in tools are used to remove the barriers to emissions. In general, there are several cases adoption (as we will discuss in more detail in in which efficiency brings about a net increase the next chapter). In calculating this potential, in total consumption, because if a unit of sources of discrepancy can be the result of consumption delivers more utility, it becomes errors in estimating the full penetration of the more desirable. The calculated abatement solution or the savings potential (expected results in this report do not include rebound technical reduction in emissions as a result of effects. They are incredibly complicated and implementing the solution) and changes in difficult to model, there are no agreed upon other industries that may or may not occur but scientific approaches, and they depend on could have an impact on the abatement highly variable socio- and macro-economic potential of ICT-enabled solutions. The reader factors. That said, rebound effects are is encouraged to view the appendix for all of important, and it is important for policy the assumptions used in both the estimate of makers, the ICT industry, and other ICT’s emissions and the abatement potential. stakeholders to consider these effects when ICT plays a varying role, with each of the designing policy and discussing the sublevers used to estimate the abatement environmental impact of the industry. potential. Although all proposed GHG abatement potentials are related to ICT, some of the mentioned abatement sublevers are much more strongly linked to ICT (e.g. telecommuting) while others play a more indirect role (e.g. integration of renewables). Since it is impossible to allocate a fraction or portion of the abatement from a specific 5 55 GeSI SMARTer 2020 GeSI SMARTer 2020 56 5: Framework for ICT-enabled emissions reduction
5 2 Financing High up-front investment costs of solutions can Framework be especially problematic in situations in which the cost of capital is high, common for many of for ICT-enabled the ICT solutions. While the actual risk of many of these solutions are low, the perceived risk emissions reduction can be high (due to un- familiarity with these types of In the previous sections we have identified the projects among lenders), Policy has an important role role that ICT can play in reducing emissions which can increase the cost in reducing the barriers to (9.1 GtCO e). To realize the abatement potential, 2 of capital or discourage however, significant barriers to adoption need the wide-scale adoption of traditional sources of capital to be removed. The opportunity to remove these (i.e., banks and other financial ICT abatement solutions barriers span a wide variety of stakeholders: institutions) from providing the ICT industry, other private industries, the funds. This barrier can be especially policy makers, private individuals, NGOs, and problematic for individual consumers or many more. While one should not discredit households in which the access to capital is limited. the importance of any of the stakeholders in this list, we will dedicate the rest of this section 3 Lack of technology or infrastructure to addressing what is potentially the most For certain industries or situations the effective important barrier to ICT adoption: public policy. technology for carbon abatement may not exist or is still in development. Furthermore, We will take a global view of policy before diving even for developed technologies, the underlying deeper into the national policy for each of the infrastructure needed to run the technology key end-use sectors. Before discussing policy, it may not be in place or fully enough deployed is worth exploring overarching barriers, themes, to realize the full potential of the ICT solution. and the role of international organizations in helping enable ICT abating technologies. 4 Split incentives These occur in situations in which those Key barriers to the adoption of ICT receiving the benefit of the ICT solution do not It is important to start by identifying the key have full control over its implementation, or barriers to the adoption of ICT, as this will other situations in which energy or resource drive most of the design of policy. Of course, use is not priced. Many split incentives occur these barriers are not universal and may not because of the principal-agent problem, which apply to every country or end-use sector, but concerns the difficulties in motivating one discussing these at a global level helps us party (agent) to act on behalf of another party understand what is limiting the adoption of (principal.) A classic example is the landlord- ICT solutions: tenant relationship, in which the tenant is often paying for the energy costs, but does not 1 Economics have the control to install energy efficient Poor economics limits the adoption of ICT upgrades. because of a lack of a strong business case in certain specific cases. This can be the result of 5 Behavior high costs for implementing the solution or Full-scale adoption of ICT, especially at the little value in return. Solutions in this category individual level, can require or may affect the may not bring a return at all, might not have a behavior of individuals. Without the right high enough internal rate of return, or may incentives or motivation to change, behavior have too long of a payback period for an can be a major barrier to adoption. In most investor to be comfortable with the project. cases this can come down to habits; the ICT 57 GeSI SMARTer 2020 5: Framework for ICT-enabled emissions reduction
solution would provide better quality of life customers. If the previous levers are ineffective, along all dimensions, yet the consumers are public policies should be considered. Much like hesitant to change. we did with the barriers, we can consider general levers that policy can deploy. This list is not 6 Awareness meant to be exhaustive, but it does provide some Many consumers and businesses around the key ways in which policy can be implemented: world are unaware of the ICT-enabled abatement opportunities available to them. 1 Targets To ensure that the abatement potential is Setting specific limits on GHG emissions, the realized, it is crucial that people are aware of use of energy, or other targets at the sector-or the sublevers that can be utilized. technology-specific level (e.g., fuel efficiency standards for automobiles) help set hard limits Again, these are general barriers that may not to amounts of CO and other GHG gases that are necessarily apply to every country or type of 2 released into the atmosphere. For targets to be economy. In general, we observe that barriers effective, there must be an enforcing mechanism like infrastructure, economics, and financing are (typically through fines) if the target is not met. not as strong in developed versus developing economies. Naturally, there is more advanced 2 Investment in R&D infrastructure (such as ICT networks, public Helps reduce the costs of ICT or improve the transit, electric grid, etc.) in developed economies effectiveness of a product; R&D is also helpful and the business case for ICT solutions are in addressing the need for new solutions. typically stronger because of higher energy prices 3 Incentives (with the U.S. and Canada being clear exceptions) Can be implemented through tax breaks, rebates, and lower costs of capital. Developing economies or other direct subsidies. These help improve the typically have lower energy costs and, since business case for solutions by reducing costs. they are growing, the cost of capital can be quite high, making economics and financing especially 4 Education important. Behavior and split incentives can Sharing of information is vital for implementing be more important in developed economies the most efficient and effective ICT solutions. because of increased regulation. Developing Policy can have an important role of promoting economies can “leap-frog” certain technologies, this through sharing best-in-class practices, IP making behavior and habits less of an issue. sharing, etc. Also, the implementation of the We must be careful not to over generalize; we project at the customer level can often be will explore more deeply the specific barriers complicated (due to the complexity of contracting, to adoption of ICT for each country. financing, and execution). Customers need more education to increase familiarity with ICT Role of policy solutions. This lever is instrumental to helping After considering the important barriers to change the behaviors of individuals and create adoption of abatement technologies, we can bottom-up demand for abatement technologies. now start to consider the way to overcome Furthermore, collection and sharing of data is these barriers. As a first approach, the ICT important for making efficient decisions. For industry itself should offer attractive-enough instance, certified energy efficient buildings value propositions to the customers that would sell at a premium in real-estate markets. If allow the market to drive the adoption without data could be collected that demonstrated the any external intervention. If that is not realized, efficiency/cost reduction gained by installing the industry can establish groups that focus on a building energy management system, this removing the implementation barriers by, for would help with finance and business case example: defining common standards, sharing issues for many ICT solutions. R&D or by better marketing the solutions for GeSI SMARTer 2020 58 5: Framework for ICT-enabled emissions reduction
5 Regulation Global policy Non-energy or emissions-specific regulation The figure below illustrates the role of global or laws (e.g., building codes, appliance codes, policy at a high-level and how it can serve as etc.) can have significant impact on emissions by the basis for national policy. affecting consumer and commercial behavior. Regulation can be redesigned to promote the There is a fundamental policy that can drive adoption of ICT technologies that reduce reduction in emissions: setting and enforcing emissions. In some situations, regulation can global reduction targets. There has been good be very detrimental. Examples include progress toward setting targets. The Kyoto outdated national laws that can impede the protocol set standards for each country with use of fuel efficient cars (e.g., automated cars the goal of stabilizing greenhouse gas or implementation of other advanced driver concentrations in the atmosphere at a level aids). Another example includes the regulation that would prevent significant changes to the of renewables, e.g., restrictions on building wind climate.55 Global policy can also indirectly turbines and constructing solar power plants. reduce emissions through other polices like the U.N.’s Sustainable Energy For All Initiative, With an understanding of the important which seeks to give universal access to modern barriers and policy levers, we can begin a sources of energy, double the share of discussion on the role of global policy and 55. Article 2”. The United Nations renewable energy in the global energy mix, Framework Convention on Climate targets and how global targets and incentives and double the rate of improvement in energy Change can help drive the need for national policy. 56 56. Source: http://www. efficiency, by 2030. sustainableenergyforall.org
Figure 12 Global policy framework Individual behaviors, attitudes, and habits
Service & Agriculture Power Transportation Manufacturing consumer & land use Buildings
Economics Infrastructure M&E Behavior Financing Financing High costs of smart Strong public transit Difficult to Need to ensure High upfront High upfront grid and renewable must be in place to quantify savings private adoption costs, especially CAPEX costs
at national level technologies serve as a viable option without policy for small farmers
Barries to beBarries to addressed Slow adoption Landlord-tenant Deployment Behavior and habits Often little Education Economics Need to better Technology requires Must change strong motivation for Few consumers Need for stronger align incentives full deployment to habits action because of realize or business case and simplifying be effective low energy prices understand full building code benefits
Establish carbon Develop financial Ensure fair IP Create “Center market to monetize aid programs for licensing of of Excellence” emissions developing countries abatement technology
Set and enforce global cascading Recognize ICT solutions as part of Global polices Global targets for GHG emission reduction a global strategy to reduce emissions 59 GeSI SMARTer 2020 5: Framework for ICT-enabled emissions reduction
Policy can also be set at a regional level; for vital to reward those responsible for innovation. example, the EU has the “20-20-20” targets This is partly addressed by establishing clear that seek a 20 percent reduction in EU and fair rules at the onset of the program. greenhouse gas emissions from 1990 levels; raising the share of EU energy consumption 4 Creating a global “Center of Excellence” produced from renewable resources to 20 Best-in-class implementation of ICT solutions percent; and a 20 percent improvement in the could potentially have a large effect, but most EU’s energy efficiency by 2020.56 There are parties only capture part of the full abatement also several other targets set at more local potential. An existing international body (e.g., levels. Setting a target is easy; enforcing and IEA, ITU-T, UNFCCC, etc.) could help share best ensuring the targets are met requires more practices (e.g., sharing information and analysis) effort. Future work is needed to create through effective communication among penalties and other negative consequences for several parties, or a new body could be created. those countries or regions that do not meet In addition, at a global level, barriers to global their targets. It is also important at the global trade in ICT should be avoided in order to level to recognize the role of ICT in GHG encourage the uptake of ICT. Therefore, abatement. border tariffs should be avoided as stipulated Moving up from the bottom, at the second in the plurilateral WTO Information step, these are more specific policies that can Technology Agreement (ITA). WTO members be implemented at a global level by not currently participating in ITA are international organizations. These are: encouraged to sign on to the Agreement, making ICT products on their national 1 Establishing a GHG market markets more affordable. Creating an efficient market that establishes a Global policy naturally feeds into and helps price on CO2e could help improve the economics of many of the ICT solutions and influence national policy, since it is at the would create market incentives to reduce national level that established governments emissions. A GHG market may be needed can take action. The top half of Figure 12 since the negative externalities of the release summarizes some specific barriers within of GHG are not currently taken into account. each end-use sector. We will explore in more detail in the following country deep-dives how 2 Providing financial aid national policy can help address some of the to developing economies specific local concerns by sector while also Developing countries may be unable to afford meeting global targets. the expensive up-front costs for advanced GHG abatement technologies, yet most of the extreme effects of climate change will likely be felt in these countries. 5.1 Understanding the
3 Ensure fair IP licensing business case in relation of abatement technology to the role of policy The technology required to reduce emissions through renewable energy incorporation, Understanding the business case of each of higher energy efficiency, ICT applications, the sublevers is vital to prioritizing and etc., the protection of intellectual property; designing the role of policy. At the country sharing IP could help speed the adoption and level, we will explore the business case for innovation of ICT technologies. However, it is specific key sublevers. To do so, three key important to strike a delicate balance as it is considerations will be used: 57. European Commission GeSI SMARTer 2020 60 5: Framework for ICT-enabled emissions reduction
1 Investment attractiveness induce sublever adoption. If the business case If the cost of the upfront investment is too high, for adoption is strong, little to no policy people may choose other investments with a intervention is required. If the business case lower upfront cost. Being able to finance the for a technology is weak but the potential for upfront cost is crucial because even if the CO2e abatement is high, policy makers should upfront cost is reasonable, many will not have be engaged to help change factors that drive the capital on hand to make the investment the unattractiveness of the business case. outright. The distribution of the cost between Business analysis based on these above criteria suppliers and consumers and how this affects will be conducted for the most significant subsequent consumption behavior can also sublevers for each end-use sector in the influence attractiveness. individual country reports.
2 Return on investment Considering Figure 13, it is evident that different If the absolute return on investment is too low, technologies or solutions have varying levels of the monetary gain may not justify the effort CO2e abatement potential and business case even if the margin percentage is high. attractiveness. Those sublevers in the right Furthermore, if the margin percentage is too quadrants require little to no policy intervention low, investors will direct their capital to other to drive adoption. There is already a compelling investments with a higher percentage return. business case and businesses and individuals will adopt those technologies regardless of 3 Risk and feasibility policy incentives. Meanwhile, those in the top If there is a high degree of variability for the quadrants offer the greatest GHG abatement return, many will look to investments that are potential. As a result, the upper left corner less risky. If the effort involved in putting a shows ICT-enabled abatement solutions that product in place or providing an appropriate require policy intervention. Though the service is too high, the required time investment business case is not particularly attractive for upfront may not be justified by the monetary those technologies, they can reduce emissions return. Risk can be due to problems with significantly and policy makers should technology, changes in policy, or any other implement policies that make them more issues that could increase the cost of capital or economically attractive. Throughout the report, otherwise make the investment unattractive. concrete steps that policy makers can take to When considered together, these three drive adoption of key abatement technologies elements give a sense of what is required to will be highlighted.
Dependent on political Highest priority MtCO e 2 Dependent onenvironment political environment Highestfor priority implementation for implementation high 10.010.010.0 Figure 13 Focus of policy Framework for analyzing the 8.08.08.0 Sublever 1 role of policy in each sublever Sublever 3 6.0 e reduction 6.06.0 2
4.04.04.0 Sublever 2 Sublever 4
2.02.02.0 Potential for CO for Potential
0.000.0 low Low attractiveness “Low-hanging fruits“ high
Attractiveness of business model 6 61 GeSI SMARTer 2020 GeSI SMARTer 2020 62 6: Cross country deep-dive comparison
over other concerns. Political willingness and 6 ability to act is significant because in some countries, such as the U.S., lack of political will Cross-country and legislative gridlock are serious impediments even though a majority of the deep-dive comparison country has accepted climate change as fact.58 Though the global section of this report Finally, income is an important differentiating provides an overview of how ICT can be factor across countries, as wealthier countries leveraged to abate GHGs around the world on are in a better position to invest in GHG average, no “average” country exists. Each abatement solutions because of greater country has its own history, resources, culture, availability of funds and a less urgent need to and economy that distinguish it from other raise living standards. countries. Though there is the temptation to Nonetheless, ICT can play an important role separate the problems created by climate in abating GHGs in all countries while change into those relevant to developed providing a positive economic impact; per countries and those relevant to developing capita income level is not a sufficient reason to countries, the reality is more complex. avoid addressing GHG emissions. Though some Because countries’ abilities to use ICT to lower income countries face financing and address climate change differ, the following fund availability constraints not present in chapters provide an in-depth analysis of seven some advanced economies, ICT can provide a countries (Brazil, Canada, China, Germany, positive economic return while abating GHGs India, the U.K., and the U.S.) to provide a in countries across the world. In India, for sense of that diversity across the international instance, smart meters in the power system community. can play a significant role in identifying and Below is a list of the factors that affect a correcting inefficiencies in the power grid. country’s potential to leverage ICT to address This will help power companies return to climate change: profitability and will reduce electricity waste and emissions. In wealthier countries with 1 ICT penetration high levels of advanced ICT penetration there 2 Sectoral composition of the economy still remains much room for the implementation 3 Climate change awareness of the identified sublevers. In Canada, for and education instance, the use of logistics optimization 4 Political willingness and ability to act systems has the potential to provide significant 5 Income abatement in the transportation sector despite already high penetration of logistics networks ICT penetration is relevant because and ICT. unfamiliarity with the technology and a lack of infrastructure can leave a country unprepared However, one commonality across all countries to abate GHGs through ICT. Sectoral composition is the need for policy intervention to ensure of the economy is important because it impacts that the abatement potential of the identified which sublevers are important for a particular sublevers is realized. Though many of the country. For instance, the manufacturing sublevers have a positive business case and sublevers are of greater significance in uptake will be driven by the market, some Germany than Canada, despite similar income sublevers require policy intervention to levels. In many countries, there is a lack of promote high levels of use. The following list, awareness of the severity of the effects of though not exhaustive, lists the four most climate change, causing consumers and common barriers to sublever adoption across 58. ” Americans’ Global Warming businesses to deprioritize GHG abatement Beliefs & Attitudes: March 2012”, countries: Yale University 63 GeSI SMARTer 2020 6: Cross country deep-dive comparison
1 Economics business case for data network construction. 2 Financing Though this section provided an overview of 3 Awareness and education the factors that distinguish a country’s ability 4 Lack of infrastructure to engage in ICT-driven abatement, sufficiently understanding the variety of circumstances The economics of certain sublevers presents a across the international community requires barrier to adoption in almost all countries. In more in-depth consideration. The country Brazil, for instance, the use of livestock deep-dives that follow will provide the analysis management systems has enormous abatement needed to ensure that the 9.1 GtCO2e of potential by improving land use and reducing identified abatement potential is realized methane enteric emissions from cattle. The across the globe by 2020. challenge, however, is that ranchers currently have little economic incentive to invest in such systems; unless policy makers fairly price land or introduce a GHG emissions penalties, ranchers will not utilize such technology.
Financing is another common barrier, even in wealthy countries. In the U.S., building management systems have a positive business case but can often be too expensive for building owners to purchase outright. Government-facilitated financing can be a way of overcoming this concern. Another solution would be to incorporate environmental costs in energy prices.
Awareness and education surrounding many of the sublevers is another broad concern. For example, voltage optimization systems have a positive business case in the U.K., are relatively inexpensive, and typically do not require financing, but uptake is low because people are simply unaware of the technology. By increasing awareness through government publications and increasing energy efficiency standards, the government can drive uptake.
Finally, the lack of ICT infrastructure serves as a barrier in many countries. The lack of high speed data networks in India, for instance, will make it difficult for truckers to adopt logistics optimization technology because truckers cannot communicate with logistics centers in their absence. Policy makers can intervene by reducing the red tape that delays the construction of information networks and by subsidizing construction in rural areas where there is not yet a positive GeSI SMARTer 2020 64 7: United Kingdom
United Kingdom 65 GeSI SMARTer 2020 7: United Kingdom
However, emissions have been declining steadily 7 in the U.K. at the rate of 1.3 percent per year since 1990. Figure 14 shows the trend from 1990 to United Kingdom 2010. This decline has resulted in 23 percent lower emissions in 2010 compared with 1990. This is a 7.1 Context significant improvement, especially since many other countries with high emissions such as China, The U.K. has managed to reduce its GHG the U.S., and India have seen an increase during emissions over the last two decades. While the same period. It is also important to note that the U.K.’s GHG emissions declined at the rate the U.K.’s share of global emissions has declined of 1.3 percent per year from 1990 to 2010, its from 2.1 percent in 1990 to 1.73 percent in 2000. GDP grew at a rate of 2.3 percent per year. In 2010, the U.K.’s share was only 1.22 percent. This is a very encouraging trend since many countries—both developed and developing— The reduction in the U.K.’s emissions has been are still struggling to break the correlation led by the manufacturing sector. Of the total
between GDP growth and GHG emissions. The decline of 174 MtCO2e between 1990 and 2010, U.K. clearly demonstrates that it is possible to 67 percent came from the manufacturing sector: achieve economic growth while successfully in 2010, the manufacturing sector’s footprint was 59 reducing GHG emissions. 160 MtCO2e compared with 277 MtCO2e in 1990. 59. This view is based on The primary driver of this reduction in the “territorial accounting” of emissions. According to data from the UNFCCC, the U.K.’s “Consumption-based accounting” manufacturing sector’s footprint has been a 60 of emissions shows a different emissions in 2010 were 590 MtCO2e, or 1.2 continuously smaller share of the manufacturing picture – emissions of the U.K. have percent of the estimated 48,000 MtCO e of been increasing from 1990 to 2008. 2 sector in the U.K.’s economy as much of it has See “Consumption-Based Emissions global GHG emissions (see Figure 14). The shifted overseas to countries with a lower cost Reporting; Twelfth Report of Session energy and manufacturing sectors made up 61 2010–12” – Energy and Climate Change of production. As a result, the footprint of Committee, House of Commons the biggest share of the emissions in 2010 at 27 manufacturing in the U.K. decreased from 22 60. Excludes “land use, percent each. The transport sector was next at percent in 1990 to 10.8 percent in 2010. land use change, and forestry” 20 percent, followed by service and consumer Nonetheless, the U.K. remains one of the world’s 61. See earlier comment about at 18 percent and agriculture at 9 percent. territorial vs. consumption-based largest industrial nations, and further reductions emissions accounting in emissions in this sector are necessary.
GHG emissions in UK (MtCO e) Figure 14 GHG emissions in UK (MtCO2e) 2 The U.K.’s 1,0001,000 greenhouse gas emissions -23% 800 (1990-2010) 800 764 670 CAGR % 654654 650 640640 Note: Emissions data 626626 1990-2010 excludes LULUCF 590 600600 572572 Agriculture-Agriculture 1.1%-1.1 2020 emissions target (66% of 1990 levels) Source: UNFCC; Service && 0.0 UK‘s Climate Consumer 0.0% Change Act 2008; 400400 BCG analysis Manufacturing-Manufacturing 2.7%-2.7
200 Transport0Transport .1%0.1 200 2050 emissions target (20% of 1990 levels)
Energy -1.3%-1.3 0 0 19901990 ... 2000 ... 2005 20062006 2007 20082008 20092009 20102010 % global GHG 2.10 1.73 1.43 1.22 emissions GeSI SMARTer 2020 66 7: United Kingdom
The energy sector has also seen a substantial new framework to enable financing of energy reduction in GHG emissions: 27 percent of the efficiency improvements in domestic and non- total decline in the U.K.’s emissions is a result domestic properties. The Act of the gradual de-carbonization of the energy also mandated that starting sector. The primary driver of this trend has been in April 2016, private U.K.’s GHG emissions in 2010 a significantly higher share of gas in power residential landlords may were 23% below 1990 levels generation leading to lower dependence on not refuse tenants’ request coal. The share of gas has gone up from 24 percent for consent to make energy in 1990 to 45 percent in 2010 while the share efficiency improvements where financing is of coal has come down from 37 percent in 1990 available, such as through the Green Deal. to 20 percent in 2010. Further de-carbonization The Act also provides for the creation of the of power generation is expected as coal is Energy Company Obligation that will take over gradually replaced by gas and renewables. from existing obligations such as the Carbon
Emissions Reduction Target (CERT) and Among the remaining sectors, agricultural Community Energy Saving Programme emissions have decreased slightly. However, (CESP). Besides these measures, it also includes the overall impact of the improvement in the steps to enable use of low-carbon technologies. agricultural sector is small as its emissions are Also, Buildings Regulation 2010 lays out the relatively insignificant. Other sectors— standards and certification requirements. transport and service and consumer—have not fared as well. Figure 14 shows that total Besides these acts, other measures such as emissions from these sectors have stayed flat subsidies and tax benefits are in place to or increased slightly. encourage energy efficiency. Energy-intensive industries are already covered by the European Current policy environment Union’s Emissions Trading Scheme. Further, all businesses listed on the Main Market of the State and public awareness regarding climate London Stock Exchange will have to report their change is high in the U.K and accordingly, levels of GHG emissions from the 2013 financial there is strong policy support for emissions year. The U.K. is the first country to make it abatement. The Climate Change Act 2008 sets compulsory for companies to include emissions clear targets for GHG emissions reductions in data in their annual reports. This move has been the U.K. and also provides for a carbon budgeting welcomed by the vast majority of businesses system that caps emissions over five-year periods, as it provides greater clarity and transparency.63 with three budgets set at a time. The first three carbon budgets were set in May 2009. Achieving GHG The first carbon budget ran from 2008 to 2012, emissions reduction targets with the remaining budgets to run from 2013 Under the Climate Change Act 2008, the U.K. to 2017 and 2018 to 2022. As part of the Act, has set ambitious GHG reductions targets, the Committee on Climate Change (CCC) was which exceed the EU-wide commitments. The created to advise the government on the level GHG emissions target for 2020 is 36 percent 62. Department of Energy of carbon budgets and areas in which cost- and Climate Change below the level in 1990. Likewise, the 2050 target effective carbon abatement can be realized. 63. DEFRA (http://www.defra.gov.uk/ is 80 percent below the 1990 level. If emissions news/2012/06/20/greenhouse-gas- Several targeted policies have already been reductions were to continue at the current pace, reporting/ ) implemented in the buildings and service and the U.K. would achieve its targets. However, 64. The U.K. sets hopes on the ability consumer sectors. The Energy Act (2011) aims the U.K. cannot rely on further reduction in to use Carbon Capture and Storage technology to help with this. However, to bring about a step change in the provision the size of the manufacturing sector to achieve this potential is unlikely to be realized of energy efficiency measures to homes and this target and will therefore have to focus on until the late 2020s (Source: http:// www.decc.gov.uk/en/content/cms/ 62 64 business. This Act created the Green Deal, a adopting new levers for emissions abatement. emissions/ccs/ccs.aspx ) 67 GeSI SMARTer 2020 7: United Kingdom
This study focuses on levers in the buildings capital funding is increasingly focused on such and service and consumer sectors. Total start-ups, similar to the trend in the U.S. emissions in these sectors have been largely Moreover, as the next section will discuss in constant. The buildings sector accounts for 35 more detail, innovative ICT-enabled solutions percent of the country’s emissions65 and, as are already available in the market today—for previously mentioned, the service and consumer example, building management systems. While sector accounts for 18 percent. The following the market is expected to drive adoption of some sections discuss the trends in these sectors in solutions, such as online and digital media, policy greater detail. Given the large share of these can play a role in scaling up solutions for which sectors and little-to-no reduction in total the market is not likely to drive adoption. emissions, this study discusses the role that ICT-enabled solutions can play in emissions The use and adoption of ICT is expected to abatement. However, as mentioned in the increase by 2020. Smartphones are widely section on global abatement potential, ICT used in U.K., with a 40 percent penetration. will play an important role in enabling GHG While in its early days, the adoption of tablets abatement in other sectors as well. has been rapid as well. As the prices of smart devices continue to fall, they will become more accessible to a larger population. 7.2 Impact of ICT Further, increased proliferation of devices and Web-enabled services will increase the 65. Emissions from buildings have on GHG emissions amount of data traffic on networks and data been captured in the other sectors in Figure 14; to avoid double-counting, stored in data centers. these emissions have not been shown The U.K. has a strong foundation for scaling explicitly up innovative ICT-enabled GHG abatement This widespread adoption of technology,
66. The U.K. ranks among the top solutions. Business and consumers alike have however, comes at the cost of high greenhouse countries in the world in terms of ICT adopted these modern technologies in their gas emissions. Figure 15 shows ICT emissions end-user readiness. ITU’s 2011 report 66 titled “Measuring the Information day-to-day activities. Good ICT infrastructure in the U.K., which were estimated to be 27 Society” considered 11 sub-factors —access to computing and mobile devices, high- MtCO e in 2011. As a result, the ICT sector across three major categories 2 (access, use, and skills) to assess ICT speed networks—contributes to an innovative contributes 4 percent to the U.K.’s overall development within a country. The culture in and around GHG abatement solutions emissions, which is twice the global average. U.K. got a score of 7.6 out of 10, which placed it tenth highest in the world, in the U.K. There is already a vibrant start-up Three-quarters of these emissions are from ahead of Germany and the U.S. community focused on “cleantech”. Venture end-user devices, while networks and data
ICT emissions in the U.K. Figure 15 ICT industry's emissions (MtCO2e) The ICT industry’s greenhouse 4040 +1% gas emission in the U.K. % CAGR 30 30 2011-2020 3030 27 Source: Gartner; Press search; 27 BCG analysis 6 1212 DataData centers centers 8% 8
2020 5 5 NetworksNetworks 0% 0
1010 17 End-user 1414 End-user devices -2 devices- 2%
00 20112011 20202020 GeSI SMARTer 2020 68 7: United Kingdom
centers make up the rest. The higher usage of Buildings ICT will lead to an increase in the total Context emissions to an estimated 31 MtCO e in 2020. 2 GHG emissions from buildings in the U.K. 67 While the number of devices in use will go up, amounted to 220 MtCO2e in 2008. This is the overall footprint of end-user devices is equal to 35 percent of total emissions in 2008. estimated to decrease. Two important trends Buildings emissions in the U.K. are primarily will drive this reduction: significant improvements driven by the existing stock of energy-inefficient in manufacturing and usage energy, and a residential and commercial buildings. High shift from desktop PCs to laptops and tablets demand for heating in the U.K. further amplifies that are more energy efficient. Efficiency the need for energy efficiency of buildings. improvements in networks will similarly Figure 16 shows the trends in buildings compensate for the higher data traffic carried. emissions. Emissions from buildings were only On the other hand, data center emissions are 5 percent lower in 2008 compared with 1990, expected to double as the amount of stored whereas the total emissions in the U.K. had data is expected to increase drastically. come down by 18 percent in the same period. Several technologies to improve data center As a result, the share of buildings in the U.K.’s energy usage are currently in development total emissions has increased from 30 percent and being tested. For instance, switching to in 1990 to 35 percent in 2008. DC power, using natural cooling, and running data centers at higher temperatures. However, Residential buildings account for two-thirds of since many of these are at an early stage, it is buildings emissions, or 23 percent of the U.K.’s difficult to predict if any of them, or even all of total greenhouse gas emissions. Fifty-six them put together, will make any material percent of residential emissions are “direct”— difference on a national scale. that is, nonelectricity related, mostly due to heating. The remaining 44 percent are “indirect”—that is, electricity usage for 7.3 Abatement potential running appliances, lighting, and so forth. There has been little decline in residential in prioritized buildings and emissions since 1990. Compared with 1990, service and consumer sectors residential emissions in 2010 were only 6 percent lower. The primary driver is the As discussed earlier, this study focuses on the continuously high direct emissions due to few buildings and service and consumer sectors in energy-efficiency improvements in the U.K. to demonstrate the GHG abatement existing stock of buildings. Also, the energy potential of ICT-enabled solutions. mix for heating has largely remained the same. The small decline has come mainly The buildings sector accounts for a high share from a reduction in indirect emissions due to a of the total GHG emissions in the U.K. and has switch from coal to gas power generation. seen little reduction in total emissions. ICT- enabled GHG abatement solutions, while already Non-residential buildings, which comprise available, have not been widely adopted in this private and public office buildings, factories, sector. Similarly, the services and consumer’ hospitals, schools, stores, and so forth, account sector accounts for a large share of emissions for the remaining third of the building and has not seen a decline in the last 20 years. emissions. Their share amounts to 12 percent The next section discusses the emissions of the U.K.’s total GHG emissions. Commercial trends in these sectors, drivers of these trends, buildings account for 75 percent of non- the role of ICT-enabled solutions, and the role residential-buildings emissions, while the 67. Most recent available data that policy can play to encourage their adoption. remainder comes from public buildings. is for 2008 69 GeSI SMARTer 2020 7: United Kingdom
Emissions from commercial buildings are residential buildings. It proposes tying low- largely indirect, whereas for public buildings interest loans for energy efficiency improvements the split between direct and indirect emissions to the energy bills of the properties on which is more even. Public buildings have fared the upgrades are performed. This will allow much better than commercial buildings in for low upfront costs of what are expected to terms of emissions reductions over the last 20 be positive net present value (NPV) upgrades. years. Public buildings’ emissions are 30 percent lower compared with 1990, but the Aside from financing and standards, emissions from commercial buildings have been informational requirements are also in place. largely flat. The emissions intensity has come Starting in 2007, all residential buildings have down in the buildings sector, but the increased had to display an Energy Performance usage has neutralized any realized gains. Certification before they are sold or subleased. It is hoped that such energy labeling will raise Public policy in the U.K. recognizes the awareness about energy efficiency among buildings sector as a key area for emissions consumers, and ultimately encourage property reductions and provides strong support. Several owners to undertake energy efficiency upgrades. policies and measures, such as subsidies and tax relief for incorporating low GHG solutions While the biggest impact can be made by in existing buildings, have been adopted. improving the energy efficiency of existing Insulation standards have been defined for buildings, new buildings—residential and residential and non-residential buildings in non-residential—are also being targeted for Building Regulations 2010. Additionally, new emissions reduction. By 2016, all new homes financing measures have been proposed. The constructed will be expected to be zero carbon. Green Deal, a part of the Energy Act, seeks to Similarly, all new commercial buildings will provide financing options for upgrading the be required to be zero carbon by 2020. These energy efficiency of the existing stock of are encouraging regulations, but effective
GHG emissions (MtCO e) Figure 16 GHG emissions in U.K.‘s buildings2 sector (MtCO2e) Total emissions 300 Greenhouse 300 down 18% in same gas emissions time period in the U.K.’s -5% 233 CAGR buildings sector 222 224 1990-2008 218 222 217 220 Non-residential Source: “The Fourth 200200 Non-residential (electricity) -0.5 Carbon Budget“ (electricity)- 0.5% (Committee on Non-residentialNon-residential .2 Climate Change); (non-electricity)(non-electricity)0 .2% BCG analysis Residential Residential -1.0 100100 (electricity)(electricity)- 1.0%
Residential Residential .3 (non-electricity)(non-electricity)0 .3%
0 0 1990 ...... 2000 ...... 2005 2006 2007 20082008 UK GHG emissions
(GtCO2e) 771 674 661 656 647 634
% 30 32 34 34 34 35 GeSI SMARTer 2020 70 7: United Kingdom
implementation will be crucial. Additionally, the in the U.K. make the economics of adopting replacement rate of buildings in the U.K. is much these solutions favorable. too low to have a significant impact by 2020. Figure 17 shows the total abatement potential Clearly, the buildings sector has lagged behind of each of the four building sector sublevers. the rest of the economy in reducing its own The total abatement potential using these
GHG emissions. The recent policies should sublevers is 23 MtCO2e in 2020. Building play an important role in reversing this trend. design and integration of renewables offer the Given the large share of emissions, buildings highest potential. The combined potential emissions will have to decline drastically if amounts to 71 percent of the total possible this sector has to play its part in achieving the abatement.
U.K.’s ambitious carbon reduction targets. Voltage optimization offers savings from reduction in voltage received by the end-user Buildings abatement potential and consequently reduces total energy use. ICT-enabled GHG abatement solutions for Several firms already build and market these buildings are already available in the U.K. solutions. The economics of adopting these These include building management systems solutions favor the end-user and involve and programmable thermostats, among relatively low upfront costs. Further, these others. If adopted widely, these solutions can solutions apply to nearly all buildings—old play an important role in reducing buildings and new, urban and rural. Consequently, emissions, especially since high energy prices adoption of voltage optimization solutions
38 MtCO2e Breakdown of ICT-enabled GHG Sublevers Drivers of sublevers reduction potential Figure 17 Voltage • Savings from reduction in voltage received by end-user; ICT-enabled GHG reduction 13% optimization reduces energy use potential in buildings sector • Applies to all end-users that can be covered by smart grid infrastructure, easy to implement and cost is low Source: BCG analysis
Building • Savings from more efficient use of ventilation, lighting etc. 16% management • Applies mostly to large builds as scale is needed to make the systems economics work; not ready for residential mass market yet
Integration • Large building electricity use creates opportunity to 29% of renewables replace electricity from grid with a carbon-free energy free of transmission and distribution losses • Applies to rural areas, large industrial parks and warehouses in urban settings • But limited potential in the UK due to small overall resource of distributed solar and wind
Building • Zero Carbon or Near Zero Carbon new buildings 42% design due to better design • Applies to nearly all new buildings due to low design cost, but will be less impactful due to low replacement rate 71 GeSI SMARTer 2020 7: United Kingdom
should be easy to scale up in the U.K. and is although the potential in the U.K. is limited likely to be driven by the market, provided there because of the small overall resource of is sufficient awareness about their availability. distributed solar and wind energy at an individual building or household level. 68 Building management systems enable efficient use of ventilation, lighting, and so on. Several Better building design is a good opportunity to such solutions are already available in the start accumulating a stock of energy efficient market today, such as those offered by Siemens buildings. ICT is leveraged in designing more and BMSi. While effective at reducing energy efficient buildings by allowing for architects use, given their cost, these solutions are to use advanced drafting technology that currently best suited to large buildings. They enables them to minimize future building are not yet ready for the mass market. energy use by considering site-specific However, companies such as AlertMe are conditions (for example, sunlight and wind bringing these solutions to the residential patterns). The U.K. has legislated targets for market. It remains to be seen if the price and all new building construction to be zero or performance of these solutions will improve near-zero carbon by 2020. This impact per to make them more appealing to a broader set building is the highest among all sublevers of residential customers. discussed. However, given the low replacement rate of buildings, it will take time for the full High electricity use in the buildings sector benefit of this sublever to be realized. creates an opportunity to replace electricity from the grid with low-emissions energy. Additionally, local generation averts any Barriers and recommended transmission and distribution losses. policy steps to overcome them Integration of renewables should offer a ICT-enabled sublevers offer substantial potential 68. However, the U.K. had 7 GW of valuable avenue to reduce energy demand on to reduce GHG emissions in the buildings installed wind capacity in 2011, making the grid, and thus to lower emissions. In the sector if scaled up. However, several barriers it the eighth largest in the world. This is substantially smaller than some of the U.K., this sublever is relevant for rural areas in to their adoption exist. This study discusses leading countries though – China (63 which space is not a constraint. In urban these barriers and proposes policy steps to GW), the U.S. (47 GW), and Germany (29 GW). (Source: Global Wind Energy areas, large industrial parks and warehouses ensure successful adoption of these solutions. Council) offer potential for distributed generation, In general, the business case for sublevers in
Attractiveness Return on Risks and Overall Sublever of investment investment feasibility business case Figure 18 Business case assessment Integration of buildings sector sublevers of renewables
Source: BCG analysis Building design Low attractiveness
High attractiveness Building management systems
Voltage optimization GeSI SMARTer 2020 72 7: United Kingdom
Case Study BT plans to implement a remote BT is close to completing a remote smart energy management and control system smart energy management and across its estate, with the aim of reducing its carbon footprint by 5% and knocking control system across its centers £13M off its energy bills.
The initiative, in conjunction with Matrix Energy Control Solutions Ltd will connect smart energy meter consumption data, Building Energy Management Systems and invoice data into one central system called IEMS, the Integrated Energy Management System.
This is expected to reduce BT’s carbon footprint by 60,000 tonnes a year - equivalent to the annual emissions of electricity supplied to 23,000 houses.
IEMS is a significant and ambitious project. It links half hourly consumption data from more than 72,000 smart energy meters, controls and alarm information from circa 1,950 Building Energy Management Systems with data from some 92,000 invoices a year. IEMS will cover all of BT’s UK offices, data and call centres with a drive to go global.
The System provides a central data repository for energy management projects and will allow energy consumption to be turned into useful business insights. It will be used for all aspects of energy management, including data validation, billing, actual and comparative forecasting, monitoring and verification, benchmarking, analysis and reporting.
The system is a flexible, scalable solution that provides the ability to select and filter data in order to deliver customised reports, graphs and charts. The power of the system will allow BT to have ‘energy intelligence in action’ by allowing the Energy Control Centre in BT to develop and implement initiatives to avoid energy waste whilst optimising control strategies.
“Having real-time energy usage information for thousands of buildings will really help us drive down BT’s carbon footprint and energy bills,” said director of energy and carbon Richard Tarboton.
“Thousands of smart meters placed at BT offices, telephone exchanges and data centres will help us monitor energy usage levels and identify areas where we can deliver savings.” 73 GeSI SMARTer 2020 7: United Kingdom
the buildings sector is strong. High upfront Figure 19 combines the business case analysis costs and the longer payback periods, with the abatement potential analysis in the particularly at the small-scale, weaken the previous section. Combining the two, it becomes business case for the sublevers in this sector. clear that the role of policy is likely the strongest The strongest business case among the in facilitating the integration of renewables sublevers exists for building design and voltage since the abatement potential is high and the optimization. Both of these sublevers have business case is weak. Adoption of BMS, better relatively low up-front cost and little building design and voltage optimization will implementation-risk associated with the likely be driven by the market given the strong solution. The return on investment, however, business case. Thus, policy intervention will is better for building design than for voltage likely not be required be required to facilitate optimization. The business case for building the adoption of these sublevers. management systems (BMS) is also quite Financing is a barrier in adopting multiple strong when the implementation is at a large GHG abatement solutions, especially at a scale (see BT case study). However, the upfront smaller scale. High up-front investment, such cost can be high, which increases the risk since as that for distributed generation, often a decline in the price of energy over the prevents adoption of these solutions. State- lifetime of the BMS could make the economics sponsored financing is more readily available less favorable. Finally, the weakest business for large industrial-scale energy efficiency case is for the integration of renewables projects, such as that via the Green Investment because of the limited potential of wind and Bank (GIB). The GIB, capitalized with GBP 3 solar in the U.K. and the high up-front billion, has a mission to provide financial investment required. However, in general, solutions to accelerate private sector investment compared with other countries such as the in the green economy. However, similar U.S. where energy prices are substantially funding for smaller-scale projects is also vital lower, the business case is much stronger for to fully realize the potential offered by these the buildings sublevers in the U.K.. solutions.
Dependent on political Highest priority MtCO e 2 Dependent onenvironment political environment Highestfor priority implementation for implementation high 10.010.010.0 Figure 19 Building design Buildings sector sublever prioritization by potential 8.08.08.0 for CO2e reduction and Integration of 6.0 renewables in business potential e reduction 6.06.0 2 building
Source: BCG analysis 4.04.04.0 Building managment system Voltage optimization 2.02.02.0 Potential for CO for Potential
0.000.0 low Low attractiveness “Low-hanging fruits“ high
Attractiveness of business model GeSI SMARTer 2020 74 7: United Kingdom
Easy access to capital will be essential to drive available, are not widely used. Programs that adoption of these solutions. Government inform and instruct consumers about these funded, but privately controlled, financing solutions could help bridge the gap to large- avenues should be made available to lower the scale adoption. Further, while buildings burden of upfront costs at the small-scale regulations already mandate that buildings level. One way to do this could be to provide must prominently display a Display Energy access to small-scale projects to the GIB’s Certificate (DEC), more underlying balance sheet via an intermediary. The information could be provided to consumers. intermediary would be a single “large” This would enable consumers to make more investment for the GIB. In turn, the GIB could informed choices when looking to rent or make multiple small scale loans, something purchase real estate. The long-term strategy that would not be feasible for the GIB. for mobilizing investment in the renovation of residential and commercial buildings, as Even if financing were available, the required by the forthcoming EU Energy unfavorable economics of certain solutions Efficiency Directive, offers an opportunity for are a barrier in their adoption. For instance, considerable improvement in the energy building management systems require a large performance of buildings in the U.K. scale to be NPV-positive. As discussed earlier, these systems are not yet economically Lastly, even if none of the previously discussed attractive for residential buildings. Policy could barriers exist, the split incentive between help improve the economics of these solutions landlords and tenants is another formidable by promoting investment in technological barrier. Owners, who make the investment for innovation that drives down the price, upgrades, do not reap the benefits of lower improves their performance to increase energy bills. Tenants are direct beneficiaries returns from these solutions, or both. It is of these upgrades. Therefore, unless some of important to note that in general, though, the these financial benefits accrue to the owners, economics are particularly favorable in the return on their investment cannot be U.K. because of high energy prices. guaranteed. Further, a complex ownership structure for large commercial buildings For the commercial sector, there is currently prevents implementation of solutions as far as no incentive to purchase electricity from may be economically feasible. A regulatory renewable sources. Since much of the framework that addresses this problem is emissions of commercial buildings are indirect needed. (that is, from electricity usage), an incentive to purchase green electricity could help reduce The U.K. government could also be the emissions related to commercial buildings. “efficiency leader” in this sector. As discussed For instance, purchasing electricity from earlier, the public sector has seen a significant renewable sources could be made a part of the improvement in its building emissions. The CRC Energy Efficiency Scheme. This would let best practices and learnings from the owners of these buildings offset some of their government’s own experience can be shared carbon requirement and, in the process, with other building owners or operators. The provide a demand-side boost to renewable forthcoming EU Energy Efficiency Directive’s energy. requirement for renovation of public buildings can provide exemplary solutions and good Lack of awareness and education regarding experiences in this respect. the availability of solutions can be a barrier in some cases, even if the financing and economics are not a problem. For instance, voltage optimization solutions, though readily 75 GeSI SMARTer 2020 7: United Kingdom
Service and consumer footprint comes with subsequently large Context emissions. Greenhouse gas emissions from the The service and consumer sector has an service and consumer sector amounted to 104
important role in the U.K.’s economy. The MtCO2e in 2010. This is equal to 18 percent of sector’s share of the domestic economy is the total emissions in 2010. According to UNFCCC largest among various countries in the world. data, this share is substantially larger than As the share of manufacturing has decreased that in other developed countries studied in over the years, the services and consumer this report—the U.S. (8.4 percent), Canada sector has grown. However, a large economic (10.1 percent), and Germany (15 percent).
What stands in the way? What should happen?
Challenges Policy Key considerations Table 12 • High up-front costs of some Provide easy • Create government funded Barriers to adoption of Financing solutions, e.g., distributed access to but privately controlled funds ICT-enabled GHG abatement generation via renewables, capital for financing upgrades facility solutions and policy steps prevents mainstream adoption and adopting other solutions to overcome these barriers • Some funding available for at small-scale, e.g., Green large-scale projects, e.g., via Investment Bank finances Green Investment Bank, but a program responsible for 1. Display Energy Certificates making loans to small-scale Source: BCG analysis few financing avenues for small-scale projects projects
• Certain technologies and Change • Promote technological Economics sublevers are not NPV-positive economics innovation that drives down at small scale, e.g., building through: costs at small-scale maganagement systems or improves performance • Offer Tax rebates for EE upgrades • Provide carbon offset benefits • No incentives for companies Provide to compnaies for purchasing to source energy generated incentitves renewablw energy by e.g., from renewable sources to purchase renewable including it as part of CRC energy Energy Efficiency Scheme
• Lack of awareness can be Initiate • Provide consumers with Awareness abarrier in some cases even programs more information, e.g., & education if the solutions do not involve targeted at data underlying DECs1, to high cost and the economics educationg make them better informed work, e.g., Voltage Optimization consumers and allow them to make “greener’“choices
• Tenants or others that are Create • Encourage building owners to Split renting capture benefits of regulatory implement carbon abatement incentives effieciency upgrades but the structures solutions by transferring owener will not make the that align some of the energy cost investment unless ROI is incentives savings from tenants to guarnteed owners • Complex ownership structure • Alternatively, could for large buildings prevents implement property taxation pushing abatement solutions as based on energy efficiency far as is economically resonable/ possible GeSI SMARTer 2020 76 7: United Kingdom
Services & Consumer GHG emissions (MtCO2e) Services and Consumer GHG emissions (MtCO2e) Total emissions 150 down 23% in same time period
0% 120 120 112 106 104104 101 104 97 99 91 Figure 20 9090 Greenhouse gas emissions of U.K.’s service and consumer sector 6060
Source: UNFCCC; BCG analysis
3030
0 0 1990 ...... 2000 ... 20052005 20062006 20072007 20082008 20092009 20102010 % UK’s GHG 14 17 16 16 15 16 16 18 emissions
Figure 20 shows the trends in service and penetration is expected to grow rapidly and consumer emissions. Emissions in this sector accelerate the move from physical media to have remained largely flat since 1990, whereas online and digital media. This trend is borne the total emissions in the U.K. have decreased by out in the declining sales of physical CDs. 23 percent in the same period. As a result, the Annual sales of CD albums fell by 13 percent to sector’s share of the U.K.’s emissions has increased 86 million discs in 2011 while sales of digital from 14 percent in 1990 to 18 percent in 2010. albums rose 27 percent to 27 million.
ICT-based goods and services in this sector are Additional smart technologies are being adopted readily available in the U.K. High ICT or tested in other facets of business and daily penetration and end-user readiness has life. For instance, Thames enabled piloting and testing of solutions such Water is piloting a smart as smart water meters. Others, such as water meter in London. The The service and consumer e-commerce, have been available for a while pilot program is part of the sector’s share of emissions and are now on a path to robust growth.69 company’s goal of installing has increased from 14 percent 85,000 meters in their area Digital and online technologies have already in 1990 to 18 percent in 2010 by 2015. The objective is to seen significant uptake in the U.K. A recent lower the water use for BCG study estimated that e-commerce residential use and for yards, gardens, pools, contributed over GBP100 billion to the British and so forth, thus reducing emissions from water economy in 2010 and is expected to grow.70 use. Further, smart inventory management tools Consumers increasingly shop online. According are available in the market today. These tools to data from the Office of National Statistics, help optimize the amount of inventory a retailer 32 million people (66 percent of all adults in has to keep, thus lowering costs and emissions. the U.K.) purchased goods or services over the 69. Other solutions such as field force Internet in 2011, up from 62 percent in 2010. All of these solutions are being driven by the automation, mobile working, home or flexible working and workstyle market today and further growth is expected management solutions are also seeing Smart devices, especially e-readers and to follow without government mandate or fast adoption. These are covered in tablets, have also been adopted quickly. In other sectors in this report. intervention. The government does, however, 2011, the penetration of tablets and e-readers 70. “The Internet Economy have an important role to play in providing was 5 percent and 9 percent, respectively. Their in the G-20,” BCG Perspectives. 77 GeSI SMARTer 2020 7: United Kingdom
information and raising awareness to enable Figure 21 shows the total abatement potential consumers to make green choices. Further, the of each of the SMARTer 2020 service and government can lead by example by adopting consumer sublevers. The total abatement
these green technologies in its own functioning. potential by 2020 is 22 MtCO2e. Solutions that help lower retailer footprint offer the highest Service and consumer potential. The combined abatement potential of minimization of packaging and inventory abatement potential reduction amounts to 69 percent of the total ICT-enabled solutions for the service and abatement potential. Online and digital consumer sector are widely used in the U.K. technologies—e-commerce, online media, This is driven by an enthusiastic uptake by e-paper—together provide 24 percent of the businesses and consumers alike. However, total abatement potential. these solutions will truly have significant GHG abatement impact if they are scaled up further to cover a larger population of the country.
22 MtCO2e Breakdown of Figure 21 ICT-enabled GHG Sublevers Drivers of sublevers ICT-enabled GHG reduction reduction potential potential in service and 1% Public safety • Lower footprint from human activities e.g., security consumer sector cameras replace need for constant patrolling • London amongst earliest adopters; similar solutions already 1. IFPI annual report 2010 exist in other cities, thus limiting total unrealized potential Source: BCG analysis Online media • Elimination of emissions from production and distribution 17% and e-paper of physical media • Sales of physical media in U.K. among the highest in the world, e.g., fourth highest CD sales in U.K. in the world1 • Applies to all people using physical media, e.g., CDs, DVDs, physical books
5% Smart water • Reduced production and distribution emissions due to lower end-use consumption of water • More applicable in the southeast, less so in the rain abundant northwest
7% E-commerce • Lower physical footprint of retail sector and reduced logistical/ transportation emissions • Consumers already used to e-commerce, so possible to scale up further
Reduction • Less storage space required 31% in inventory • Lower logistical/ transportation emissions due to optimized levels of inventory
Minimization • Reduction in total materials required 38% of packaging • Lower emissions from eco-friendly materials GeSI SMARTer 2020 78 7: United Kingdom
Attractiveness Return on Risks and Overall Sublever of investment investment feasibility business case Figure 22 E-commerce Business case assessment of service and consumer Online media sector sublevers and e-paper
Low attractiveness Minimization of packaging High attractiveness
Public safety/ disaster
Reduction in inventory
Smart water
ICT-enabled solutions for retailers help reduce e-paper can help reduce emissions from their GHG footprint. Better product design production and distribution of paper-based along with the use of eco-friendly materials media. Approximately 5 percent of the world’s and a reduction in total materials required printing paper was consumed in the U.K. in offer significant potential for decreasing 2011. This makes the U.K. one of the biggest emissions in the retail sector. Further, other users of paper after the U.S., Japan, China, ICT-enabled solutions can help optimize the and Germany. Because of this large use of inventory requirements of retailers. Ability to paper, scaling up e-paper could have a keep lower inventory levels will reduce meaningful impact on GHG emissions. retailers’ emissions associated with storage. E-commerce reduces GHG emissions associated Also, lower inventory levels can help reduce with brick-and-mortar retail provided delivery the logistical or transportation emissions. of goods to customers is efficient. An estimated Given the large economic footprint of the 20 percent of all private transportation is service and consumer sector, a reduction in dedicated to shopping at physical stores.71 retailer emissions can make a significant E-commerce helps reduce emissions associated contribution to GHG abatement in this sector. with this significant amount of traveling. A shift to online media reduces production Further, on the retailer side, e-commerce and distribution emissions of physical media. helps lower logistical emissions. Since a large Since the U.K. has high sales of physical media number of consumers are already used to (for example, the fourth highest CD sales in shopping online in the U.K., further scaling up the world), there is still scope to lower the will be feasible as behavioral barriers are associated emissions. Similarly, growth in largely coming down on their own. 71. SMART 2020 79 GeSI SMARTer 2020
Barriers and policy the strongest business case. This is evident from the rapid penetration of these solutions Adoption of most of the ICT-based solutions in in the U.K. today. Solutions targeted toward this sector is currently being driven by the reducing retailers’ footprint—that is, market, for example, e-commerce, online media, minimization of packaging and reduction in and so forth. Only behavioral barriers to higher inventory—also offer a strong business case. As adoption remain. For instance, many people, a result, the uptake of these is also expected to especially older generations, still prefer physical be market driven. media. Also, “late adopters” of relatively new technologies such as tablets will take up these Figure 23 combines the business case analysis devices in time. Tablet and e-reader penetration with the abatement potential analysis in the is expected to increase rapidly as more competing previous section. Combining the two, it becomes products enter the market and the prices become clear that the role of policy in driving the lower. We see little role for policy to play in penetration of the sublevers in this sector is driving adoption of these technologies as the limited since the business case is very strong market is primarily expected to fulfill this role. for most of the sublevers. For the others (public The business case for most sublevers in the safety and smart water), since the abatement service and consumer sector is strong. potential is relatively low, this is unlikely to be E-commerce, online media, and e-paper offer the focus of policy.
Dependent on political Highest priority MtCO e 2 Dependent onenvironment political environment Highestfor priority implementation for implementation 10.0 Figure 23 high 10.010.0 Service and consumer sector su- Minimization of packaging blever prioritization by 8.08.08.0 potential for CO2e reduction Reduction in inventory 6.0 and business potential e reduction 6.06.0 2
Source: BCG analysis 4.0 4.04.0 Online media & e-paper
2.02.02.0 E-commerce Potential for CO for Potential Smart water Public safety 0.000.0 low Low attractiveness “Low-hanging fruits“ high
Attractiveness of business model GeSI SMARTer 2020 80 7: United Kingdom
Case Study Green Packaging at Tesco Tesco is one of the largest retailers in the world. Given the large volume of products Tesco sells, the environmental impact of the packaging of its products is substantial. Tesco recognizes this and has made a commitment to using greener packaging options. The self-imposed target is to reduce all product packaging by a quarter on food and non-food goods, such as electrical items and housewares, and on branded products as well.
While it is important that packaging of all products is reduced and made more environmentally friendly, Tesco is currently focusing on key products in which they see the biggest impact. These include wines, sauces, preserves, and canned foods
Some early successes include the following:
• Tray-less bags are used for chickens, reducing packaging by 68 percent (equivalent to 540 fewer vehicles on the road). • Tomato puree tubes no longer come in cartons, reducing packaging by 45 percent. • Size of the caps on bottles of carbonated drinks have been reduced, saving 603 tons of plastic per year. • Tesco’s lightweight wine bottles are 30 percent lighter, which will reduce glass usage by 560 tons per year.
Overall Tesco has worked with more than 300 suppliers and is on track to save over 100,000 tons of packaging this year. As Tesco expands its efforts beyond the set of products currently in focus, the reduction in packaging and realization of the GHG abatement potential will increase. 81 GeSI SMARTer 2020 7: United Kingdom
Cost-effective choices to reduce GHG emissions transparency of emissions energy accounting. An could be encouraged if emissions pricing were “A-G scheme” could be considered (see Figure 24). underpinned with a globally replicable labeling Further, the government should lead by example. system—offsetting price premiums with a For instance, the government could adopt a revenue -neutral levy would act as an incentive policy of “green procurement.” This would lower for consumers to purchase cleaner energy. This the government’s own emissions, as it is itself a would encourage competitors to enter the market large purchaser of goods and services. Additionally, and improve their service offering. Emissions it will set an example for businesses to emulate. intensity labeling of electricity would have the added benefit of increasing confidence in the
Electricity CO2 label CO2 /kWh £/MWh Figure 24 A A-G carbon intensity A Renewable/zero carbon 0g £4 labeling scheme B Low carbon/CCS <200g £6
C Gas CHP <300g £8
D CCGT gas <400g £9
E UK average/gas <600g £10
F Good coal/oil <800g £12
G Coal <800g £14
Average levy £9 GeSI SMARTer 2020 82 7: United Kingdom
What stands in the way? What should happen?
Challenges Policy Key considerations Table 13 • Sublevers impacted: E-commerce, Little role for • Market will drive furth Behavioral online mediea, E-paper policy to play uptake of these solutions Barriers to adoption of ICT-enabled carbon abatement • Reluctance to adopt new technologies solutions and policy steps • Many people, especially older to overcome these barriers generations, prefer physical media Source: BCG analysis • Smart Water: high cost of smart Allocate • Provide subsidies to drive Financing water meters government intial adoption; work with funding manufactureres to rduce cost to drive • Try alternative pricing adoption schemes for meters
• Little incentive for retailers Lead by • Make “green” a criteria in Awareness to lower carbon footprint example government procurement & education • Insufficient availability of • Energy intensity labeling Mandate information to make “green” choices of appliances to help change provision consumers’ habits and • Public opposition to ICT-based of energy attitudes towards energy use safety technology due to, e.g. intensity privacy concerns information 83 GeSI SMARTer 2020
Brazil GeSI SMARTer 2020 84 8: Brazil
Brazil that figure is only 34 percent. 73 Sixty- 8 six percent of Brazil’s contribution to climate Brazil change results from deforestation, other land use changes, and methane from livestock. When non-CO sources are incorporated into 8.1 Context 2 the total, Brazil emitted 1,288 tons of CO2e in Despite its relatively modest income levels, 2008, placing it as the world’s sixth-largest Brazil is one of the world’s largest emitters of GHG emitter.74 greenhouse gases. Any serious attempt at Though CO and other GHGs come from addressing climate change will require Brazil’s 2 different sources, both have been growing engagement given its large contribution to the roughly at the same rate since 1990 as the world’s emissions totals. Moreover, deciding economy has expanded rapidly. As is the case what techniques to use when moderating in the majority of developing nations, Brazilian emissions requires an understanding emissions growth is correlated with GDP growth, of its unique emissions profile. more so in countries where manufacturing is a
Considering only CO2 emissions, Brazil is the big component of the economy. CO2 emissions world’s fourteenth largest source. In 2008, have been growing at a rate of 3.6 percent
Brazil emitted 450 Mt CO2, representing a 1.4 CAGR since 1990, resulting in CO2 emissions 75 percent contribution to worldwide emissions 88 percent higher in 2008 than in 1990. 72. EIA 72 73. “Brazil Low Carbon Case Study”, in that year. Considering only CO2, however, Similarly, CO2e emissions have been growing World Bank understates Brazil’s contribution to climate at 3.1 percent CAGR since 1990, exceeding the 74. EDGAR Joint Research Centre change. In other countries, roughly 77 percent global growth rate of 2.0 percent over the 75. World Bank 76 of total emissions result from CO2, but in same period. 76. Ibid
20082008 Brazil‘s Brazil's total total GHG GHGe emissions missions (MtCO (MtCO22e)e) 1,5001,500
62 1,2881,288 72 Figure 25 878 149149 Brazil‘s 2008 total GHG emissions breakdown 232232 1,0001,000 Source: Brazil Low Carbon Case Study, Other Energy Sector Management Assistance Other GHG Program 237237 GHG
New icons/graph 536536 500500
410
CO CO2
0 0 LandLand use LivestockLivestock EnergyEnergy TransportTransport AgricultureAg. WasteWaste TotalTotal 85 GeSI SMARTer 2020 8: Brazil
Brazil's CO emissions( MtCO ) Figure 26 Brazil‘s CO2 emissions2 (Mt) 2 500 Brazil‘s CO2 emissions 500 1990-2010 450
+3.5% 410 Source: EDGAR 410 400400
300300
220 200200
100100
0 0 1990 19951995 2000 20052005 20082008 2009 2010 20112011 % Brazilian CO2 emissions as 1.0 1.3 1.4 1.3 of world total
Land use changes, agriculture, and livestock Land requirements for livestock and agriculture emissions, all intimately connected, play a are the principal drivers of deforestation. As particularly important role demand for Brazilian agricultural products, in understanding Brazil’s and livestock in particular, has grown, Land use changes comprise climate change contribution. ranchers and farmers have increased their a significant amount of all Deforestation, particularly operations and have consumed a large area of GHG emissions in the state of Amazonas, what was formerly rainforest. While the contributes to 42 percent of agricultural and livestock sector itself is a Brazil’s emissions and is large contributor to climate change, the driven by demand for Brazilian agricultural destruction of forests is an even more egregious products. Livestock, which contributes 18 concern, contributing almost twice as much to percent to the total, consumes 70 percent of Brazil’s total emissions. the land that is deforested and is a particularly Transportation, which constitutes 12 percent of GHG-intensive industry.77 Agriculture Brazil’s total emissions, is particularly contributes an additional 6 percent to total inefficient and is projected to contribute 17 emissions and consumes the remaining 20 80 78 percent to Brazil’s total emissions by 2030. 77. “Livestock Report”, percent of deforested land. The remaining 34 While over half of Brazil’s fuel used in transit Carbon War Room percent of Brazil’s emissions come from 78. Brazil Low Carbon Case Study is eco-friendly biodiesel derived from sugar energy (18 percent), transport (12 percent), 79. Ibid cane, Brazil is highly reliant upon private and waste (5 percent).79 80. Brazil Low Carbon Case Study 21 GeSI SMARTer 2020 86 8: Brazil
transit to move both passengers and cargo. In change, the economics behind many of the urban areas, public transit is so inefficient sublevers need to become more attractive to that its share of total rides is declining. drive widespread uptake. Brazilians have been turning to cars despite increased congestion and transit times, particularly in urban areas. With cargo shipping, there is little rail and water 8.2 Impact of ICT infrastructure for cargo transport, so heavy on GHG emissions trucking is essential to the transit system. Increasing reliance on these modes of The ICT market has grown rapidly since the transportation is projected to raise the opening of the Brazilian economy in 1990. transportation sector’s share of total emissions. Between 2000 and 2007, the value of the Brazilian ICT market grew 108 percent, with Brazil has attempted to address climate most of the growth being driven by the change concerns, but the policies put in place communications and IT hardware segments.82 have been ineffective because of difficulties High growth levels are projected to be with implementation. Brazil’s National Policy sustained through 2020.83 on Climate Change, signed into law by then- President Luiz Inácio Lula da Silva in 2010, Despite high levels of ICT growth, private ICT seeks to reduce Brazil’s GHG emissions R&D expenditures are perceived to be between 36.1 to 38.9 percent by 2020 from lagging.84 Though the sector is more innovative 1990 levels. To reach this goal, the than the average industrial sector, it is government’s aims include reducing inherently dependent on large multinational deforestation in the Amazon by 80 percent, firms: 70 percent of Brazilian ICT revenues recovering 15 million hectares of land that has come from 16 percent of ICT firms, all of been degraded by cattle grazing, and creating which are large multinational corporations. 85 4 million hectares of integrated farming and These companies import the majority of the livestock land.81 However, these efforts have components they use and set the electronics so far been hampered by the inability to detect standards that dominate the industry, erecting and punish illegal actions that cause barriers for homegrown innovation. Combined deforestation. The use of satellite imagery to with a lack of interest from multinational detect deforestation and punish violators in corporations in investing in R&D in Brazil, some states is a promising development that there are relatively few high value-added has helped the country work toward meeting opportunities within the Brazilian ICT sector. its deforestation reduction targets. Furthermore, the level of advanced ICT Particularly pressing is the need of economic penetration is relatively low. Only 45.0 percent incentives for GHG abatement. As Brazil is of Brazilians regularly use the Internet (in abundant in land and renewable energy Hungary, where per capita income levels are 86 sources, energy and land costs are low. As a similar, that figure is 59.0 percent). Lack of 81. “New Decree Details: National result of low prices, it is challenging to universal access depresses this figure, as the Policy on Climate Change”, www.brasil.gov.br incentivize the conservation of energy and infrastructure is not in place to accommodate 82. The ICT Landscape in BRICS protection of the rainforests. Rather than use all those who desire Internet access. Consider Countries: Brazil, India, China, 20 more concentrated farming techniques, it is the number of broadband terminals in Brazil: 83. Ibid currently more economical for farmers to use currently, there are only 60 million high-speed 84. The ICT Landscape in BRICS Countries: Brazil, India, China, 23 more land when existing land becomes data terminals for a population of 196 million. 85. The ICT Landscape in BRICS exhausted. Because of pervasive apathy and This is largely due to the concentration of Countries: Brazil, India, China, 21 lack of understanding of the effects of climate infrastructure in urban areas while large 86. World Bank 87 GeSI SMARTer 2020 8: Brazil
geographic regions are neglected. The lack of MtCO2e in 2011 to 39.1 MtCO2e by 2020, a 7.0 universality of high-speed Internet access may percent CAGR over that period. While growth hinder ICT’s ability to offer GHG abatement in emissions is attributable to growth from all solutions in Brazil. Most of the levers identified three segments (data centers, networks, and to reduce emissions depend largely on high end-user devices), 70.0 percent of the growth speed mobile Internet access. in emissions results from a higher number of and more energy intensive end-user devices. Nevertheless, Brazil’s high speed networks are These emissions, though growing, are still low in the midst of expansion. The number of high by developed economy standards. In Brazil, speed Internet terminals is slated to rise to 160 the per capita ICT emissions are 0.1t while in million by 2017, an increase of 167 percent the U.S. the emissions are 0.8t per capita. The over five years.87 This expansion of the high lower emissions in Brazil are attributable to speed data network is occurring at a rapid both lower penetration of ICT devices and the rate, but remains lower than many countries fact that a high percentage (82 percent) of at a comparable stage of development. Brazil’s power comes from renewable sources, 87. The ICT Landscape in BRICS 88 Countries: Brazil, India, China, 27 As a result of the ICT industry’s rapid growth, primarily as hydroelectric generation. 88. Brazilian Ministry of Energy direct emissions are slated to rise from 21.3 and Mines, 2007
CO2 emissions( MtCO2e) Figure 27 ICT emissions in Brazil (MtCO2e) ICT sector‘s direct 50 emissions in Brazil Low emissions: 0.1 ton
of CO2e per capita compared to 0.8 ton Source: Gartner, BCG analysis 40 per capita in the U.S. 39.1 +7.0% DataData centers centers
30 NetworksNetworks
21.3 20
End-userEnd-user devices devices 10
00 20112011 20202020 % ICT of total 1.5 1.9 emissions GeSI SMARTer 2020 88 8: Brazil
8.3 Abatement potential sinks in the form of trees, but it also releases the carbon that was held in the foliage. in agriculture and land use In the Amazonas region, the destruction has and transportation end-use been particularly devastating. Since 1970, 745,289 km of rainforest coverage in the sectors 2 Amazons has been lost; this loss is equivalent Sector prioritization to twice the size of Germany.89 Though When considering which end-use sectors to deforestation policies are in place, the Brazilian address using ICT, two sectors stand out as government has struggled to slow deforestation. particularly important: agriculture and land Annual forest loss has a high degree of use and transportation. variance, but since 1990 the deforestation rate has declined by only 1 percent CAGR.90 The agriculture and land use sector is Nevertheless, satellite surveillance used in particularly important in Brazil because it conjunction with ICT has provided Brazilian comprises 66 percent of Brazil’s overall emissions. state governments with a powerful tool to High demand for Brazilian agricultural products, catch and punish actors that cause livestock, and cattle causes deforestation. To deforestation. The use of PRODES and DETER prevent further loss of forest cover, the detection software, for instance, has helped economic factors driving agriculture must be push deforestation rates from 27,000 km2 to addressed. ICT can be leveraged to make less than 6,500 km2 from 2004 to 2010 in the agriculture and livestock more efficient so as Amazonas region.91 It remains to be seen, to require less land and to slow deforestation. however, if satellite-based deforestation prevention techniques alone are powerful Transportation is another excellent opportunity enough tools to keep deforestation rates low. for ICT-enabled GHG reductions. Brazil is highly reliant upon private transportation A large majority of the deforested land is used within urban areas and on heavy trucking to for livestock, more specifically cattle ranching. move cargo, and this dependency is projected Because tropical soil tends to be resource to grow. As there is currently a lack of rail and poor, agricultural workers realized that raising water infrastructure to move both passengers livestock was a more productive use of the land and cargo in a more energy efficient manner, than attempting to cultivate crops. Additionally, improving the efficiency of trucking and strong international demand for Brazilian public transportation through ICT has the beef drove exports higher. Between 2000 and potential to yield large GHG reductions. 2007, beef exports grew 397 percent as Brazil became the world’s largest exporter of beef.92 Agriculture and land use Seventy percent of all deforested land and 91 Overview percent of deforested land since 1970 is used Deforestation is the single largest component for livestock.93 Using deforested land only 89. Projeto PRODES: Monitoramento exacerbates the emissions total because of the da Floresta Amazonica Brasileira por of Brazilian GHG emissions, comprising 42 Satelite”, Brazilian Ministry of Science percent of Brazil’s emissions total. In 2008, high emissions intensity of livestock production. and Technology 536 Mt CO e was released primarily as a result Through digestive emissions, an individual 90. National Institute for Space 2 Research of clearing land that was formerly occupied by cow can annually produce between 80 and 91. ICT-Based Monitoring of Climate rainforests. Many farmers and livestock herders 110 kilograms of methane, which is 21 times Change Related Deforestation: The 94 Case of INPE in the Brazilian Amazon are engaged in what is known as slash and more potent per molecule than CO2. As a 92. USDA-FAS attaché report burn farming, in which they cut down the result, Brazilian livestock collectively released 93. “Causes of Deforestation of foliage and burn the remaining waste to clear 237 MtCO2e in 2008, which was equivalent to the Brazilian Amazon.” World Bank the land. Not only does this destroy carbon 18 percent of Brazil’s total emissions. Working Paper No. 22 94. “Ruminant Livestock”, U.S. EPA 89 GeSI SMARTer 2020 8: Brazil
2 Figure 28 Annual forest loss (km ) 30,00030,000 Brazilian deforestation -1% rate 1990-2008
25,00025,000 Source: National Institute of Space Research 20,00020,000
15,00015,000
10,00010,000
5,0005,000
0 0 1990 19951995 20002000 20052005 20082008
Constituting 6 percent of total emissions, is 7.1 percent of Brazil’s total emissions, Brazil’s agricultural production is largely representing huge abatement potential. The defined by a farmer’s geography. The southern largest opportunities for abatement potential half of the country is characterized by better come from deforestation prevention (52 percent), growing conditions, sufficient infrastructure, livestock management (20 percent), and soil and more advanced technology. The northern monitoring and weather forecasting (19 percent). half is populated largely by subsistence farmers Deforestation prevention is such a significant and has poorer growing conditions and abatement opportunity because of the inadequate infrastructure. Aside from the risk frequency with which it occurs and its of deforestation, the emissions intensity from importance as a carbon sink. The use of sustenance farming is relatively low. Wealthier satellite detection systems to determine where farmers in the southern regions of Brazil tend deforestation is occurring and then providing to utilize more fossil fuel-intensive equipment, that information to law enforcement officials engage in higher levels of tillage, and use more so they can punish individuals acting illegally fertilizer, and have higher emissions as a result. will serve as a major deterrent against Therefore, the use of ICT technology to reduce deforestation. GPS systems and GIS mapping agricultural emissions will be most effective in can also be used to more accurately determine the wealthier, more technologically advanced how much land was cleared by a particular southern region. individual. This system is currently being Land use and agricultural utilized to a degree, but could prevent even more deforestation if penetration were higher abatement potential and if more Brazilian Institute of Environment ICT offers tremendous opportunities for GHG and Renewable Natural Resources (IBAMA) abatement within the agricultural and livestock environmental protection agents were hired sector. The ICT-enabled abatement potential to protect forests.
across the end-use sector is 90 MtCO2e, which GeSI SMARTer 2020 90 8: Brazil
90 MtCO2e Breakdown of ICT-enabled GHG Sublevers Drivers of sublevers reduction potential Figure 29 Livestock • Changing cattle diet and monitoring methane will 20% ICT-enabled greenhouse management dramatically reduce methane emissions gas reduction potential in • Using GPS collars will allow for integration of livestock agriculture and land use sector pasture and cropland Source: BCG analysis • Former pasture land can be reforested
8% Smart farming • Apps inform farmers as to appropriate crop rotation to reduce the amount of fertilizer required for crop cultivation • Crucial for Brazil because land is so resource depleted
1% Smart water • Sensors measuring moisture in the soil can prevent unnecessary irrigation and soil erosion
Soil • Reduces the amount of fertilizer required for crop 19% monitoring/ cultivation Weather forecasting • Monitors the weather conditions immediately around the plants and data can be collected remotely or on site
Deforestation • The use of satellite-based detection systems will allow for 52% prevention IBAMA agents to prosecute deforestation policy violations, serving as a deterrent to destroying forest coverage • Sublever specific to Brazil
Livestock management is a profound opportunity using smart fences and GPS tracking of for abatement because Brazilian livestock livestock. Smart fences keep animals in a production is inefficient by developed country specific area by producing a slight electric standards and consumes a growing portion of shock to warn the animal that it is crossing the formerly forested land. While most cattle are boundary, keeping it in the appropriate held in concentrated animal feeding pasture.96 Given that 70 percent of all operations in developed nations, in Brazil, the deforested land is used to raise cattle, reducing majority of cattle graze freely outside in the amount of land required per animal is an inefficient feeding patterns that lead to over- essential component of combating deforestation. grazing and under-grazing. The concern with Two other applications of ICT in livestock over-grazing is that it keeps the grass too short management include radio frequency and prevents it from sinking its roots into the identification (RFID) health monitoring and soil, eventually leading to desertification and methane emissions monitoring.96 RFID animal soil erosion. 95 Under-grazing can also be health monitors can alert ranchers as to when detrimental, as it allows for healthy grass to their animals are becoming sick, helping prevent become overgrown by other plant species. the death of an animal. The premature death Both require that new land with fresh grass be of an animal that cannot be used as meat made available, often leading to more 95. “Wireless and the means that emissions created in its lifetime Environment”, BSR, 40 deforestation. ICT can be utilized to reduce were to no end. Methane emissions can be 96. “Wireless and the the amount of land required to raise cattle by Environment”, BSR, 48 91 GeSI SMARTer 2020 8: Brazil
reduced through the deployment of monitors. Business case Researchers have discovered that cattle produce different levels of emissions at The business case for each of the sublevers different periods of the day, depending on varies quite widely. Soil monitoring and feeding schedules. Wireless monitors placed weather forecasting is the most attractive in the rumen (the second stomach of the cow) business opportunity because of the moderate can reduce methane emissions through better upfront costs, low risks and high rate of return. control of cattle’s feeding schedule. Soil monitoring systems will almost always yield a positive return because, as described Soil monitoring and weather forecasting have earlier, determining the correct soil inputs is the potential to abate 18.5 MtCO e, largely 2 highly dependent on guesswork. Ensuring the because of how difficult it is for farmers to correct ratio of water and fertilizer has the determine exactly how much to water crops. potential to increase yield substantially. Smart Farmers currently base their watering farming, though attractive, is not quite as schedule on intuition, attempting to take into attractive as soil monitoring and weather account factors as diverse as soil characteristics, forecasting; smart farming returns information the type of crop, and weather projections, similar to that of soil monitoring and weather yielding an educated guess as to how much forecasting systems but has a higher upfront water their crops require. Because it is difficult cost. Deforestation prevention, though easy to to coherently analyze such disparate variables, implement on a small scale, would require there is much excessive and wasteful irrigation. large increases in the number of environmental ICT-enabled monitors in the soil can provide protection officers to be fully effective. Though information as to exactly how moist the soil is satellite-based deforestation monitoring and, combined with accurate weather provides the information law enforcement forecasting information and knowledge of the needs, the law cannot be enforced if there are crop, a crop insight website can inform the too few officials; lack of funding for large farmer exactly how much irrigation is personnel increases makes full implementation required. 97 This prevents crop loss due to of ICT-based deforestation prevention less overwatering and water waste, both of which likely. Smart water is not particularly attractive because of the low return on investment in lead to higher CO2 emissions. This sublever is of particular importance in Brazil because both absolute and percentage terms. Livestock rainfall can be challenging to predict. management is the least attractive from a business perspective. Smart farming also yields significant abatement Livestock management, despite its high potential at 7.6 MtCO2e. Because of the resource depletion and inconsistencies of abatement potential, is particularly unattractive
Brazilian soil, it is challenging for many because CO2e externalities are not incorporated farmers to determine how much fertilizer to into the price of a good and land in Brazil is use on their crops and how frequently to till inexpensive. Because farmers do not pay for the soil. Satellites can monitor the health and the methane their cows emit, there is no temperature of individual fields and transmit monetary incentive for farmers to invest in this information to a farmer’s computer or methane monitoring equipment as it will not smartphone. This information can then be improve the productivity of their cattle. In the utilized to adjust tilling schedules and fertilizer absence of a penalty for emitting GHG application. Ensuring that tilling does not emissions, the business case behind methane occur too frequently prevents unnecessary monitoring will not be persuasive. The business CO release, and moderating fertilizer usage case for virtual fences to prevent overgrazing 97. “Wireless and the 2 Environment”, BSR, 42 prevents its waste. of land is also poor; if cattle ruin pasture it is GeSI SMARTer 2020 92 8: Brazil
inexpensive and easy for ranchers to deforest penalty for producing large amounts of more land to use for grazing. The case for methane from cattle and accordingly ranchers health monitoring of cattle is slightly stronger, have little incentive to use methane emissions in that ensuring that cattle do not fall to illness monitoring technology. Ideally, a CO2e permit prematurely has the potential to yield a market or a CO2e tax would be instituted to positive return. For RFID health monitoring to ensure that all economic sectors have an be effective, however, it requires outfitting interest in abatement, but such a system would each animal with a health sensor and be very unpopular politically and, because of purchasing equipment to check each animal; high levels of corruption, difficult to implement. as a result, the breakeven point may take a Though such a system could theoretically be long time to reach, if it indeed ever comes. set up through an international agreement, it is highly unlikely that Brazil will unilaterally
Barriers and policy recommendations take action to institute a CO2e trading regime. to overcome them Therefore, policy-makers should consider ICT-enabled sublevers have the potential to other alternatives. The most significant lever reduce GHG emissions in Brazil’s agriculture the government could use is its ability to more and land use sector, but several barriers exist fairly price land. Particularly with regards to that prevent their widespread adoption. deforestation and livestock, many ranchers Prudent policymaking and, most importantly, choose to clear land to raise more cattle effective implementation can ensure that because it is cheaper than using the land they these solutions are adopted. currently own more efficiently. Raising the price of land would make some livestock The current economics of GHG abatement in management systems more competitive Brazil is particularly challenging for ICT- economically. To price land more fairly, the enabled abatement adoption. As is the case in government could pursue a number of many countries, there has been virtually no alternatives, including increasing the percentage attempt to incorporate the externalities of private land that must be left forested, associated with GHG emissions into the prices buying land for conservation purposes, and of goods. For instance, there is no economic
Attractiveness Return on Risks and Overall Sublever of investment investment feasibility business case Figure 30 Soil monitoring/ Business case assessment Weather of agriculture and land use forecasting sector sublevers Smart farming Source: BCG analysis
Deforestation Low attractiveness
prevention High attractiveness
Smart water
Livestock management 93 GeSI SMARTer 2020 8: Brazil
Dependent on political Highest priority MtCO e 2 Dependent onenvironment political environment Highestfor priority implementation for implementation Figure 31 high 50.010.010.0 Prioritization of policy by Deforestation prevention 8.0 potential for CO2e reduction 8.0 and business potential Livestock management Soil monitoring/Weater forcasting
6.0 e reduction 15.06.0 Source: World Bank, BCG analysis 2
10.04.04.0
Smart farming
5.02.02.0 Potential for CO for Potential
Smart water 0.00.00 low Low attractiveness “Low-hanging fruits“ high
Attractiveness of business model
using ICT to ensure that encroachment onto purchase profitable net present value ICT protected lands by ranchers does not occur. technology outright, many smaller-scale farmers These policies surrounding increasing land and individual ranchers are not in the same prices are relatively inexpensive to implement financial position. Furthermore, even if farmers and would yield large amounts of abatement. are able to buy the technology without As a result, they should be a priority for financing, many may choose not to because of Brazilian policy makers, but care should be the high upfront cost and long payback periods. taken that small farmers are not penalized The Brazilian government has already set up a unfairly because of these policies. fund through the Ministry of Agriculture, A second challenge from an economics Livestock and Food Supply called the Low standpoint is that other technologies yield a Carbon Agriculture Program, which is a good higher IRR than ICT-enabled technologies. For start toward helping farmers adopt NPV instance, the adoption of genetically modified positive emissions reduction technology. The corn seeds in Brazil could yield up to $3.59 for program provides USD3.150 billion for green each dollar invested, higher than the IRR for technology adoption with a maximum soil monitoring and weather forecasting.98 These borrowing limit of USD1 million, interest rates other solutions, however, do not directly address of 5.5 percent per year, and a payback period climate change concerns. Because the government of five to 15 years.99 Given the size of the has a vested interest in meeting its emissions Brazilian agricultural sector, however, this targets, it should lower the price of ICT-enabled program is too small and many farmers may solutions by subsidizing agricultural systems not be aware of the program. The government that also reduce GHG emissions. Lowering the should increase funding for the program and price to the point where ICT-enabled solutions should mandate that information about the are competitive economically with other program be included with purchases that agricultural investments will induce farmers farmers make regularly, such as seeds or to more readily adopt ICT. fertilizer, to increase awareness. ICT-enabled 98. “Transgenics Seed Produces mobile banking can allow for better Healthy ROI For Brazil’s Farmers”, Financing presents another barrier to adoption. connectivity between lenders and borrowers. Seed Today Journal Though many larger ranchers and farming 99. “Livestock and Food Supply”, Brazilian Ministry of Agriculture operations may have the capital on hand to GeSI SMARTer 2020 94 8: Brazil
What stands in the way? What should happen?
Challenges Policy Key considerations Table 14 • GHGs are externalities for farmers Price farm • Encroachment onto public Economics Barriers to adoption of land fairly lands must be prosecuted • Maintaining land quality more ICT-enabled GHG abatement costly than using new land • Government could buy land Develop carbon to reduce overall supply solutions in Brazilian agriculture • Efficient techniques not markets to yield available for farming and policy recommendations necessarily NPV+ higher IRR for • Other investments yield higher IRR GHG saving investments
• Farmers cannot afford to Government • Ready provision of low Financing purchase the equipment outright support of interest loans agricultural ICT • Difficult to enforce loan contracts • Mobile banking can be used purchases due to high mobility to connect borrowers and lenders
• Farmers do not understand ICT educational • Distribute educational Education the benefits of smart farming initiative materials techniques • Dispatch representatives from ICT providers to explain equipment
• Data networks do not exist in Promote • Loosen regulations Infrastructure remote farming areas construction of pertaining to data network high-speed data provision networks in • Sale of radio spectrum remote areas portion at low price • Required personnel and materials may not be available domestically
Lack of information surrounding both ICT Finally, there is a significant lack of and climate change seriously hamper ICT communications infrastructure in many parts uptake. Even in developed nations in which of Brazil. Particularly in rural areas of the information regarding NPV-positive ICT is Amazon where deforestation is the most readily available, uptake is low. In the U.S., for serious, it would be nearly impossible for instance, only 8 percent of farmers utilize soil ranchers and farmers to utilize the ICT monitoring and weather forecasting discussed; even if they possessed the hardware technology; the rate is even lower in Brazil.100 they would not be able to connect to the The Brazilian Ministry of Agriculture should networks that make such devices work. As a include information regarding NPV-positive result, the federal and state governments must applications of ICT in agriculture with ensure that high-speed data and mobile information on the Low Carbon Agriculture networks continue to develop. Government Program to clearly explain how emissions- can foster this growth by lowering tariffs on reducing technology can help them become ICT hardware from abroad, removing red tape more profitable. that hinders data network construction, and
selling portions of the radio spectrum at low 100. “Wireless and the Environment”, BSR, 40 95 GeSI SMARTer 2020 8: Brazil
prices to make private development more transportation as a percentage of the total was attractive. These steps are easy to implement 12.7 percent in 1995 and 11.6 percent in 2008, and could actually generate revenue through a small relative decline. Despite the observed spectrum auctions and cut costs by eliminating decline, emissions are expected to climb to
unnecessary bureaucracy. Increasing the 245 MtCO2e, which would comprise 17 percent attractiveness of communications infrastructure of total emissions, assuming that business development should be a priority for policy proceeds as usual. makers because of its ease of implementation. Emissions growth in recent years has been driven by increased reliance on private transit Transportation and trucking. In urban centers, commuters In 2008, the Brazilian transport sector emitted are pushed to use cars because of inefficient and unreliable mass transit systems. Only São 149 MtCO2e, which was equivalent to 12 percent of total emissions in that year. Brazil is highly Paulo is considered to have an adequate metro reliant upon road transportation to move both system; all other Brazilian cities rely heavily cargo and passengers; over 90 percent of on buses for public transit.101 Inherently slower transportation emissions came from road than metro systems, Brazil’s bus system is transportation, with the remaining portion further beleaguered by poor management. coming from rail, water, and air transport. Over 5,000 localities and organizations oversee Fifty-six percent of the road transportation Brazilian mass transit systems, making emissions resulted from private transportation coordination among different agencies in urban areas, with the remaining 44 percent difficult.102 The inability to coordinate leads to coming from private transit in rural areas and slow resource mobilization and high levels of trucking. unpredictability. Slow and unpredictable service, combined with fares rising faster than 101. “Making up for lost time: Public Emissions from transportation have been transit in Brazil’s metropolitan areas”, inflation, has led to plunging public transit Economist Intelligence Unit growing at a moderate rate since 1995. In usage. The share of rides that were taken using 102. Brazil Low Carbon Case Study 1995, emissions from transit were 103 MtCO2e public transportation has declined from 75 103. “Making up for lost time: Public and had reached 149 MtCO e by 2008, a CAGR 103 transit in Brazil’s metropolitan areas”, 2 percent to 50 percent in 2010. The share of Economist Intelligence Unit of 3 percent. The percentage of emissions from
2 Figure 32 AnnualEmissions forest from loss transportation (km ) sector (MtCO2) 180180 CO2 emissions from Brazilian transportation sector, 1995-2008 160160 +3% 150150 Source: World Bank 140140 136136 124124 120120 103103 100100
8080
6060
4040
2020
0 0 19951995 2000 20052005 20082008 GeSI SMARTer 2020 96 8: Brazil
DRAFT
Case study Deforestation and PRODES Enforcing anti-deforestation policies has long been a challenge for the Brazilian and DETER satellite imaging government. Despite its zero deforestation policy, the Brazilian Institute of software Environment and Renewable Natural Resources (IBAMA) has had trouble pinpointing exactly where deforestation is occurring and determining its extent. Beginning in the 1990s, however, IBAMA began to use satellite imagery produced by the United States’ Landsat service in conjunction with deforestation detection software called PRODES to determine where the most egregious instances of deforestation were occurring. Using the information from PRODES, policy makers realized the troubling extent of deforestation in Brazil and subsequently enacted tougher legislation to prevent the rainforest’s destruction. In 2004, the law enforcement tool DETER was developed to help IBAMA agents track deforestation and fine people who were cutting down forests.
Though it is difficult to quantify exactly how much PRODES and DETER have contributed to slowing deforestation, they are likely to have had a major impact in the slowing of deforestation rates since 2006. Since 2006, deforestation has declined
from 27,000 km2 to 6,500 km2, yielding tremendous CO2e savings over that period. Though penetration of the technology is likely to be high because of the relatively low cost, for this sublever to be effectively utilized the government must add more IBAMA officers to pursue violations. Currently there are only 580 officers for the entire Amazonas region, which is an equivalent to one officer per 800,000 hectares, double the size of Rhode Island. For PRODES and DETER to be used more effectively, there must be more agents to pursue the illegal deforestation the software discovers. Nonetheless, these tools represent an enormous opportunity to help Brazil reach its zero deforestation target if IBAMA is given appropriate resources for the program. 97 GeSI SMARTer 2020 8: Brazil
rides on public transit is projected to plunge High levels of use of eco-friendly biofuels further by 2025. A mere 19 to 38 percent of rides derived from sugar cane is a bright spot for the will be taken via public transit if trends hold. Brazilian transportation sector. Though the initial Brazilian biofuel legislation dates back Because Brazilians are reluctant to rely on to the 1970s and stems from concerns public transit, they have come to embrace the surrounding Brazilian energy independence, car and motorcycle. Between 2000 and 2010, sugar cane biofuel has helped reduce the the number of car registrations grew 120 emissions intensity of the Brazilian percent as the population grew 11 percent. transportation sector. Unlike corn-based This increasing reliance on cars is occurring ethanol, which has dubious environmental despite more congestion in population centers. benefits, sugar-cane-based ethanol reduces The average speed on São Paulo’s arterial GHG emissions by 61 percent over combusting roads during evening rush hour declined from gasoline. All Brazilian fuel used in cars is a 40 km/h in 2003 to 26 km/h in 2010. blend that contains a minimum of 20 percent Brazil’s cargo transit system is similarly ethanol, and flex-fuel vehicles have become dependent on road transportation. Because of incredibly popular. By 2009, 92.3 percent of a lack of other modes of transport, namely rail new cars and trucks sold in Brazil could run and water, Brazil is highly dependent on off either a gasoline-ethanol blend or pure trucking via the national highway system to ethanol, and by March 2012 there were over move cargo. Sixty percent of Brazilian cargo is 15 million flex-fuel vehicles on Brazilian moved using heavy trucking because of a lack roads. Since February 2008, well over half the of economically viable rail and water fuel consumed in the Brazilian gasoline- alternatives. 104 The rail network is nowhere powered fleet has been sugar cane ethanol. near the density or quality of American or European networks and is concentrated in the Transportation abatement potential economically powerful southern regions. A Because of the numerous inefficiencies in the lack of standardization across states also Brazilian transportation sector, ICT-enabled plagues interregional rail. Port fees in Brazil GHG reductions solutions are poised to make are higher than in places like Hamburg and a significant impact in reducing Brazilian Singapore and many lack sufficient emissions. The abatement potential for the connections to highways and rail lines. identified ICT solutions in transportation is 43 Moreover, inefficient intermodal transfers MtCO2e, a mere 5 MtCO2e lower than the raise the cost of transferring loads from abatement potential for agriculture and land trucking to alternative forms of transportation. use despite making up a significantly smaller Despite heavy reliance on trucking, logistics portion of total emissions. systems penetration is low. Logistics costs are Of the 11 sublevers, logistics network twice as high as the OECD average, which optimization, telecommuting, eco-driving, and threatens the competitiveness of Brazilian truck route planning offer the greatest exports. The transportation sector has become opportunities for GHG abatement and will be dramatically more consolidated in the wake described in greater detail. A list of all the of Brazil’s economic opening in 1990, but transportation abatement sublevers and their many of the larger consolidated firms have abatement potentials can be found in figure 33. delayed logistics systems implementation. Low logistics systems penetration means that Logistics network optimization is a powerful
ICT can be leveraged to make trucking much sublever, with 11.4 MtCO2e in potential emissions reductions due to poor current state 104. “Logistics in Brazil”, DHL more efficient and reduce GHG emissions. GeSI SMARTer 2020 98 8: Brazil
38 MtCO2e Breakdown of ICT-enabled GHG Sublevers Drivers of sublevers reduction potential Figure 33 Eco-driving • Mobile applications provide drivers with feedback 8% ICT-enabled greenhouse on fuel usage and driving style gas reduction potential Real-time • Provides drivers with traffic updates to help them in transportation sector 3% traffic alerts avoid congested traffic areas, particularly in large cities Source: BCG analysis like Sao Paolo and Rio de Janeiro
Apps for • Would increase ridership by making public transit 3% public transit systems that fall under the 5,000 different transit authorities more predictable
Crowd • Gives urban Brazilians the ability to share transit 6% sourcing resources through car and ride sharing
Video- • Allows for meetings to be conducted over the Internet through 6% conferencing A/V equipment even if participants are in the same city
Telecommuting • Would prevent a large amount of emissions by preventing 20% the need to use private transportation to get to work, particularly in congested urban areas
Truck route • Utilizing real-time traffic reports can help trucks avoid 9% optimization congestion and closed routes
Logistics • Prevents trailers from going empty by ensuring 30% network coordination amongst truckers in a given area, which optimization is particularly important because of Brazil’s heavy reliance on trucking over other modes of transport
Integration • When used in conjunction with ICT, EVs can provide 9% of EVs power back to the grid, reducing the need for peaking power plants during periods of high power demand
Intelligent • Reduces the amount of time that drivers burn fuel 2% traffic on congested roadways management
Fleet • Allows a centralized fleet manager to ensure that drivers 4% management are driving at the appropriate speed, are braking correctly and have the right tire pressure
of logistical planning. Despite a wave of Frequently, trailers will go as much as 80 consolidation within the trucking industry percent empty and multiple trucks headed in that increased efficiency, Brazilian logistics the same direction, carrying cargo that could costs remain twice the OECD average, be carried by a single truck. Connecting the diminishing the competitiveness of Brazilian trucks to a logistics center can coordinate goods. Logistics networks optimization has communication among different parties and the ability to reduce emissions in a number of reduce the number of trucks on the road by ways, including reducing the number of ensuring fuller loads, thereby reducing trucking loads by ensuring that loads head to emissions. the same destination are on the same truck. 99 GeSI SMARTer 2020 8: Brazil
Logistics optimization also allows for just-in- relatively high abatement potential because of time delivery that greatly reduces the need for the high rates of private transit use in Brazil. inventory. Housing inventory is an energy- intensive process, as it requires the construction of warehouses to hold the merchandise and electricity to ensure that goods are held in the Business case appropriate environment. Just-in-time delivery Sublevers that involve increasing the efficiency is particularly important in Brazil, given its of the Brazilian trucking system are the most high production and transport of agricultural attractive from an investment standpoint; as goods. Logistics network optimization can also Brazilian logistics costs are twice the relative prevent manufacturers from producing more OECD average, investments in logistics stand to of their product than the market desires make a large return on investment despite because as supply wanes they can rely on the potential high up-front costs. Eco-driving is logistics network to move new product to attractive to many, and low adoption costs may shelves quickly rather than producing drive high uptake, but the absolute return on preemptively. investment may be too low to induce people to change their behaviors. Telecommuting and Also aimed at increasing trucking efficiency, videoconferencing, though technically feasible, truck route planning offers 3.4 MtCO e of 2 may not be practical because of the need to abatement potential. Truck-route-efficiency meet face-to-face, and the split incentives software will not only find the shortest route problem may make it challenging to convince available, but will also monitor changes in employers to invest in such systems. Potential traffic and will take tolls and other barriers videoconferencing partners need to have also into account to determine which route will invested in A/V equipment, which stands as a require the lowest amount of fuel for a barrier in Brazil. Traffic management and particular trip and even how much profit that alerts systems are feasible and reasonably trip would generate. These fuel savings attractive investments, but the return on translate into lower GHG emissions. investment for local governments is unclear. Telecommuting also yields significant GHG Integration of EVs in Brazil has a very poor
emissions savings, at 4.3 MtCO2e. Telecommuting business case because of the large infrastructure allows certain Brazilian service workers to upgrades required, and Brazil’s sustainable work from home using their computers and biofuels make electrification of the vehicle fleet phones rather than going into the office a low priority.. physically. Telecommuting does not work for Truck route optimization in Brazil has an Brazilians that are employed within many exceptionally strong business case. In other sectors, but this sublever offers significant parts of the world, companies have been able abatement opportunities because of the high to reduce their overall fleet costs by as much reliance on private transit. as 16 percent through daily utilization of route Finally, eco-driving can help reduce GHG optimization software; in Brazil, the current
emissions by 3.0 MtCO2e by informing drivers high level of inefficiencies could yield even how they can alter driving behavior so as to higher savings.105 Even without investing in reduce fuel consumption. ICT built into a car large capital upgrades, truckers can take or used through a smartphone reduces fuel advantage of route optimization technology. consumption by informing drivers when they There are Web-based services that can help a drive too fast, accelerate too quickly, take driver plan his route at the outset to take the 105. “Optimizing Fixed Truck turns too sharply, and have tire pressure that most fuel efficient route. These Web apps Routes and Delivery Schedules”, Paragon Routing is suboptimal. Again, this sublever has a have a minimal upfront cost and yield GeSI SMARTer 2020 100 8: Brazil
Attractiveness Return on Risks and Overall Sublever of investment investment feasibility business case Figure 34 Eco-driving Business case assessment of transportation sector sublevers Real-time traffic alerts Source: BCG analysis
Apps for Low attractiveness
public transit High attractiveness
Crowd sourcing
Videoconferencing
Telecommuting
Truck route optimization
Logistics network optimization
Integration of EVs
Intelligent traffic management
Fleet management
immediate mileage and fuel savings. Given Barriers to ICT-adoption more limited access to capital for logistics and policies to overcome them upgrades, low-cost, Web-based solutions will There are a number of barriers that could be attractive in Brazil. Aside from reducing prevent companies from adopting ICT as a fuel cost and mileage, truck route optimization means of reducing GHG emissions. Effective can also make scheduling more predictable policy making, however, can help overcome and can cut down on inefficiencies caused by these barriers. multiple trucks arriving at the same destinations and warehouses at the same A significant concern surrounds inducing time. Moreover, when route optimization is behavioral changes. With regard to eco-driving, combined with fleet management systems, it is challenging to convince drivers to alter real-time data can be incorporated and their driving behavior if they have driven a savings can be increased even further. particular way for an extended period. Aside from more aggressively enforcing speed limits, 101 GeSI SMARTer 2020 8: Brazil
Dependent on political Highest priority MtCO e 2 Dependent onenvironment political environment Highestfor priority implementation for implementation high 50.010.010.0 Figure 35 Optimization of logistics network Prioritization of policy by Telecommuting 8.08.0 potential for CO2e reduction by business potential
6.0 e reduction 15.06.0 Source: World Bank, BCG analysis 2
Optimization of truck route planning 10.04.04.0 Integration of EVs Eco-driving Asset sharing Videoconferencing 5.02.02.0 Fleet Potential for CO for Potential Public transit apps Real-time managment Intelligent traffic management traffic alerts & telematics 0.00.00 low Low attractiveness “Low-hanging fruits“ high
Attractiveness of business model
it is challenging for governments to mandate Financing is another potential barrier. Even if that drivers drive in an eco-friendly manner. an ICT-enabled solution is NPV-positive, many Given this, the government should inform companies will be deterred because of high drivers about the potential energy and money upfront costs. NPV-positive investments with a savings that eco-driving payback period that is too long are not as and other green attractive as other uses for capital. This Financing is the biggest techniques yield. Such present bias could be a concern when barrier to ICT-enabled information could be expensive investments in ICT solutions are abatement in the displayed on highways required, such as in the establishing of logistics transportation sector and main thoroughfares networks. A solution to this bias is to provide and could be distributed financing for logistics systems and other ICT when people go in to solutions that abate GHGs in transportation. renew their driver’s licenses. Furthermore, the This program could be modeled after the Low government could mandate that all Carbon in Agriculture program and government vehicles utilize eco-driving administered by the Ministry of Transport. applications and principles. By leading by Providing financing spreads out the upfront example, the government may be able to costs to make investments more attractive to convince a greater percentage of people to potential buyers that already have capital on adopt eco-driving technology and techniques. hand and also makes technology available for Policy makers could also consider raising those who otherwise would not be able to pay gasoline and biofuel taxes, but such a policy is for it. likely to be very unpopular. Finally, the Split-incentives concern can be a barrier to government could consider mandating that all telecommuting. Depending on the nature of vehicle manufacturers integrate eco-driving job, managers and workers may have technologies into vehicles for sale in Brazil. misaligned incentives with regards to Such legislation would also be unpopular in telecommuting; it saves workers time, money, Brazil as it would drive up the sticker price of and energy when they are able to avoid their vehicles, despite the long-term savings. daily commutes but companies are often GeSI SMARTer 2020 102 8: Brazil
What stands in the way? What should happen?
Challenges Policy Key considerations Table 15 • Financial incentives for workers Financial reward • Ensuring the reward Split Barriers to adoption of to telecommute but employers if a percentage is sufficient enough to incentives must pay for telecommuting of workdays compensate for both tangible ICT-enabled GHG abatement capabilities and are worried are done via and intangible costs solutions in Brazilian about workplace culture telecommuting transportation and policy deterioration recommendations • High upfront costs for cites to Assist local • Government appetite Financing adopt ICT for transit governments for using public funds with transit ICT • High upfront costs for private • Expected IRR and purchases companies to build logistics pay-back period systems Provide • Government appetite financing for for using public funds logistics systems • Expected IRR and purchases pay-back period
• Return on investment for Allow for tax • Fiscal implications of allowing Economics investing in logistics systems write offs for equipment tax write offs unclear
• High speed data networks Promote high • Construction of new networks Infrastructure may not cover the entire route speed network is expensive development • May require expertise and equipment not found in Brazil
• Multitude of fractured state Mandate transit • Certain localities may not be Coordination institutions overseeing transit information able to use the standardized with state may not be willing to use same system system effectively ICT systems standardization
concerned about lost productivity, workplace telecommuting and to cover the intangible culture deterioration, and paying for the ICT costs of office culture deterioration. Even systems that enable telecommuting. Aside though there are fiscal implications that result from some reductions in office space and from allowing such a tax write off, promoting energy use, employers reap few economic telecommuting should be a priority for policy benefits from telecommuting yet must bear makers because of the large abatement the the costs. To induce employers to allow potential, even if funds are limited. workers to commute from home, the Coordination with the multitudinous Brazilian government should provide a tax credit if a transit authorities presents another challenge. certain percentage of work days are allowed to As commuters attempt to use ICT to make be completed remotely. This tax credit, commutes and public transit more predictable, a however, must be large enough to offset the lack of coordination among and use of different cost of purchasing ICT systems that allow for 103 GeSI SMARTer 2020 8: Brazil
Case Study Bus Rapid Transit in Curitiba The city of Curitiba, with a population of 1.7 million, developed a unique and innovative transit system in 1974 that piqued the interest of many worldwide: the Bus Rapid Transit (BRT) system. Curitiba was faced with rising congestion, poor air quality, and a lack of infrastructure and was looking to improve its public transit system despite a lack of funds. Because constructing a metro system was beyond the city’s capabilities and the bus system was plagued by high travel times and too many stops, the city sought to incorporate the positive elements of both.
As a result, the unique features of BRT transit include dedicated bus-only lanes, platforms that enable level boarding, payment before entering the bus, fewer stops, communication with a central transit authority, and coordination with traffic signals to ensure that intersections are clear for BRT vehicles. These final two features are particularly important and require ICT for implementation.
BRT vehicles are deployed to respond to increases in demand at particular stops. ICT is required to run the automated scheduling and dispatch service, which inform drivers when demand is increasing at particular stops so that they can divert resources to respond to the increase. Communication with traffic signals is also vital to prevent wasted time sitting at red lights. As a BRT vehicle approaches an intersection, the stoplight receives a signal from the bus and changes to allow the bus to pass unimpeded. The fleet is also connected to a fleet management system that conveys real-time schedule updates to riders so they can more accurately schedule their commutes and reduce waiting time. ICT enables the Curitiba BRT system to operate as efficiently and as reliably as it does while communicating its operating schedule with riders; without it, ridership would likely be lower.
BRT in Curitiba has been enormously popular and has had a significant environmental impact. It is estimated that the BRT system saves 27 million auto trips per year, yielding savings of 27 million liters of fuel. As a result, per capita fuel use in Curitiba is 30 percent lower than in similar Brazilian cities of its size.
BRT was developed in Curitiba because it required only the modification of existing resources and is economical compared to other alternatives, such as building a metro system. As a result, it has the potential to be scaled up in large cities across Brazil, though it is important to recognize that doing so could worsen congestion through the creation of dedicated bus lanes. GeSI SMARTer 2020 104 8: Brazil
standards across various transit agencies networks is imperative for the use of the could thwart their efforts. As a result, the sublevers that we have identified. Although federal government should consider passing data networks are widely available in urban legislation that would consolidate the 5,000 areas, there is a lack of suitable connections in different agencies into larger, more coherent many parts of rural Brazil, particularly areas units. If this proves unpopular or unfeasible that truckers tend to frequent. To address this politically, the government should at a minimum barrier, policy makers should foster the pass legislation that would standardize the use development of high speed data networks in of transit information systems at the state and areas that have so far been overlooked. In local levels. Even if consolidation is not an some locations, the business case for mobile option, this would enable the agencies to broadband may not be particularly strong, but interface with one another more easily and the government can remove tariffs on ICT better coordinate traffic and public transit equipment imports, or at least lower tariffs on flows between localities. A concern, however, is essential ICT equipment imports, sell that a single, standardized transit management electromagnetic spectrum rights at lower prices, system may not be the most effective for each and loosen regulations pertaining to data transit authority. network development. These policies would help the ICT industry take broad strides Finally, difficulties surround the lack of toward achieving a more uniform distribution infrastructure. As discussed with regard to of data networks across Brazil. agriculture, the ability to connect to data
Photo 105 GeSI SMARTer 2020
China GeSI SMARTer 2020 106 9: China
of China’s total emissions. The power sector 9 has witnessed the highest growth with an annual growth rate of 9 percent between 1990 China and 2008. As of 2008, the power sector contributed 48 percent of all CO2 emissions. 9.1 Context An important reason for this is the power generation energy resource mix: coal-fired China’s economy has made great progress power plants still dominate the Chinese power since the economic reforms of 1978. The rapid supply market and generate over 78 percent of GDP growth also meant that China became electricity.106 the largest GHG emitter in the world. As of Following the power sector is the manufacturing 2008, China accounted for 7,032 Mt CO , which 2 sector, which accounted for 31 percent of total is 22 percent of CO2 emissions worldwide. CO2 emissions in 2008. This Figure 36 shows the steadily increasing CO high share is mainly due to 2 China is the world’s emissions over the past 20 years in China. The rapid growth in manufacturing average growth rate of total emissions in output in China over the last largest emitter of GHGs China was 3.3 percent in the 1990s. Between two decades. As the share of
2000 and 2008, however, total CO2 emissions the manufacturing sector in China’s GDP accelerated to a CAGR of over 9.5 percent and grows, it may contribute a higher share in 106. Wood Mackenzie reached 7,032 Mt in 2008. During this period, total emissions in future. 107. Emission Database for Global Atmospheric Research. Because of almost all the sectors of the economy have More recent data from EDGAR shows that discrepancies in the emissions data seen increasing emissions. With economic from EDGAR and the World Bank, the China’s CO emissions in 2011 had reached 9.7 two sources have not been merged to growth and urbanization expected to 2 Gt.107 This makes China’s emissions 29 percent avoid inconsistency (e.g. according to continue, GHG emissions in China are EDGAR, China’s CO emissions in 2008 of the 33.9 Gt global CO emissions in 2011. 2 expected to increase further. 2 were 7.79 Gt or approximately, 0.79 Gt However, breakdown by sector is not available, higher). The latest, most robust data available that allow for a consistent Figure 36 shows that two sectors—power and so it is not possible to tell how the sector-specific breakdow of emissions by sector have manufacturing—contribute the largest shares trends discussed below have evolved since 2008. been used in this report
CO emissions (Mt) CO22 emissions (Mt) 8,000 % CAGR 7,0327,032 1990-2008 Others 3.1% Figure 36 +9.5% Others 3.1 Servicervice & 6,000 Service & 0.6 China’s CO2 emissions buildingBuilding 0.6% (1990-2008) 31%31 ManufacturingManufacturing5 5.0 +3.3% 4,000 Source: World Bank; Wood Mackenzie; 3,405 TransportTransport7 .8%7.8 Xinhua Agency; China‘s 12th Five-Year- Plan; BCG analysis 2,461 2,000 28%28 48%48 PowerPower9 .0%9.0 37%37 43%43 29%29 0 0 1990 20002000 20082008 107 GeSI SMARTer 2020 9: China
The Chinese government realizes the importance emissions rise. In fact, this is the scenario that of the environmental hazards related to high is most likely to unfold in China in the coming emission growth. It has increasingly devoted years. itself to controlling emissions. In the eleventh While emissions are expected to increase in five-year plan (FYP) introduced in 2006, the China, we can identify at least three favorable government stated its position on energy trends in emissions that can potentially reduce efficiency. For the first time, it aligned the the pace of growth. First, the government is energy conservation targets with the GDP making serious efforts to improve the air growth targets.108 At the UN Copenhagen quality. In part, this effort is driven by Summit in 2009, the Chinese government increasing concerns among the Chinese public announced a plan to cut the 2005 level of about air pollution. One of the measures is to “emission intensity” by 40 to 45 percent by close coal-fired power plants and manufacturing 2020.109 To meet the target set in the plants in urban areas, which helps reduce Copenhagen summit, the emission intensity of GHG emissions. Second, the government China has to drop to at least 0.65 kg CO per 2 intends to gradually replace high-polluting dollar of GDP. In 2008, emissions intensity was coal as the primary energy source with other 0.86 kg CO per dollar of GDP (see Figure 37). 2 resources that are less emissions-intensive. It should be noted that China’s emissions The government’s investment in renewable target differs from those set by other countries. energy is a promising trend.110 Third, China’s China does not aim to reduce overall GDP growth rate is likely to slow down, as the emissions, but instead its “emission intensity,” government targets a so-called “soft landing”
which is defined as the CO2 produced in to ensure healthy and sustainable growth in kilograms per U.S. dollar of GDP generated. the long term. In the twelfth FYP, the annual The implication is that to reduce the emission growth target was set at 7 percent despite an
intensity, the total CO2 emissions do not average of 11.2 percent during the eleventh
108. China’s 11th FYP necessarily need to decline. As long as GDP FYP. As the GDP slows down, the pressure to 109. Copenhagen Accord growth outpaces emission growth, emission reduce GHG emissions will increase to meet 110. More details in section 1.1.3 intensity can be reduced even though total the emissions intensity target.
1 EmissionEmission intensity (kgCO (kgCO2 perper $ of $ GDP of GDP)) Figure 37 2 33 Development of the 2.7 emission intensity in China -8% Source: World bank; Wood Mackenzie; Xinhua Agency; China‘s 12th Five-Year- 22 Plan; BCG analysis
-4% 1.1
11 0.9
2020 target: 0.65
00 19901990 1991 1992 1993 19941994 19951995 19961996 19971997 19981998 19991999 20002000 20012001 20022002 20032003 2004 20052005 20062006 20072007 20082008
GDPGDP ($T)($T): 0.90.4 1.2 4.58.2 GeSI SMARTer 2020 108 9: China
9.2 Impact of ICT moving three services to the cloud— cloud-based e-mail, customer relationship on GHG emissions management, and groupware applications— is 1.9 MtCO2e annually.112 The penetration of ICT is currently low in China compared with the world’s other largest As China’s economy grows, the penetration of economies such as the U.S., Japan, or the U.K. ICT, especially of end-user devices, is expected ITU ranked China eightieth among 150 to rise rapidly. For example, mobile penetration countries in terms of ICT end-user readiness will compare with that in developed countries, in 2011. China had reached only 20 percent and many consumers are expected to trade up penetration of computing devices in 2011. to smartphones. The rising ICT penetration Broad-based uptake of ICT-based solutions will lead to substantial increase in IP traffic, across the economy is also lacking. both mobile and fixed. As ICT penetration increases, the direct GHG emissions of the ICT A recent survey of ICT professionals in China industry will rise as well, with a 6 percent conducted by Alcatel Lucent and Tsinghua CAGR from 2011 to 2020. This growth rate is University shows a high level understanding higher compared to some developed countries of what green ICT is and why it is important. such as the U.S. and the U.K. However, the understanding declines when it comes to how to implement green ICT, driving Figure 38 shows the estimated emissions achievable targets, and how reaping the full growth of the ICT sector in China. Emissions potential of green ICT can help China achieve are expected to grow from 197 Mt in 2011 to 111. “Green Information Communications Technology social and economic goals.111 326 Mt by 2020. End-user devices will remain in China” – Alcatel Lucent and the largest contributor and constitute 68 Tsinghua University However, cloud computing, in particular, is percent of the entire ICT sector’s emissions by 112. “The Enabling Technologies expected to be widely adopted in China. A of a Low-Carbon Economy- a Focus 2020. Data centers are expected to register the on Cloud Computing” – GeSI and forthcoming study by GeSI and Microsoft highest annual growth rate of 13 percent per Microsoft (study conducted by finds that the GHG abatement potential of ThinkPlayDo Group of Imperial year between 2011 and 2020. College London)
ICT industry's emissions in China (MtCO e) ICT industry‘s emissions in China (MtCO2 2e) Figure 38 400 ICT industry’s greenhouse % CAGR gas emission in China 2011-2020 +6% 326 300 Source: Gartner; IEA; Greentouch; 300 63 Data centers 13% 13 Ovum; GSMA; press search, BCG analysis 56 Networks 3% 3 197 200 197 2121 4242
End-user 100 207 5 100 devices5devices % 134134
0 0 2011 2020 109 GeSI SMARTer 2020 9: China
9.3 Abatement potential sector. The annual growth rate of 11 percent between 2000 and 2010 in the power sector in power and manufacturing exceeded that of total emissions across all end-use sectors sectors during the same period. The dominant energy source for power As discussed earlier, the largest contributors generation in China is coal. In 2010, 78.5 to carbon emissions in China are the power percent of all power was generated from coal- and manufacturing sectors, with shares of 48 fired power plants.113 Compared to coal, the percent and 33 percent in 2008, respectively. usage of other less polluting fossil fuels (for The share of emissions from other sectors is example petroleum and natural gas) for power relatively low. This gives us reason to focus generation is limited. Other energy sources mainly on these two sectors in the context of such as nuclear and renewable energy are this study. expected to gain share in power generation. But at least in the near term, coal-fired power Power will remain the backbone of China’s power Context supply. CO2 emissions from power generation in China amounted to 3,470 Mt in 2010, making the Currently, significant inefficiencies exist in power sector—with a share of 48 percent—the China’s power sector, resulting in both largest emitter among all sectors. Figure 4 unnecessary consumption of energy resources 113. Wood Mackenzie shows the rapid growth of emissions in this and high GHG emissions. For instance, to
COCO emissionsemissions inin China‘sChina's powerpower sectorsector (MtCO(MtCO)) Figure 39 22 22 4,000 CO2 emissions of China’s power sector 3,470 NaturalNatural gas Gas 14 40 PetroleumPetroleum Source: IEA, Wood Mackezie; 3,000 BCG analysis +11%
2,1622,162 51 7 2,000 3,4163,416 CoalCoal
1,1931,193 40 4 1,000 2,1032,103
1,149
0 0 2000 20052005 2010 % Total CO2 emissions 39 43 48 GeSI SMARTer 2020 110 9: China
generate 1 kWh of electricity, China consumes economically advanced and high-power- about 50 to 60 grams more coal than the consuming eastern part of the country. The highest efficiency level in the world. Further, ultra-high voltage technology is an efficient transmission loss is estimated to be 2.0 to 2.5 way to lower losses through long distance percent higher than that in advanced transmission. nations.114 Therefore, improving energy and Compared with the level of focus on the process efficiency will play a significant role supply-side improvements, there has not been in controlling emissions in China’s power much action with regard to demand-side sector. Currently, the Chinese power sector is management. Some pilot projects like smart still a highly regulated market. Despite some metering and dynamic pricing exist in recent liberalization attempts (for example, economically developed regions. A large-scale separation of the State Power Corporation rollout of such programs could have a strong into five national power-generation groups in impact on future GHG abatement in China. 2002), the state maintains its control over the power sector, including generation, distribution, and pricing. The lack of competition and the Power-sector abatement potential high subsidies provided by the government ICT-enabled solutions can contribute to GHG (required for state-controlled electricity abatement in the Chinese power sector in pricing) worsen the inefficient resource use different ways. Figure 40 and consumption. shows the abatement potential of each identified Power emissions contribute China’s plan to promote renewable energy is sublever. In total, 390 Mt ambitious. For instance, it targets a total to 48% of all CO2 emissions CO e could be avoided by installed base of 200 GW on-grid wind power 2 in China 2020 if these ICT-enabled capacity and 50 GW solar power capacity by solutions are implemented 2020. This would represent approximately 16 and scaled up. The most promising sublever is percent of the 1600 GW expected power the integration of renewable energy sources, capacity in 2020. Given that installed capacities which could cut GHG emissions by 153 Mt for these two sources in 2008 were 12.2 GW CO e by 2020. This is a result of high and 0.14 GW, respectively, meeting the 2020 2 investments in renewable energy in China and targets a challenging task.115 The initial signs expected rapid expansion of renewable power are encouraging. The Chinese government is plants. making large investments in renewable energy, not only because of concerns about The second most effective sublever is power sustainability but also to secure mid- and grid optimization. It is expected to contribute long-term energy supply for economic growth. a reduction of 143 Mt CO2e by 2020. These In 2009 alone, China added 25.8 GW of wind estimates are based on recent efforts by the capacity, which was the largest in the world Chinese government to optimize the power that year.116 In 2011, China spent USD52 billion grid infrastructure. It is especially important on renewable energy, which was almost one- to equip the new grids with the most modern fifth of total global investment.117 ICT. Doing so will minimize distribution losses, thereby lowering GHG emissions. 114. China’s electrical power sector, Besides efforts in power generation, China is environmental protection and sustainable trade, IISD (2009) investing heavily in the power transmission A key issue in abating emissions in the power 115. National Development infrastructure. It plans to build several ultra- sector is matching the demand and supply of and Reform Commission; Reuters, high voltage grids by 2015. These grids will power. Innovative pricing mechanisms like Renewable Energy World mainly connect the power plants in China’s time-of-day pricing could shift the peak 116. “Market Analysis Report: China’s Renewable Energy Industry,” APCO western and southern parts with the demand to off-peak hours via variable 117. Forbes 111 GeSI SMARTer 2020 9: China
electricity tariffs based on consumption time. Compared to these sublevers, other ICT-enabled As a result, not only can the utilities avoid sublevers are expected to have a relatively supply shortages during peak time, but also minor impact. For example, the consolidation the total power demand will decline. The of decentralized renewable power plants to abatement potential of time-of-day pricing virtual power plants has an abatement
could be as high as 79 Mt CO2e. potential of 2 Mt CO2e. This sublever requires advanced-grid-infrastructure capabilities, which are not well developed in China as yet.
390 MtCO2e Breakdown of ICT-enabled GHG Sublevers Drivers of sublevers reduction potential Figure 40 Demand • Reduction of peak load electricity ICT-enabled GHG reduction 1% management • Government has stronger control of industry potential in the power sector (4 MtCO e) 2 and could potentially mandate
Source: BCG analysis, BCG interviews, Time-of-day • Reduces emissions by shifting peak consumption to base-load BCG Perspectives, EPRI, IEA, 20% Pike research, PNNL pricing – will require upgrade to infrastructure and a market for
(79 MtCO2e) pricing electricity (pilots being conducted at industry level)
Integration • Increasing the use of carbon-free energy 39% of renewables • Strong government support, but ICT (smart grid) has (153 MtCO e) 2 important role to overcome technical barriers to adoption
Virtual • Not a major sublever in China – requires advanced power plant grid infrastructure capabilities (2 MtCO e) 2 • Current grid monopoly hinders large implementation
Island Grid • Some small potential in China because of number of diesel generators and other off-grid applications (1 MtCO2e)
Power-load • Not a major sublever in China – requires high 2% balancing electricity prices to make the economics favorable
(9 MtCO2e)
Power grid • Improve efficiency of distribution and minimize losses 37% optimization • Government has indicated they will take strides (143 MtCO e) 2 to incorporate ICT technology to optimize the grid GeSI SMARTer 2020 112 9: China
Case study China‘s first demand To achieve better demand-side management, a demonstration project launched response project in 2012 by Honeywell and the Tianjin Economic-Technological Development Area intends to implement China’s first smart-grid demand-response project. This project aims to connect the utility and its commercial and industrial consumers in a smarter way. With the help of ICT, utilities can automatically put into action a customized energy reduction strategy. For example, during peak hours, utilities could quickly and reliably drive down the consumer’s overall power consumption. This would avoid the running of peak power plants and unnecessary carbon emissions. In addition, consumers could cut their energy use and save on energy costs without compromising critical operations.
The deployment of automatic demand response is estimated to enable peak-load reduction by 15 to 30 percent. Given the huge power demand in China, the potential of this initiative for carbon abatement is considerable.
This project is currently at the planning stage. Because of high technological feasibility and realistic energy and carbon savings, an expansion of this project could contribute immensely to the country’s goal of developing a smarter electrical grid to better meet the growing power demand and improve the reliability and efficiency of the power supply in China. 113 GeSI SMARTer 2020 9: China
Barriers and recommended the lack of modern power infrastructure and policy steps to overcome them the currently low energy prices. Power grid ICT-enabled solutions offer significant abatement optimization likely presents the best business potential in the Chinese power sector. But case given the possibility to avert transmission there are several barriers that can affect the and distribution losses. Power load balancing full deployment of these solutions. In most is not very attractive because of the need for such cases, appropriate support from the the high investment required to build the government through laws or policy is necessary. necessary storage technology and capacity. Demand management also requires a high The business case for most sublevers in the upfront investment and is risky, as it may not power sector is medium to weak. The primary be implementable without a government drivers of this are the high upfront cost given mandate.
Attractiveness Return on Risks and Overall Sublever of investment investment feasibility business case Figure 41 Demand Business case assessment management of power sector sublevers Time-of-day Source: BCG analysis pricing
Low attractiveness Integration of renewables High attractiveness Power-load balancing
Power grid optimization GeSI SMARTer 2020 114 9: China
Dependent on political Highest priority MtCO e 2 Dependent onenvironment political environment Highestfor priority implementation for implementation high 10.010.080 Figure 42 Power sector sublever Integration of renewables 608.08.0 Power grid optimizaton prioritization by potential for
CO2e reduction and business 6.0 potential e reduction 406.0 2
Time-of-day pricing Source: BCG analysis 204.04.0
2.002.0 Potential for CO for Potential Power-load balancing Demand management 0.00.0 low Low attractiveness “Low-hanging fruits“ high
Attractiveness of business model
Figure 42 combines the business case analysis Currently, dominant state control over the with the abatement potential analysis in the power sector discourages industrial initiatives previous section. The key insight from the because of lack of competition. Therefore, combined view is that the role of policy is deregulation of the Chinese power sector must likely the strongest in facilitating the be intensified so that the power supply will be integration of renewables and power grid secure while also encouraging sufficient optimization. China is already one of the competition to drive the technological biggest markets for renewable energy. progress. However, it is important to note that Integrating renewables into the grid can yield this is not a new idea and there has not been significant benefit for China if done much progress on it in the past. successfully. Similarly, power grid optimization A big challenge within the power sector is offers significant abatement potential but managing peak demand. If utilities are not needs a push from policy for implementation able to provide sufficient power required by because of the lack of a strong business case. customers during peak hours, expensive fossil- Compared to their multinational counterparts, fuel-fired peak-power plants have to be run, firms in the Chinese power industry still have which usually stay idle during the off-peak to bridge a huge technological gap. As already time. This process is economically discussed above, inefficient resource use and disadvantageous and causes additional GHG high transmission losses suggest that the emissions. Demand-side management could Chinese power industry lacks technological play a vital role in balancing the peak load excellence and efficiency. Consequently, the and avoiding these unnecessary emissions. government could continue to promote The government could consider mandating research and development through new demand-side management for very large regulations or attract foreign investment and industrial users. However, expanding to technology. consumers will first require building the necessary infrastructure. 115 GeSI SMARTer 2020 9: China
From the point of view of the consumer, through education campaigns. Besides general awareness about green power is still encouraging consumers to optimize their low. There are also few economic incentives consumption voluntarily, other innovative for consumers to change their behavior and power pricing mechanisms (for example, manage their demand. Therefore, the time-of-day pricing) will create additional government needs to enhance awareness incentives to hasten this shift.
What stands in the way? What should happen?
Challenges Policy Key considerations Table 16 • Advanced technologies Promote • R&D funding and program Barriers to adoption of Technology technological still controlled by MNCs • Strengthen IP protection ICT-enabled GHG abatement innovation • Lack of domestic technological solutions and policy steps to • Attract foreign investments excellence and efficiency and joint ventures overcome these barriers
• Dominant state control Proceed on • Induce competition among discourages innovation and deregulating the power companies power sector to competition • Encourage market pricing encourage market and innovation pricing and innovation
• Dependence on coal Increase emphasis • Consider mandating demand- High – high emission fossil-fuel on demand-side side management for very demand management large industrial users for power • Government efforts focus on securing the supply rather than • Expanding to consumers shifting demand will first require building the necessary infrastructure
• Low general awareness about Enhance public • Encourage consumers to Awareness/ green power among consumers education program voluntarily change their incentives • Limited incentives for behavior into a more efficient consumers to change their way by educating the benefits behavior of efficency Adopt different pricing mechanism • Create incentives for consumers to adjust their consumption, e.g. reduce power demand during peak hours etc. GeSI SMARTer 2020 116 9: China
Manufacturing the steel industry contributes 6.5 percent of 119 Context the global GHG emissions and China is With a contribution of 31 percent in 2008, the currently the world’s largest steel producer, 120 manufacturing sector is the second biggest with a share of 45 percent. contributor to China’s GHG emissions. In 2008, Taking note of these emissions, the Chinese it reached a total CO2 emission of 2,168 Mt (see government has been including the Figure 43). While the growth in emissions was improvement of energy efficiency and low in the 1990s, it increased rapidly after manufacturing emission control in its five- 2000. Between 2000 and 2008, the CAGR in year plans since 2006.121 Its policy focuses emissions was 10.6 percent. mainly on reducing the energy intensity per unit of output. The policy mandates that The main drivers for the rising CO2 emissions in the manufacturing sector were rapid before a company adds new production industrialization and high GDP growth. capacity, an energy efficiency assessment is Despite the growth of the tertiary sector, the required. Further, several inefficient manufacturing sector enhanced its share in manufacturing facilities have been closed China’s economy from 36 percent in 1990 to 40 down. These are among the first steps that the 118. OECD percent in 2010.118 Within the manufacturing Chinese government has taken to limit GHG 119. World Steel Association: emissions in the manufacturing sector. But as Presentation by Dr. Edwin Basson sector, some industries, such as iron and steel, in Rio de Janeiro in 2012 of now, no binding sector specific emission cement, and chemicals, contribute significantly 120. World Steel Association: to the sector’s total emissions. For example, targets have been set. World Steel in Figures 2012 121. China’s Eleventh Five-Year Plan
Manufacturing COCO22 emissionsemissions (MtCO (MtCO2)2) 3,000
2,168 +10.6% Figure 9 2,000 CO2 emissions of China’s manufacturing sector
+0.7% Note: 1. Permanent growth of the tertiary 965 1,000 905 sector and decline of the agriculture sec- tor change the manufacturing share only slightly 2. Since the 11th Five-Year-Plan
Source: UNFCC; World Bank; China‘s 12th Five-Year-Plan; BCG analysis 0 0 19901990 20002000 20082008
% Total CO2 emissions 41 32 33 117 GeSI SMARTer 2020 9: China
512 MtCO2e Breakdown of ICT-enabled GHG Sublevers Drivers of sublevers reduction potential Figure 4 Optimization • A frequency converter as add-on for the actual motor ICT-enabled GHG 68% of variable reduction potential in to vary the rotational speed and better match the speed motor energy use with required output the manufacturing sector systems • Huge potential in China due to poor efficiency of the (347 MtCO2e) Note: Motor electricity consumption current motor systems1 accounts for 60% of all electricity consumption and over 70% of these • Economically favorable due to short pay-back period is attributed to inefficient medium and large induction motor system • Can be widely used e.g. in pumps and ventilators
Source: BCG analysis, BCG interviews, Automation • Monitoring and control for large industrial process 32% IEA, Smart 2020 Report, World bank of industrial to optimize and reduce the energy use of the process databank processes • Replacing older, inefficient processes with current (165 MtCO2e) best-practices • Closing the existing efficiency gap offers great potential for emission abatement
Manufacturing sector lower performance is required, the motor abatement potential rotation slows down, thereby saving energy. Such energy savings would not be possible The potential of using ICT-enabled solutions with conventional motor systems without to reduce carbon emissions in the Chinese variable drives. In economic terms, this option manufacturing sector is promising, given could be highly attractive for manufacturing the current high technological deficit. If companies to implement because of the short implemented well, a total emissions abatement payback period. of 512 Mt CO2e could be reached by 2020 (see Figure 44). Another ICT-enabled sublever is the automation of industrial processes. The abatement The optimization of variable-speed motor potential of automation is estimated to reach systems is the strongest sublever and could 165 Mt CO e by 2020. The main purpose of help reduce 347 Mt CO e. The current motor 2 2 this sublever is to reduce the energy use of systems in China are of poor efficiency, since industrial processes through automatic over 70 percent of all electricity used by motor monitoring and control. systems is attributed to inefficient medium and large inductor motor systems.122 Variable- speed motor systems, which are equipped with a frequency converter, can adjust the rotation automatically according to the performance required. For example, when 122. IEA GeSI SMARTer 2020 118 9: China
Case study Process automation at the Sinopec is the largest producer of refined oil products in China. In light of the Sinopec Qingdao Refining increasing cost of oil in the world markets and the strong growth in China’s demand and Chemical Corporation Ltd. for refinery and petrochemical products, Sinopec planned to build a new integrated oil refinery in Qingdao capable of processing 10 million tons of crude oil per year. Becuase of growing awareness about safety and environmental protection issues in China, the government now requires any newly built facility to comply with tightening energy efficiency regulations. Therefore, applying the latest information and communication technologies to manage the production processes automatically and efficiently was central to the project.
The specifications drew up by Sinopec included a wide range of industrial activities, including instrumentation, human machine interface (HMI), safety, data archiving, inventory control, services for maintenance, and so forth. These activities could all be efficiently supported by ICT-enabled solutions. Through automation, productivity could be significantly improved, production costs lowered, and quality improved. Because of the improved efficiency, energy consumption could be reduced substantially, which would in turn reduce carbon emission.
In addition to automation, several new advanced technology processes were employed as well. For instance, the waste products from the distillation stages were processed in a coking plant to release further economically useful materials. From the coking unit, the waste products then went into a boiler, where energy was generated for use in other processes. These improvements all had a positive impact on reducing carbon emissions.
Industrial automation via ICT could definitely contribute to the national carbon abatement targets in China. Investments made in automation typically have a short payback period for the enterprises. Automation would significantly improve the productivity and efficiency of a firm’s production processes. Such improvements would also be critical in sustaining the competitiveness of enterprises, given the continuously increasing energy prices. 119 GeSI SMARTer 2020 9: China
Barriers and recommended policy this are the relatively low-to-medium up-front steps to overcome them cost and a short payback period. The feasibility To realize the abatement potential of ICT- for broad-based adoption, however, may enabled solutions in the Chinese become a barrier if sufficient skilled labor for manufacturing sector, several barriers need to managing advanced manufacturing systems be addressed. Similar to the power sector, the and processes is not available. existing technological deficit embodies a Figure 46 combines the business case analysis significant barrier for emission abatement. with the abatement potential analysis in the The government should encourage rapid previous section. The combined view reveals adoption of the most modern technologies. that indeed there is a limited role for policy. A The business case for both sublevers in the strong business case is expected to be sufficient power sector is strong. The primary drivers of to drive market-based adoption.
Attractiveness Return on Risks and Overall Sublever of investment investment feasibility business case Figure 45 Optimization Business case assessment of of variable-speed manufacturing sector sublevers motors
Source: BCG analysis Automation of industrial processes Low attractiveness
High attractiveness
Dependent on political Highest priority MtCO e 2 Dependent onenvironment political environment Highestfor priority implementation for implementation Figure 46 high 12510.010.0 Variable-speed motors Manufacturing sector sublever prioritization by potential for 1008.08.0
CO2e reduction and business potential 6.0 e reduction 756.0 2
Source: BCG analysis 504.04.0 Automation of industrial processes
252.02.0 Potential for CO for Potential
0.000.0 low Low attractiveness “Low-hanging fruits“ high
Attractiveness of business model GeSI SMARTer 2020 120 9: China
What stands in the way? What should happen?
Challenges Policy Key considerations Table 17 • Local manufacturers face Promote • R&D funding Technology Barriers to adoption of technological huge technological gap compared • Attract foreign investments innovation ICT-enabled GHG abatement with MNCs and joint ventures solutions and policy steps to • Existence of inefficient production overcome these barriers • Carbon emissions reductions Create national • Close down inefficient plants Alignment is still not a priority for the industrial with national • Address energy efficiency government efficiency goals and emissions in KPIs standards • Lack of government support for • Create standards by device/ enterprises regarding energy industry type efficiency • Supervise and offer local support for energy efficiency
• Absence of data standards Establish • Create industry wide standards/ Monitoring for emission and efficiency data and methodology for monitoring and measurement and evaluation evaluation • Limited possibility to benchmark standards or assess improvement • Enforce compliance to emission measurement • Encourage “learning from the best practices”
• Potential rise of unemployment Provide further • Strengthen human capital Social due to automation and shut- training for cross-sector re-employment perspectives down of inefficient plants (if not opportunities replaced with more efficient ones)
For a long time, the central and local Another important barrier is a lack of governments in China were focused only on monitoring and evaluation of a manufacturer’s GDP growth while the GHG emissions have footprint. In China, no such standards have largely been ignored. This changed in 2006, been established. Without standards, availability when the Chinese government announced its of data, or benchmarking, an assessment for eleventh five-year plan. For the first time, improvement is almost impossible. The need energy conservation and emission abatement to create such data and measurement were added to the five-year plan. In the future, standards for GHG emissions is acute. Doing aligning emission targets with GDP growth so will help the government monitor and goals will play a significant role in China’s evaluate industrial emissions more effectively. emission control. Indicators for energy Finally, the social perspective should be efficiency and emissions should be addressed considered as well. The Chinese manufacturing in key performance indicators to evaluate sector has made great strides in the last several government performance. Defining national decades, but there is still a need for large-scale industrial efficiency standards could help the modernization. A pre-requisite for this will be government identify inefficient plants and a highly trained labor force. Therefore, availability take action. This could enhance the state’s role of a well-trained labor force should be ensured. as supervisor and partner to offer specific support, Training opportunities could be offered to so that small and medium enterprises (SMEs) strengthen human capital and facilitate further especially could get access to and adopt advanced modernization of the manufacturing sector. technology to improve their energy efficiency. 121 GeSI SMARTer 2020
United States GeSI SMARTer 2020 122 10: United States
large—350 MtCO e in the power sector and 10 2 305 MtCO2e in the buildings sector—providing United States significant reductions (combined to be approximately 7 percent of U.S. total emissions 10.1 Context in 2010). These reductions will result largely from lowering the use of energy and increasing As the world’s largest economy, the U.S. is the the power mix to domestic renewable-energy second-largest emitter of GHGs in the world, sources. Furthermore, the savings from representing 14 percent of the global total. A implementing ICT solutions can be invested modern and industrialized society, the U.S. back into the American economy. has lower emissions per economic output than A large abatement potential for ICT exists those of a developing economy (for example, because there is still significant room China is the second-largest economy yet the for improvement in the U.S. toward reducing largest GHG emitter). But lower emissions per GHG emissions. Figure 47 unit of output are not necessarily due to more illustrates that emissions efficient use of energy and resources, but The U.S. is the second-largest have risen 10 percent since rather to the mix of sectors in the U.S. Over 1990. Unlike other developed GHG emitter, contributing the last several decades, the U.S. has countries—such as Germany transitioned from high-emitting industries 14% to the world total and the U.K., which have like manufacturing, as many of those jobs generally decoupled economic growth from have moved overseas, and toward lower- growth in emissions—the U.S. has experienced emitting sectors like service. increases in GHG emissions as its economy has The ICT industry has an important role to play grown. In fact, the correlation with economic in emissions reductions while also achieving growth is clearly visible in 2008 and 2009 other important goals like creating jobs and when the U.S. GDP fell as a result of the global increasing energy independence. The abatement recession; when the economic recovery began potential from ICT in the U.S. is quite in 2010, emissions rose once again. There are,
Figure 47 U.S. greenhouse gas emissions GHGGHG emissions emissions in in US US (MtCO (MtCO2e)2e) 9,0009,000 (1990-2010) +10% 8,0008,000 % CAGR Note: Emissions data excludes LULUCF 7,215 2002-2011 7,072 7,179 7,116 7,215 7,021 Source: UNFCCC; BCG analysis 7,0007,000 6,802 6,588 Agriculture0 0.5 6,161 Agriculture Service & 6,0006,000 Service & 0.1 consumerConsumer
5,0005,000 ManufacturingManufacturing- 0.3
4,0004,000
Transport 3,0003,000 Transport0 0.8
2,0002,000
Energy 1,0001,000 Energy 1.1
0 1990 ...... 2000 ... 2005 2006 2007 2008 2009 2010 % Total CO2 emissions 16.9 18.3 15.7 14.1 123 GeSI SMARTer 2020 10: United States
however, some indications that carbon emissions While targets were set for the U.S. in the Kyoto fell in 2011 (ignoring other GHG gases) as many agreement (a multinational commitment to U.S. power companies swapped out coal for reduce GHG emissions worldwide that first relatively cleaner natural gas, consumers used entered into force in 2005) the U.S. chose not less energy for heating because of a mild to ratify the targets, nor has it come close to winter, and people drove less and purchased achieving those targets. While there are some more efficient cars. 123 targets for reducing energy use in federal buildings, there is no coherent national The largest source of growth in U.S. GHG emissions reduction plan in place at the emissions has been in the energy sector, with national level. All efforts to institute a carbon total growth of 25 percent between 1990 and tax or trading scheme have failed. 2010. This was driven by increases in the need for electricity (electricity generation grew 37 Most energy and environment policy is set at percent from 1990 to 2010) with little effort the state level, and certain states have more taken to reduce the carbon footprint of stringent standards. Several states have generation.* It is likely, however, for emissions aggressive targets for acquiring energy from from power generation to fall in the future as renewable sources, enforced through a more power generators switch from coal to renewable portfolio standard (RPS). As of natural gas. Transportation emissions have 2012, 29 states and the District of Columbia also significantly grown in the last two have an RPS. 126 However, few states have decades, at a CAGR of 0.8 percent. It is likely explicit targets for reducing emissions; only 20 that emissions from the transportation sector states have some form of energy efficiency will decline as well as a result of recently passed resource standards (EERS). EERSs establish fuel efficiency standards: CAFÉ standards raised specific, long-term targets for energy savings average fuel efficiency by 2016 to the equivalent that utilities or non-utility program of 35.5 mpg and 54.5 by 2025 which will cut administrators must meet through customer 2M barrels of consumption of oil per day.124 energy-efficiency programs.127 The strength of the RPS and EERS varies by state; some Current policy environment in the U.S. have strong targets with high alternative compliance payments (the penalty the utility The policy environment in the U.S. for ICT has to pay for not meeting the targets) while GHG abatement solutions is mixed. While others have weaker targets with little to no there are no major national targets set to penalty. address the increase in GHG emissions, there *Note: “Electricity”, EIA are some strong programs in place at the state There has been some development in creating level. These state level targets are not consistent regional cap and trade markets for emissions. across the U.S, and GHG reduction goals change Two programs are being developed in the U.S. drastically from state to state. Much of the The first implementation phase of the Western reason that a concerted policy effort to address 123. IEA news http://iea.org/ Climate Initiative (WCI) will start in 2012 in newsroomandevents/news/2012/may/ climate change does not exist at the national several U.S. states (California, Montana, New name,27216,en.html level and in many states is that many Americans 124. www.nhtsa.gov/About+NHTSA/ Mexico, Oregon, Utah, and Washington) and Press+Releases/2012/Obama+Administ remain unconvinced of the science behind some Canadian provinces (British Columba, 125 ration+Finalizes+Historic+54.5+mpg+ climate change. Moreover, the misconception Manitoba, Ontario, and Quebec). WCI’s target Fuel+Efficiency+Standards that legislation to address climate change will 125. ”Fall 2011 National Survey of is to reduce 2020 emissions by 15 percent American Public Opinion on Climate necessarily have an adverse economic impact versus 2005 levels. Another regional program, Change”, the Brookings Institute has become widespread, causing many the Regional Greenhouse Gas Initiative 126. DSIRE; www.dsireusa.org/ American policy makers to deprioritize documents/summarymaps/RPS_map.pdf (RGGI), was implemented in 2008 and includes 127. DSIRE, www.dsireusa.org/ climate change legislation in favor of pursuing several northeast states. RGGI’s target is to documents/summarymaps/EERS_map.pdf other items on their political agenda. GeSI SMARTer 2020 124 10: United States
reduce 2018 emissions by 10 percent from 10.2 Impact of ICT 2009 levels. However, it is unclear how useful the support has been, and some states have on GHG emissions threatened to leave the program (New Jersey The U.S. has a strong foundation of innovative, left the initiative in late 2011). On a positive ICT-enabled carbon abatement solutions. note, RGGI has amassed USD993 million in Business and consumers have always been auction proceeds through March 2012; this is eager to adopt modern technologies in their invested in consumer benefit programs, day-to-day activities. In fact, the U.S. is ranked including energy efficiency, renewable energy, seventeenth out of 152 for “ICT readiness” by direct energy bill assistance, and other the UN/ITU.128 There is ready access to ICT, greenhouse gas reduction programs. The with widespread access to multiple devices and California Air Resources Board will also networks. There are an average of 1.16 computers launch its own cap and trade system in 2013 per household129 and nearly 100 percent of the that will be linked to the WCI. population has access to some type of cell-phone Policy will play an important role in promoting service, more than 75 percent with 4G LTE.130 ICT-enabled abatement solutions in the U.S. High quality and reliable ICT infrastructure, This is especially true because of the lack of a access to computing and mobile devices, high- national target for emissions reductions and speed networks, and the like contribute to an the fact that energy prices are low, which innovative culture surrounding carbon abatement reduces the scope of economical applications. solutions in the U.S. The U.S. is the leading There is also likely no immediate price on country in ICT R&D spending (USD80 billion carbon to discourage emissions, another in 2008).131 There are numerous innovative 128. UN / ITU “Measuring the reason that policy is important for removing start-ups and established companies that develop Information Society” 2011 report any barriers to ICT adoption. As we will 129. 2008 data, Bureau many of the ICT solutions that have the explore in the next sections, the potential for of Labor Statistics opportunity for GHG abatement. But as we will abatement in the U.S. is quite high. 130. Verizon explore in more detail for the power and building 131. TIA Whitepaper www.tiaonline.org/ end-use sector, while the U.S. is innovative, it sites/default/files/pages/TIA%20U%20 S%20%20ICT%20RD%20Policy%20 lags behind in large-scale adoption. Policy can Report.pdf
ICT industry's emissions (MtCO e) ICT industry‘s emissions (MtCO2 2e) 250250 +0.4% % CAGR 211 2002-2011 204 200200 Figure 48 ICT industry’s greenhouse 59 101 DataData centers 6.1%6.1 gas emission in U.S. 150150 1818 Source: Gartner; Press search, BCG analysis 100100 1818 NetworksNetworks -0.1%-0.1
127 5050 93 End-user 93 devicesEnd-user s--3.4 3.4%
0 0 2011 20202020 125 GeSI SMARTer 2020 10: United States
play an important role by scaling up solutions As a matter of fact, after accounting for these where the market likely will not drive adoption. two factors, the 2011 estimate in SMARTer 2020 is slightly less than what would be expected Figure 2 shows ICT emissions in the U.S., which on the basis of the U.S. addendum. This is were estimated to be 204 MtCO e in 2011 2 consistent with the lower global ICT emissions (representing approximately 3.0 percent of U.S.’s estimate in SMARTer 2020 for 2011 due to total emissions). Around 60 percent of these more accurate data, especially for networks emissions were from end-user devices. Networks emissions. and data centers made up the rest. The higher usage of ICT in the future will lead to a slight Further, this study estimates a slightly higher increase in the total emissions to an estimated footprint of the ICT industry in 2020 than
211 MtCO2e in 2020 from 204 MtCO2e in 2011. GeSI’s U.S. Addendum to the SMART 2020 report. The current estimate is 31 MtCO e While the number of devices will significantly 2 higher, primarily due to the inclusion of smart increase, the overall footprint of end-user devices devices (tablets and smartphones) and Web- is expected to increase only slightly, by 0.4 percent enabled TV emissions. The former accounts per year. Three important trends will drive this for 17 MtCO e, while the latter for 11 MtCO e. reduction: significant improvements in 2 2 Further, as mentioned in the chapter on global manufacturing, device efficiency increases, and emissions, availability of more accurate data a change in device mix from desktop PCs to has made the current estimate more precise. laptops and tablets. Efficiency improvements in networks will nearly match the need for the higher data traffic, causing those emissions to stay constant. On the other hand, data center 10.3 Abatement potential emissions are expected to nearly double as the in power and buildings amount of stored data is expected to drastically increase. Several technologies (for example, end-use sectors running data centers at a higher temperature, In the U.S. section we will focus on the power virtualization, more energy-efficient processors, and buildings sectors. The power sector in the natural cooling, switch to DC power, and so U.S. makes up 42 percent of all emissions. forth) to improve data center energy usage are There are several factors driving these currently in development and being tested. emissions. One is simply that the U.S. has a However, since many of these are at an early relatively dirty power mix: the most prevalent stage, it is hard to predict if any will lead to fuel for electricity generation in the U.S. is substantial emissions reductions. coal (37 percent), which emits more CO2 than GeSI’s U.S. Addendum to the SMART 2020 report any other traditional fuel source aside from estimated ICT industry’s emissions in 2007 at oil, which is rarely used.132 The total emissions
150 MtCO2e. The estimate for 2011 in this factor is 0.67 kgCO2/kWh, much higher than 133 study is higher by 54 MtCO2e because of two the EU27 average of 0.44 kgCO2/kWh. We drivers: inclusion of embodied emissions and focus on the power sector not only because the a broader scope of devices covered in this study. addressable emissions are large but also Embodied emissions in the U.S. are approximately because there is a large abatement potential one-third of the total ICT emissions, and thus and a strong role for ICT. As we will explore in account for the bulk of the higher estimate. more detail in the next section, ICT plays a SMARTer 2020 includes smartphones, tablets, vital role in smart grid, integration of 132. EIA 133. Department of Energy & Climate and Web-enabled TVs, all of which were not renewables, and other important sublevers in Change, “ 2011 Guidelines to Defra / included in the U.S. addendum. All of these this sector. DECC’s GHG Conversion Factors for Company Reporting” amount to only 14 MtCO2e in 2011. GeSI SMARTer 2020 126 10: United States
The second sector we focus on is the buildings emissions factor (0.67 kgCO2e/kWh), which sector, which is responsible for approximately is significantly above the EU27 average of 0.44 134 135 37 percent of all emissions in the U.S. This kgCO2/kWh. There are likely future reductions sector plays an especially important role in in the emissions factor; however, as coal power the U.S. because of the high average building plants are decommissioned size and relatively high heating and cooling for economic and regulatory needs. We believe there is substantial room reasons. Natural gas will 37% of the electricity in the for improvement in policy. The U.S. lags become an increasingly U.S. is generated from coal significantly behind in policy on energy important fuel source, as efficiency for buildings. The business case for growth in domestic energy efficiency improvements is frequently production will continue to push prices lower. strong, and these improvements are an under- Because it emits fewer GHGs per unit of energy utilized source of savings. There is an created, natural gas will help lower the U.S.’s important role for policy to identify some of emissions factor. the structural barriers, like building codes and Figure 49 illustrates that emissions from the other regulations, that restrict the adoption of power sector have been decreasing over the technology that could reduce emissions. This last decade at a rate of 3 percent, from 4.3 sector is also especially important because GtCO e in 2000 to 3.2 GtCO e in 2010. This ICT is the principal driver behind many 2 2 decrease in emissions is mainly driven by important sublevers, fore example, building decreases in the emissions from coal as the management systems. generation has shifted to using other fuels.
The next section discusses the emissions But while emissions have been decreasing, the trends in these sectors, drivers of these trends, grid has remained outdated and inefficient, the role of ICT-enabled solutions, and the role with important concerns surrounding of policy in encouraging adoption. reliability, especially as demand increases in Power the future. Grid operators and regulators will have to maintain sufficient reserve margins to Context preserve adequate supply reliability. This The power sector, critical to the functioning of could become troublesome as a significant the American economy, is marked by high amount of generation is going off-line and energy use, a dirty generation mix, and an there is little price support for building new aging and inefficient grid. The emissions from capacity, especially in unregulated markets. this sector make up 42 percent of all U.S. emissions. This presents a excellent opportunity The U.S. generally has low energy prices. This for ICT-enabled solutions to reduce emissions is partly due to lower taxes on energy than in and make the power grid more efficient. In other developed economies as well as the fact, we estimate that the total abatement availability of domestic oil-and-gas resources. potential of ICT in the power sector is 350 This decreases the economic favorability of
MtCO2e or 1.7 times the total emissions from many renewables and some of the sublevers the ICT industry in 2020. discussed in this section, increasing the importance of policy to ensure widespread The U.S. has a relatively dirty power-generation adoption. mix. Coal represents the largest fuel source and is used for 37 percent of the total electricity The policy landscape for ICT in the U.S. is 134. EIA generation. The second largest fuel source is quite mixed. There are generally no national 135. Department of Energy & Climate natural gas, followed by nuclear. The focus on level targets or support for the power sector, Change, “ 2011 Guidelines to Defra / DECC’s GHG Conversion Factors for fossil fuels for generation results in a high with a clear exception being the investment Company Reporting” 127 GeSI SMARTer 2020 10: United States
metering, system owners receive retail credit % of total from a utility for at least a portion of the Fuel generation electricity generated by their on-site Table 18 renewables that they cannot use and which U.S. electricity generation Coal 37 are thus fed back into the grid. This policy in 2010 split by fuel improves the economics of solar and other 31 Gas systems, since the peak for solar power Source: EIA generation occurs during the day, when people Nuclear 20 often are notat home to use this electricity. Renew 5 Over 43 states have some policy addressing net metering.138 Other 7 There is less support for smart grid and other demand management technologies. While tax credit (ITC) and production tax credit there have been significant improvements in 136 (PTC). Both of these are tax-related subsides the policy space, especially through recent that provide support for investment in FERC orders,the region independent service renewables. Any other support for renewables operators (ISOs) have been slow to make any is set at the state level through RPS, which set significant change toward large-scale adoption, targets for the amount of generation a utility although it is worth noting there have been 137 must source from renewable sources. The some important pilot demonstrations. strength of these standards varies by state, with states like California and New Jersey Power abatement potential 136. DSIRE leading the way. 137. DSIRE; www.dsireusa.org/ ICT has an important role to play in GHG documents/summarymaps/RPS Net metering is an policy that is currently abatement in the power sector in the U.S. We _map.pdf 138. www.dsireusa.org/documents/ driving much of the adoption of solar and estimate that the total abatement potential is summarymaps/net_metering_map.pdf other distributed generation. Under net 350 MtCO2e, driven by several important
US electricity e missions (GtCO e) Figure 49 U.S. electricity emissions (GtCO2e) 2 U.S. electricity emissions 55 Driven by decreasing dependence on coal in the power sector by fuel generation -3% 4.3 4.1 4.1 Source: EIA 3.9 44 3.9 3.8 3.93.9 3.7 3.7 3.6 % CAGR 2000-2010 3.2 3.1 OtherOthe 0 Petroleum 33 -13 Natural gas 0
22
CoalCoal -3 11
00 2000 2001 2002 2003 2004 2005 2006 20072007 2008 2009 2010 GeSI SMARTer 2020 128 10: United States
sublevers, most notably integration of and efficient grid makes this balance even renewables (197 MtCO2e) and power grid more difficult. ICT can assist this integration optimization (91 MtCO2e). The full results are by improving communication between grid listed in Figure 50. operator and the renewable power plant,
analyzing weather for predicting future Integration of renewables represents nearly generation, and performing complex data half of the abatement potential in the power analysis and optimization. sector. Being a nearly-carbon free source of energy, it can replace carbon intensive power ICT also plays an essential role in power grid generation. ICT plays an important role in optimization, representing 26 percent of the integrating these renewables into the grid. abatement potential. Power grid optimization Most renewables are described as being is essential for reducing transmission and intermittent, which means their generation distribution losses, and for reducing the fluctuates depending on variables like the reliability concerns. ICT is important both weather or time of the day. This can be a from a communication and optimization problem because the supply of electricity must perspective, as it can monitor the grid and perfectly match the load; in the U.S., an aging provide real-time optimization of its use.
350 MtCO2e Breakdown of ICT-enabled GHG Sublevers Drivers of sublevers reduction potential Figure 50 Demand • Reduction of peak load electricity 6% ICT-enabled GHG reduction management • Dependent on system of smart meters and other Smart potential in power sector (21 MtCO e) 2 Grid infrastructure and changing consumer behavior Source: BCG analysis Time-of-day • Increasing the percentage of base-load generation and 6% pricing reducing the demands on the grid – requires proper
(22 MtCO2e) market to price electricity Integration • Creates opportunity to replace electricity from grid with 56% of renewables a carbon-free energy – dependent on RPS at state level,
(197 MtCO2e) grid’s ability to handle intermittent generation and new transmission
Virtual • Dependent on advanced smart-gird technology 2% power plant and advanced regulations that cut ‘red-tape’
(6 MtCO2e) Island grid • Not an important driver in US due to availability of grid-connected electricity
Power-load • Large abatement opportunity, but may be 4% balancing technologically limited (13 MtCO e) 2 • Dependent on ISO and other regulatory changes
Power grid • Important abatement potential in the US due 26% optimization to aging infrastructure
(91 MtCO2e) 129 GeSI SMARTer 2020 10: United States
Case Study Echelon launches apps for the smart grid Although many utilities in the U.S. would like to effectively use smart grid technology to understand their customers’ energy consumption patterns, managing the deluge of smart grid information is a challenge. Making sense of all of the data collected by smart meters, grid sensors, and other devices typically requires building large, centralized data centers to analyze the inputs. The problem, however, is that utilities do not necessarily have these “big data” capabilities to make sense of what they receive or have the resources to build them. As a result, they cannot effectively use the smart grid to improve grid efficiency and cut their GHG emissions.
Echelon, a San Jose, CA-based company, has developed innovative smart grid monitoring technology that is modular and does not require companies to invest in large back-end ICT support systems to understand and analyze smart grid outputs. Rather than analyzing large quantities of individual data points at a centralized center, Echelon’s smart grid app analyzes the data itself at the transistor and condenses it into more manageable quantities of information before sending it to the utility for analysis. This more manageable level of information allows companies to more easily form load profiles to understand where, when, and how their energy is being used. By virtue of the fact that Echelon’s meters are cutting down on the quantity of data sent to utilities, it can integrate even more useful data than other systems. Echelon’s apps have integrated data on distribution transformers monitoring, outage and low-voltage loss detection, transformer oil temperature, and other quality-monitoring data. All of these data, if successfully understood and incorporated by utilities, offer the ability to cut down on transmission losses, unnecessary power generation, and GHG emissions.
Though innovative, Echelon’s technology has yet to find a strong foothold. Despite holding a large share of the smart grid app market in Europe, Echelon has only one project in the U.S., with Duke Energy. If Echelon can demonstrate the superiority of modular data processing for smart grid technologies over more traditional big data- center approaches, it could help more utilities make sense of the smart grid data they are receiving and, in turn, cut emissions. GeSI SMARTer 2020 130 10: United States
Barriers and recommended the lack of proper regulation and pricing policy steps to overcome them structures in the case of demand management. ICT-enabled sublevers offer substantial Because of the dependence on regulation and potential to reduce carbon emissions in the sensitivity to small changes in pricing, many renewable sector. However, several barriers to of these sublevers are also quite risky from a adoption exist. This study discusses these business case. On the other hand, power-grid barriers and, the importance of business case, optimization sometimes can have a stronger and proposes policy steps to ensure successful business case because of the significant reduction adoption of these solutions. of transmission and distribution losses.
In general, the business case for sublevers in The business case for the integration of utility- the power sector is not strong; additional scale renewables without subsides is currently support is needed from policy to encourage weak. The revenue from utility-scale development in this sector. The least favorable renewables depends on wholesale rates of business case by sublever is time-of-day electricity, which can vary drastically, but are pricing and virtual power plant. Both of these often quite low in the U.S. (anywhere from sublevers depend on regulation, markets, and $0.04 to $0.08/kWh).139 These low prices can advanced pricing structures that simply do not make it difficult for large utility scale exist for large-scale adoption today in the U.S. renewables to compete because of high up- Balancing the grid through reducing demand front costs. The standard tool for comparing (demand management) or storage (power-load the total cost for generation versus the balancing) can have a slightly better business electricity rate is the levelized cost of electricity case, but is still difficult to implement because (LCOE). It includes the initial capital, discount of high up-front costs in the case of storage; or rate, and the costs of continuous operation, 139. EIA
Attractiveness Return on Risks and Overall Sublever of investment investment feasibility business case Figure 51 Demand Analysis for business management case by sublever Time-of-day pricing Source: BCG analysis
Low attractiveness Integration of renewables High attractiveness
Virtual power plant
Power-load balancing
Power grid optimization 131 GeSI SMARTer 2020 10: United States
fuel, and maintenance. Today, system costs To first understand where policy should play can average around $2.5/W.140 With typical the biggest role, we prioritize on the basis of assumptions for a more sunny location in the the business case and total abatement potential. U.S.141 the estimated levelized cost of electricity As you can see from Figure 51, very few of the will be around $0.13/kWh. Including the sublevers in the power sector have a favorable, investment tax credit (a 30 percent reduction unsubsidized business case in the U.S., which on the upfront costs), this lowers the cost to means that there is an important role for around $0.10/kWh, still significantly higher policy to play to helping improve the than the wholesale rate of electricity, meaning economics. We prioritize policy on those that additional support from RPS and other sublevers that have the greatest potential to local incentives are still needed. However, reduce emissions (those in the upper-right system costs are likely still going to decrease in 140. NREL, please note that quadrant of the plot); that is, integration of prices are quickly decreasing the future, meaning the LCOE could start to renewables in power generation and power 141. BCG model; model assumes WACC approach the wholesale electricity rate in the of 0.05, lifetime of 20 years, and total grid optimization solar irradiance of 5.3 kWh/m2/day long term.
Dependent on political Highest priority MtCO2e Dependentenvironment on political environment Highestfor priority implementation for implementation Figure 52 high 200.0 Prioritization of policy Integration of renewables in power generation Power grid optimization by potential for CO2e reduction and business potential
e reduction Time-of-day pricing
Source: BCG analysis 2 Demand management 20.0
Power-load balancing 10.0
Potential for CO for Potential Virtual power plant
0.0 low Low attractiveness “Low-hanging fruits“ high
Attractiveness of business model GeSI SMARTer 2020 132 10: United States
What stands in the way? What should happen?
Challenges Policy Key considerations Table 19 • Certain technology and Promote • Important role for ICT industry to Economics Barriers to adoption of sublevers are not NPV positive technological reduce costs innovation ICT-enabled carbon abatement • Other technology may be NPV • Advertise the potential of jobs through through R&D positive but have too long of a “green-growth” and opportunity of new solutions and policy steps funding and pay-back period for adoption industries/ start-ups through innovation to overcome these barriers programs or the capital requirements are • Rebates for ICT enabled upgrades too large Change and solutions economics • Price carbon to encourage more green through: technologies (but difficult to implement in US)
• System integration is vital, Mandate • Create decentives for those that fail to Full technology must be fully through state adopt (but not as strong as incentives) deployment deployed or the entire system regulators & adoption • Build a complete policy support that can’t function (e.g. smart meters) covers entire range of technologies
• Regulation/decoupling in Set up • Encourage market pricing of electricity Aligned the power sector regulations and negawatts – make information and incentives/ and markets business case clear consumer • Proper set-up of pricing schemes that are behavior for electricity (e.g. dynamic • Factor in the need for changing favorable pricing, price for carbon, consumer behavior in policy to carbon negawatts, DR, etc.) abatement • Important to promote ICT’s role • Consumers unwilling to change in providing energy security ingrained behaviors
Table 19 lists specific barriers to the adoption door and helps drive further innovation and of these sublevers (and the other in this sector) the creation of new jobs—a core strength of and the role of policy. There are three the U.S. Addressing research helps drive long- important barriers we have identified: term concerns with economics, but to address economics, full deployment, and aligned more immediate problems, direct incentives incentives. can be used, such as stronger RPS policies across more U.S. states and additional rebates As identified above, the single most important for ICT technologies. barrier is economics. Most of the sublevers in the power sector do not currently have a A second significant barrier is the need to have strong business case. They are either too high deployment and adoption. This is particularly in cost or do not provide enough return in important for the smart grid in that there are terms of revenue of savings. While there is several technologies that must be deployed in some policy in place today to address costs, order to capture the entire value. Time-of-day additional measures can be taken, one of pricing and demand management serve as two which is to promote more fundamental research illustrative examples. These technologies (through organizations like the National depend on the implementation of smart meters Science Foundation or the Department of in the case of time-of-day pricing and smart Energy) that is targeted at improving the appliances in homes and businesses for both of performance or reducing the costs of the those sublevers. Without covering the entire technologies used in these sublevers. The technology suite, they are ineffective. The role investment in this primary research opens the of policy is to ensure adoption, ideally through 133 GeSI SMARTer 2020 10: United States
U.S.US Building emissions emissions (GtCO (GtCOe)e) Figure 53 2 2 3.5 Historic emissions from +0.1% % CAGR U.S. buildings, split by fuel 2000-2011 3.0 2.932.93 2.922.92 2.932.93 2.922.92 2.912.91 2.852.85 2.82 2.862.86 2.892.89 2.862.86 2.892.89 2.82 2.782.78 Coal -5.2 Source: EIA PetroleuPetroleum -2.3 2.5
2.0 2.0 Natural gasGa -0.3
1.5
1.01.0
ElectricitElectricity 1.4 0.50.5
0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
incentives, but could also consider penalties for there are several regions of the country where those who fail to adopt. Smart policy that there are inherently high heating or cooling supports the entire value chain is also needed costs because of the climate. All of these factors and takes into account the first- and second- combine to result in very high costs; for example, order implications and interplay among the the total commercial energy costs in the U.S. technologies. are USD179 billion (approximately USD1.50/ ft ).143 This provides an excellent opportunity The last major barrier identified is the need to 2 for ICT to provide substantial financial savings align incentives, important for nearly every in addition to reducing GHG emissions. power sector worldwide. The U.S. is especially ripe with misaligned incentives because of the While buildings are responsible for a large complex rules around regulation, which vary amount of U.S. emissions, over the last decade drastically from state to state. Very often in the emissions have been generally steady. Figure sector the organization or individual with the 53 illustrates how emissions have grown at a authority or ability to implement an innovative rate of 0.1 percent from 2000 to 2011 (emissions
solution does not reap the benefit. Here, policy were approximately 2.9 GtCO2e in 2011). has an important role of making sure current Electricity makes up the largest portion of regulations align incentives. For example, by emissions, followed by fuels used for heating providing the proper pricing of electricity in (natural gas and petroleum). open markets, policymakers can ensure that all Most buildings in the U.S., including older parties involved reap the benefits of ICT buildings and new builds, have not leveraged solutions in a transparent manner. opportunities to increase their energy efficiency. The U.S. lags significantly behind Buildings other developed economies in policy for Context building energy efficiency. There are very few Buildings in the U.S. use a significant amount binding goals or targets at the national level. of energy, which results in approximately 37 One of the few goals, reducing energy percent of all GHG emissions in the U.S.142 consumption by 30 percent by 2015, applies This high energy use is partly driven by poor only to the federal sector. Much as in the 142. EIA design and lack of insulation. In addition, power sector, most of the energy efficiency 143. Buildings, EIA GeSI SMARTer 2020 134 10: United States
standards are set at the state level. Only 20 sublevers like building design (130 MtCO2e)
states have some form of EERS, which and integration of renewables (87 MtCO2e). establish specific, long-term targets for energy The full results are listed in Figure 54. savings that utilities or non-utility program Building design provides the largest abatement administrators must meet through customer potential (130 MtCO e) among all of the energy efficiency programs.144 At a local level, 2 building sublevers in the U.S. This potential is there are some state- and national-supported partly driven by current inefficient design of utility programs for energy efficiency and U.S. buildings. ICT can be used to help model some progress toward rating buildings based and calculate the ideal design. While efficient on their efficiency has been made (for buildings can be built without the use of ICT example, LEED certification of commercial (by using more insulation, for example), ICT buildings) but in general, more support is can help plan for the most efficient use of needed. resources. The sublever has a small up-front The business case for energy efficiency cost but results in significant savings in energy improvements, depending on the technology and GHG over the lifetime of the building. used, can be very strong and thus these Building management systems are ICT- improvements represent an under-utilized dependent, computer-based systems that source of savings. Policy is needed to identify control and monitor the building’s mechanical structural barriers, such as building code and and electrical equipment including ventilation, other regulations, that restrict the adoption of lighting, power systems, fire systems, and technology that could reduce emissions. security systems. We estimate the total abatement from these systems to be 48 Buildings abatement potential MtCO2e. Through cases like the example We estimate the abatement potential for the implemented at the Empire State Building in
identified ICT-enabled solutions is 305 MtCO2e the global chapter, it is clear these systems have (or 1.4 times the total emissions of the ICT the opportunity for GHG abatement in the 144. DSIRE, www.dsireusa.org/ documents/summarymaps/EERS industry), driven by several important U.S., especially in large commercial buildings. _map.pdf
305 MMtCO2e Breakdown of ICT-enabled GHG Sublevers Drivers of sublevers reduction potential Figure 54 Integration of • Large building electricity use creates opportunity to 28% Analysis of business renewables replace electricity from grid with a carbon-free energy case by sublever (87 MtCO2e) free of transmission and distribution losses Building • Would provide savings for nearly every type of building Source: BCG analysis 16% management – very large addressable market but depends on quality system technology and favorable economics
(48 MtCO2e) Building • Large addressable market because of current inefficient 43% design design and high penetration because of low costs
(130 MtMtCO2e) (requires very little investment during design phase) Voltage • Large theoretical potential driven by large electricity 13% optimization use in building sector, but dependent on smart grid
(40 MtCO2e) infrastructure being in place 135 GeSI SMARTer 2020 10: United States
Attractiveness Return on Risks and Overall Sublever of investment investment feasibility business case Figure 55 Analysis of business Demand management case by sublever Time-of-day Source: BCG analysis pricing
Low attractiveness Integration High attractiveness of renewables
Virtual power plant
Voltage optimization offers savings from management systems (BMS) is also quite strong; reduction in voltage received by the end user, however, the upfront cost can be slightly larger and consequently reduces total energy use and also a bigger risk since changes in the price
and emissions (potential of 40 MtCO2e in U.S.). of energy over the lifetime of the BMS could As with nearly all of the sublevers, the change the economics (namely, significant economics of adopting these solutions should decreases in the cost of heating fuels and be favorable in many situations. electricity could reduce the expected savings in energy costs that was expected to pay for the Barriers and recommended high up-front costs; this is especially important policy steps to overcome them for systems that are funded by a third party The business case for adopting ICT-enabled where a performance contract promises savings sublevers in the buildings sector is generally in the future). Finally, the weakest business positive. But even with a positive business case (though it drastically depends on the local case, the U.S. has failed to see large-scale weather and retail electricity rates of the adoption. In this section, we will explore the region) is the integration of renewables. business case and resulting barriers restricting Exploring in more detail the business case for the adoption of ICT. the integration of renewables, there are two In general, the business case for sublevers in important factors to consider: the total system the buildings sector is strong, especially in terms price for installing the system and the retail rate of the total return. Weakening the business of electricity. Compared to installing renewables case are high up-front costs and the longer in the power sector, the business case for payback periods. The strongest business case buildings is much more favorable because the among the sublevers exists for building design retail rates of electricity are much higher. In and voltage optimization. Both of these the US, retail rates generally vary from ~$0.08 sublevers can have relatively low up-front to $0.15/kWh (and even higher in a state like costs, little risk associated with implementing Hawaii).146 If we explore rooftop solar energy the solution, and a strong return on investment. in more detail, the up-front costs have drastically 145. SMART 2020 Of the two, building design is likely the strongest decreased within the last couple years, with 146. EIA “State electricity profiles” case, with a relatively low investment and a module prices falling by at least half. Today’s 147. LBNL, NREL reduction in emissions (and thus resulting system costs can average around $4.5/W.147 148. BCG model; Model assumes WACC With typical assumptions for a more sunny of 0.05, lifetime of 20 years, and total reduction in energy costs) as much as between solar irradiance of 5.3 kWh/m2/day. 30 to 40 percent.145 The business case for building location in the U.S.148 the LCOE for solar is GeSI SMARTer 2020 136 10: United States
DRAFT
Case study Controlling home heating Heating buildings when occupants are not present represents a large waste of using occupancy prediction resources. Home heating uses more energy than any other residential energy expenditure, making it an important goal for reducing energy use, saving money, and cutting GHGs. Though programmable thermostats help address this problem, fewer than half of U.S. households have them installed and over 30 percent of those that do fail to use the programming feature. This unnecessary heating wastes money for consumers and releases GHGs.
To address this problem, Microsoft developed PreHeat, a system that is easier to use than a programmable thermostat and helps avoid the tradeoff between comfort and energy savings. PreHeat systems were installed in three houses in the U.S. and two in the U.K. and utilize active RFID, passive IR-based occupancy sensors, temperature sensors, and heating system controllers used in conjunction with PC- based control software. From those sensor inputs, the software learns to predict occupancy schedules on the basis of present and past occupancy patterns, and turns on the heat only when people require it.
The homes in the U.S. were heated at the level of the entire house (for example, not room by room) and PreHeat was able to ensure much better occupant comfort than when using a programmable thermostat and consumed the same amount of gas. The homes in the U.K., on the other hand, were analyzed and heated at the room level, giving PreHeat the ability to acquire additional energy savings by heating rooms adaptively at different times of day. In the U.K. homes, PreHeat halved the amount of time an occupant spent in unheated rooms while reducing gas usage by 8 to 18 percent. While these results are impressive, there is room for improvement. Microsoft is hoping to use more sophisticated algorithms to predict when occupants are about to depart or to detect when occupants are sleeping to lower the heating costs and emissions. Though PreHeat has already demonstrated its ability to save on energy costs and lower GHG emissions from heating, its abatement potential will rise as the software becomes increasingly sophisticated and becomes commonplace technology in buildings worldwide. 137 GeSI SMARTer 2020 10: United States
around $0.25/kWh. Once the ITC incentive is the up-front costs can be especially high, included, the cost is reduced $0.17/W, approaching particularly in the residential sector, where it the retail rate of electricity. With increasing can be difficult for homeowners to cover costs of electricity, drastically decreasing system them. This is especially true in the U.S., where costs (due both to the fall in module prices and large home sizes make these upgrades expensive the remaining cost of installation), it is expected and very few financing opportunities for these that integration of solar energy will be profitable types of upgrades are available to homeowners. in many of the sunnier states that have higher The role of government and policy is to provide electricity rates within the next couple years. easier access to capital for these types of upgrades. This can be done directly by giving To first understand where policy can play the government-backed loans at low costs of capital. biggest role we explore each sublever based on Policy also has a role, through tax incentives the attractiveness of the business case and and relaxing financial controls, to help reduce total abatement potential (see Figure 56). the cost of capital for building upgrades.
It is clear in Figure 56 that the business case A second important barrier is behavior and for many of the solutions is quite positive. education. In the U.S., many homeowners and Only the integration of renewables in buildings commercial building owners are unaware of sublever has a weak business case. This is due the existence of ICT solutions to save energy to relatively low retail electricity rates of costs. Lack of familiarity with these ICT- electricity and the relatively high costs of enabled sublevers can deter adoption. distributed generation. Many of the policy Executives can be wary of investing in solutions recommendations discussed in the power for commercial buildings even when their sector (investment in R&D and financial building managers make a strong business incentives) will help improve the economics of case for the upgrades. At the residential level, this sublever. the complexity of the contracting, financing, Among the other sublevers, there are several and execution of upgrades can create a important structural barriers to consider; significant barrier to action. Policy has a role these are listed in Table 20. in the distribution of information and giving consumers unbiased perspectives to help them The single most important barrier for the make educated decisions. There is also a role buildings sector is financing. While ICT- for government to execute pilot programs, enabled solutions have a substantial return, serving as a positive example and illustrating
Dependent on political Highest priority MtCO e 2 Dependent onenvironment political environment Highestfor priority implementation for implementation high 150.0
Figure 56 Building design Prioritization of policy by potential for CO e reduction 2 100.0
and business potential e reduction Integration of renewables in buildings 2
Source: BCG analysis Building management system 50.0
Voltage optimization Potential for CO for Potential
0.0
low Low attractiveness “Low-hanging fruits“ high
Attractiveness of business model GeSI SMARTer 2020 138 10: United States
What stands in the way? What should happen?
Challenges Policy Key considerations Table 20 • Private and public customers Provide easy • Create governmentally funded but Financing Barriers to the adoption of don’t have capital to cover high- access to capital privately controlled funds for large up front costs capital upgrades ICT-enabled GHG abatement • Financing and contracting is • Relax financial controls and taxes on solutions in the buildings sector becoming an essential part of money loaned for ICT enabled upgrades and policy steps to the customer offering overcome them • Performance contracting can help alleviate some problems, but must have partners willing to invest
• Certain technology and Promote • Important role of ICT industry to lower Economics sublevers are not NPV positive technological prices or provide better performance at innovation • Other technology may be NPV similar price through R&D positive but have too long of a • Advertise the potential of jobs through funding and pay-back period for private “green-growth” and opportunity of new programs adoption industries/start-ups through innovation Change • Rebates for ICT enabled upgrades and ecomomics solutions (target high-impact comm. sector) through: • Price carbon to encourage more green technologies (likely difficult to promote)
• Due to the complexity of Create • Ensure access to information needed Behavior contracting, financing, and incentives that to make informed decisions & education support decision execution – customers need • Use case-studies and examples to build makers and more education and hesitate credibility and make benefits clear to start projects because of business leaders lack of familiarity
• Tenants or others that are Create • Encourage building owners to control Split renting cannot capture benefits regulatory energy costs incentives of efficiency upgrades structures that (landlord/ • Support leasing and other financing align incentives tenant options for renewables problem)
to homeowners and the private sector that the in which there may be many stakeholders implementation of these sublevers can be involved within the same building (the tenant, effective. the building manager, a real estate intermediary, the building owner, and so forth). Similar The final barrier, the landlord-tenant problem, problems can even occur within companies’ is a result of split incentives. In many rental own facilities. The Uptime Institute recently units in the U.S., the tenant pays for his or her published a report, the 2012 Data Industry energy costs, but does not have the authority Survey, finding that only 20 percent of to make energy efficiency upgrades to the organizations’ IT departments pay their building. Even if the tenant has the control to electricity bill—highlighting intercompany make upgrades, it may not make economic disconnects on creating an energy efficiency sense as they cannot ensure that they will live environment. Policy can assist in this through in the building long enough to cover the initial regulation to align incentives for the purchase cost of the investment. The situation can be of energy efficiency upgrades. even more challenging for commercial spaces 139 GeSI SMARTer 2020
Germany GeSI SMARTer 2020 140 11: Germany
Since 1990, however, emissions in Germany 11 have been declining steadily, at a rate of 1.4 percent per year. Figure 57 shows the trend Germany from 1990 to 2010. This trend is similar to the trend in the U.K., where emissions declined 11.1 Context at a CAGR of 1.3 percent over the same time period. In 2010 Germany had 25 percent lower Germany’s GHG emissions have been declining emissions than in 1990. over the last two decades. Further efforts, Additionally, the global German GHG emissions however, will be required to meet its ambitious footprint has increased GHG abatement targets, especially in the during the same period, but in 2010 had declined to power sector. By 2022, Germany plans to Germany’s share of global 75 percent of 1990 levels phase out nuclear power generation, which emissions has decreased. In constituted 22 percent of its total power 1990, Germany’s share of global emissions generation capacity in 2010. There will be a was 2.4 percent, but by 2010 its share had big impact on Germany’s overall GHG dropped to only 1.3 percent. footprint if renewable energy scales up successfully to replace nuclear energy, or even The manufacturing sector has led the reduction goes beyond to replace fossil fuels. in Germany’s emissions. The sector has contributed 64 percent of the total decline According to UNFCCC data, Germany’s GHG of 310 MtCO2e from 1990 to 2010. In 2010, emissions in 2010 were 937 MtCO 149 2e, or 1.9 the manufacturing sector’s footprint was percent of global emissions (see Figure 57). 248 MtCO2e as opposed to 447 MtCO2e in The power and manufacturing sectors 1990. The primary driver of this reduction has contributed the biggest shares of emissions in been a continuously smaller share of the 2010, at 34 percent and 26 percent, respectively. sector in the economy, primarily due to the These two sectors were followed by the deindustrialization of the former East transport sector (17 percent), service and Germany. The former East German industry consumer sector (15 percent), and agriculture was focused on energy-intensive basic (8 percent). 149. Excludes “land use, industries. Additionally, energy efficiency was land use change, and forestry”
Germany‘sGermany'sG GHG HG Emission (MtCO (MtCO2e)2e) 1,5001,500 -1.8% 1,2461,246 75% of 1990 level -1.0% 1,0391,039 % CAGR 997997 1,0001,000 937 2002-2011 Figure 57 TransportTransport- 0.3 %0.3 Agriculture -1.2 %-1.2 Germany’s greenhouse Service & & -1.7 gas emissions (1990-2010) 36%36% consumerConsumer -1.7 % 500500 26%26% ManufacturingManufacturing- 2.9 %-2.9 Source: BMWi, Destatis.de, EEA, NIR (Apr. 2012), OECD, UNFCCC, BCG analysis, BCG interviews, „Toward a Zero Carbon 36%28% 34%34% PowerPower- 0.3 %-0.3 World“ – BCG Perspectives; BCG analysis
0 0 19901990 ...... 2000 ...... 2005 2006 2007 2008 2009 2010 % global GHG 2.4 1.7 1.5 1.3 emissions 141 GeSI SMARTer 2020 11: Germany
relatively low. Nonetheless, Germany remains A defining feature of the plan is its emphasis one of the biggest industrial nations in the on targets related to renewable energy. The world, and further reductions in emissions in government plans to increase the share of this sector are necessary to lessen overall power generated from renewable sources, global emissions. with a target of 35 percent by 2020, 50 percent by 2030, and up to 80 percent by 2050. Emissions in the service and consumer sector declined at 1.7 percent per year between 1990 If nuclear energy is phased out over the next and 2010, leading to a 30 percent overall decade as planned, then meeting even the decline. The agricultural sector’s footprint in 2020 renewable targets may have little impact 2010 was 80 percent of the 1990 level. on overall emissions. Like renewable energy, nuclear energy has a low emissions footprint.150 The other sectors—transport and power— Hence, replacing one with the other will not have seen the least improvement. Germany’s make a difference in overall emissions. The real power sector has stayed dependent on fossil impact of renewable energy sources will be fuels for power generation. Fossil fuels generated felt onlyl if the share of fossil fuels goes down. 347 TWh of electricity in 1990 and 350 TWh in 2010. The trends in the power sector are It is important to note that if emissions were discussed in greater detail later in this chapter. to continue to decline at the same rate as they have over the last decade, it is unlikely that Current policy and emissions Germany will meet its 2020 emissions target, targets in Germany which is 40 percent below the 1990 level. Given the potential phase-out of nuclear energy and State and public awareness regarding climate the lower rate of decline of manufacturing change is high in Germany. Accordingly, there emissions, Germany will have to adopt new is strong policy support for emissions abatement. levers to achieve its emissions reduction As part of a plan called the Energiewende— targets. ICT-enabled solutions offer significant 150. Nonetheless, the risk of nuclear energy transformation—clear targets have been abatement potential in power, manufacturing, accidents and problems with set for reductions in GHG emissions, share of radioactive waste make nuclear energy and other sectors, and could help accelerate a substantially less environment- renewable energy sources in power generation, Germany’s emissions decline. friendly source of energy than and energy efficiency (see Table 21). renewables
Today 2020 2030 2040 2050 Table 21 Reduction in greenhouse gas emissions Energy targets set -27% -40% -55% -70% -80% (base year: 1990) in the Energiewende Share of renewable energies 10% 18% 30% 45% 60% Source: Ministry of in total final energy consumption Economics and Technology, Germany Share of renewable energies 16% 35% 50% 65% 80% in electricity consumption
Reduction of primary energy consumption -5% -20% -50% (base year: 2008)
Reduction of electricity consumption -1% -10% -25% (base year: 2008)
Reduction of final energy consumption -10% -40% in the transport sector (base year: 2008) GeSI SMARTer 2020 142 11: Germany
11.2 Impact of ICT ICT use, however, is likely to increase with further adoption of smart devices, higher on GHG emissions broadband penetration, and use of cloud- based services. Efficiency gains in end-user Businesses and consumers use ICT widely in devices and networks infrastructure are Germany. However, Germany still lags behind anticipated. Specifically, wireless networks some other European countries in using ICT.151 emissions are expected to stay relatively flat, For instance, in 2010, the penetration of while fixed network emissions are expected to smartphones in Germany was 25 percent as decline to half the current levels because of opposed to 40 percent in the U.K. Similarly, large-scale optimization of network the penetration of broadband services—both infrastructure. In contrast, data center wired and wireless—is also lower in Germany emissions are expected to increase. This trend than in other European countries: according to is similar to the expected trend in the rest of OECD data, there are approximately 33 wired the world. The main driver of an increase in broadband connections per 100 inhabitants in emissions is the expected explosion in stored Germany, placing it ninth in Europe. The data. As discussed in the chapter on global ICT statistics are worse for wireless access: 35 151. ITU’s 2011 report titled emissions, several technological advances that “Measuring the Information Society” subscriptions per 100 inhabitants puts improve the energy use of data centers are considered 11 sub-factors across Germany behind 19 other European countries. three major categories (access, use, being tested. It is, however, difficult to predict and skills) to assess ICT development which, if any, of these will come to fruition within a country. Germany got a score ICT emissions in Germany were 32 MtCO2e in of 7.27 out of 10, which placed it 2011 (see Figure 58). This translates to 0.39 and have an impact. The net expected effect fifteenth-highest in the world, behind tons of CO e per capita. This is a relatively low of the above trends is no growth in ICT Sweden, Iceland, Denmark, Finland, 2 Luxembourg, Switzerland, Netherlands, figure compared with the U.S., where ICT emissions in Germany until 2020. the U.K., and Norway. emissions were 0.66 tons per capita.
ICT industry's emissions in Germany (Mt CO2e)4 4 ICT industry‘s emissions in Germany (Mt CO2e) 4040
-0% % CAGR 2011-2020 32 3232 Figure 58 3030 7 ICT industry’s greenhouse 5 1111 Data centers gas emission in Germany
6 2020 Source: Gartner, U.S. Census Bureau; IEA; 4 Networks -6 Greentouch; Ovum; GSMA; SMART 2020: Germany Addendum; press search, BCG analysis
1010 19 End-userEnd-user 19 1717 devicesdevices -1
0 0 2011 20202020
% global GHG emissions 2.4 ICT emissions in the US is 0.66 tonnes CO2e per capita 143 GeSI SMARTer 2020 11: Germany
11.3 Abatement potential Power Context in power and manufacturing Germany’s government is at the forefront of end-use sectors defining a roadmap to achieve its ambitious emissions, efficiency, and energy targets. The The power and manufacturing sectors account government outlined the Energiewende plan in for 60 percent of Germany’s carbon footprint. “Energy Concept for an Environmentally Sound, Given their high contribution, this study Reliable and Affordable Energy Supply,” a policy focuses on these sectors to demonstrate the document published in 2011.152 As mentioned GHG abatement potential of ICT-enabled previously, Germany plans to phase out nuclear solutions. energy by 2022 under the Energiewende plan. While emissions have declined in the The longer-term goal is to also eliminate the manufacturing sector, the rate of decline has country’s dependence on fossil fuels. reduced considerably since 2000. New levers Figure 59 shows the historical trend in power are needed to further reduce emissions in this generation by fuel source. The share of fossil sector. On the other hand, there has been fuels has decreased from 63 percent in 1990 to minimal reduction in emissions in the power 56 percent in 2010. This decline not sector because of continued dependence on withstanding, fossil fuels contribute the biggest fossil fuels. Given the impending nuclear share in power generation, thereby indicating phase out and its replacement by renewable Germany’s continued high dependence on 152. This document was published energy sources, ICT-enabled solutions will 153 in 2011 by the BMWi and BMU them. In 2010, nuclear energy contributed play a vital role in this shift. 153. Within fossil fuels, gas has 22 percent of total power generation, while marginally replaced coal; the share renewable energy sources contributed 16.8 of coal has decreased from 57 percent percent. In 2011 the share of electricity from in 1990 to 46 percent in 2010 as gas has gone up from 7 percent in 1990 renewable sources reached 20.3 percent and it to 14 percent in 2010 exceeded 25 percent for the first half of 2012.
Figure 59 Power generation generation (TWh) (TWh) Power generation by fuel source 800800 in Germany (1990-2010) % CAGR 621 628 599 2011-2020 Source: AGEE-stats, BMWi, 600600 577 550 547 Destatis, EEA, EWI, UNFCCC, 6060 -14 36 9898 OthersOthers BCG analysis, BCG interviews 16 161161 163163 153153 170 141141 199199 RenewableRenewable 66 400400 9494 31 NuclearNuclea -27
200200 348348 341341 359359 350350 331331 301301 Fossil fuelFuel -3
00 19901990 20002000 2005 2010 2015e2015e 2020e GeSI SMARTer 2020 144 11: Germany
Germany‘s total GHG PowerGHG emissionssector GHG (MtCO emissionse) (MtCO e) emissions declined 25% 2 2 in the same time period 400400 -6% 349 % CAGR 343 339 341341 331 2002-2011 319 321 Figure 60 310310 Waste 4.4 300300 Oil -2.3 Greenhouse gas emissions Natural 3.8 gas of Germany’s power sector
Source: AGEE-stats, BMWi, Destatis, EEA, EWI, UNFCCC, BCG analysis, 200200 BCG interviews Coal -0.7
100100 19901990 ... 20002000 ...... 2005 20062006 20072007 20082008 20092009 20102010 % GHG emissions 28 31 34 34
Figure 60 shows the emissions trend in the power generation is 35 percent by 2020, 50 percent power sector. The power sector’s footprint was by 2030, and up to 80 percent by 2050. It is expected only 6 percent lower in 2010 than in 1990; that wind energy—both onshore and off-shore however, total emissions in Germany decreased —and, to a lesser extent, solar photovoltaic (PV) by 25 percent in that same period. As a result, will play a key role in achieving these targets.154 the share of the power sector in total emissions Currently, Germany is a world leader in solar increased from 28 percent in 1990 to 34 PV and wind energy. In 2011, the installed percent in 2010. This has been driven by the capacity for solar PV in Germany was the consistently large share of fossil fuels in power highest in the world at 25 GW. Wind capacity, generation, as discussed earlier. onshore and offshore combined, exceeded the As other sources of power generation are phased solar PV capacity by 4 GW, giving Germany out, renewable energy will become increasingly the third highest wind capacity in the world at 154. “Toward a Zero Carbon World,” important. The target for the share of renewables in 29 GW (see Figure 61). BCG Perspectives
Germany has the highest Germany has the third highest solar PV installed capacity wind installed capacity Figure 61
Germany 25 ChinaChin 63 Solar PV and wind capacity Italy 13 UnitedUnited States States 47 by country (2011) Japan 5 GermanyGerman 29 United States 4 SpainSpai 22 Sources: Global Wind Energy Council; Spain 4 IndiaIndi 16 EPIA Market Report 2011 China 3 FranceFrance 7 France 3 ItalyItal 7 CzechCzec Republic 2 UnitedUnited Kingdom Kingdo 7 Belgium 2 CanadaCanada 5 Australia 1 PortugalPortugal 4 RestRe of World 7 RestRest of ofWorld worl 32 0 5 10 15 20 25 30 0 5 10 15 20 25 30 35 40 45 50 55 60 65 2011 2011Solar Solar PV capacityPV capacity (GWp) (GWp) 20112011 Wind Wind capacity capacity (GW) (GW) 145 GeSI SMARTer 2020 11: Germany
40 MtCO2e Breakdown of ICT-enabled GHG Sublevers Drivers of sublevers reduction potential Figure 62 Demand • Little impact on carbon abatement potential but high ICT-enabled GHG reduction 1% management importance for ensuring electricity supply security in potential in the power sector (0.3 MtCO2e) Germany Sources: SMART 2020 Germany Time-of-day • Reduces emissions by shifting peak consumption to base-load Addendum, BCG interviews, 8% pricing BCG analysis. • Some potential in Germany due to the mandatory variable (3.2 MtCO e) 2 tariff offering from 2011 and the more pragmatic ways to balance peak consumption
Integration • Increasing and optimizing the use of emission-neutral power 72% of renewables • Absolute priority for Germany because of the nuclear (28.8 MtCO e) 2 phaseout – otherwise, additional fossil-fuel-fired plants would be necessary
Virtual • Limited impact on direct emissions reduction 4% power plant • Unlikely to be relevant for Germany as it requires advance (1.7 MtCO e) 2 grid infrastructure
Island grid • Likely very little impact becuase of availability of reliable grid (0 MtCO2e) Power-load • Balance peak demand via off-peak storage balancing • Low potential in Germany because of efficient hydro (0.2 MtCO e) 2 and other pumped storage
Power grid • Some potential in Germany because of scope to minimize 14% optimization existing T&D losses in the grid
(5.71 MtCO2e)
For Germany to reach its 2050 goal of energy production that necessarily accompany generating 80 percent of power from solar and wind-based power generation. renewables, a recent BCG study estimated Effective demand-side management will be that the best mix would be 130 GW of onshore needed to manage the imbalance of supply wind (or 80 GW of onshore with 25 GW of and demand. However, demand-side offshore wind) and 65 GW of solar PV. 155 management requires installation of smart meters, which Germany has struggled with Scaling up renewables to meet the 80 percent thus far, primarily as a result of the lack of a goal will create significant challenges for positive business case for utilities. policy makers. High investments will be required to create the necessary infrastructure. This includes north-south transmission lines Power sector abatement potential that can transmit the offshore wind energy Figure 62 shows the abatement potential of generated in the North Sea. Further, integration each of the SMARTer 2020 sublevers for the of renewables will be a technological challenge power sector. The total abatement potential
because of the intermittence of solar and wind offered by these sublevers is 40 MtCO2e in energy. Large-scale energy storage will be 2020. Integration of renewables offers the 155. “Toward a Zero Carbon World,” required to handle the peaks and troughs of highest potential at 72 percent of the total BCG Perspectives GeSI SMARTer 2020 146 11: Germany
abatement. Power grid optimization is second generated for this reason.156 Based on this at 14 percent, followed by time-of-day pricing assumption, power grid optimization offers an at 8 percent. abatement potential of approximately 28
MtCO e by 2020. ICT-based solutions are essential for the 2 integration of renewables into the grid. If Time-of-day pricing or variable pricing is also Germany does manage to scale up the use of expected to play an important role. The renewables, this sublever will be a necessity to abatement potential from this sublever is derive maximum gains from the use of approximately 3 MtCO2e by 2020. However, renewables. It is important to note that if realizing this goal will depend on the successful nuclear energy is indeed phased out, installation of smart meters. Because of a weak renewables will replace only nuclear energy business case, Germany is currently struggling and not fossil fuels. This means that instead of with installation of smart meters. Policy reducing emissions from the current level, this initiatives can help ensure that smart meters sublever helps avoid additional emissions that are successfully installed in Germany. would have occurred if fossil fuels had Other sublevers, such as demand management replaced nuclear energy. Whatever the and virtual power plants, can be instrumental eventuality, this sublever offers an abatement in ensuring electricity security. Because of the potential of approximately 28 MtCO e by 2020. 2 lack of infrastructure, however, they are Germany has a reliable and modern power unlikely to result in any sizeable GHG grid. However, as in the rest of the world, abatement by 2020. transmission and distribution losses do exist. 156. The Energy This study assumes a 6 percent loss of power and Resources Institute
Attractiveness Return on Risks and Overall Sublever of investment investment feasibility business case Figure 63 Demand Business case assessment management of power sector sublevers Time-of-day pricing Source: BCG analysis
Low attractiveness Integration of renewables High attractiveness
Virtual power plant
Power-load balancing
Power grid optimization 147 GeSI SMARTer 2020 11: Germany
DRAFT
Case Study Deutsche Telekom, T-City, and Friedrichshafen Providing consumers with precise knowledge of how and when they are using smart meters electricity has long been a challenge for energy providers. Though consumers know how much energy they have used over the course of a month, they have not been able to systematically break down their energy consumption patterns, determine when they spend the most energy, or use ICT to moderate their consumption.
Smart meters, used in conjunction with smart grids, offer a solution. In the Oberhof and Windhag districts of Friedrichshafen, Deutsche Telekom, through its T-City program, worked with Technische Werke Friedrichshafen (TWF) to build the first intelligent energy network of the future, colloquially known as a smart grid. Using the smart grid, Deutsche Telekom was able to install over 2,000 smart electricity, water, and gas meters and connect them via ICT to energy providers—all to help consumers better understand their energy usage.
Smart electricity meters provide energy consumption information to energy suppliers, which then take the information and communicate it to consumers through an Internet portal. Consumers can access this portal through their computers and smart-phones, making personal energy consumption information readily accessible at all times. Consumers can identify which appliances use the most energy and also avoid energy consumption during periods of peak demand. Not only does this information benefit consumers, but it also is of great value to power generators. With the constant stream of information, power generators can better forecast demand and avoid utilizing unnecessary capacity.
By providing consumers and energy providers with more information on consumption patterns, money is saved, less energy is wasted, and fewer GHGs are released. The average household that uses smart meters has been able to save about 4 percent on their energy bills. Though dependent on the wider development of smart grids, ICT-enabled smart meters can yield significant GHG emissions savings in future. GeSI SMARTer 2020 148 11: Germany
Barriers and recommended implementation risk and a more certain policy steps to overcome them return on the investment. Power load Given the significant abatement potential balancing is not as favorable since Germany offered by ICT-enabled sublevers, it is already uses pumped-hydro storage for peak important to ensure that these are adopted power (both domestic and from Norway). and scaled up. However, not all of these Integration of renewables faces several sublevers are likely to be driven by the market, challenges, as discussed later. as several do not present a positive business Figure 64 combines the business case analysis case, especially when assessed individually. with the abatement potential analysis in the The business case for most sublevers in the previous section. The key insight from the power sector is medium to weak. The primary combined view is that the role of policy is drivers of this are the high up-front cost and likely the strongest in facilitating the although higher energy prices make the integration of renewables. Germany already business case more attractive than in other has among the highest solar PV and wind countries with low energy prices such as the energy installed capacity. Integrating U.S. Power grid optimization presents the renewables into the grid can yield significant most favorable business case because of lower benefit if done successfully.
Dependent on political Highest priority MtCO2e Dependentenvironment on political environment Highestfor priority implementation for implementation high 30 Figure 64
Integration of renewables Power sector sublever prioritization by potential for 6 Power grid optimization CO2e reduction and business potential e reduction 2
4 Source: BCG analysis Time-of-day pricing
2 Virtual power plant Potential for CO for Potential Power-load balancing Demand management 0 low Low attractiveness “Low-hanging fruits“ high
Attractiveness of business model 149 GeSI SMARTer 2020 11: Germany
To better understand the dynamics behind positive for consumers. Solar energy is already the adoption of renewables in Germany, this past grid-parity in Germany. The key barrier study analyzes the key drivers, their to full-blown scaling up is the unavailability of interdependence, and the role of policy in cheap storage. As technology progresses and enabling them. Figure 65 shows the driver tree storage becomes cheaper, further penetration for the adoption of renewables in Germany of distributed generation can be expected and highlights the role of policy. without needing a regulatory push. In this model of power generation, consumers turn The key insight is that many policy levers will into “prosumers,” that is, producers and have to be enacted simultaneously to drive consumers of electricity. These prosumers will utility-scale power generation based on not need to rely on smart meters, smart renewables. Only then will the full abatement appliances, demand management, or other potential offered by renewables be realized. technologies for their own consumption. Such It is worth noting that distributed generation is technologies are, however, necessary for likely to be driven by the market. High energy utility-scale renewable-based power generation 157. “Toward a Distributed-Power 157 World,” BCG Perspectives prices in Germany make the business case to achieve its full potential.
Figure 65 Policy makers will need to pull multiple levers simultaneously to drive adoption of renewables and realize abatement potential
1. Power Purchase Agreement Source: BCG analysis
Utility-scale generation
Policy instruments Project-level economics for renewables, e.g., Capital cost, e.g., investment financing, feed-in tariffs for initial set-up Legal framework Regulation to provide Revenue, e.g. PPA1 to enforce renewable energy government-funded pilots adoption (hard targets) and R&D investments Proof of concept to lower technological/ implementation risks Realization Legal Smart meters for “power generators” Business case Text of abatement framework • forText smart grid and to enforce Demand-side sublevers integration of renewables potential adoption Smart appliances e.g., dishwashers, Demand management refrigerator, driers Infrastructure Adoption of renewables Time-of-day pricing necessary to address Affordability Consumer education intermittency of renewables and awareness to drive behavior change Supply-side sublevers Reduction of site Also need other infra-structure Powe-load balancing Regulation to drive restrictions and other such as trans-mission lines to penetration of necessary barriers ensure integration of renewables Virtual powe plant technology
Consistency of regulations Increase transparency of regulations Policy coordination across states
Distributed generation: expected to be market driven
Policy focus to enable adoption of ICT sublevers GeSI SMARTer 2020 150 11: Germany
What stands in the way? What should happen?
Challenges Policy Key considerations
• Requisite technology not in Support • Create necessary regulatory Demand-side place, e.g., smart meters, smart deployment of and legal framework to ensure management appliances smart meters and deployment of smart meters other technology • Dynamic pricing, as required and other necessary technology by EnWG1, not feasible without • Subsidies for R&D and pilot deployment of smart meters tests
• High infrastructure investment Provide funding • Policy to drive creation of High needed to integrate renewables for creation infrastructure necessary for infrastructure and enable long-distance of necessary integration of renewables, as investment transmission of wind energy infrastructure market unlikely to play a big • Large-scale energy storage will part here be necessary as and when share of renewables increases
• Lack of enforcement of targets Enforcement of • Create necessary legal Regulations set in EnWG 2011 could existing targets framework to ensure current adversely affect realization EnWG targets are met of 2020 emissions target Facilitate • Create regulations to provide • Insufficient incentives for investment in incentives to utilities to boost utilities to invest in ICT ICT solutions for investment in ICT, e.g., tax Table 22 essential for a smart grid the smart grid incentives to help with the Barriers to adoption of business case ICT-enabled GHG abatement solutions and policy steps to overcome them
Based on this analysis, a few barriers to the Further, Germany’s power sector will require adoption of utility scale power generation have high infrastructure investment to integrate been identified. Table 22 summarizes these renewables. For instance, it will require barriers and the policy steps to overcome them. installation of north-south transmission lines or development of large-scale energy storage. Demand management and time-of-day Providing funding for the creation of the pricing—the latter already mandated in the necessary infrastructure will be crucial in Energiewende—are not feasible without the ensuring renewables are successfully installation of smart meters. Given the current integrated into the grid. Also, it is important lag in this process, policy steps could be taken to ensure there is policy coordination across to accelerate the penetration of smart meters. states. For instance, the plan to supply the Specifically, a regulatory framework is south with off-shore wind energy from the required to ensure that smart meter north will not work if the states in the south installation is enforced. Further, government- plan for alternative sources for their power funded research and development efforts requirements.158 could be initiated in areas in which technological gaps remain. Any early successes A legal framework is also required to ensure could be tested in state-sponsored pilot that the targets of the Energiewende are met. 158. There is also a problem with long studies. This will allow mitigation of the At the time of this study, the pace of progress approval procedures for new electricity technological risk associated with the new on the ground is not as fast as required to distribution lines and unsolved liability technologies and encourage private investment. meet Germany’s emissions targets. There is a questions with respect to off-shore wind should also be addressed 151 GeSI SMARTer 2020 11: Germany
Figure 66 Germany'sManufacturing GHG GHG emissions emissions (MtCO (MtCO2e)2e) Greenhouse gas 600 emissions of Germany’s manufacturing sector 447 -4.2% Reduction due Source: BMU, BMWi, EEA, to economic UNFCCC, SMART 2020 Germany slow-down Addendum, -1.6% BCG analysis, BCG interviews 292 % CAGR 300 276 269 270 264264 1990-2010 237 248248 Energy -4.5 Metal -0.8 Mineral -1.1 Chemical Waste -2.8 -6.1 Others -2.9 00 1990 ... 2000 ... 2005 2006 2007 2008 2009 2010 % GHG 1990 ... 2000 ... 2005 2006 2007 2008 2009 2010 emissions 36 28 27 26
risk that without a legal framework to ensure emissions, whereas in Germany, manufacturing enforcement, Germany will miss its 2020 targets. constitutes 28 percent of the economy and the total emissions share is only 26 percent. Policy instruments could also be used to incentivize utilities to invest in ICT that is The sector’s emissions footprint has been essential for a smart grid. Given the lack of a declining over the last two decades: the positive business case for a smart grid for footprint in 2010 was 45 percent lower than in utilities, utilities need incentives to invest in 1990. While there have been energy-efficiency technologies that are essential for the shift to gains, the primary driver was the a smart grid. Currently, regulations do not deindustrialization of the former East Germany. provide for such incentives. Hence, policy The primary causes were the closure of makers need to pay attention to this issue. energy-intensive industries due to the loss of competitiveness and the breakdown of traditional export markets in Eastern Europe. Manufacturing Context The rate of decline, unfortunately, has slowed Germany is a leading industrialized nation. In since 2000. Emissions declined at a rate of 4.2 2010, manufacturing accounted for 28 percent percent between 1990 and 2000. However, as of the approximate USD2.9 trillion GDP of the the deindustrialization of the former East German economy. However, the cost of this Germany had mostly taken place by 2000, the large economic footprint is a large emissions rate of decline slowed to 1.6 percent per year footprint. Figure 66 shows the emissions in over the following ten years. this sector from 1990 to 2010. The footprint of Given the magnitude of emissions from the the sector was 248 MtCO2e in 2010, or 26 sector, it is important to tap into any abatement percent of the total emissions in the country. potential possible. Currently, the government This shows the low emissions intensity of the is supporting energy efficiency improvement manufacturing sector: for instance, in the with subsidies and other measures. For U.K., the GDP share of manufacturing is only instance, SMEs can receive subsidized energy 11 percent but it accounts for 27 percent of the consultations. An “Ecotax” that rewards GeSI SMARTer 2020 152 11: Germany
manufacturers for energy efficiency gains has the rotational speed of the motor to better been instituted. Further, the State-Enterprise match the actual speed with the speed Partnership aims to provide information and required. Optimizing the speed lowers the training to enterprises to improve their total energy use and thus indirectly helps with willingness and ability to increase energy emissions abatement. Many such systems are efficiency. readily available on the market today and awareness about these is high among Manufacturing sector engineers. Also, the business case in a typical abatement potential setting is positive, with a payback period of only one year.159 ICT-enabled sublevers provide an abatement potential of 33 MtCO2e by 2020 (see Figure Automation of industrial processes refers to 67). Eighty-two percent of the abatement the monitoring and control of industrial potential comes from the widespread adoption processes to optimize and automate for of variable-speed motors, while automation of reducing energy usage. The business case is industrial processes accounts for the rest. positive because of the high savings potential that can be achieved through the reduced Variable-speed motor systems comprise the 159. “SMART 2020 Germany utilization of resources—both material and actual motor plus a frequency converter. The Addendum: The ICT Sector as the personnel. Driving Force on the Way to Sustained frequency converter makes it possible to vary Climate Protection,” GeSI and BCG
33 MtCO2e Breakdown of ICT-enabled GHG Sublevers Drivers of sublevers reduction potential Figure 67 Optimization • A frequency converter as add-on for the actual motor ICT-enabled GHG reduction 82% of variable- to vary the rotational speed and better match the potential in manufacturing speed motor energy use with required output systems sector • Important lever for Germany as one of the biggest (27 MtCO e) 2 industrial nations with a large number of existing Source: SMART 2020 German Addendum, BCG analysis, BCG interviews electric motors • Economically attractive for the German industry because of short payback period and long reinvestment cycles
Automation • Monitoring and control of industrial processes to 18% of industrial optimize and automate to reduce the energy use processes • Also reduce utilization of personnel resources (6 MtCO2e) • Business case is positive because of high energy and labor costs 153 GeSI SMARTer 2020 11: Germany
Barriers and recommended Figure 69 combines the business case analysis policy steps to overcome them with the abatement potential analysis in the previous section. The combined view reveals The market is expected to continue to drive that indeed there is a limited role for policy. A the adoption of the solutions. The solutions strong business case is expected to be sufficient are readily available in the market and have a to drive market-based adoption. positive business case for manufacturers, and the awareness and willingness to adopt advanced Several minor barriers do exist, but policy can solutions is high. As a consequence, it is expected help in these situations. The investment cycles that further uptake will continue unabated. can be long when it comes to upgrading to variable-speed motor systems. In certain niche The business case for both sublevers in the power areas of the industrial sector, providing sector is very strong. The primary drivers of this incentives for upgrades may accelerate the are the relatively low upfront cost and a short adoption rate. payback period, often as little as one year. However, outage costs are necessarily incurred from the shutdown of plants during modernization. This reduces the overall feasibility a bit.
Attractiveness Return on Risks and Overall Sublever of investment investment feasibility business case Figure 68 Optimization Business case assessment of variable-speed of manufacturing sector motors sublevers Automation of Source: BCG analysis industrial processes Low attractiveness
High attractiveness
Dependent on political Highest priority MtCO e 2 Dependent onenvironment political environment Highestfor priority implementation for implementation Figure 69 high 12510.010.0 Variable-speed motors Manufacturing sector sublever prioritization by potential for 1008.08.0
CO2e reduction and business potential 6.0 e reduction 756.0 2
Source: BCG analysis Automation of 504.04.0 industrial processes
252.02.0 Potential for CO for Potential
0.000.0 low Low attractiveness “Low-hanging fruits“ high
Attractiveness of business model GeSI SMARTer 2020 154 11: Germany
DRAFT
Case study Bosch Rexroth 4EE—Rexroth Over a quarter of German electricity needs are driven by demand from industrial for Energy Efficiency plants and machines. Motors, pumps, and compressors are at the heart of the German industrial machine, but they are often inefficient, waste large amounts of electricity, and release large quantities of GHG emissions in the process. Because antiquated machines and motors do not adjust the amount of work they perform to the strain being placed on them at any particular moment, they operate at the same speed continuously. This continuous exertion leads to electricity overuse and unnecessary release of GHG emissions.
Bosch Rexroth AG, a German industrial goods firm, has designed systems that optimize variable motor systems to reduce unnecessary energy expenditures. The IndraDrive folding press system is a particularly innovative example of motor system optimization. Rather than operating at a constant rate, the IndraDrive system senses the weight of the load being put on the folding press and will lower its operating speed to zero during partial-load utilization or pauses. Additionally, the system’s servo motors automatically switch into generator mode during load-free downward movements, which generates electricity that can be fed back into the system. Not only do these developments reduce the direct energy requirement, but also the heat generated by the system mostly eliminates the need for cooling systems.
These efficiency gains can be magnified when IndraDrive machines are combined into a circuit. When 20 IndraDrive machines were merged into a single system to form a package distribution system, the system was able to save 23,400 kWh of
electricity annually. This translates into a CO2 reduction of 14 metric tons per year. Not only do these machines save energy and lower GHG emissions, but they also have the potential to save money for manufacturers. As manufacturers come to realize the economic viability of investing in such systems, optimizing variable motor systems will become more widespread and reduce GHG emissions from manufacturing. 155 GeSI SMARTer 2020 11: Germany
Faster market penetration of industrial- adoption. Currently, targets are based on process automation is hampered primarily by historical values, which are too high relative outage costs arising from the required temporary to the long-term emissions-reduction goals of shutdown of plants undergoing modernization. Germany. Therefore, tightening targets can be However, because of a strong business case, considered a boost to the adoption of these this should not prevent full realization of the solutions. abatement potential by 2020. However, it is important to note that as the Most important, policy can help by setting German manufacturing industry shows tighter emissions and efficiency targets for the comparably high energy efficiency, policy sector. In addition to the business case, the measures should take into account international requirement to meet targets is an impetus in competitiveness to avoid GHG leakage.
What stands in the way? What should happen?
Table 23 Challenges Policy Key considerations Barriers to adoption of • Current industrial-emissions Create tighter • Necessary to set more Ineffective ICT-enabled GHG abatement budget is too high to have a emissions aggressive emissions- emissions solutions and policy steps to big impact in terms of driving budgets, reduction targets so that targets overcome them energy efficiency upgrades targets, efficiency improvements or both become a necessity • At the same time, care must be taken to make targets economically and technically feasible • Improve energy efficiency standards across all industries
• Economics still not favorable in Provide • Tax credit, investment credit, Economics some niche areas, e.g., old paper incentives or subsidies could help mills to improve improve the economics for economics industries that are lagging behind
• Slow adoption due to likely long Limited role Slow equipment and process change for policy adoption or upgrade cycles in some areas GeSI SMARTer 2020 156
Canada 157 GeSI SMARTer 2020 12: Canada
helped offset emissions growth from 12 transportation. Because Canadian emissions fell slightly as world emissions grew at 2.0 Canada percent, its emissions as a percentage of the world total declined. In 2000, Canadians 12.1 Context emitted 2.2 percent of the world’s GHGs, and by 2010 that figure had dropped to 1.7 percent. Though Canada contributes only 1.7 percent to the world emissions total, it has one of the The transportation sector makes up 22 percent world’s highest per capita of Canada’s total emissions. Much like the Canada has the emissions. Excluding land U.S.and Australia, Canada has relatively low use changes, Canada has population densities even in major cities and, eighth-highest per capita the eighth highest per capita by international standards, accordingly is
emissions in the world emissions at 20.3 tons CO2e dependent on cars. Emissions from passenger per person, just below those vehicles are relatively high but have stabilized
of the United States. Its high per capita at 79 MtCO2e and are projected to decline. emissions signifies that Canada has significant Canada is also becoming increasingly potential to abate its GHG emissions by 2020.160 dependent on heavy trucking as a means of moving cargo. Though railways move the most While Canada’s emissions are high, they have amount of cargo by tonnage, trucking emits stabilized in recent years. In 2000, Canada’s nearly nine times more GHGs and is growing. emissions—excluding land use—were 718 Emissions from trucking are projected to grow MtCO e; by 2010, emissions had declined to 2 to 20 percent, increasing from 80 MtCO e in 692 MtCO e, even though the population rose 2 2 2005 to 96 MtCO e in 2020.162 161 2 160. National and Sectoral GHG by around 10 percent from 31 to 34 million. Mitigation Potential: A Comparison This represents a 3.6 percent decline over the The oil and gas sector is currently the second Across Models, OECD 32 decade. Canadian emissions remained flat largest contributor to the GHG emissions total, 161. “Canada’s Emissions Trends 2011”, Environment Canada largely because of increases in the use of emitting 21 percent of Canada’s total 162. Ibid renewables to generate electricity, which emissions. Emissions from this sector are
Canadian total emissions (MtCO e) Figure 70 Canadian GHG emissions (MtCO2e)2 Canadian total greenhouse 1,0001,000 gas emissions, 2000-2010 -0.4%
Source: Environment Canada 800800 % CAGR 718 2002-2011 692
600600 ManufacturingManufactur -0.2 2012 Kyoto target (left Protocol in Dec 2011)
400400
Transport0Transport 0.8
200200 Power-Power -2.3
Buildings -1.2 Agriculture0Agriculture 0.1 0 0 2000 2005 2010 % Canadian 2000 2005 2010 of world 2.2 1.9 1.7 total GeSI SMARTer 2020 158 12: Canada
particularly high because of the energy results from differences in emissions accounting intensity required to extract and refine used across countries.) Emissions from residential Canada’s hydrocarbon resources. One resource buildings grew very slowly between 2005 and that Canada has in abundance is tar sands, 2010, from 42 MtCO2e to 44 MtCO2e, even as 1 which is sand, clay, and water that is saturated million new households were added. The with a particularly dense form of petroleum reason for the small magnitude of the increase and is found in abundance in the northern is that that energy efficiency increases in part of the Alberta province. Because the existing homes helped offset the emissions petroleum is mixed with so many different increases from new homes. The small growth solids, it requires large amounts of natural gas of emissions from the residential subsector is for extraction and more energy to refine than expected to continue until 2020, when residential traditional petroleum. Tar sands extraction emissions are expected to reach 46 MtCO2. only recently became economically viable when Emissions from buildings in the commercial international oil prices rose in the middle of sector have actually declined since 2005. In the last decade, which pushed Canadian oil 2005, emissions were 38 MtCO2e, and by 2010 and gas emissions higher. The recently developed they had declined to 36 MtCO2e. As with the process of “fracking” for natural gas, or using residential sector, emissions decreased large volumes of water at high pressures to because of gains in efficiency despite new force gas out of the ground, has also increased added capacity. Most of these efficiency gains oil and gas emissions. The process allows the have been realized, however, and emissions escape of methane, which is a potent GHG. from the commercial sector are expected to
Because of high worldwide energy prices, the climb to 40 MtCO2e by 2020 as a result of an use of these techniques is projected to continue increase of 170 million m2 in floor space. and Canadian oil-and-gas emissions are expected to rise from 153 MtCO2e in 2005 to 199 MtCO e in 2020, an increase of 30 percent. 2 12.2 Impact of ICT The Canadian power sector contributes 17 on GHG emissions percent to the overall emissions total, a low percentage relative to other industrialized The Canadian ICT sector may not be as well- nations. Hydropower produces 58.2 percent of positioned as other high-income countries to Canadian electricity while nuclear, wind, offer GHG abatement solutions. In an annual solar, and other renewables constitute another survey conducted by the International 16 percent. Overall, 74.2 percent of Canadian Telecommunications Union that measures electricity comes from low-carbon sources.163 uptake rates and growth potential of ICT This trend toward decarbonization of the readiness, Canada was ranked twenty-sixth.164 electricity sector is projected to continue. Even The principle concerns for Canada are relatively as capacity is expected to grow between 629 low ICT uptake by businesses and low TWh in 2010 to 734 TWh in 2020, emissions economic impact. Though Canada’s business are expected to decline from 107 MtCO e to 95 2 uptake is only slightly below the high-income MtCO e over the same period. 2 country average, lower-than-average uptake
Finally, the buildings sector emitted 79 MtCO2e could present challenges for ICT-enabled in 2010, which was 11 percent of Canada’s overall abatement solutions. Adoption by businesses emissions, having decreased from 85 MtCO2e is critical to ensuring the success of many of 163. “Electric Power Generation— in 2005. (On a per inhabitant basis, this figure the sublevers, and emissions reductions will Transmission and Distribution,” is lower than buildings emissions figures for not reach their maximum potential if business Statistics Canada other industrialized countries; the discrepancy penetration remains low. The principle 164. UN/ITU “Measuring the Information Society,” 2011 report 159 GeSI SMARTer 2020 12: Canada
concern of many businesses surrounds data The Canadian ICT sector is in a period of security. Some businesses are wary of transition. The manufacture of devices to information theft and many are not yet export abroad, primarily to the U.S., used to comfortable with trusting their most sensitive be a more significant component of the data to external companies. However, this is a Canadian ICT sector but in recent years there problem that can be alleviated over time as has been a shift away from manufacturing businesses learn from the experience of others toward the provision of services. Since 2002, that data security is generally not a concern. manufacturing revenues have declined 17 Moreover, the ICT sector may be able to increase percent while revenues from service firms business penetration by promoting profitable have grown 57 percent. As a result, ICT abatement solutions that will increase businesses’ manufacturing as a share of total ICT revenues efficiency. Another concern that could be has slipped to 6.0 percent as software and suppressing business uptake is that broadband computer services (80.9 percent), ICT Internet connectivity is significantly more wholesaling (9.2 percent), and communication expensive in Canada than in industrialized services (3.8 percent) have grown to represent nations.165 Using data-intensive applications 94.0 percent of the sector.168 The shift toward could be significantly more expensive for services has also changed the composition of Canadian firms than international businesses that make up the ICT sector. As competitors, given the current business service firms generally tend to be smaller climate. than manufacturing firms, the sector is
becoming increasingly fragmented and The ICT sector also has a lower economic dominated by smaller companies. A significant impact than ICT sectors in other developed number of Canadian ICT firms, 83.4 percent, economies. While Canada has higher levels of have between one and nine employees, while 165. “The Cost of Bandwidth: Canada connectivity and a superior business environment only 1.7 percent have more than 100 vs. the World”, Chris Stavropoulos, (in terms of the resources required to start a Xcrew employees.169 As the sector is dominated by business, corporate tax rate, and quality of its 166. The Global Information smaller firms that have less access to capital managers) than the U.S., the U.S. ICT sector Technology Report 2012, 309 and fewer employees to leverage, it may be contributes more as a percentage of GDP than 167. The Global Information challenging for these smaller firms to adapt Technology Report 2012, 19 does Canada’s.166 The principal reason for this their offerings to provide greater access to 168. Industry Canada, Canadian ICT is the superior innovative capacity of the U.S. Statistical Overview GHG abatement technologies as market and its enhanced ability to develop and 169. Canadian ICT Sector Profile, demand changes. Industry Canada distribute groundbreaking technologies.167
ICT emissions in Canada (MtCO e) Figure 71 2 ICT emissions in Canada (MtCO2e) 20 ICT industry’s greenhouse 20 +1.8% % CAGR 2011-2020 gas emissions in Canada 17.617.6 17.917.9
Source: Gartner, BCG analysis 1515 Data centers centers +6% 6
1010 NetworksNetworks0 % 0
55 End-user End-user devices -3% -3 devices
00 20112011 2020 GeSI SMARTer 2020 160 12: Canada
As ICT penetration is expected to grow, so too end-use sectors. The Canadian transportation will Canada’s direct ICT emissions. Emissions sector is currently the largest source of are slated to rise slightly from 17.6 MtCO2e in emissions, and ICT has the potential to yield
2011 to 18.0 MtCO2e in 2020, which represents large emissions reductions growth of 1.8 percent over current levels. The in this sector. The building Transportation represents principal driver of the rise in emissions is a 72 end-use sector is in the percent increase in the direct emissions process of adding capacity, the largest source of GHG coming from data centers. Emissions from and leveraging ICT to make emissions in Canada data centers are rising because of large new buildings more energy increases in data demand. The growth of data efficient is an easy application that can yield center emissions is partially offset by the large GHG savings. ICT can also lead to large decline in emissions from end-user devices. reductions through retrofits and changing Penetration of ICT devices is expected to energy consumption patterns within buildings. increase only moderately as new devices are becoming increasingly efficient, leading to a Transportation direct emissions decline from 11.0 MtCO2e in Context
2011 to 8.33 MtCO2e in 2020. The Canadian transportation sector represents the largest source of GHG emissions because of Canada’s heavy reliance on road transportation as 12.3 Abatement potential in a means of moving passengers and cargo. Much like the U.S. and Australia, Canada has a low transportation and buildings population density even in its largest cities. As a end-use sectors result, Canada’s public transit system was not sufficiently developed and cars became the pri- Though the oil and gas sector is projected to mary mode of transportation. Only 8 percent of become Canada’s largest source of GHG Canadians use public transportation on a daily emissions, the potential for abatement in that basis; in the U.K., one of Europe’s most car-de- sector is low, meaning ICT technology will likely pendent nations, the rate is double that of Cana- 170 170. 1. Greendex 2009: Consumer not have a large impact on reducing emissions da’s. Because of few developments in public Choice and the Environment – from that sector. As a result, we will consider transportation in recent years, Canada’s reli- A Worldwide Tracking Survey the Canadian transportation and building ance on cars has only grown. 2. Canada’s Emissions Trends, 24
Canadian road transittransit emissions emissions (MtCO (MtCO2e)2e) 250250
+33% Navigation 200200 195195 (Waterways) Railways Figure 72 Civil aviation Canadian transportation sector 146 Other transport 150150 146 greenhouse gas emissions
Source: Environment Canada
100100
Road transport 5050
0 0 19901990 20102010 161 GeSI SMARTer 2020 12: Canada
As Canada has become increasingly reliant on purchasing more than one car, increased the private transportation, emissions from number of vehicles on Canadian roads by 44 transportation grew 33 percent between 1990 percent over that 20-year period.172 There was and 2010. Several factors have Canada’s171 also an overall change in the vehicle mix. pushed emissions from private transportation Canadians became increasingly dependent on higher. The first is that there are more vehicles SUVs and light trucks, which emit more per on the road. Between 1990 and 2010, the driving kilometer driven than a smaller passenger vehicle. 171. Greenhouse Gas Inventory -age population increased 22 percent, and, given The third contributing factor is that Canadians 1990-2010, Environment Canada Canada’s lack of efficient public transportation, were also driving more miles with vehicles that 172. Canadian Emissions by Sector, Climate Change Connection this caused an increase in the number of cars. were already on the road—30 percent more on a 173 173. Ibid The population increase, combined with families kilometers-per-passenger basis.
55 MtCO2e Breakdown of ICT-enabled GHG Sublevers Drivers of sublevers reduction potential Figure 73 20% Eco-driving • Applications integrated into vehicle provide drivers ICT-enabled GHG with feedback on fuel usage and driving style, and can reduction potential in help anticipate upcoming traffic the transportation sector 2% Real-time • Current high penetration of real-time traffic alerts traffic alerts Source: BCG analysis in Canada diminish the importance of this sublever
1% Apps for • Could induce a higher percentage of Canadians to consider public transit public transit as an alternate means of getting to work
3% Crowd • Allows urban residents areas to share transit resources sourcing through car and ride sharing
7% Video- • Allows for meetings to be conducted over the Internet through conferencing A/V equipment even if participants are within driving distance
21% Telecommuting • Reduces the number of times that Canadians need to physically commute to work, which is the source of large amounts of emissions
9% Truck route • Utilizing real-time traffic reports can help trucks avoid optimization congestion and closed routes
26% Logistics • Prevents trailers from going empty by ensuring coordination network among truckers in a given area, which is crucial given the optimization large increase in Canada’s heavy trucking volume
6% Integration • When used in conjunction with ICT, EVs can provide power of EVs back to the grid, reducing the need for peaking power plants during periods of high power demand
Intelligent • Reduces the amount of time that drivers burn fuel on 1% traffic congested roadways management
Fleet • Allows a centralized fleet manager to ensure that drivers 3% management are driving at the appropriate speed, are braking correctly, and have the right tire pressure GeSI SMARTer 2020 162 12: Canada
Despite the emissions growth in recent years, Transportation Abatement Potential emissions from passenger cars are projected Because of the relative size of Canada’s to decline by 2020. Increasing fuel efficiency transportation sector, ICT could yield 55 standards, modeled after the more stringent MtCO e of GHG abatement, which is over a Corporate Average Fuel Efficiency (CAFE) 2 quarter of current transportation emissions. standards passed in the U.S. in August 2012, Of the 11 available transportation sublevers, will lower Canada’s passenger car emissions logistics network optimization, truck route from 22 kg CO e/100 km in 2010 to 19 kg 2 planning, telecommuting, and eco-driving CO e/100 km by 2020. Though these emissions 2 stand to have the most significant impact. are still high by European standards (the EU25 (Because of the conservative nature of the had already reached an average emissions Canadian government’s emissions accounting level of 16 kg CO e/100 km by 2006, for 2 for buildings, the buildings abatement instance), it will still be an improvement over potential is similarly conservative. The the current efficiency levels of the Canadian buildings abatement potential could be higher fleet.174 These efficiency gains will decrease than the 55 MtCO e stated).* Canada’s passenger car emissions from 79 2 175 MtCO2e to 73 MtCO2e over the same period. Logistics network optimization has the potential to yield 14.3 MtCO e of abatement, or Reliance on road transportation to move cargo 2 26 percent of the total ICT-enabled reductions has grown as well. Canada has well-developed in transportation. Logistics in Canada has rail and marine networks that move the such high abatement potential because of the majority of its cargo, but the use of heavy growing importance of heavy trucking as a trucking is growing quickly. At 44 freight ton- means of moving cargo and the logistics kilometers in 2009, railways move the most system’s relative inefficiency compared to that cargo by tonnage which, from an emissions of the U.S. If business continues as usual, characteristic, is a positive characteristic.176 emissions from heavy trucks will rise by 20 Railways are still more energy efficient than percent between 2011 and 2020 as the amount heavy trucks despite improvements in the of cargo transported by heavy trucks grows. efficiency of road transportation, and high Meanwhile, Canadian logistics system energy efficiency standards for rail are *Note: because of the conservative managers are struggling to reduce inventory nature of the Canadian government’s projected to continue pushing emissions lower. and bring down fuel costs. Canadian logistics emissions accounting for buildings, the However, the amount of cargo being moved buildings abatement potential is costs were 12 percent higher for manufacturers, via rail is declining; since 2000, there has been similarly conservative. The buildings 18 percent higher for wholesalers, and 30 abatement potential could be higher a decline of 5 freight ton-kilometers moved by than the 55 MtCO e stated percent higher for retailers than those of their 2 rail. Marine transportation is Canada’s most U.S. counterparts,178 all despite lower fuel prices important means of international trade in in Canada.179 These higher costs result from terms of both volume and value. Marine higher fuel and inventory expenditures, which transportation moved 27 freight ton-kilometers 174. “Germany’s Efforts to Reduce signify the release of unnecessary emissions. Carbon Dioxide Emissions From in 2009 but, like rail, is lessening in importance. Cars: Anticipating a New Regulatory More effective implementation of logistics Trucks moved 34 freight ton-kilometers in Framework and Its Significance for systems using ICT systems can make inventory Environmental Policy”, Kerry Rogers 2009, which is behind rail in terms of cargo flows more predictable, coordinate shipments 175. Canada’s Emissions Trends, moved but nonetheless the largest source of to reduce empty trailer space, and ensure that Environment Canada, 24 cargo transit emissions. Heavy trucks emitted 176. Transportation in Canada 2011, drivers are driving in an eco-friendly fashion Transit Canada 80 MtCO2e in 2008, and these emissions will to bring down logistics costs and reduce 177. Canada’s Emissions Trends, rise to roughly 96 MtCO e by 2020 as the 2 trucking emissions. Environment Canada, 24 amount of cargo moved by heavy trucks 178. State of Logistics: The Canadian increases.177 In the same vein, truck route planning has the Report 2008, Industry Canada ability to decrease emissions by 5.0 MtCO e, 179. State of Logistics: The Canadian 2 Report 2008, Industry Canada 163 GeSI SMARTer 2020 12: Canada
DRAFT
Case Study Telecommuting and Bell Canada At Bell Telecom, almost half of the company’s 48,550 employees are equipped to work remotely but a survey revealed that only 6 percent of workers choose to Source: “Innovating toward a low-carbon Canada: exercise this option. The typical worker only does so occasionally, and the average Using technology to transform number of days worked offsite for telecommute-enabled workers is 4.8 days per tomorrow,” World Wildlife Fund, 9 month (measured over 18 workable days including holidays, sickness, and so on). Regular telecommuters will work from home far more frequently, averaging 13.5 days per month.
Despite worries about productivity losses, both workers and management have come to embrace telecommuting. Workers cite lifestyle improvements as a major source of satisfaction and managers have seen that the use of technology has led to more efficient interactions. One Bell manager was quoted as saying, “The fact is some teleworkers can be more efficient than office workers through elimination of commuting, and reduced disruptions associated with normal office environments. Phone calls are more focused and shorter. Use of Instant Messaging has grown to replace e-mail and phone calls for obtaining info and permits more multitasking.”
Telecommuting at Bell has yielded large energy savings. Twenty percent of workers commute 60 to 90 minutes each way, which is very resource intensive in terms of both time and gasoline. Bell estimates that their telecommuting policy has led to
emissions reductions of 20,000 tons CO2e annually.
Teleworking also allows Bell business to be more resilient by ensuring remote work access during any potential emergency situation. GeSI SMARTer 2020 164 12: Canada
which represents emissions reductions of Business case 9 percent of the transportation total. Although many truckers may check to make sure they Most of the transportation sublevers are take the shortest route possible, this is not reasonable investments in Canada. Truck always the most fuel-efficient route because of route optimization has the strongest business terrain changes, speed limit changes, traffic, case because of the low up-front costs and and tolls. Advanced ICT software can help reasonable return on investment. Fleet truckers minimize their fuel costs and management and logistics optimization are maximize profits by determining the most also sensible investments because of the fuel-efficient route between two places. inefficiencies in Canada’s logistics systems
and its high costs relative to its southern Telecommuting can yield up to 11.6 MtCO e in 2 neighbor. Videoconferencing is also GHG abatement because of Canada’s heavy particularly attractive, as up-front costs are reliance on private cars for commuting. only the purchasing of A/V equipment and it Canadians tend to drive large cars, drive to allows employers to make a marked reduction work alone, and live in low-density communities, in the number of flights required for business. and therefore large quantities of fuel are Telecommuting has similarly low up-front consumed as people physically commute to costs and has a high return on investment, but work. Allowing people to work from home via the attractiveness of investment for employers mobile computers and the Internet makes a is low because of the split-incentives problem. round trip commute to the office unnecessary. Eco-driving is easy to implement and has low Telecommuting also enables employers to pay up-front costs, but the absolute return on for less office space and accordingly lower investment may be too low to induce major their heating and energy bills. behavioral changes. Traffic management and The eco-driving sublever has an abatement real-time traffic alerts are also attractive, which explains their already high penetration potential of 11.0 MtCO2e, representing 20 percent of the transportation total. Modifying in Canada. Integration of EVs is again the the way a person drives and maintains her car least attractive transportation sublever, as the has significant potential to increase fuel projected energy savings are not significant efficiency. Making small modifications to enough to offset the large initial investments behavior, such as driving 55 mph on the required by the Canadian government to highway rather than 75 mph, can yield improve infrastructure. significant energy savings, increasing fuel Videoconferencing has a particularly strong efficiency by 25 percent.180 Remembering to business case in Canada, particularly given close windows when driving over 50 mph can the long flights that connect Canada’s major reduce wind drag and increase energy cities. Depending on a business’s access efficiency, as can moderating air conditioning to capital and its willingness to spend and heater use. Drivers can also increase on videoconferencing systems, up-front energy efficiency by engaging in regular videoconferencing costs can range between vehicle maintenance, such as keeping tires very inexpensive to moderately expensive. For properly inflated and changing oil regularly. example, at Bell Canada in 2011, employees ICT can make it easier to adopt eco-driving conducted more than 1.1 million techniques by integrating technology into cars teleconferences and also substituted Web and that would inform drivers when they are videoconferences for travel. That reduced driving inefficiently and when to perform travel costs and eliminated the emission of an maintenance. Apps on smartphones and estimated 2,300 tonnes of greenhouse gases tablet computers could also perform a similar 180. California Energy Commission, during the year. On the low end would be a role without being directly built into a car. Consumer Energy Center 165 GeSI SMARTer 2020 12: Canada
Attractiveness Return on Risks and Overall Sublever of investment investment feasibility business case Figure 74 Business case assessment of Eco-driving transportation sector sublevers Real-time Source: BCG analysis traffic alerts Apps for Low attractiveness public transit High attractiveness Crowd sourcing
Videoconferencing
Telecommuting
Truck route optimization
Logistics network optimization
Integration of EVs
Intelligent traffic management
Fleet management
Web-enabled PC, tablet, or smartphone with a Barriers and policy solutions webcam that can connect people via cost- Despite the environmental benefits associated effective or even free programs found on the with adopting ICT to help lower GHGs, there Internet. Systems like HP’s Halo are obstacles that may prevent widespread videoconferencing system can cost up to adoption of these technologies. However, $350,000 but are so technologically advanced different policies at the national and provincial that it can feel as though all the participants levels could help incentivize their uptake. are in the same room.181 While video conferencing cannot replace all business travel, it can One of the most significant barriers to the decrease the number of less essential trips uptake of logistics systems is the unclear return taken and has been estimated to reduce on investment and trouble with financing. The business travel by 11 percent per year.182 Even problem with logistics expenditures is that they represent high upfront costs, meaning that 181. “Will Video Conferencing Kill the most expensive video conferencing systems the Road Warrior?”, the Economist can pay for themselves over a year, meaning they can be difficult to finance and have 182. Ibid significant, potentially adverse balance sheet 183. “Chapter 3: Measuring logistics that video conferencing systems can yield large implications.183 Though most logistics costs and performance,” savings over the course of the device’s lifetime. Supply Chain Management investments will pay for themselves over time, GeSI SMARTer 2020 166 12: Canada
Dependent on political Highest priority MtCO e 2 Dependent onenvironment political environment Highestfor priority implementation for implementation high 15.0 Figure 75 Optimization of logistics network Prioritization of policy by potential for CO e reduction Eco-driving Telecommuting 2 10.0 and business potential e reduction 2 Source: BCG analysis
5.0 Optimization of truck route planning Integration of EVs Videoconferencing
Potential for CO for Potential Fleet management and telematics Real-time Asset sharing traffic alerts Public transit apps 0 Intelligent traffic managment low Low attractiveness “Low-hanging fruits“ high
Attractiveness of business model
What stands in the way? What should happen?
Challenges Policy Key considerations Table 24 Behavior • ICT-enabled GHG reductions Use economic • Increases in gasoline tax or Barriers to adoption of in transit require large incentives to implementation of a carbon tax behavioral shifts facilitate good could be unpopular politically ICT-enabled GHG abatement solutions and policy steps to behavior • Given the infrastructure in place, economic incentives may not be overcome them enough to induce desired behavior, i.e., in public transit
Economics • Return on investment for Allow for tax • Fiscal implications of allowing logistics systems unclear write-offs of for equipment tax write-offs logistics equipment • Break-even point takes too long to reach
Missing • Dependence on limited Make funds • Despite investments, low population infrastructure public-transit system available for public density of Canadian cities could keep transit investments public transit use low
Split • Workers benefit from Reward businesses • Determine what percentage will incentives telecommuting, but management monetarily if be set for monetary incentive is concerned about lost percentage of work • Incentive must be large enough to productivity and harm to culture days are done via offset telecommuting capital costs telecommuting 167 GeSI SMARTer 2020 12: Canada
the payback period can vary widely. Each systems more financially attractive by company’s situation is unique, inventory can increasing gasoline taxes. Though this would fluctuate substantially, and it is difficult to further make the case for logistics accurately project future fuel costs. As a result, improvements, increased gasoline taxes are a company cannot be sure of exactly how long very unpopular politically, particularly it will take to recoup its initial investment. because Canada is highly reliant on cars. It With warehouse management systems, for would be most prudent for policy makers to instance, some firms can reach the break-even enact the first two solutions before raising point within three months whereas for other gasoline taxes. firms it can take well over 18 months.184 Inducing behavioral changes is another Because many companies are wary of making barrier to ICT adoption, particularly with large investments that have an uncertain, regard to eco-driving. Eco-driving requires potentially long payback period, they may changing ingrained driving behaviors, which choose to forego investing in logistics systems. can be difficult to do even when it makes To incentivize the use of logistics systems, the economic sense. Although there is little the government can take several steps. One easy government can do to force people to change step is allowing businesses to write off third- their behavior aside from more stringent party logistics expenses. If a company wants enforcement of speed limits, it can lead by to improve its logistics to increase efficiency example and provide the necessary and reduce its emissions but is concerned with information to make informed decisions. The investing in logistics technology itself, federal and provincial governments can collaborating with a non-asset-based logistics mandate that their employees utilize eco- firm is a low-risk way of doing so. This option driving applications to reduce fuel will be attractive for many companies consumption and possibly induce other (particularly retailers) as China is becoming Canadians to follow their example. The an increasingly important, though national and regional departments of unpredictable, trading partner.185 Contracting transportation could also provide information with external firms can help companies about the benefits of eco-driving by mandating manage the risk of unpredictable inventory that information on eco-driving be included fluctuations coming from China. The as part of drivers’ education programs and government can incentivize collaboration that its benefits be displayed in point-of- between non-asset-based logistics firms and contact displays when people renew their companies by allowing for companies to write licenses. off their third-party logistics expenses. There Alternatively, the government could mandate is a risk, however, that reducing the cost of the inclusion of eco-driving ICT in vehicles. contracting with logistics firms could facilitate The Canadian government has mandated offshoring and increase demand for specific modifications to Canadian vehicles transportation, both of which could cause (when it mandated daytime running lamps in emissions increases. all cars beginning in 1990, for instance) and Additionally, to incentivize transportation could do so again with eco-driving technology. companies to invest in their own logistics While this would be an effective means of equipment and to bypass third-party ensuring uptake, it could meet significant providers, the government could offer low- resistance from manufacturers and 184. “Top Five Ways Warehouse Management Systems Deliver ROI,” cost financing to decrease the upfront costs consumers, as the inclusion of the technology Inbound Logistics Magazine associated with setting up logistics systems. would drive up the sticker price of automobiles. 185. State of Logistics: The Canadian Finally, the government could make logistics Report 2008, Industry Canada GeSI SMARTer 2020 168 12: Canada
With telecommuting, there is a split incentives use public transit. Using ICT to integrate EVs barrier. Telecommuting helps workers reduce with a smart grid does not work if there is not their spending on energy because they do not a smart grid in place, and commuters will not have to pay to get to work and it saves them use apps to make public transit more predictable time in transit. However, employers see few if public transit remains highly inefficient. To benefits (slightly lower office space and energy address these concerns, the federal government requirements) and incur some costs from of should allocate more funds for smart grid telecommuting. Telecommuting requires that construction and increase funding for public employers pay for the ICT technology that transit infrastructure upgrades while also allows employees to work from home and exploring public-private infrastructure ventures there is a perception among many employers to bring down the cost of infrastructure that they will bear costs associated with investments. These types of infrastructure productivity loss and workplace culture upgrades are an expensive proposition, deterioration. To align incentives so that however. Given that funds are limited, these employers also have an interest in letting policy solutions should be deprioritized workers stay at home, the government should because of their high cost and relatively low allow for a tax credit if businesses allow a abatement potential. certain percentage of work days to take place from home. This credit must be large enough Buildings to compensate for both the hard cost of ICT Context systems upgrades and the associated soft costs. Canadian buildings emitted 79 MtCO2e in Lastly, the lack of infrastructure is a particularly 2010, which was 11.4 percent of Canada’s total difficult challenge to address. Upgrades to emissions. These emissions are driven by the infrastructure must be funded for people to fact that Canadian buildings are far larger start using electric vehicles or to more readily than the global average and heating needs are
Canadian building emissions (MtCO2e) 100 +15% 91 -7% Figure 76 85 Canadian buildings sector 80 7979 80 greenhouse gas emissions
ResidentialResidential Source: Environment Canada
6060
4040
Commercial 2020
00 2005 2010 2020e 169 GeSI SMARTer 2020 12: Canada
high because of the cold climate; heating in increased its standards for new buildings by Canada consumes roughly 63 percent of all 25 percent between 1997 and 2011. Many energy used in buildings.186 Emissions from builders have aimed for efficiency standards commercial and residential buildings each 25 percent higher than the minimum required make up roughly half of total buildings by the government, leading to further emissions emissions, commercial buildings having reductions.178 The federal government also ran
emitted 38 MtCO2e in 2010 while residential the ecoENERGY program with its provincial
buildings emitted 41 MtCO2e. equivalents to help homeowners pay for energy saving retrofits between April 2007 Buildings emissions have been on the decline and March 2012. Under this program, since 2005. Emissions have gone down 6 homeowners could receive up to CAD 5,000 in MtCO e, which represents a 7 percent 2 grants to help save energy, assuming that they reduction. These reductions resulted primarily met several criteria. Programs like these and from energy efficiency gains from commercial their commercial equivalents helped decrease buildings, which saw emissions decline from buildings emissions. 43 MtCO2e in 2005 to 38 MtCO2e in 2010. These emissions have been occurring as a result of Many of the easiest efficiency gains have already government efficiency programs in spite of been realized and government programs to increases in capacity. Between 2005 and 2010, aid with retrofits are beginning to wind down, Canada added 900,000 new households and meaning that building efficiency gains are 1.24 million m2 of commercial floor space. projected to stall. Moreover, Canada is expected to add another 1.8 million new households The federal government and numerous and 1.8 million m2 of new commercial floor provincial governments have instituted a space between now and 2020. The combination number of programs aimed at increasing the of slowing efficiency gains and more capacity energy efficiency of buildings. The National means that emissions are expected to rise by 186. “Energy Efficiency Trends in Energy Code for Buildings, which sets 15 percent to 91 MtCO e by 2020. Canada, 1990 to 2007,” Chapter 3, minimum efficiency standards for buildings, 2 Office of Energy Efficiency
38 MtCO2e Breakdown of ICT-enabled GHG Sublevers Drivers of sublevers reduction potential Figure 77 Integration • Wide-scale renewable use, particularly increased use ICT-enabled GHG reduction 6% of renewables of hydro and wind, is an opportunity to switch from potential in the building sector (7.3 MtCO2e) coal-generated power to carbon-free energy sources Source: BCG analysis Building • Would provide savings for nearly every type of building 6% management – very large addressable market but depends on quality system technology and favorable economics
(4.0 MtCO2e) Building • Large addressable market because of current inefficient 56% design design and high penetration because of low costs (10.9 MtCO e) 2 • Important to incorporate to diminish the impact of Canada’s new building capacity
Voltage • Large potential due to high electricity use in buildings, 2% optimization but dependent on smart grid construction
(3.4 MtCO2e) GeSI SMARTer 2020 170 12: Canada
Buildings abatement potential there is more land available for renewable energy installations, on-site renewable There are significant opportunities for technologies stand to make a significant abatement using ICT within the buildings contribution toward reducing GHGs. Solar sector, yielding a total of 26 MtCO e in possible 2 appliances and wind turbines can provide abatement. This represents a reduction of significant amounts of power in rural areas nearly a third of 2010’s total building and photovoltaic panels can be installed emissions. The two most significant abatement profitably throughout much of southern opportunities are optimized building design Canada.189 For these technologies to work, and the integration of renewables. however, they require smart home energy Building design holds the potential to reduce meters and monitoring technology. Because emissions by 11.2 MtCO2e, which is 43 percent many of these technologies will not supply 100 of the total abatement potential for buildings. percent of a building’s energy needs, they ICT can address GHG emissions through must be connected to an electricity meter that building design in two ways. First, much of the accounts for the renewables’ contribution to advanced technology installed to reduce the building’s energy use. Smart building energy consumption relies on ICT. Seemingly energy meters track total electricity small factors in a building’s design can have consumption and subtract from that the enormous implications for energy consumption amount of power provided by renewable levels. The challenge, however, is that there sources. ICT is also required to ensure that are so many different factors to take into renewable power sources are functioning consideration that it is more difficult to correctly. If a solar panel stops working or a maximize energy efficiency using traditional wind turbine goes offline, ICT is required to architecture tools. One of the ways ICT can let the building owner know that the renewable lower buildings emissions is by allowing energy generator is not functioning as it architects and developers to use computerized should. simulation, modeling, analysis, monitoring, Building management systems have the and visualization tools to determine how potential to yield 4 MtCO e in abatement, different factors would affect energy 2 which is 16 percent of the buildings total. consumption.187 The use of these tools will be Building management systems control a wide particularly helpful in Canada as the country variety of building components, such as power continues to add building capacity. Second, systems; heating, ventilation, and air ICT can be leveraged to determine the energy conditioning; and plumbing. They can reduce performance of buildings and identify energy use and emissions by ensuring that common inefficiencies. Policy makers can resources are conserved by turning lights off then use this information to determine best when occupants are not in the room, reducing practices and opportunities and pass heating and cooling at night, and using smart legislation that aims to promote these best sensors to reduce water waste. Because of the practices. high heating requirements in Canada, The integration of renewables has the building management systems stand to make potential to reduce emissions by 7.5 MtCO2e, a significant reduction in heating which is 29 percent of the abatement potential requirements. Building management systems for buildings. Canada has incredible resources are characterized by hardware connected to 187. “Information Society: to leverage with regard to renewable energy, computers and software that oversee and ICT for Sustainable Growth,” particularly wind energy and, despite its maintain the building. European Commission northerly latitude, solar energy.188 Particularly 188. “Solar Energy Overview,” Centre for Energy for commercial and farm buildings, where 189. Ibid 171 GeSI SMARTer 2020 12: Canada
DRAFT
Case Study Manitoba Hydro Place When the developers of the Manitoba Hydro Place wanted to build one of the most energy efficient buildings in North America in Winnipeg, Manitoba, they knew it was bound to be a challenge. During the winter, temperatures in Winnipeg regularly dip below zero Fahrenheit and buildings must withstand a stiff southerly wind. Keeping energy use, particularly energy for heating, down to a minimum in spite of the adverse climate is not easily achieved.
Despite the difficulty, the use of ICT throughout the design process helped the architects reach their conservation goals. After conducting a number of computerized site evaluations, the builders were able to settle on a site that would take advantage of Manitoba’s unique sunny winters and strong winds. By designing the building so no office was more than 30 feet from a window, the architects were able to cut down on power requirements for lighting and even used Manitoba’s stiff winds to naturally circulate air throughout the building without relying on systems powered by electricity. The structure also has system features to naturally cool it during warmer months. For instance, when the temperature in the building rises above a certain threshold, sensors will communicate with automated windows that open to allow warm air to escape. All these ICT-enabled solutions have yielded energy savings for Manitoba Hydro of roughly 66 percent over usage in similar buildings in the area.
Not only is this building extremely energy efficient, but it has also integrated renewable energy sources into its energy supply. The building is powered primarily by geothermal wells and relies on solar power and hydropower to meet demand as required. The Manitoba Hydro Place’s high levels of efficiency combined with the use of renewable energy greatly reduces the amount of GHGs released by the building. The use of ICT in new constructions across Canada can help combat emissions growth even as Canada continues to add more building capacity. GeSI SMARTer 2020 172 12: Canada
Finally, voltage optimization can reduce GHGs local environmental conditions (that is, in Canada by 3.4 MtCO2e, 14 percent of the sunshine and wind gusts), knowing with buildings’ total abatement. Many appliances certainty the return on investment of a function best on a lower voltage than what is renewable energy system at a particular actually supplied by the grid, and voltage location is impossible. Moreover, investing in optimization decreases incoming voltage to home renewable-energy systems represents a reduce energy use, power demand, and significant upfront investment that most reactive power demand. Losses within the households cannot make. Commercial lenders devices are reduced and the equipment are often reluctant to finance such purchases operates at its peak efficiency level. Voltage because of the unclear return on investment. optimization extends the life of the electrical Government lending, which is currently on equipment and reduces GHG emissions. hold, is often required to spur the purchase of home renewable energy systems.
Barriers and Business case recommended policy solutions The building design sublever is by far the most Most of the difficulties surrounding ICT attractive investment opportunity. Hiring adoption in buildings involve financing and architects and engineers that have the economics. Many homeowners and small expertise and tools required to design a more businesses may not be able to gain access to energy efficient building may be more the capital they need to fund energy efficiency expensive than hiring less specialized upgrades. For small-scale energy efficiency professionals, but this relatively small upfront projects, it can often be difficult to secure investment can yield large dividends over the funding from retail banks and, as a result, course of the building. Moreover, it is easier to policy intervention is needed. To ensure that build a new building that incorporates homeowners can continue to invest in energy efficient technology than it is to retrofit an efficiency, the federal and provincial older building. Building management systems governments should reinstate and expand the require a relatively high initial investment, but ecoENERGY programs that were suspended in have been proved to help reduce heating, early 2012. This would allow Canadians that cooling and lighting costs and are likely to did not take advantage of the program the yield a positive return. Voltage optimization first time around to have the opportunity of requires a lower up-front investment than investing in energy efficiency. It should also building management systems, but the return raise the program cap to a level higher than is likely to be lower and the payback period CAD 5,000 so that more expensive projects, longer. Integration of renewables is the least such as home renewable energy systems, that attractive of the sublevers from a business were not initially covered would yield perspective. additional efficiency gains. And, as funds are not unlimited, policy makers should focus Renewable integration is not particularly their efforts and funds on those projects that attractive in the absence of government will yield the highest abatement potential per assistance. Power generation from coal and dollar spent. hydro is cheaper per kWh than power generated from wind and solar if there are not The government should also consider feed-in tariffs to make up for the disparity in extending financing through the program to cost (the disparity being dependent on several larger businesses. If the payback period for local factors). And, by virtue of the fact that certain energy-efficiency investments is too renewable power generation is dependent on 173 GeSI SMARTer 2020 12: Canada
Attractiveness Return on Risks and Overall Sublever of investment investment feasibility business case Figure 78 Business case assessment Integration of renewables of building sector sublevers Building Source: BCG analysis management Low attractiveness systems
High attractiveness Building design
Voltage optimization
Dependent on political Highest priority MtCO e 2 Dependent onenvironment political environment Highestfor priority implementation for implementation Figure 79 high 15.0 Prioritization of policy by potential for CO2e reduction and business potential Building design 10.0 e reduction Source: BCG analysis 2 Integration of renewables
5.0
Voltage optimization Building management system Potential for CO for Potential
0 low Low attractiveness “Low-hanging fruits“ high
Attractiveness of business model GeSI SMARTer 2020 174 12: Canada
long or uncertain, businesses may balk at the through a CO2e tax or permit system is easier investment. Providing low-cost financing technically to implement and requires less could make the investment opportunity more time to induce people to take up the attractive for uncertain investments. technology. The problem, however, is that incorporating the externalities of GHG From an economics perspective, some emissions into the price of energy is politically technologies and sublevers may not yield high very unpopular and would be challenging to enough energy savings to be profitable at a do in the absence of an international GHG small scale. There are two things that can reduction treaty. Lowering the price of the remedy this situation: one is to raise the price sublevers by encouraging innovation is much of energy and the other is to lower the cost of more popular politically but is more the technology. Raising the price of energy
What stands in the way? What should happen?
Challenges Policy Key considerations Table 25 • High up-front costs of some Provide easy • Create governmentally funded Financing Barriers to adoption of solutions prevent mainstream access to capital but privately managed green adoption finance fund to ensure that ICT-enabled GHG abatement • Low availability of financing NPV-positive projects can solutions and policy steps for small-scale projects proceed to overcome them
• Certain technologies and Change • Promoting technological Economics sublevers are not NPV-positive economics innovation that drives at small scale, e.g., Building through: down costs at small scale Maganagement Systems or improves performance • Offereing Tax rebates for EE upgrades
• No incentives for companies Provide • Implementation to source energy generated incentives of a carbon market from renewable sources to purchase • Renewable-energy-portfolio renewable standards for power providers energy
• Lack of awareness can be abarrier Expand the • Expand the program to Awareness in some cases even if the solutions EnerGuide include more devices & education program do not involve high cost and the • Legislate that ratings be targeted at economics work, e.g. Voltage more prominently displayed Optimization educating consumers • Increase public visibility of the program through advertising
• Tenants or others who are renting Create • Encourage building owners to Split capture benefits of efficiency regulatory implement carbon abatement incentives upgrades but the owner will not structures that solutions by transferring some (landlord/tentant problem) make the investment unless ROI align incentives of the energy cost savings from is guaranteed tenants to owners • Complex ownership structure • Implementation of property for large buildings prevents taxation based on energy pushing abatement solutions efficiency as far as is economically reasonable or possible 175 GeSI SMARTer 2020 12: Canada
challenging to achieve. Creating an enabled technologies exist to reduce home environment that allows for technological and commercial energy use. Even when people development by providing tax breaks for R&D are aware of different means to reduce energy and increasing intellectual property consumption, they may not understand the protections for GHG abatement technology magnitude of the energy and money savings. takes years to yield results and will not As a result, it is important that policy-makers immediately address the economic concerns help consumers and businesses understand that are hampering uptake. the potential savings by adopting energy efficient technology. The Canadian A second concern surrounding the economics government already has a program called of ICT uptake in buildings is that there are EnerGuide that allows people to compare the limited incentives for consumers and relative energy efficiency of different businesses to integrate renewable energy into appliances and provides home-energy- their power supply. In the absence of efficiency tips, such as using insulation to government policies, it is easier and often reduce heating costs. EnerGuide should be cheaper for most building owners to get their expanded to include ICT-enabled energy power from utilities that produce electricity solutions so that consumers have a better idea from fossil fuels. Feed-in tariffs or guaranteed of how much money they can save. It should payments per kWh of electricity produced also provide information to builders and from renewable sources are an excellent way designers about how they can leverage ICT in of convincing many building owners to install the design of energy-efficient buildings. renewable energy capacity on site. Feed-in tariff rates are set by policy makers to cover Finally, there is a split incentives problem for the cost of a device’s installation and ensure a landlords and tenants when investing in reasonable return on investment. Ontario energy-efficient technologies. Although some already has a feed-in tariff program for small- tenants have their utilities included as part of scale renewable projects called microFIT, their rent, many tenants are paying their own which pays a guaranteed price for renewable energy bills, and the landlords, who typically energy installations with a capacity of 10 MW are the ones investing in energy efficiency or under for 20 years.190 Though renewable improvements, have little incentive to do so in energy systems are not viable investments for this case. Given that they do not capture the all buildings given their local conditions, feed- energy savings, there is no rationale for them in tariff programs like microFIT can reduce to do so. As a result, policymakers should the risk of installing such systems for create regulatory incentives that align the homeowners where renewable energy systems interests of landlords and tenants. One way are viable. To promote renewable energy they could do this is by transferring some of integration in buildings across Canada, the the energy cost savings from tenants to owners federal government and other provinces through a small rent increase or through some should adopt feed-in tariffs modeled after other contractual measure. Alternatively, Ontario’s. However, feed-in tariff programs localities could index their property taxes to can be expensive and provinces will need to energy efficiency to incentivize energy take into account their individual fiscal efficiency upgrades. situations when determining the size of the program.
There is also concern surrounding a lack of
awareness of energy abatement solutions. 190. “What is microFIT?”, Many people may not be aware that ICT- Ontario Power Authority GeSI SMARTer 2020 176
India 177 GeSI SMARTer 2020 13: India
13 are much lower when compared to developed countries: India’s 2010 CO2 emissions were 1.5 tons per capita, as opposed to the EU-27 per India capita figure of 8.1 tons. India’s per capita emissions are low even compared to other big 13.1 Context developing economies. For comparison, China had per capita emissions of 6.8 tons in 2010 India’s rapid economic growth has led to high and Brazil’s per capita emissions were 1.9 growth of greenhouse gas (GHG) emissions. In tons.196 With regard to emissions intensity, 1994, India’s total GHG emissions were 1,252 India is roughly the median of the developing MtCO e; by 2007 those emissions had reached 2 economies. India’s 2005 emissions intensity of 1,905 MtCO e, which represents an increase of 2 .37 kg CO e per USD of GDP is between that of 52 percent over that period.193 2 Brazil and China and has recently been on the A longer time-series of GHG emissions is not decline; between 1994 and 2007, India’s emissions intensity decreased by more than 30 available, but a look at CO2 emissions show s that rate of emissions growth has increased percent.197 The Indian government is hoping to maintain the downward trajectory of its 193. “India: Greenhouse Gas since 2005 as a result of faster rate of economic Emissions 2007,” Ministry of Forests emissions intensity and has stated a reduction expansion since 2005. CO2 emissions increased and Environment, Government of India. by 4.6 percent CAGR between 1990 and 2005 target of between 20 and 25 percent of the Note: these figures exclude land use 198 changes while Indian GDP growth averaged 6 percent 2005 level by 2020. 194. World Bank per year, and CO emissions growth rose to 7.3 2 Emissions have grown in almost all sectors 195. EDGAR percent between 2005 and 2011 while GDP 196. “Long-term Trend in Global CO (with the exception of agriculture), but the 2 growth accelerated to 8 percent per year (see emissions, 2011 report,” JRC European 194 most significant sources of emissions growth Commission, 16 Figure 80). have been from the power and industrial 197. 1. Ibid, 2. “Summary of GHG Reduction Pledges Put Forward India emitted 5.6 percent of the world’s total sectors. Emissions from the power sector grew by Developing Countries”, World CO emissions in 2010, making it the world’s from 355 MtCO e in 1994 to 719 MtCO e in Resources Institute 2 2 2 2007, a CAGR of 5.6 percent. This emissions 198. “India Announces Plan to Slow third largest emitter behind China and the Emissions,” The New York Times U.S.195 On a per capita basis, India’s emissions growth has been driven by increases in
Figure 80 India‘sIndia's COCO22 emissions (Gt) (Gt) 2.5 India‘s CO2 emissions accelerating due to faster +7.3% 1.97 economic growth since 2005 2.0
Source: 1. xxxxx 1.5 +4.6% 1.29
1.06 1.0 1.0 0.87
0.66 0.5 0.5
0.0 0.0 19901990 1995 2000 20052005 20112011 % of global 2.9 3.7 4.2 4.4 5.8 CO2 emissions
GDP ($ Tn)1 .27 .35 .47 .65 1.03 GeSI SMARTer 2020 178 13: India
electricity demand. As incomes have grown in the second-largest cement producer after India, the demand for electrical appliances China and has pushed emissions higher.204 such as TVs, refrigerators, and air conditioners Transportation emissions are also on the rise has increased. Increased power demand in the because of a more than an eighteenth-fold commercial and manufacturing sectors has increase of the number of vehicles on India’s also pushed electricity use higher. As the roads since 1985. In 1985, there were 5.4 energy demands from homes, stores, and million registered vehicles on India’s roads, factories have grown as a result of India’s and by 2007 that number had exploded to 99.6 modernization, so too have the emissions million.205 Eighty-seven percent of the from the power sector. emissions come from road vehicles, 7 percent Emissions growth in the power sector was come from aviation, 5 percent from the rail exacerbated by two factors: the inefficiency of system, and 1 percent from water transport. the Indian power grid and the use of coal to Diesel, which is highly polluting, is the meet demand increases. The Indian power dominant fuel used for road transportation in grid is highly inefficient by international India. It makes up 65 percent of the total fuel standards. The Indian national average used in road transportation, while gasoline transmission and distribution (T&D) loss is 22 makes up only 24 percent.206 Emissions from percent of generated power, and in some states transportation remain a relatively small this figure can be as high as 50 percent.199 By portion of India’s overall emissions, at 7.5 comparison, in China this figure is only 6 percent of the total. Nonetheless, transportation percent.200 T&D losses are high in India emissions are growing significantly faster at because of a combination of high levels of 4.5 percent CAGR than the 2.9 percent CAGR electricity theft (particularly in rural areas) growth of total emissions. Transportation poor management of power generators, and emissions are growing faster than the overall grid infrastructure. Because of the highly total because of the rapid increase in the inefficient grid, India must add additional number of vehicles, a shift in vehicle mix generation capacity and generate more toward more passenger cars, and a heavier emissions to meet demand. Moreover, India reliance on trucking. The sector’s emissions has primarily relied upon fossil fuels when will likely continue to grow rapidly as a result adding additional capacity. Estimates vary, of huge latent demand. In 2009, India was but in 2009 electricity generated from coal, ranked one hundred thirty-ninth in the world 199. “Transmission and natural gas, and oil comprised between 65 in terms of per capita car ownership in 2009, Distribution Losses (Power),” The Energy Resources Institute and 84 percent of India’s supply, with energy with 18 cars per 1000 people. In the U.S., that 200. Ibid 207 from renewables (excluding hydro) making up rate is 812 cars per 1,000 people. 201. “World Energy Outlook 2011,” IEA approximately 2 percent of India’s electricity 202. Over 69.6 percent of the sector’s Agricultural and land use emissions, though emissions are generated by cement, supply.201 declining both in absolute and relative terms, metal, and chemical production. 203. “India: Greenhouse Gas Emissions Industrial emissions, particularly those from remain India’s third-largest source of 2007,” Ministry of Forests and steel, cement, and chemical production, are emissions. The sector’s footprint in 1994 was Environment, Government of India becoming an increasingly significant source of 355 MtCO2e, which represented 27.6 percent of 204. “Indian Cement Industry,” India’s emissions.202 GHG emissions from total emissions, but by 2007 it had declined to Binal R. Vora 205. “India: Greenhouse Gas industry rose to 413 MtCO2e in 2007, up 49.0 334 MtCO2e, representing 17.6 percent of total Emissions 2007” Ministry of Forests and Environment, Government of India. percent from 277 MtCO2e in 1994, representing emissions. The majority of India’s agricultural a CAGR of 3.1 percent.203 Of the rise in emissions result from the raising of livestock Note: by 2008, this figure had risen to 106 million registered vehicles industrial emissions, 51.6 percent can be (64 percent), which is a particularly emissions- [source: Department of Road attributed to increases in cement production. intensive process because livestock release Transport and Highways] 206. Ibid As India has become increasingly urban, high methane as a byproduct of digestion. Rice 207. “Motor vehicles (per 1000 domestic demand for cement has made India cultivation, crop soils, and crop residue people)”, World Bank 179 GeSI SMARTer 2020 13: India
burning comprise 21 percent, 13 percent, and reduce India’s emissions intensity, the 2 percent of total agricultural emissions, legislation states that these goals should not respectively. Much of the decline in agricultural interfere with economic growth and efforts to emissions resulted from the decline in raise living standards.211 The legislation emissions from livestock. The number of cattle explains that these goals were set because the decreased by 1.2 percent CAGR between 2003 government believes that they would yield and 2007, leading to lower methane both economic and environmental benefits. emissions.208 More irrigation use in rice The federal government has pledged, however, cultivation increased methane emissions, but that at no point during its development will not enough to offset the decline in emissions India’s emissions exceed the per capita levels from livestock. And, unlike in many tropical currently seen in developed nations. developing countries such as Brazil and Indonesia, emissions from land use changes are not as serious a concern in India. In fact, through reforestation and reclaiming land to 13.2 Impact of ICT be used as grassland, India saw an increase in on GHG emissions
the carbon stock of its land by 67.8 MtCO2e. In recent years, India has made some progress Current policy environment in India toward broader and deeper penetration of ICT, but the country’s track record is mixed. At the national level, the Indian government Low usage rates and a poor regulatory has set goals that seek to moderate its GHG environment continue to plague Indian uptake emissions. The National Action Plan on of ICT, but there are encouraging signs that ICT Climate Change (NAPCC), passed in 2008, is is being used as a base upon which a significant India’s flagship climate change program. It economic transformation is being built.212 has set eight missions that aim to improve India’s environmental conditions by 2017.209 India has significant improvement to make in One component of the NAPCC is the national terms of individual ICT usage. There were 612 solar mission, which seeks to promote the mobile subscriptions per 1,000 Indians in 2011, development of solar energy and has set a goal which is low by international standards; this of increasing solar PV production to 1,000 figure puts it in one hundred seventeenth MW/year by 2017. A second mission is to place out of 142 countries considered. However, increase energy efficiency, which the the number of subscribers is substantially lower government hopes will yield 10,000 MW/year since many consumers have multiple phones 208. Ibid 209. “Impact of Climate Change energy savings through economic incentives to take advantage of rate differences between Policies on the Growth of the for more energy efficient appliances and by carriers. As a result, only 26 percent of Indians Indian Economy” mandating efficiency increases in large are unique mobile phone subscribers.213 210. “India Announces Plan to Slow Emissions,” The New York Times energy-consuming sectors. The government is However, it is important to note that even a 211. “Summary: India’s National Action also seeking to reduce emissions from waste low penetration rate implies a large number of Plan on Climate Change“ Center for disposal, particularly in urban areas, by subscribers given India’s large population. Climate and Energy Solutions encouraging recycling and by using more fuel- 212. “The Global Information India performs even more poorly when Technology Report 2012,” efficient waste collection vehicles. A fourth World Economic Forum, 22 Internet usage is considered.214 Only 7.5 percent goal is to increase forest coverage from 23 213. “GSMA Announces New Global of individuals regularly use the Internet, Research that Highlights Significant percent of India’s land mass to 33 percent. Growth Opportunity for the Mobile placing India in 124th place in terms of Internet Industry,”GSMA As mentioned earlier, the Indian government usage. 215 A lack of fixed and mobile broadband 214. “The Global Information has stated a targeted reduction of 20 to 25 availability is the key driver of the low personal Technology Report 2012,” 210 World Economic Forum, 230 percent of the 2005 level by 2020. While use of the Internet. For instance, only 2 percent these goals are ambitious and would help of the population uses broadband. To overcome 215. Ibid GeSI SMARTer 2020 180 13: India
this problem, the government launched a And, despite relatively low uptake by individuals, program in February 2012 called the Bharat uptake by business and government is high by Broadband Network Limited, which aims to lower-to-middle income country standards, increase broadband connectivity to 600 million placing Indian businesses as the fourty- connections by 2020.216 A second encouraging seventh most ready adopters of ICT of the 142 trend is that mobile broadband subscriptions countries considered.220 The government has surpassed fixed broadband subscriptions also focused on ICT as a means of addressing within 18 months of it first being available, many of India’s most serious concerns, suggesting that Indians are recognizing the including job creation, corruption, and potential of mobile devices as a means of education; government use of ICT is driving economic growth and improving accordingly higher than the income group quality of life. average. Moreover, the government is seeking to base a broader economic transformation on Despite the sector’s challenges, there are ICT and the sector has a more significant many reasons for optimism. One is that India economic impact than in peer countries. is the world leader in innovative, low-cost ICT Nonetheless, whether the sector will serve as a offerings. India has pioneered the world’s most base for broader economic changes remains to inexpensive computers targeted at consumers, be seen. including the USD 35 touch screen computer developed in 2010, which seeks to increase the Figure 81 shows ICT emissions in India. 216. “Frequently Asked computer literacy of India’s school children.217 Emissions in 2011 were 55 MtCO e and are Questions,”Bharat Broadband 2 Network Limited The cost of using high-speed Internet is declining expected to rise 9 percent CAGR to reach 118 217. “India develops the world’s as well; broadband data network providers MtCO2e by 2020. Though emissions increases cheapest laptop at $35,” Reuters have managed to pioneer a service that offers will be seen from all three components of 218. “The Global Information high-speed mobile access for less than USD 2 direct ICT emissions, 80 percent of the increase Technology Report 2012,” World Economic Forum, 82 per month.218 Further, mobile phone service in emissions will result from greater use of 219. Open Technology Initiative (http:// rates are among the lowest in the world at end-user devices, as higher levels of affluence newamerica.net/publications/policy/ USD 0.01 per minute.219 Increased availability drive higher levels of device uptake. an_international_comparison_of_cell_ phone_plans_and_prices) of low-cost ICT devices and services should The emissions increases from the ICT sector 220. “The Global Information help drive uptake as Indians grow progressively are exacerbated by the high inefficiency levels Technology Report 2012,” World wealthier. Economic Forum, 22
ICT industry's emissions in India (Mt CO e) ICT industry‘s emissions in India (Mt2 CO2e) 150150 >2x % of change 118 Figure 81 4 Data centers 4 Data centers ICT emissions in India, 100100 24 NetworksNetworks 16 2011 and 2020
55 4 50 50 End-user 33 72 80 devicesEnd-user devices
63
0 0 2011 2020 181 GeSI SMARTer 2020 13: India
of the power sector. For instance, limited grid selected because it is declining as a share of connectivity necessitates high diesel use to India’s overall emissions, and low incomes run cell phone towers in India. This leads to a and the lack of infrastructure in rural areas large footprint of the mobile phone network presented a challenge for ICT uptake. As India operators. A recent study by the Telecom is still developing, buildings are smaller and Regulatory Authority of India (TRAI) study consume less energy, and the sublevers found that 60 percent of the 400,000 towers identified may be too costly given Indian run on diesel generators, emitting over 10 Mt income levels. The emissions from the service
of CO2 annually. However, in April 2011. TRAI and consumer sector were lower than the mandated that 50 percent of all rural towers other considered end-use sectors and were and 20 percent of urban towers must be run therefore not used. on hybrid power (renewables and grid power) by 2015, with a further increase to 75 percent Power of rural towers and 33 percent of urban towers Context by 2020. 221 As India has experienced rapid economic growth, the demand for electricity from consumers, businesses, and industry has grown 13.3 Abatement potential quickly. Consumer demand has been driven by the desire to use electric lighting, TVs, in power and transportation refrigerators, and, of particular importance in end-use sectors India, air conditioning.222 Only 3 percent of Indians had air conditioning in 2008, but use For India, this study focuses on the abatement is expected to increase dramatically as there is potential in the power and transportation huge latent demand; by 2015, this figure is sectors because of their growing contribution expected to rise to 5 percent.223 According to to the overall emissions total and the ability of some estimates, the electricity required for ICT to contribute to emissions abatement. The cooling the city of Mumbai could potentially power sector is the largest contributor to equal a quarter of all the power used for air India’s emissions and they are projected to conditioning in the U.S.224 India’s industrial continue growing quickly as India experiences sector has also helped drive demand higher. economic growth. Moreover, particularly Because cement, steel, and chemicals, the through grid optimization, ICT stands to make backbone of India’s industrial sector, are very significant abatement contributions in that energy-intensive industries, their electricity sector. The transportation sector, though a needs have risen accordingly. Higher income relatively small portion of emissions currently, levels and subsequently high consumption 221. “Recommendations on approach is growing as a share of overall emissions, and towards green telecommunications” – allowed electricity use to surge 44 percent TRAI (April 2011) ICT can help improve the highly inefficient between 2000 and 2010, rising from 416 billion 222. “The Cost of Cool” The New logistics network. The manufacturing sector, 225 York Time, Elisabeth Rosenthal kWh to 601 billion kWh. though the second-largest contributor to GHG 223. ”Factors Favour Indian AC Market”, The Economic Times, emissions, was not considered because ICT- This rise in demand, however, has outpaced Sanjeev Sinha enabled abatement is more challenging as it increases in supply. 40 percent of Indians 224. “The Cost of Cool” The New remain unconnected to the power grid, and York Time, Elisabeth Rosenthal produces primarily cement, steel, and 225. CIA World Factbook, note: this chemicals, leaving less applicability for the even those who are connected regularly is beyond the population growth of identified sublevers, and low Indian wages experience blackouts, particularly in rural 18% over the same time period make automation of industrial processes less areas.226 India routinely runs energy supply 226. “Country Analysis Briefs: India,” Energy Information Administration attractive from a business perspective. The deficits that are 10 percent of peak demand 227. “Background and Impacts of agriculture and land use sector, the third- levels, leading to cascading blackouts.227 Not World’s Largest Blackout in India,” the even India’s major cities are immune, as Institute of Energy Economics, Japan largest contributor to GHG emissions, was not GeSI SMARTer 2020 182 13: India
evidenced by the largest blackout in history To meet most of the increase in electricity that took place on July 30 and 31, 2012, which demand, Indian utilities have boosted their left 670 million people (roughly 10 percent of fossil fuel-based capacity. Estimates vary, but the world’s population) in the dark.228 These between 68 and 84 percent of India’s electricity blackouts carry significant economic was generated by fossil fuels while renewables consequences. Not only do they cause productivity make up between 2 and 12 percent of electricity losses, but they also affect long-term economic generation.231 The government is hoping to decisions. Having to build emergency power change the situation surrounding renewables capacity to cope with the challenges posed by rapidly, however. India has set ambitious supply disruptions is a burden on business and targets for renewable electricity generation to hinders economic growth. ensure that renewables become a more significant component of the effort to meet The need to increase the electricity supply is increased demand. The government plans to exacerbated by the poor state of India’s power increase the share of renewables as a portion 228. “2nd Day of Power Failures infrastructure. The Indian power grid is highly Cripple Wide Swath of India,” of the power supply by 1 percent per year to the New York Times inefficient, and much of the generated power ensure that 15 percent of all electricity in India 229. “Transmission and Distribution is lost to transmission and distribution (T&D) Losses (Power),” The Energy comes from renewable sources by 2020.232 losses. Though estimates vary, the Indian Resources Institute 230. Ibid national T&D loss of electricity is approximately The principal way the government is looking 231. 1. National Action Plan on Climate 22 percent. In some Indian states such as to increase renewable energy generation is by change (2008), 2. CIA World Factbook, Jammu and Kashmir, the T&D losses reach increasing wind and solar power generation. 3. IEA, 4. “India is committed to increasing share of renewable energy,” 229 nearly 50 percent. By comparison, T&D losses Under the NAPCC, the Ministry of New and Government of India Press Information in both Canada and China are 6 percent.230 As Renewable Energy plans to almost double Bureau a result, Indian power generators must wind energy production from 13,900 MW in 232. “Strategic Plan for New and Renewable Energy Sector for the increase supply by a significant margin over 2011 to 27,300 MW in 2017. The ministry wants Period 2011-17,” Ministry of New and demand increases to meet demand requirements. to expand solar in a dramatic fashion as well, Renewable Energy
GHGG emissions in India‘s in India's power power sector (MtCOsector2e) (MtCO2e) 1,0001,000
800800 719 +6% Figure 82 GHG emissions in India’s 600 600 544 power sector, 1994-2007
400400 355
200200
0 0 19941994 2000 20072007 % Total GHG 29 38 emissions 183 GeSI SMARTer 2020 13: India
from 35 MW today to 4,035 MW by 2017, which on fossil fuelshas pushed the power sector’s goes well beyond the target of 1,000 MW set in emissions higher over the course of India’s the national solar mission in the NAPCC.233 economic ascent. In 1994, the emissions from
An important aspect of renewables as an the power sector were 353 MtCO2e and by energy source is that they are inherently 2007 emissions from electricity generation
decentralized forms of energy production, and had more than doubled to 719 MtCO2e. The as such, they can be particularly helpful in CAGR of emissions growth from the electricity electrifying rural areas. Even if this increase sector of 5.9 percent is more than double that in renewable energy capacity is realized, the of total emissions growth, which had a CAGR share of renewables as a percentage of total of 2.9 percent (including land use changes).235 electricity-generation capacity will remain low Ensuring that emissions growth from the 233. Ibid relative to fossil fuels, constituting only 15.9 power sector is moderated requires increasing 234. “Energy Scenario and Vision 2020 234 in India”, Journal of Sustainable Energy percent of electricity production by 2022. integration of renewable energy into the & Environment, 16 supply as well as modifications to the power 235. Despite increasing use of renewables, higher “India: Greenhouse Gas Emissions infrastructure to bring T&D losses more in 2007,” Ministry of Forests and demand for electricity and consistent reliance Environment, Government of India line with international levels.
141 MtCO2e Breakdown of ICT-enabled GHG Sublevers Drivers of sublevers reduction potential Figure 83 Demand • Reduction of peak load electricity 1% response Power sector abatement • Lack of necessary technological infrastructure expected (1 MtCO e) potential, 2020 2 to be a hindrance
Time-of-day • Could be useful to lower the peak demand, especially 10% pricing in urban areas where the peak is caused by heavy
(14 MtCO2e) air-conditioner use • Reduction potential due to removal of highly polluting ‘peaker plants’
Power load • Some potential to reduce total capacity required 7% balancing • Especially valuable if renewables are indeed scaled (10 MtCO e) 2 up to meet 15% of power demand as planned
Power grid • Use of ICT-enabled technologies to detect 65% optimization and reduce T&D losses (91 MtCO e) 2 • Large potential in India due to massive T&D losses (22%)
Integration • Large potential in India due to big solar and wind resource 17% of renewables • Low reach of the grid also makes it an attractive option (24 MtCO e) 2 to reach the unconnected population
Integration • Important for niche applications like replacing diesel 1% of storage use to run cell phone towers (6 MtCO2 emissions from into off-grid cell phone towers today) applications
(2 MtCO2e) GeSI SMARTer 2020 184 13: India
Power sector abatement potential power are produced during the day and cannot be used to meet peak energy demand When considering the ICT-enabled abatement at night, the renewable energy production potential within the power sector, the seven does not help offset the need for fossil fueled sublevers offer a combined 143 MtCO e of 2 electricity generation. By better synchronizing abatement. The most significant opportunities renewable energy supply with demand, ICT result from the optimization of the power grid can ensure that renewables are a viable and the integration of renewables. Time-of- alternative to fossil fuel energy sources and day pricing and power-load balancing also help India meet its ambitious goal of 15 offer significant abatement opportunities, percent of electricity being sourced from though the abatement potential is lower. renewables by 2020.
The use of ICT to optimize the state of the Time-of-day pricing has the potential to yield power grid stands to yield enormous CO e 2 13.8 MtCO2e of abatement in India by 2020, abatement because of its poor state of repair. which represents 9.9 percent of the Indian Even if T&D losses are reduced by just a third, power sector abatement potential. Time-of- to levels still high by international standards, day pricing, which requires the use of an optimizing the power grid would yield 91.4 advanced ICT-enabled smart grid to coordinate
MtCO2e of abatement. ICT can play a role in supply and demand fluctuations and prices, power grid optimization by gathering information would help reduce demand at peak periods by on suppliers, consumer behavior, and grid encouraging consumers and businesses to inefficiencies. Power generators, transmitters, consume electricity when demand is lower. and distributors can then use that information This would help prevent the addition of extra to analyze and address areas where T&D capacity to meet peak demand and utilization inefficiencies arise. Though the development of highly polluting peaking plants. of a smart grid would likely occur in phases over a period of time, using smart meters to Power-load balancing could yield 9.6 MtCO2e of determine efficiency losses would be among abatement in India, which represents 6.7 percent the first steps of development and is one of the of the power sector’s total abatement potential. easiest applications of smart grid technology.236 Power-load balancing would also require the While smart grid implementation is not the use of an advanced ICT-enabled smart grid to only way of addressing T&D losses, it is the communicate fluctuations in demand to a easiest way to simultaneously detect those power plant. Using this technology, the power efficiency losses and discover power theft. plant could then store electricity during off- peak periods and release it during periods of The integration of renewables is another high demand. ICT plays an essential role in significant opportunity for GHG abatement in this process by ensuring that this power is the Indian power sector, offering 23.8 MtCO2e stored and released at the right time. Power- in abatement. This is particularly important load balancing would prevent highly polluting as demand for electricity is expected to rise peaking plants from being online to meet 91.7 percent between 2009 and 2020; peak demand, which would accordingly renewables can play an important role in reduce emissions. meeting demand increases, particularly for rural areas that are currently not connected to the power grid.237 There are a number of 236. “Smart Grids White Paper, challenges with relying on renewables as a ” Center of Study of Science, source of power, primarily that production is Technology and Policy, 4 often not synchronized when demand is 237. IEA World Energy Outlook 2011 Annex A Tables for Scenario highest. For instance, if large amounts of solar Projections, India 185 GeSI SMARTer 2020 13: India
Attractiveness Return on Risks and Overall Sublever of investment investment feasibility business case Figure 84 Business case for Demand management power sector sublevers Time-of-day Source: pricing
Low attractiveness Power load
High attractiveness balancing
Power grid optimization
Integration of renewables
Integration of storage
Dependent on political Highest priority MtCO e 2 Dependent onenvironment political environment Highestfor priority implementation for implementation high 100.0100.0 Figure 85 Power sector sublever prioritization by potential for 90.090.0 Power grid optimization
CO2e reduction and business e reduction potential 2 Integration of renewables 20.020.0
Time-of-day pricing 10.010.0 Power load balancing Potential for CO for Potential
Demand response Integration of storage 00.0 low Low attractiveness “Low-hanging fruits“ high
Attractiveness of business model
Business case
The business case for most of the sublevers GeSI SMARTer 2020 186 13: India
identified is not particularly strong, mostly seems reasonably straightforward, it requires because they rely on infrastructure (such as a information coordination among power highly developed smart grid) that is not yet generators, transmitters, distributors, and widely available or has high upfront costs. As consumers.239 Currently, Indian utilities are a result, policy can play a significant role, focused on using ICT to reduce T&D losses, if particularly with regards to the adoption of they are considering using ICT monitoring at power grid optimization and the integration of all, and this type of ICT integration is far renewables. beyond the capabilities of Indian utilities today.240 Moreover, consumers, businesses, Demand response requires advanced smart- and industries need monitors that convey grid technology that enables power suppliers, price fluctuations so that they can change consumers, and appliances to communicate consumption decisions, or they need to have with one another to change electricity ICT-enabled smart appliances that operate consumption in response to supply fluctuations; only when energy prices are low. As only 7.5 this requires grid technology that is technically percent of Indians regularly use the Internet, advanced, expensive, and likely to be limited it is highly unlikely that consumer demand in India by 2020.238 Similarly, time-of-day will induce utilities to invest in advanced pricing of electricity requires a smart grid that smart-grid technology.241 So, although time- communicates price fluctuations to consumers of-day pricing could help reduce electricity and appliances and will be difficult to implement. demand and emissions in the future, the Power-load balancing is more feasible, but the realization of its full potential by 2020 is unlikely. return on investment is dependent on individual equipment conditions and is Barriers and recommended therefore difficult to predict. Power grid optimization has the potential to yield huge policy steps to overcome them savings in India because of high T&D losses There are several barriers that require policy and electricity theft, but installing grid intervention to drive uptake of ICT technologies. monitoring and optimization systems is an The multiple barriers to smart grid development expensive proposition and many utilities would are the most serious impediments to widespread find financing such upgrades challenging. ICT-enabled abatement-solution adoption. All Integrating renewables into the power supply the identified sublevers rely at least partially on has a strong business case in some circumstances deployment of a smart grid for proper (such as in remote villages far from a power functionality, which means that fostering smart grid connection), but renewables are often not grid growth should be prioritized. Although competitive with coal and other sources in deploying smart grid technology would have a terms of price. Moreover, successful integration large impact on T&D losses, significantly help of intermittent renewables is dependent on reduce additional capacity development needs, advanced smart grid technology. The integration and could eventually reduce energy usage of storage into off-grid power sources has the from consumers, the current state of the strongest business case of the sublevers, as the Indian power sector makes widespread smart high fuel prices in India makes diesel power grid deployment quite challenging. 238. “Technology: Enabling generators less economically competitive. One of the most challenging aspects of advanced the Transformation of Power Distribution,” Infosys, 32 Time-of-day pricing demonstrates the smart grid development is the fractured 239. “Technology: Enabling nonfeasibility of certain power sector sublevers nature of the power distribution network. the Transformation of Power in the absence of advanced smart-grid Currently there are 78 different utilities across Distribution,” Infosys, 36 technology. Time-of-day pricing requires that India, most of them smaller companies, with 240. Ibid electricity supply and demand be equilibrated several large, state-owned utilities distributing 241. “The Global Information Technology Report 2012,” through fluctuations in price. Though this most of the power, all overseen by a complex World Economic Forum, 230 187 GeSI SMARTer 2020 13: India
What stands in the way? What should happen?
Challenges Policy Key considerations Table 26 • A large number of utilities across Government • State-owned utilities distribute Barriers to adoption of Stakeholder India (78 in all), overseen by a leadership 75% of all power, which enables fragmentation ICT-enabled GHG abatement complex regulatory framework via state- the state to lead the setting owned solutions and policy steps to • Utilities, businesses, and of technological standards utilities and overcome these barriers consumers all must interface • Electricity board regulatory regulatory with advanced smart grid bodies have the authority boards • Adoption of uniform technological to set standards for grid standards can be a challenge technology
• Installing a full-blown smart Provide low- • Prioritizing installation of Financing grid or individual constituent cost loans to smart grid is an important technologies requires large help with lever to deal with India’s investment high up-front power challenges investment • Likely beyond the financial • Need political will to prioritize capabilities of most utilities availability of capital for the power sector
• The NPV of some sublevers may Subsidize • Economic feasibility for Economics be questionable given the sheer investment the government should be size of the investment required to encourage assessed given the already adoption high public debt
• Knowledge and awareness Provide and • Provision of necessary Awareness/ of ICT-enabled solutions is promote training to handle advanced technical often lacking among utilities educational technology is a prerequisite capability programs • If awareness is not a problem, a lack of technical skills is a Hire needed hindrance • Most utilities have had a talent 15-year moratorium on hiring
regulatory framework.242 In addition to of Energy and regulates interstate power utilities, there are many other players that transmission distribution, can mandate that would be a part of the advanced smart grid the standards set by the largest state-run system, including transmission control centers, utilities are those that are used to connect all businesses, and consumers. Coordination interstate grid elements together. However, as among these parties to ensure smart grid not all grids operate across state lines, the interoperability within the sector is vital to its regulatory bodies that oversee intrastate functionality, but fractured institutions could electricity transmission must also ensure that jeopardize that standardization.243 those smart grid technical standards are adopted at the state level to achieve uniformity. Policy-makers can play a significant role in the Given that the construction of the smart grid is setting of national smart grid standards. First, 242. “Can a Smart Grid Help India?,” a long-term process that will involve trial and Katherine Tweed, Green Tech Media given that the state-run electricity distributors error to determine the best technologies and 243. “Technology: Enabling provide more than 75 percent of India’s the Transformation of Power practices, policy makers should allow utilities Distribution,” Infosys, 38 electricity, they have significant power in to experiment with their own standards at a 244. “India power cut hits millions, selecting the most efficient technology among world’s worst outages,” Reuters small scale to learn which would work best for standards that can then be adopted 245. “Technology: Enabling India before scaling up those solutions to the nationwide.244 The Power Grid Corporation of the Transformation of Power national level.245 Distribution,” Infosys, 44-45 India, which is administered by the Ministry GeSI SMARTer 2020 188 13: India
A second concern is that economically distressed continued economic growth, there is a strong power distributors may not have the financial case for diverting funds to smart grid construction. resources or will to begin the process of smart The Ministry of Power has developed the grid deployment. Currently, utilities do not Restructured Accelerated Power Development pursue instances of power theft in rural areas and Reforms Program (R-APDRP) to promote and the government does not pay for the basic smart-meter deployment in two phases power it consumes, leaving the state-run power and offers financing to help pay for the companies in poor financial shape. Though infrastructure upgrades.249 It is primarily focused power distributors are likely to see positive on increasing the efficiency, accountability, returns by losing less power to inefficiency and and transparency of the grid rather than decreasing power theft, they likely would not allowing for bi-directional flows of electricity be able to finance the infrastructure upgrades and greater communication among different themselves.246 Across the state-run power sector, actors in the sector. For this program to meet for instance, the rate of return is -18 percent, its targets, however, it is imperative that the largely because of T&D losses and theft hurt funds are available as promised and that the profitability. Though smart grid technology program is appropriately administered. Moreover, would likely put them on better financial footing as this first stage of smart grid development over the next several decades, as shown by nears completion, a second legislative program positive net present value returns on smart grid will need to be passed to help with the deployment investments in other countries, smart grid of more advanced smart grid technology. investments are out of reach financially for 247 many utilities. Additionally, even if utilities can Though promoting smart grid development is finance smart grid purchases, many are not even the most significant barrier to power sector aware of the potential to use ICT to reduce ICT-adoption, there are other policy concerns inefficiencies and emissions; even if they are, as well. The economics surrounding the use of expanding grid access is prioritized over increasing renewable energy presents a challenge, for 248 the efficiency of the grid currently deployed. instance. Though the price of coal is expected to rise because of decreased mine productivity Addressing the financial concerns surrounding 246. “Technology: Enabling and difficulties surrounding coal exploration, the Transformation of Power smart grid deployment is more challenging it is still significantly cheaper as a fuel source Distribution,” Infosys, 6 than ensuring standardization. For the state- 247. “The Smart Grid Return than renewables like solar and wind energy. run corporations, the government could on Investment (ROI): A Catalog In an extreme example, in 2008 solar PV of Consumer and Utility Company provide low-cost financing or simply allocate generation could be up to 20 times more Benefits,” NEMA, 2-3 funds from the budget to pay for smart grid 248. “Can a Smart Grid Help India?” expensive than generating electricity from upgrades to the existing grid. For private Katherine Tweed, Green Tech coal.250 As a result, the government must make Media; “Technology: Enabling the corporations, the government could provide Transformation of Power Distribution,” solar PV and wind energy more competitive grants and low-cost financing for smart grid Infosys, 5 economically to combat emissions through 249. “Guidelines for the Re-structured projects that use the technology and mirror renewable energy integration. The National Accelerated Power Development and the efforts of the state-run power companies. Reforms Programme (APDRP) during Tariff Policy (2006) attempts to make renewable Of course, it is important to bear in mind that XI Plan,” Ministry of Power energy sources more economically competitive 250. “Indian Renewable Energy Status finances are limited, particularly in India Report,” National Renewable Energy with fossil fuels and mandates that utilities where there are so many development Laboratory, 19 purchase a certain amount of energy from 251. “Analysis of Renewable concerns competing for financial assistance, renewable sources.251 Though this is a good start, Promotional Policies and Their but smart grid deployment is something that Current Status in Indian Restructured the feed-in tariff structure is not entirely clear should be designated a high priority. As smart Power Sector,” Institute of Electrical and has not significantly contributed to renewable and Electronics Engineers grid technology would help reduce emissions, energy development in India.252 The feed-in 252. “The Development of Renewable increase efficiency, reduce the need to add Energy Power in India: which Policies tariff policy should be rewritten with a clearer more electricity capacity, and is vital to ensuring have been Effective?” Gisele Schmid, and more significant incentive structure. 29 189 GeSI SMARTer 2020 13: India
Another concern is lack of awareness within Transportation Sector the power sector about the ability of ICT to Context increase efficiency and reduce emissions. The Emissions from transportation remain a relatively power sector is marked by an aging workforce low percentage of India’s overall emissions total. and a lack of skilled workers. Because of higher The Indian transportation sector accounted incomes in other sectors, talent has been for 142 MtCO e in 2007, which was 7.5 percent siphoned and the average age of the employees 2 of India’s overall emissions in that year. India’s at the state electricity boards is over 50.253 As transportation emissions are expected to rise much of the workforce at both utilities and in both absolute terms and as a percentage of their regulatory bodies lack the knowledge and overall emissions, as transportation emissions the motivation to significantly transform the have grown 4.5 percent CAGR between 1994 power sector, few changes will occur until new and 2007 while overall emissions grew 2.9 talent is acquired. At many of the state-owned percent CAGR over the same period. The trends utilities, hiring as been restricted or banned for that have been driving fast transportation the last 15 years; this practice should be growth—namely, an increase in the number reversed to bring in workers who have the of vehicles, greater reliance on trucking, and technical expertise and exposure to ICT required an unfavorable change in vehicle mix—are to transform the power sector. Educational projected to continue, pushing emissions 90.5 initiatives to explain the current poor state of percent higher than 2009 levels by 2020.254 the power sector and how technology can help alleviate its problems should also be offered to Road emissions, which made up 94.3 percent employees. A more radical step would be to of India’s domestic transportation emissions privatize the state-owned utilities. Although in 2010, have been growing rapidly as a result 253. “Technology: Enabling 255 the Transformation of Power this would need to be intricately planned and of several trends. There has been a dramatic Distribution,” Infosys, 11 the impact on consumers carefully considered, rise in the overall number of vehicles on India’s 254. Contribution to India’s National it would make the sector more competitive roads, and growth is expected to continue. There Action Plan on Climate Change, and raise wages to attract new talent. were 99.6 million vehicles on India’s roads by Digital Energy Solutions Consortium 2007 and there are expected to be approximately 255. “Reducing Transport Greenhouse 256 Gas Emissions: Trends and Data 2010,” 140 million vehicles on the road by 2020. International Transportation Forum Even though this represents a 40 percent 256. “Energy & Emissions Outlook increase, Indian car usage will still be low by for the Transport Sector in India, international standards and the number of ” Dr. Sarath Guttikunda
GHGGHG emissionsemissions in India'sIndia‘s transportation transportation sector sector (MtCO (MtCO2e) 2e) 200200 Figure 84 GHG emissions in India’s 150150 142 NavigationNavigation transport sector, 1990-2007 +4% 1 5 RailwaysRailways 7 Aviation Aviation
98 50100 80
87%87 RoadRoad 050
0 19941994 2000 2007 GeSI SMARTer 2020 190 13: India
DRAFT
Case study Gram Power and smart grid As 40 percent of Indians currently have no access to the electricity grid, ensuring integration of renewable energy universality of grid access is a principal goal of the Indian government. The in Rajasthan
challenge, however, is that connecting small remote villages to the power grid can Sources: “Indian blackout held no fear be expensive and economically difficult to justify. for small hamlet where the power stayed on,” The Guardian; “Gram Power: Yashraj A pair of recent engineering graduates from the University of California, Berkeley, Khaitan’s ‘smart microgrid’ produces, stores renewable energy on location,” noticed during a summer trip to India the challenges faced by rural Indians who The Economic Times lacked reliable access to electricity, and they felt compelled to help. After graduation, the pair moved to the Indian state of Rajasthan and founded Gram Power, a start-up company that uses low-cost smart meters and renewable energy generation to electrify villages far from the nearest power grid. They managed to develop a smart microgrid system that relies entirely on renewable energy sources (solar PV, wind, and biomass) and that is distributed using a smart grid. And, rather than developing a system that can power only a few LED lights, the Gram Power system provides a standard 240VAC connection, which sets it apart from its competitors. By helping consumers switch away from kerosene-based electricity generation or from needing to connect to the coal-dependent grid, the use of island microgrid helps mitigate GHG emissions.
Gram Power distributes its electricity on a pay-as-you-go basis, and a household can purchase nine hours of lighting, six hours of a ceiling fan and television, and enough power to charge a cell phone—for approximately USD0.19 per day. Smart monitors allow Gram Power to bill its customers effectively and can detect theft and pilferage, which helps to keep prices down for paying customers. Because of clever financing and low T&D losses, the price of electricity from Gram Power is less expensive and more reliable than that provided by the government.
Gram Power had electrified 200 homes by the middle of 2012, but the company is hopeful that it will be able to power 500 households by the end of the year. Expansion is expected to occur even more rapidly in 2013. Through partnerships with the state and central renewable-energy ministries, the company hopes to have deployed 20 smart grids with 250 kW peak of generation to cater to 40,000 people by September 2013.
This innovative approach to electrifying rural villages has attracted attention around the world, winning more than ten prestigious international entrepreneurship awards, and provides a way of addressing rural electrification concerns while preventing the rise of GHG emissions on the path to development. 191 GeSI SMARTer 2020 13: India
vehicles will continue to rise as economic people and cargo, however, the rail system growth continues.257 often handles more than twice the capacity for which it was designed. 265 India needs to expand Moreover, the vehicle mix in India is changing its rail capacity, but limited financial resources from smaller vehicles, such as two-wheelers have prevented the infrastructure expansion and auto rickshaws, to larger cars. Though required to adequately meet demand. two-wheelers will remain the majority of the Indian fleet by 2020, the share of passenger cars Public transportation is used heavily, but is expected to rise dramatically.258 The share overcrowding, inefficiencies, and rising of cars as a percentage of passenger transport incomes are leading to its relative decline. will increase from 7 percent in 2005 to 22 Indian cities rely on buses for 90 percent of percent in 2020.259 And, as passenger cars their public transportation needs, but bus emit significantly more emissions than two- services are marked by undependable services, wheeled vehicles, this shift will contribute congested roadways, and a chaotic, uncoordinated significantly to emissions. Passenger cars, operating environment.266 During rush hour, which contributed 24 percent of transportation bus speeds can drop to 6 to 10 km/hr in the emissions in 2010, are expected to be the most crowded cities. Public-transportation largest source of GHG emissions in 2030, -related accidents are common, and tens of contributing 47 percent of transportation thousands of passengers are killed annually. emissions in that year.260 Despite poor service, most Indians cannot afford other means of transportation. Rising Higher reliance on trucking is also pushing incomes will facilitate a shift to using private road emissions higher. In 1990, the rail system transportation and will cut down on the handled 61 percent of cargo by weight and the number of rides being taken via public transit. remaining 39 percent was split between trucking In 2005, 71 percent of all passenger -kilometers and water transportation. Capacity constraints occurred on buses and trains; but by 2020, 257. “Energy & Emissions Outlook have caused the rail system to become relatively for the Transport Sector in India, that figure is projected to be only 48 percent.267 ” Dr. Sarath Guttikunda less important in cargo transportation, however, 258. Ibid as trucking rose to handle 45 percent of all A positive trend in public transportation is the 259. “An Assessment of India’s 2020 cargo by 2005. By 2020, trucking is expected to development of mass rapid-transit systems in Carbon Intensity Target,” Grantham 261 Institute for Climate Change transport 68 percent of all Indian freight. urban India. The Delhi Metro, which first began 260. “Energy & Emissions Outlook Trucks represent a small fraction of the vehicles operations in 2002, is India’s most developed for the Transport Sector in India,” on the road, but they are a significant contributor metro system to date. The system has 193 km of Dr. Sarath Guttikunda 261. “An Assessment of India’s 2020 to GHG emissions. In 2010, trucks represented track, carries 2.06 million riders daily and is Carbon Intensity Target,” Grantham 3 percent of the vehicles on the road but continuing to expand; by 2021, the system is Institute for Climate Change accounted for 35 percent of India’s expected to have expanded to 413 km of 262. Ibid transportation emissions.262 track.268 Other Indian cities are following Delhi’s 263. “The World Factbook: Country Comparisons: Railways,” CIA example. Kolkata, Chennai, and Bangalore The rail system in India plays a significant role 264. “India Transportation Sector have operational metro systems that are in the in carrying passengers and cargo across India’s Overview,” World Bank process of expanding and metro systems in 265. “The Crisis of Public Transport vast territory, but is marked by inefficiencies in India: Overwhelming Needs but another six cities are under construction and are Limited Resources,” John Pucher and capacity constraints. India has the fourth- scheduled to begin operation by 2014. Despite and Nisha Korattyswaroopam largest rail network, nearly all of which is run rapid expansion, overcrowding and unreliability 266. Ibid by Indian Railways, a state-owned corporation of service on Indian metro systems are becoming 267. “An Assessment of India’s 2020 that is one of the world’s largest railway Carbon Intensity Target,” Grantham increasingly common.269 Though the systems under single management.263 It carries Institute for Climate Change development of metro systems is likely to help 268. “Annual Report”, 17 million passengers and 2 million tons of alleviate private transportation needs to a Delhi Metro Rail Corporation freight daily and is one of the world’s largest degree, it is unlikely that they alone will be able 269. “Overcrowding is a challenge”, employers.264 Because of the sheer number of The Sunday Times handle all increases in transportation demand. GeSI SMARTer 2020 192 13: India
Transportation sector The optimization of truck routing, which has abatement potential an abatement potential of 7.6 MtCO2e, is of particular importance in India. India’s Across the 11 transportation sublevers, there is highways are narrow, congested, have poor a total of 80.2 MtCO e of ICT-enabled abatement 2 surface quality, and many are not accessible potential. The sublevers that offer the most under all weather conditions. Forty percent of abatement potential are the optimization of Indian villages are not connected to the logistics networks, eco-driving, telecommuting, highway system using all-weather roads and and the optimization of truck routing. the unpredictability of road conditions presents The optimization of logistics networks offers a significant transportation challenge. As these conditions can drastically affect the 22.4 MtCO2e of abatement potential, or 28 percent of the transportation total. Particularly amount of time it takes to move cargo, route as trucking is projected to exceed the importance planning systems that take these factors into of railways as a means of moving cargo, the account can substantially reduce emissions. rapidly changing cargo transportation sector Telecommuting has the potential to contribute offers many opportunities for efficiency gains 12.5 MtCO e toward abatement in the and GHG abatement. Advanced logistics networks 2 transportation sector. Generally, service are currently very nascent in India, workers that have the technology to contributing to fuel waste, loss of cargo, and telecommute are also those most likely to use high GHG emissions. Consider the transportation private transportation to commute. Given the of food, for instance. Despite facing chronic congested nature of large Indian cities, long food shortages, India loses between 20 and 40 commutes are relatively common and cutting percent of all food produced because of its the number of trips to the office would have a poor roads, lack of proper storage, and poor large impact on GHG emissions. Twenty-six intermodal connection facilities.270 And, percent of Indians spend over 90 minutes despite the lack of basic logistics infrastructure, commuting every day and 12 percent spent investment in logistics systems is still below over two hours commuting.273 Particularly as what is required to meet growing demand.271 passenger cars become an increasingly Though the current lack of infrastructure important part of India’s vehicle mix, allowing presents a significant challenge, the high employees to work from home will help temper levels of inefficiency present an opportunity the rise of emissions from private vehicles. to use ICT to reduce fuel costs, unnecessary waste, and, subsequently, GHG emissions. Eco-driving offers 12.1 MtCO2e of abatement Leveraging ICT to minimize the time that potential, which is 15.1 percent of the goods sit in storage is a principal way that transportation abatement potential. As the waste can be diminished and emissions reduced. vehicle mix in India shifts toward higher use Facilitating intermodal transfers is another of passenger cars, ensuring that people are significant way that ICT can improve logistics using their cars in the most fuel-efficient efficiency, particularly as trucking and rail manner will be critical to reducing emissions systems must effectively interface with one growth. By installing eco-driving systems in another to move cargo. Moreover, given the new vehicles or by using eco-driving apps 270. “Sustainable approaches to reducing food waste in India,” current poor quality of India’s roads and the through mobile devices, car owners can make MIT News energy necessary to move cargo via trucking sure that they are driving at the right speed, 271. “Current status of logistics (it takes trucks five to six days to cover the have the correct tire pressure, and are infrastructure and key demand 2,061 kilometer route between Bangalore and drivers of logistics,” Infrastructure appropriately servicing their vehicles to cut Development Corporation Limited Delhi, for instance), using ICT to coordinate down on fuel consumption and GHG emissions. 272. “Logistics in India,” DHL among drivers, ensuring trucks are carrying 272 273. “1 in 4 workers in India commute full loads, will be particularly important. over 90 mins/day,” Rediff Business 193 GeSI SMARTer 2020 13: India
Attractiveness Return on Risks and Overall Sublever of investment investment feasibility business case Figure 85 Business case for transportation Eco-driving sector sublevers Real-time Source: BCG analysis traffic alerts Low attractiveness Apps for High attractiveness public transit
Crowd sourcing
Videoconferencing
Telecommuting
Truck route optimization
Logistics network optimization
Integration of EVs
Intelligent traffic management
Fleet management
Dependent on political Highest priority MtCO e 2 Dependent onenvironment political environment Highestfor priority implementation for implementation Figure 86 high 25.010.010.0 Transportation sector sublever Optimization of logistics network prioritization by potential for 20.08.08.0
CO2e reduction and business potential 6.0 e reduction 15.06.0 2
Telecommuting Eco-driving 10.04.04.0
Integraion of EVs Truck route optimization
5.02.02.0 Asset sharing
Potential for CO for Potential Videoconferencing Fleet management and telematics Real-time traffic alerts Apps for public transit Intelligent traffice management 0.00.00.0 low Low attractiveness “Low-hanging fruits“ high
Attractiveness of business model GeSI SMARTer 2020 194 13: India
Business case Optimization of truck route planning offers significant emissions and fuel use reductions Within the transportation sector there is wide in India given the unpredictable quality of its variance in the ability of the market to drive roads, and low upfront costs should help route uptake of the identified sublevers. For some, planning to be widely used by 2020. The highly such as truck route optimization, the business inefficient logistics network in India signifies case is strong enough where little to no policy that logistics network optimization has the intervention would be required to ensure that potential to yield significant savings, but its use becomes widespread. For others, such certain optimization solutions have high as the integration of EVs, even significant upfront costs or are reliant upon mobile data policy interventions are unlikely to guarantee networks that are still in development. widespread use by 2020. The integration of EVs by 2020 is unlikely to Eco-driving offers a low-cost way for drivers to occur because of a lack of advanced smart grid reduce their fuel consumption but requires technology and the high cost of EVs relative to that they have smartphone or onboard conventional vehicles. technology capabilities, which cannot be broadly Real-time traffic alerts have a reasonably strong assumed in India; moreover, eco-driving apps business case, particularly in India’s most may need to be adapted given the country’s congested cities. Real-time traffic alerts are unique vehicle fleet mix. Real-time traffic typically generated by computerized monitoring alerts are relatively easy to implement, though systems on highways and by communicating if the Ministry of Road Transport and with local police and can be disseminated in a Highways is expected to be the principal variety of ways. Alerts can be communicated to driver of uptake it may find that its funds are commuters through electronic billboards on large better used elsewhere. Apps for intermodal and roadways and highways, through commercial public transportation are unlikely to make a providers such as TV and radio systems and, big contribution to emissions reductions, given increasingly, from the government itself. In the poor coordination of Indian public Pune, for instance, the traffic police have transportation systems, the lack of smart fleet begun an SMS service that informs drivers of monitoring, and the fact that public rush hour road conditions, while the police in transportation ridership is well over capacity Bangalore use social media to communicate in many cities. traffic information to local residents.274 Though Asset sharing and crowd sourcing is viable traffic updates have been adopted in India’s given that many are seeking an alternative to seven largest cities, it may be more challenging using public transportation but cannot afford to implement in smaller cities. Given the their own vehicles, but there are relatively extreme infrastructure upgrades required in high upfront costs associated with purchasing many cities, real-time traffic updates may be some assets (such as fleets of cars) that may deprioritized as local departments of dampen uptake. transportation use their funds on other projects.
Relatively low upfront costs and a high return Barriers and recommended on investment should allow videoconferencing policies to overcome those barriers to steadily become an alternative to physical travel. Telecommuting offers significant Despite the potential of the market to drive abatement potential and is particularly the uptake of some of the sublevers, policy attractive to employees, but policy efforts may makers will play a key role in addressing the 274. “Traffic alerts service begins,” be required to overcome employer reluctance barriers that will impede the use of the others. The Times of India, Pune; “Now real-time traffic on Google Maps,” to allow working remotely. One of the most significant concerns is the The Indian Express 195 GeSI SMARTer 2020 13: India
lack of mobile data network availability in leader in developing affordable ICT solutions, many parts of India, particularly in rural it should promote the local development of areas. As being able to collect and analyze ICT-enabled abatement solutions for data on the go is a key component of many of transportation. For instance, logistics network the transportation sublevers, the lack of optimization uptake could be increased by network availability presents a barrier to use. developing lower cost on-board trucking Mobile broadband networks only became monitoring systems designed for Indian available in late 2009 and their utilization is vehicles. The government can assist in these becoming increasingly widespread, but they efforts by providing grants and research aid to are still in the midst of development.275 India projects that are seeking to use technology to ranks 111th in terms of mobile network reduce GHG emissions. coverage, with only 83 percent of Indians Even if businesses are comfortable with covered, and mobile broadband network incurring the necessary upfront costs, a lack of penetration is even lower.276 To ensure ICT- financing can often scuttle investment abatement solutions are not overlooked for plans.278 This challenge is particularly evident lack of network coverage, the government for logistics network optimization and fleet should take steps to ensure broad network management systems, which large upfront coverage across all of India. costs. Given the highly fragmented nature of A second concern surrounds the economics of the Indian trucking system, many smaller some sublevers. Some ICT-enabled abatement trucking companies and individual truckers solutions in the transportation sector have will find it difficult to afford the equipment costs that are simply too high. Fleet upgrades without financing. To help remedy management systems, for instance, require this concern, the government can provide low- the development of logistics centers that can cost financing to trucking and logistics firms analyze and process data inputs coming from that are interested in using ICT to reduce their the logistics network and then communicate emissions and fuel costs. with elements of the logistics network to The split incentives concern surrounding optimize fleet performance. This requires telecommuting must also be addressed in large capital investments in fitting the vehicles India. Employees that have network of the fleet with ICT as well as an investment connectivity at home have an interest in in the coordination center itself. Though reducing the number of trips they need to take possible, these upfront costs are relatively to the office because it saves them both time larger in India than in more developed nations, and fuel expenses. Though businesses benefit which have made few businesses willing to from telecommuting to a degree in that it can accept the risk associated with such cut energy costs and can somewhat reduce expenditures.277 The logistics industry in India office space, many fear productivity losses is highly fragmented, and has many small and must incur the technical costs of ensuring players who cannot afford these solutions due that employees can work remotely. To align to their small scale. the interests of employees and their employers, 275. “The Global Information Technology Report 2012,” To lower the upfront costs and associated risk the government should create a financial World Economic Forum, 69 involved with adopting some of the sublevers, incentive that rewards businesses if a certain
276. “The Global Information the government could reduce ICT costs by percentage of their employee’s work days are Technology Report 2012,” reducing the tariffs on ICT imports. As much completed remotely. World Economic Forum, 230 of the required technology for the abatement 277. “Logistics in India,” DHL solutions must be imported from abroad, 278. “ICT’s Contribution to India’s National Action Plan on Climate reducing the tariff schedule would help reduce Change,” DESC, 10 upfront costs. Moreover, as India is the world GeSI SMARTer 2020 196 13: India
Finally, there is a general lack of awareness publications. In a Ministry of Road Transport about the emissions abatement and monetary and Highways report on the state of the Indian savings that ICT offers, particularly among logistics network, for instance, the Ministry individuals.279 Because of relatively low has an opportunity to educate interested penetration of basic ICT, many are not familiar parties as to how using logistics network with how more advanced ICT can be leveraged optimization can increase efficiency, lower to their benefit. Even businesses, which tend costs, and mitigate adverse environmental to embrace technology adoption more readily impacts. The state governments should also than consumers, are often unaware of the seek to change consumer driving behavior by abatement opportunities offered by ICT. As a sharing information on the benefits of ICT- result, policy makers should seek to increase enabled transportation solutions every time awareness of ICT-enabled abatement solutions people apply for a new driver’s license or by promoting them through government registers their vehicle. 279. Ibid
What stands in the way? What should happen? Table 27 Challenges Policy Key considerations Barriers to adoption of ICT-enabled GHG abatement • Mobile broadband networks Promote • Removing regulatory Infrastructure solutions and policy steps to required for some sublevers mobile barriers for broadband overcome these barriers are not well-developed, broadband network construction particularly in rural India1 network • Subsidies for network 1. „The Global Information Technology development construction in rural areas Report 2012“, World Economic Forum, where not economically feasible 156 2. „ICT‘s Contribution to India‘s National Action Plan on Climate Change“ • Cost of some sublevers Reduce cost of • Reducing technology import DESC, 10 3. Ibid 4. Ibid Economics is too high given Indian imports costs by eliminating tariffs on ICT income levels2 that reduces GHG emissions Promote • Promote development India specific of lower cost abatement solutions solutions through research grants and aid
• Logistics network optimization Provide • Availability of funds Financing has high upfront costs that financing businesses may not be able for logistics to afford outright3 network optimization
• Employers bear perceived Financial • Ensuring the reward Split costs of telecommuting reward if a is sufficient enough incentives but employees realize percentage to compensate for both the economic gains of workdays tangible and intangible costs are done via telecommuting
• Lack of familiarity with Promote • Promotion of consumer-targeted Awareness the abatement and savings ICT-enabled sublevers when a vehicle is opportunities that ICT presents4 abatement registered or a driver’s license solutions is applied for through • Promotion of business-targeted government sublevers through Ministry of publications Road Transport and Highways publications 197 GeSI SMARTer 2020 13: India
DRAFT
Case study GIS route planning and mass transit in Jaipur Brisk economic growth and high levels of population growth were leading to increased mass transportation demand in the city of Jaipur, a city of 3 million. As in many other rapidly growing Indian cities, the public transportation planning that had been used for decades was not sufficient to deal with changes in the urban landscape brought on by modernization. Increased traffic congestion and road safety concerns began to hinder the system’s effectiveness, and the city recognized the need to alter its transportation model. As a result, the city turned to Geographic Information Systems (GIS) to model transportation flows within the city and optimize routes being taken by its public transportation vehicles.
By using encoding, management, analysis and reporting functions offered by GIS software, the Mass Rapid Transit System (MRTS) was able to efficiently capture, store, and analyze a broad array of data to optimize its MRTS corridors. GIS operates by layering different levels of information on top of one another to determine how various factors interact in the aggregate. Urban planners first employed the available land use map to get a better understanding of how topographical factors would impact the system’s functionality. They then added a layer that considered population density, as that is an important indicator of public transportation demands. By then incorporating data that expressed vehicle flow patterns, planners were able to determine peak hour traffic flows. By analyzing commuter flows, the MRTS was then able to optimize its transit corridors to cut down on transit times and provide the most reliable, effective service. And, as GIS allows users to recombine the collected data and analyze various different scenarios, city planners were able to use future transportation projections to ensure that the chosen routes would be the most effective for the foreseeable future.
Though the city government is only in the first phase (out of four) of implementing the best routes determined through the GIS survey, the safety, reliability and, most significantly, environmental impacts have already been substantial. Even though only approximately 15 percent of the system has been implemented, the bus system has become significantly safer, with accidents involving buses declining 12 percent. Bus speeds have increased substantially to 25 km/h and service has become more frequent and reliable. All of these public transit system improvements have led to greater customer satisfaction, and increased ease of use translates to fewer private vehicles on the road. As a result, the efficiency improvements that resulted from GIS-enabled route planning led to lower levels of fuel consumption and fewer GHG emissions. GeSI SMARTer 2020 198 199 GeSI SMARTer 2020 14: Conclusion
transportation can improve the efficiency of 14 logistics and reduce cargo transport emissions, and can even reduce transportation needs Conclusion altogether through video conferencing and Not only has ICT enhanced the quality of life telecommuting. around the globe, but it also provides solutions, The adoption of many of these technologies tools, and technologies to tackle climate will be driven by a strong business case. The change and reduce GHG emissions. Because energy savings of variable speed motors, of greater utilization of ICT around the world, logistics systems, and advanced building the direct emissions from ICT are slated to design, for instance, more than compensate grow from 1.9 percent of total global emissions for the upfront cost associated with the in 2011 to 2.4 percent of global emissions by implementation of each of those technologies; 2020. But while ICT emissions are growing as a result, businesses and consumers will faster than average global emissions growth, invest in those sublevers because of the ICT has the potential to abate 16.5 percent of positive and significant return on investment. the world’s total emissions by 2020; this Some of the other sublevers, however, have a represents a GHG savings of 9.10 GtCO e, 2 weaker business case and adoption will not be which is over seven times greater than the driven by the market. Livestock management direct GHG emissions footprint of the ICT systems, for example, will not be taken up by sector itself. These savings will be generated ranchers because eliminating methane through the use of ICT in the agriculture and emissions has no economic bearing on them land use, buildings, manufacturing, power, in the absence of GHG abatement targets. For service and consumer, and transportation less attractive sublevers, policy interventions sectors around the world. must occur to ensure adoption rates.
In the agricultural and land use sector, ICT To accelerate adoption, an international will allow farmers to more accurately use climate favorable to GHG abatement should irrigation and fertilizer to control emissions be created. The setting of binding emissions and can reduce methane emissions from targets, the development of international livestock. With buildings, architects and CO2e markets, and the institution of financial builders can design more efficient buildings assistance programs to help developing from the outset and ICT can be incorporated countries with emissions abatement are all into a building’s management system to allow developments that would create an for even more efficient energy use. In factories, environment in which combating climate ICT will enable the increasing automation of change is taken seriously. Ultimately, however, industrial processes and will make it possible the policies that most effectively change the for machines to communicate with one economics surrounding a sublever are another to allow them to work together at the developed at the national level. To ensure that optimal level. ICT will allow for the creation of the abatement potential of 9.10 GtCO2e is a more dynamic power sector that will better reached by 2020, much responsibility lies with synchronize supply and demand to avoid national policy makers to create the required overproduction and will more easily integrate incentives to drive GHG abatement through renewables into the power supply. In the ICT-enabled solutions for the end-use sectors service and consumer sector, ICT links identified. By working together, the ICT sector consumers and merchants through and policy makers can make serious strides e-commerce, avoiding the need to meet face- toward mitigating the effects of climate to-face; it can also eliminate unnecessary change and building a world economy waste associated with the production and grounded in the principle of sustainable growth. distribution of goods. Finally, ICT in GeSI SMARTer 2020 200 15: Appendix
15 Appendix 15.1 Definition of greehouse gases
Although CO2 is the most widely known and most frequently emitted of the greenhouse gases, there are many other gases that contribute to climate change, including (but not limited to) methane (CH4), nitrous oxide (NOx), and ozone (O3). Because each of these gases has chemical properties that differ from those of CO2, they trap heat in the atmosphere differently. As a result, one molecule of one gas may trap more or less heat than one molecule of another. One molecule of methane, for instance, traps 21 times as much heat as one molecule of CO2. As a result, to ensure that all GHGs are accounted for and discussed using the same terminology, we have converted the warming potential of all non-CO2 gases into what their equivalent warming potential in tons of CO2 would be; hence the report uses the term CO2e to talk about GHG emissions collectively. For example, one ton of methane would be equivalent to 21 tons CO2e. Using CO2e rather than CO2 alone allows us to talk about all emissions sources and better grasp their contribution to climate change. 201 GeSI SMARTer 2020 15: Appendix
15.2 UNFCCC categories and sector segmentation
Sector UNFCCC category Description of category
1.A.1.a Emissions from public electricity generation, public Power Public electricity and heat combined heat and power generation, and public production heat plants
1.A.1.b All combustion activities supporting the refining Petroleum refining of petroleum products
1.A.1.c Combustion emissions from fuel use during the Manufacture of solid fuels manufacture of secondary and tertiary products from and other energy industries solid fuels including production of charcoal
1.A.2 Emissions from combustion of fuels in industry Manufacturing industries including combustion for the generation of electricity and construction and heat
1.A.5 Manufacturing All remaining emissions from non-specified fuel Other fuel combustion combustion activities
1.B Intentional or unintentional releases of gases from Fugitive emissions from fuel anthropogenic activities
By-product or fugitive emissions of greenhouse gases 2 Industrial processes from industrial processes
3 NMVOC emissions resulting from the use of solvents Solvent and other product use and other products containing volatile compounds
Total emissions from solid waste disposal on land, 6 Waste wastewater, waste incineration, and any other waste management activity
Emissions from the combustion and evaporation of Transport 1.A.3 Transport fuel for all transport activity, regardless of the sector
1.A.4.a Emission from fuel combustion in commercial and Commercial/Institutional institutional buildings Service/Center 1.A.4.b Residential All emissions from fuel combustion in households
1.A.4.c Emissions from fuel combustion in agriculture, forestry, Agriculture/Forestry/Fishing or domestic inland, coastal and deep-sea fishing Agriculture Al anthropogenic emissions from this sector except 4 Agriculture for fuel combustion and sewage emissions
Note: The UNFCCC category “Land use change and Forestry” is excluded from the calculation Source: UCFCCC, BCG Analysis GeSI SMARTer 2020 202 15: Appendix
15.3 Description of sublevers by change-lever
Sublever Sector Description of category Target emissions Description of sublevers Road, train, and airline Use collaborative tools such as video- for digitalization and Video transportation. Also Transportation conferencing to replace an in-person conferencing building emissions dematerialization change-lever meeting that would involve travel —hotels, conference centers
Mostly road, train, Work arrangement in which an subway, and some airline employee does not commute to a transportation, and some Telecommuting Transportation central place of work for at least part office emissions of their workweek (as the result of less office space needed)
Paper use (also transport Reduction of paper use and printing of paper goods and finished E-paper Service/Consumer as a result of e-readers and other paper media) and printing technology emissions
Commerce/retail related Buying and selling of products or transport and commercial Service/Consumer services over the Internet—results in E-commerce building and inventory a more efficient market for commerce space
CDs, DVDs (and related Elimination of all hard media as a result Service/Consumer transport, storage, etc. Online media of digitalization needs) 203 GeSI SMARTer 2020 15: Appendix
Sublever Sector Description of category Target emissions Description of sublevers Mechanisms to manage consumer and Demand for the data collection and Power enterprise consumption of electricity in Non-base load electricity management communication change-lever response to supply conditions
Communication through mobile devices or other systems of different pricing for Time-of-day electricity during different times in the Power Non-base load electricity pricing day—allows consumers and enterprises to adjust load during peak demand and thus reduce overall demands on the grid
Adopting a driving style as a result of Eco-driving Transportation alerts and other technology to improve Road transportation overall efficiency of the car
Alerts that help drivers avoid traffic Road transportation in Real-time Transportation traffic alerts delays and drive more efficiently traffic congested areas
Apps for Apps that improve the adoption of intermodal Transportation public transportation through increased Transportation emissions travel/public awareness and information transportation
The use of ICT to make smarter Agriculture/ Weather decisions about the impact of weather Agricultural emissions Land use forecasting on farming
Water infrastructure that uses ICT to gather and act on information, such as information about the behaviors of suppliers and consumers, in an Emissions from residential Service/Consumer Smart water automated fashion to improve the and commercial water use efficiency, reliability, economics, and sustainability of the production and distribution of water
Water infrastructure that uses ICT to gather and act on information, such as information about the behaviors Agriculture/ of suppliers and consumers, in an Emissions from water use Smart water Land use automated fashion to improve the efficiency, reliability, economics, and sustainability of the production and distribution of water
Leverage communications, HD cameras and intelligent sensor networks for Public safety/ video surveillance, video imaging Emissions from accident/ Service/Consumer Disaster sensors to identify pending weather, incident occurrences management natural disasters, terrorist attacks, or other safety concerns
Knowledge of assets and how they can Emissions avoidance based Service/Consumer; be effectively shared or reused through Asset sharing/ on reduced manufacturing Transportation the use of social networks or other crowd sourcing and extended use communication tools GeSI SMARTer 2020 204 15: Appendix
Sublever Sector Description of category Target emissions Description of sublevers Integration of ICT that allows for the integration of renewables in Power renewables into the grid or the more Electricity generation for the system integration power generation effective use of renewables change-lever
Technology that enables and collectively runs a cluster of distributed generation Virtual Power installations (such as microCHP, wind- Electricity generation power plant turbines, small hydro, back-up gensets, etc.)
Integration of ICT that promotes the use of EVs Transportation Road transportation EVs and biofuels or bio-fuels
Use of ICT to remotely monitor and Intelligent traffic Transportation Road transportation management control automobile traffic
More efficient use of a fleet through Fleet vehicle maintenance, vehicle telematics management Transportation (tracking and diagnostics), driver Road transportation and telematics management, speed management, and fuel management
Integration of renewables in ICT that allows for the integration Commercial and residential commercial Service/Consumer of renewables into the energy use building energy use and residential of commercial or residential buildings buildings
A computer-based control system installed in buildings that controls Building and monitors the building’s mechanical Commercial and residential management Service/Consumer and electrical equipment building energy use system (i.e. ventilation, lighting, power systems, fire systems, and security systems)
Integration of ICT technology that enables the Emissions from off-grid storage into off- Power integration of storage into off-grid power loads grid applications power loads (e.g. isolated telecom tower) 205 GeSI SMARTer 2020 15: Appendix
Sublever Sector Description of category Target emissions Description of sublevers Use of various techniques by electrical for the process, activity, Power load power stations to store excess electrical Power Non-base load electricity and functional optimization balancing power during low demand periods for change-lever release as demand rises The use of software and other technologies Optimization to improve the efficiency of delivery trucks Commercial road of truck route Transportation (includes optimization of truck itinerary transportation planning planning)
Optimization The use of software and other technologies Commercial road of logistics Transportation to improve the efficiency of a logistical transportation network network
Optimization Control of a motor system to better match of variable speed Manufacturing Industrial energy use its power usage to a required output motor systems
Automation The monitoring and control for large of industrial Manufacturing industrial process with technology to optimize Industrial energy use process and reduce the energy use of the process
Commercial material, Minimization Service/ Smarter packaging of goods to reduce transportation, and storage of packaging Consumer the total amount of materials required use
Service/ Improved initial design of a building to Commercial and residential Building design Consumer make it more energy efficient building energy use
Systematic controlled reduction in the Voltage Service/ voltages received by an energy consumer Commercial and residential optimization Consumer to reduce energy use, power demand, and building energy use reactive power demand
Warehouse building Reduction Service/ Optimization of the delivery of goods, energy use and commercial in inventory Consumer which results in less need to store inventory transportation
ICT that improves the efficiency and reduces Agriculture/ the energy use of agriculture activities Smart farming Agricultural emissions Land use (e.g. precision farming, efficient crop rotation and analysis, and other eco-technology)
ICT that reduces the emissions from livestock Livestock Agriculture/ through optimization of grazing and other Livestock-related emissions managment Land use techniques
Electrical grid that uses ICT to gather and act on information to optimize the infrastructure Power grid Emissions from power Power reduce inefficiencies with the transmission optimization generation and distribution of electricity (i.e., T&D- related smart grid applications)
Use of various techniques by electrical power Power-load stations to store excess electrical power Power Non-base load electricity balancing during low demand periods for release as demand rises GeSI SMARTer 2020 206 15: Appendix
15.4 Details for estimation Telecommunication networks Includes both fixed or wireline networks and of global ICT direct emissions wireless networks (excludes local Wi-Fi networks)
Data centers Includes all small, medium-sized and large 15.4.1 Scope enterprise data centers. All IT systems (servers Range of ICTs covered and storage) and cooling systems are included This study covers the same range of ICTs as in Range of ICT compared with the previous SMART 2020 study published in OECD’s definition of ICT 2008, with additions such as tablets and smartphones to account for the new The scope of ICTs used in this study differs 191 developments since 2008. from that defined by the OECD. The scope used in this study is as in SMART 2020 to ICTs are divided up into three categories: maintain consistency. The following table shows the scope of ICT defined by the OECD. End-user devices Further details can be found on OECD’s Includes PCs (desktops, laptops), mobile website devices (tablets, smartphones, regular mobile 191. ”Information Economy product definitions based on the central phones), and peripherals (external monitors, product classification (Version 2)” printers, set-top boxes, routers, IPTV boxes) -- OECD
Figure 1 ICT emissions Range of ICTs covered
End-use devices Telecommunication networks Data centers
PCs Mobile devices Peripherals Smartphone Monitor Servers, storage systems, Fixed line Wireless Desktop Other mobile dev. Printer cooling systems Set-top box, Laptop Tablet home router 207 GeSI SMARTer 2020 15: Appendix
Number of CPC subclasses Broad level categories (products) Table Computers and peripheral equipment 19 Broad level categories for ICT products Communication equipment 8 Consumer electronic equipment 11 Source: CPC stands Central Product Classification Miscellaneous ICT components and goods 14
Manufacturing services for ICT equiptment 5
Business and productivity software and licensing services 11
Information technology consultancy and services 10
Telecommunications services 12
Leasing or rental services for ICT equipment 3
Other ICT services 6
Total 99
Scope of emissions as defined Scope 3 by the Greenhouse Gas Protocol Other indirect emissions, such as the extraction and production of purchased materials and To account for ICT’s emissions, this report fuels, transport-related activities in vehicles takes the most-inclusive possible route. This not owned or controlled by the reporting entity, means that not only did we account for the electricity-related activities (i.e. transmission emissions that occurred at the location where and distribution losses) not covered by Scope ICT exists but also for emissions that were 2, outsourced activities, waste disposal, etc. generated elsewhere that directly resulted from ICT activities. The GHG Protocol As a result, our ICT emissions total includes characterizes direct and indirect emissions in emissions from ICT devices themselves, from three different scopes; to avoid the risk of the electricity generated to run them, and understating ICT’s emissions contribution, we from the process required to extract and calculated emissions using most-inclusive refine fuel for electricity production. criteria, which involved incorporating all three scopes: Nonetheless, the inclusivity of each individual figure is dependent on the source of the data Scope 1 from which we derived the information. For All direct GHG emissions more information on the scope of a particular figure, please consult the source cited. Scope 2 Indirect GHG emissions from consumption of purchased electricity, heat or steam GeSI SMARTer 2020 208 15: Appendix
15.4.2 End-user devices publically available sources, and have been mentioned. Where appropriate, data have The GHG emissions footprint of all end-user been triangulated using multiple sources, and devices is broken up into usage footprint and the most reasonable estimates have been embodied footprint. The former refers to used. Where data weren’t available, indirect emissions from the consumption of assumptions have been made or extrapolations electricity to run the devices, and the latter from trends have been done as necessary. All refers to all direct and indirect emissions from assumptions and extrapolations have been the production, transportation and disposal of stated as such in Figure 2. Further, these these devices. assumptions and extrapolations have been discussed and vetted with industry experts. Figure 2 shows the driver tree for the estimation of the footprint of these devices, both for 2011 and 2020. All data are from
2020 installed base projections imply following global 2020 penetration rates10. PCs 37%, Tablets 16%, Smartphones 37%, other mobile phones 55%
2011 2020 Figure 2 Smart- Mobile Smart- Mobile PCs Tablets phones phones PCs Tablets phones phones End-user devices
7 8 emissions estimation Installed base (B)1 1.53 0.07 0.66 3.65 2.81 1.18 2.80 4.17 +7% +37% +17% +2%
1 Electricity used/device 4 Third-party reports/ estimates Usage footprint x (kWh/yr) 218.98 15.60 5.45 2.50 101.66 15.60 5.45 2.50 -8% BCG research Extrapolation from industry trends Emissions factor3 (kg CO e/kWh) 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 + 2 Shipments (B)1 0.397 0.07 0.36 1.41 0.788 0.68 1.23 1.38 Embodied +8% +29% +15% -0.2% x emissions Emissions/device 332.38 97.5 21.19 11.70 252.68 74.12 21.19 8.89 PCs and mobile devices PCs (kgCO2e/yr) -3% -3% -3%
Total emissions (MtCO2e) 330 7 10 22 367 61 35 19
2011 2020
Peripherals Peripherals 1. Gartner, Forrester Total electricity used 2. Gartner (TWh)2 131 1319 3. Global electricity emission factor (IEA) Usage footprint x Emissions factor3 4. Lowered to reflect efficiency gains, fewer hours spent 0.6 0.6 (kg CO2e/kWh) on PCs due to emergence of smart devices, and greater use of laptops vs. desktops 9 Shipments (B)2 0.12 0.14 5. Assumed same figure as in 2007 (“Greenhouse Gas Embodied +1% Emissions and Operational Electricity Use in the ICT + x emissions and E&M Sectors“ by Jens Malmodin et al, 2010) Emissions/device 5
Printers 68 68 (kgCO2e/yr) 6. Lowered from 0.19 in 2007 to allow for improvement in fleet efficiency Paper shipped2 96.6 96.69 7. 45% laptops (tonnes) Distribution of 8. 70% laptops x 9. Printers industry trends assumed flat printed media Emissions/ tonne paper 6 9 0.15 0.15 10. Assuming 2020 world population of 7.6 B (tonne CO2e)
11 (U.S. Census Bureau) % overall end-user 13%5 13%5 11. Includes set top boxes, home routers and modems device emissions and other computer peripherals Others 179 206 Total emissions (MtCO2e) 209 GeSI SMARTer 2020 15: Appendix
15.4.3 Networks from trends have been done as necessary. All assumptions and extrapolations have been The GHG emissions footprint of all wireless is stated as such. Further, these assumptions broken up into usage footprint and embodied and extrapolations have been discussed and footprint. The former refers to indirect vetted with industry experts. emissions from the consumption of electricity to run the networks equipment and Wireless networks infrastructure, and the latter refers to all Figure 3 shows the driver tree for the direct and indirect emissions from the estimation of the footprint of mobile networks, production, transportation and disposal of both for 2011 and 2020. Since it’s difficult to these equipment and infrastructure. predict the evolution of the key drivers, the study models the 2020 footprint as a multiple All data are from publically available sources, of the 2011 footprint. The key driver is the and have been mentioned. Where appropriate, growth of mobile IP traffic, assumed to grow data have been triangulated using multiple to 50 times that of the 2011 level by 2020. The sources, and the most reasonable estimates model details are presented in Figure 3. have been used. Where data weren’t available, assumptions have been made or extrapolations
Figure 3 Input Source Wireless networks Electricity used/ subscriber 17 GSMA: Mobile’s Green Agenda 2012 emissions estimation (kWh/ yr) # Subscribers (B) 5.9 Greentouch Usage footprint Third-party reports/ estimates 2011 x Emissions factor1 (kg CO e/kWh) 0.6 IEA BCG analysis 2 Operations overhead (%) 2 Wireless networks emissions + 20 Assumed same as in 2007
Diesel usage (MtCO2e) 10 GSMA: Mobile’s Green Agenda 2012 Emissions/ subscriber 3 Assumed same as in 20072 (kg CO2e/ year) Embodied emissions x # Subscribers (B) 5.99 Greentouch
Total emissions (MtCO2e) 101
2020 Network component Note: Key assumptions triangulated and reviewed Sub-model discussed and 1.62x (% emissions)5 with experts as possible validated with topic expert Increase Base Station emissions Sub-model for 1. Global electricity emission factor (IEA ) in wireless (58%) x changes in emissions Represents efficiency gains + 2. 2007 data from "Greenhouse Gas Emissions and networks due to technological advances4 Operational Electricity Use in the ICT and Entertainment emissions Energy consumed but excludes changes in Mobile switching (20%) 0.1x & Media Sectors" by Jens Malmodin et al, 2010 per unit traffic network structure 3. BCG analysis 4. "Power Trends in Communication Networks" Average of Greentouch Core Transmission (15%) Traffic growth ~50x by Dan Kilper; data for North America, but similar trends + and UMTS Forum estimates expected in other markets 5. Saving the Planet – The Rationale, Realities, emissions Energy-efficiency gain due to Data center (5%) Changes in network structure 40% and Research of Green Radio); Expert interview 2011 wider adoption of femtocells5 6. Multiple input Multiple output wireless
2020 networks wireless networks Lower emissions due Assumes 10% base stations Retail (2%) emissions to adoption of greener 4% dependant on diesel; 40% decline power sources in diesel use at these stations
Energy consumption assumed Total emissions (MtCO2e) 197 to be insensitive to the growth of the data traffic – applies to the majority of the network GeSI SMARTer 2020 210 15: Appendix
Fixed or wireline networks Figure 4 shows the driver tree for the estimation of the footprint of fixed networks, both for 2011 and 2020. Fixed networks are divided up into home access networks, 192. “Greenhouse Gas Emissions and enterprise networks, and data transport Operational Electricity Use in the ICT and Entertainment & Media Sectors”-- networks following the methodology used in Jens Malmodin, Asa Moberg, Dag
Malmodin et. al. (2010).192 Lunden, Goran Finnveden, and Nina Lovehagen
2011 2020
Input Source Input Source
Electricity used/ subscriber 34 Figure 4 45 Malmodin et al2 Expert interview6 (kWh/ yr) -3% Wireline networks # Subscribers (B) Greentouch 1.74 Greentouch –broadband, PSTN 1.63 Ovum +0.5% BCG analysis Usage footprint x emissions estimation Emissions factor1 0.6 IEA 0.6 Assumption (kg CO2e/kWh) Third-party reports/ estimates Home access networks + 2 2 Operations overhead (%) 25 Malmodin et al 25 Assumption BCG research Emissions/ subscriber 6 Malmodin et al2 4.6 Alcatel Lucent (kg CO2e/ year) Embodied emissions x # Subscribers (B) Greentouch Greentouch –broadband, PSTN 1.6 1.7 Ovum3 BCG analysis4
Total emissions (MtCO2e) 64 51
1.4 Other fixed lines networks emissions drivers # Enterprise PCs (B) 0.73 Gartner BCG analysis +8% Electricity/office PC 27 35 Malmodin et al2 Expert interview6 (kWh/year) -3% Usage footprint x Emissions factor1 0.6 IEA 0.6 Assumption (kg CO2e/kWh) Enterprise networks + Overhead for hubs, routers, 25 Assumption 25 Assumption switches (%) Embodied emissions 3.5 Alcatel Lucent 5.1 Alcatel Lucent (MtCO2e) 78 Total electricity used (TWh) 20 BCG analysis5 BCG analysis5 +17% Usage footprint x Emissions factor1 0.6 IEA 0.6 Assumption 7 (kg CO e/kWh) Data transport + 2
Embodied emissions 2.2 Alcatel Lucent 8.4 Alcatel Lucent (MtCO2e)
37 89 Total emissions (MtCO2e) 211 GeSI SMARTer 2020 15: Appendix
15.4.4 Data Centers
Figure 5 shows the driver tree for the estimation of the footprint of mobile networks, both for 2011 and 2020. Since it’s difficult to predict the evolution of the key drivers, the study models the 2020 footprint as a multiple of the 2011 footprint. The key driver is the growth of data stored in data centers, assumed to grow to 20 times that of the 2011 level by 2020. The model details are presented in Figure 5.
Input Source
“Growth in Data Total electricity consumed 2372 Center Electricity Use” (TWh) 2011 – Jonathan Koomey Figure 5 Usage footprint x Emissions factor1 0.6 IEA (kg CO e/kWh) Data center emissions Data center 2 emissions + estimation Assumed same % of total data Embodiedemissions 13.17 center emissions as in 20073 (MtCO2e) Third-party reports/ estimates
BCG research Total emissions (MtCO2e) 155
Sub-model4 “Cloud Computing – The IT Solution for the 21st Century” 20% Increase in “Power Usage – CDP, Google data, AT&T, BCG Note: Key assumption triangulated and reviewed 5 Effectiveness” experience, expert interview with experts as possible 1.86x
1. Global electricity emission factor (IEA ) AT&T, BCG experience, Increase in data cneter x Decline in computing 30% 2. 2010 data 2020 emissions unit energy used expert interview 3. 2007 data from “Greenhouse Gas Emissions and Operational Electricity Use in the ICT and Data center Increase in nubmer Entertainment & Media Sectors” x 3.3x by Jens Malmodin et al, 2010 emissions of computing units 4. „Cloud Computing – The IT Solution for the 21st Century“ – CDP 2011 data center x Increase in data 20x Cisco 5. Defined as ratio of energy consumed by emissions a data center and energy required to run the IT equipment; assumes CAGR of -2.5% Increase in server “Reducing Data Center utilization due to 6x Energy Consumption” virtualization -- CERN
Total emissions (MtCO2e) 288 GeSI SMARTer 2020 212 15: Appendix
15.5 Details for estimation of ICT direct emissions by country The U.K. 2011 2020
Smart- Mobile Smart- Mobile PCs Tablets phones phones PCs Tablets phones phones Figure 6.1 Installed base (B)1 0.06 0.003 0.03 0.04 0.07 0.05 0.07 0.02 +2% +35% +11% +2% U.K. ICT emissions
Electricity used/device 4 Usage footprint x (kWh/yr) 218.98 15.60 5.45 2.50 101.66 15.60 5.45 2.50 estimation: end-user devices -8%
3 Emissions factor 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 (kg CO2e/kWh) + Third-party reports/ estimates1 Shipments (B)1 0.01 0.002 0.02 0.02 0.02 0.02 0.05 0.02 BCG research Embodied +2% +27% +9% Extrapolation from industry trends x emissions Emissions/device 332.38 97.5 21.19 11.70 252.68 74.12 21.19 8.89 PCs and mobile devices PCs (kgCO2e/yr) -3% -3% -3% 1. Gartner 2. IEA Total emissions (MtCO e) 2 10.16 0.23 0.50 0.28 7.18 1.66 1.12 0.23 3. Includes set top boxes, home routers and modems, other computer peripherals and IPTV related emissions
2011 2020
Peripherals Peripherals
PC emissions 10.16 7.18
(MtCO e) 2
/
Printers Global ratio of PC to printers 3.2 3.6 emissions 3
13%5 13%5 Others
Total emissions (MtCO2e) 5.40 3.71
2011 2020
Input Source Input Source Figure 6.2 Global emissions 101 BCG analysis 164 BCG analysis U.K. ICT emissions estimation: (MtCO2e) Wireless / networks and data centers Share of global Greentouch 1% 1% BCG analysis subscriptions Ovum Networks + Third-party reports/ estimates1 Global emissions BCG research 100 BCG analysis 139 BCG analysis Extrapolation from industry (MtCO2e) trends/ previous estimates Wired / Share of global Greentouch 3% 3% BCG analysis subscriptions Ovum
4.6 4.6
Input Source Input Source
Global emissions 155 BCG analysis 299 BCG analysis (MtCO2e) Data centers /
Share of global 4% Gartner 4% BCG analysis installed servers
6.0 11.9 213 GeSI SMARTer 2020 15: Appendix
Brazil 2011 2020 Smart- Mobile Smart- Mobile PCs Tablets phones phones PCs Tablets phones phones
Installed base (B)1 0.04 0.00 0.03 0.21 0.11 0.06 0.09 0.18 Figure 7.1 +13% +14% -1%
Brazil ICT emissions Electricity used/device 4 Usage footprint x (kWh/yr) 218.98 15.60 5.45 2.50 101.66 15.60 5.45 2.50 estimation: end-user devices -8% Emissions factor3 (kg CO e/kWh) 0.11 0.11 0.11 0.11 0.4 0.4 0.4 0.4 + 2 Third-party reports/ estimates1 1 BCG research Shipments (B) 0.02 0.00 0.01 0.04 0.05 0.02 0.02 0.04 Embodied +13% +10% Extrapolation from industry trends x emissions Emissions/device 332.38 97.5 21.19 11.70 252.68 74.12 21.19 8.89 PCs and mobile devices PCs (kgCO2e/yr) 1. Gartner -3% -3% -3% 2. IEA Total emissions (MtCO2e) 6.64 0.01 0.18 0.49 9.54 1.88 0.71 0.26 3. Includes set top boxes, home routers and modems, other computer peripherals and IPTV related emissions
2011 2020
Peripherals Peripherals
PC emissions 16.4 14.22
(MtCO e) 2
/
Printers Global ratio of PC to printers 3.2 3.6 emissions 3
13%5 13%5 Others
Total emissions (MtCO2e) 3.47 6.66
2011 2020
Input Source Input Source Figure 7.2 Global emissions 101 BCG analysis 164 BCG analysis (MtCO e) Brazil ICT emissions estimation: 2 Wireless / networks and data centers Share of global Greentouch 4% 4% BCG analysis subscriptions Ovum Networks + 1 Third-party reports/ estimates Global emissions 100 BCG analysis 139 BCG analysis BCG research (MtCO e) Extrapolation from industry 2 trends/ previous estimates Wired / Share of global Greentouch 3% 4% BCG analysis subscriptions Ovum
7.7 11.0
Input Source Input Source
Global emissions 155 BCG analysis 299 BCG analysis (MtCO2e) Data centers /
Share of global 2% Gartner 2% BCG analysis installed servers
2.8 4.8 GeSI SMARTer 2020 214 15: Appendix
China 2011 2020 Smart- Mobile Smart- Mobile PCs Tablets phones phones PCs Tablets phones phones Figure 8.1 Installed base (B)1 0.27 0.002 0.08 0.97 0.69 0.31 0.54 1.26 +11% +75% +24% +3% China ICT emissions
Electricity used/device 4 Usage footprint x (kWh/yr) 218.98 15.60 5.45 2.50 101.66 15.60 5.45 2.50 estimation: end-user devices -8%
Emissions factor3 0.94 0.94 0.94 0.94 0.94 0.94 0.94 0.94 Third-party reports/ estimates1 (kg CO2e/kWh) + BCG research Shipments (B)1 0.08 0.002 0.03 0.41 0.19 0.15 0.19 0.54 Extrapolation from industry trends Embodied +11% +65% +22% +1% x emissions Emissions/device 332.38 97.5 21.19 11.70 252.68 74.12 21.19 8.89 1. Gartner PCs and mobile devices PCs (kgCO2e/yr) -3% -3% -3% 2. IEA 3. Includes set top boxes, home routers and modems, Total emissions (MtCO e) 2 80.64 0.19 1.05 7.09 115.22 15.70 6.70 7.74 other computer peripherals and IPTV related emissions
2011 2020
Peripherals Peripherals
PC emissions 80.64 115.22
(MtCO e) 2
/
Printers Global ratio of PC to printers 3.2 3.6 emissions 3
13%5 13%5 Others
Total emissions (MtCO2e) 44.6 61.8
2011 2020
Input Source Input Source Figure 8.2 Global emissions 101 BCG analysis 164 BCG analysis China ICT emissions estimation: (MtCO2e) Wireless / networks and data centers Share of global Greentouch 16% 12% BCG analysis subscriptions Ovum Networks + Third-party reports/ estimates1 Global emissions BCG research 100 BCG analysis 139 BCG analysis Extrapolation from industry (MtCO2e) trends/ previous estimates Wired / Share of global Greentouch 26% 26% BCG analysis subscriptions Ovum
42.5 55.9
Input Source Input Source
Global emissions 155 BCG analysis 299 BCG analysis (MtCO2e) Data centers /
Share of global 13% Gartner 22% BCG analysis installed servers
20.7 63.0 215 GeSI SMARTer 2020 15: Appendix
U.S. 2011 2020 Smart- Mobile Smart- Mobile PCs Tablets phones phones PCs Tablets phones phones Figure 9.1 Installed base (B)1 0.33 0.04 0.11 0.22 0.34 0.35 0.20 0.23 U.S. ICT emissions +27% +7% +1%
Electricity used/device 4 estimation: end-user devices Usage footprint x (kWh/yr) 218.98 15.60 5.45 2.50 101.66 15.60 5.45 2.50 -8%
Emissions factor3 Third-party reports/ estimates1 0.67 0.67 0.67 0.67 0.67 0.67 0.67 0.67 (kg CO2e/kWh) BCG research + Extrapolation from industry trends Shipments (B)1 0.07 0.03 0.10 0.08 0.08 0.13 0.14 0.08 Embodied +17% +4% x emissions Emissions/device 1. Gartner 332.38 97.5 21.19 11.70 252.68 74.12 21.19 8.89 PCs and mobile devices PCs (kgCO2e/yr) 2. IEA -3% -3% -3% 3. Includes set top boxes, home routers and modems, Total emissions (MtCO e) other computer peripherals and IPTV related emissions 2 72.99 3.50 2.56 1.34 42.16 13.00 3.80 1.13
2011 2020
Peripherals Peripherals
PC emissions 72.99 42.16
(MtCO e) 2
/
Printers Global ratio of PC to printers 3.2 3.6 emissions 3
13%5 13%5 Others
Total emissions (MtCO2e) 46.34 32.60
2011 2020
Input Source Input Source Figure 9.2 Global emissions U.S. ICT emissions estimation: 101 BCG analysis 164 BCG analysis (MtCO2e) networks and data centers Wireless / Share of global Greentouch 6% 3% BCG analysis subscriptions Ovum Networks + Third-party reports/ estimates1 BCG research Global emissions Extrapolation from industry 100 BCG analysis 139 BCG analysis (MtCO2e) trends/ previous estimates Wired / Share of global Greentouch 12% 9% BCG analysis subscriptions Ovum
18.1 17.9
Input Source Input Source
Global emissions 155 BCG analysis 299 BCG analysis (MtCO2e) Data centers /
Share of global 38% Gartner 35% BCG analysis installed servers
59.2 100.9 GeSI SMARTer 2020 216 15: Appendix
Germany 2011 2020 Smart- Mobile Smart- Mobile PCs Tablets phones phones PCs Tablets phones phones Figure 10.1 Installed base (B)1 0.06 0.004 0.02 0.08 0.08 0.06 0.05 0.08 +4% +36% +9% Germany ICT emissions
Electricity used/device 4 Usage footprint x (kWh/yr) 218.98 15.60 5.45 2.50 101.66 15.60 5.45 2.50 estimation: end-user devices -8%
Emissions factor3 (kg CO e/kWh) 0.52 0.52 0.52 0.52 0.52 0.52 0.52 0.52 Third-party reports/ estimates1 + 2 BCG research Shipments (B)1 0.01 0.003 0.01 0.02 0.02 0.02 0.03 0.02 Extrapolation from industry trends Embodied +4% +24% +10% x emissions Emissions/device 332.38 97.5 21.19 11.70 252.68 74.12 21.19 8.89 1. Gartner PCs and mobile devices PCs (kgCO2e/yr) -3% -3% -3% 2. IEA 3. Includes set top boxes, home routers and modems, Total emissions (MtCO e) 2 11.61 0.31 0.31 0.31 9.54 1.88 0.71 0.26 other computer peripherals and IPTV related emissions
2011 2020
Peripherals Peripherals
PC emissions 11.16 9.54
(MtCO e) 2
/
Printers Global ratio of PC to printers 3.2 3.6 emissions 3
13%5 13%5 Others
Total emissions (MtCO2e) 6.21 4.92
2011 2020
Input Source Input Source Figure 10.2 Global emissions 101 BCG analysis 164 BCG analysis Germany ICT emissions (MtCO2e) Wireless / estimation: networks Share of global Greentouch 2% 1% BCG analysis and data centers subscriptions Ovum Networks + Third-party reports/ estimates1 Global emissions Half of 2011 BCG research 100 BCG analysis Extrapolation from industry (MtCO2e) estimates (based on trends/ previous estimates Wired 1.85 / Deutsche Share of global Greentouch Telekom 4% subscriptions Ovum analysis)
5.6 3.5
Input Source Input Source
Global emissions 155 BCG analysis 299 BCG analysis (MtCO2e) Data centers /
Share of global 5% Gartner 4% BCG analysis installed servers
7.5 11.2 217 GeSI SMARTer 2020 15: Appendix
Canada 2011 2020
Smart- Mobile Smart- Mobile PCs Tablets phones phones PCs Tablets phones phones Figure 11.1 Installed base (B)1 0.04 0.00 0.01 0.02 0.04 0.01 0.02 0.02 Canada ICT emissions +17% +7% +2%
Electricity used/device 4 estimation: end-user devices Usage footprint x (kWh/yr) 218.98 15.60 5.45 2.50 101.66 15.60 5.45 2.50 -8%
Emissions factor3 (kg CO e/kWh) 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 + 2 Third-party reports/ estimates1 BCG research Shipments (B)1 0.01 0.00 0.01 0.003 0.02 0.01 0.01 0.003 Embodied +15% +6% +1% Extrapolation from industry trends x emissions Emissions/device 332.38 97.5 21.19 11.70 252.68 74.12 21.19 8.89 PCs and mobile devices PCs (kgCO2e/yr) 1. Gartner -3% -3% -3% 2. IEA Total emissions (MtCO2e) 6.90 0.27 0.19 0.04 4.88 0.71 0.32 0.04 3. Includes set top boxes, home routers and modems, other computer peripherals and IPTV related emissions
2011 2020
Peripherals Peripherals
PC emissions 6.90 7.18
(MtCO e) 2
/
Printers Global ratio of PC to printers 3.2 3.6 emissions 3
13%5 13%5 Others
Total emissions (MtCO2e) 3.62 3.71
2011 2020
Input Source Input Source Figure 11.2 Canada ICT emissions Global emissions 101 BCG analysis 164 BCG analysis (MtCO2e) estimation: networks Wireless / Share of global Greentouch and data centers 0.4% 0.3% BCG analysis subscriptions Ovum Networks Third-party reports/ estimates1 + BCG research Global emissions 100 BCG analysis 139 BCG analysis Extrapolation from industry (MtCO e) trends/ previous estimates 2 Wired / Share of global Greentouch 2% 1% BCG analysis subscriptions Ovum
1.4 2.5
Input Source Input Source
Global emissions 155 BCG analysis 299 BCG analysis (MtCO2e) Data centers /
Share of global 3% Gartner 2% BCG analysis installed servers
4.1 7.1 GeSI SMARTer 2020 218 15: Appendix
India 2011 2020
Smart- Mobile Smart- Mobile PCs Tablets phones phones PCs Tablets phones phones Figure 12.1 Installed base (B)1 0.05 0.0001 0.02 0.45 0.17 0.20 0.33 0.87 +14% N/A +34% +8% India ICT emissions
Electricity used/device 4 Usage footprint x (kWh/yr) 218.98 15.60 5.45 2.50 101.66 15.60 5.45 2.50 estimation: end-user devices -8%
Emissions factor3 1.44 1.44 1.44 1.44 1.44 1.44 1.44 1.44 Third-party reports/ estimates1 (kg CO2e/kWh) + BCG research Shipments (B)1 0.01 0.0001 0.01 0.17 0.07 0.07 0.20 0.16 Extrapolation from industry trends Embodied +14% N/A +37% -1% x emissions Emissions/device 332.38 97.5 21.19 11.70 252.68 74.12 21.19 8.89 1. Gartner PCs and mobile devices PCs (kgCO2e/yr) -3% -3% -3% 2. IEA 3. Includes set top boxes, home routers and modems, Total emissions (MtCO e) 2 19.80 0.01 0.42 3.62 42.26 9.41 6.71 4.55 other computer peripherals and IPTV related emissions
2011 2020
Peripherals Peripherals
PC emissions 19.80 42.26
(MtCO e) 2
/
Printers Global ratio of PC to printers 3.2 3.6 emissions 3
13%5 13%5 Others
Total emissions (MtCO2e) 10.99 22.24
2011 2020
Input Source Input Source Figure 12.2 Global emissions 101 BCG analysis 164 BCG analysis India ICT emissions estimation: (MtCO2e) Wireless / networks and data centers Share of global Greentouch 15% 11% BCG analysis subscriptions Ovum Networks + Third-party reports/ estimates1 Global emissions BCG research 100 BCG analysis 139 BCG analysis (MtCO e) Extrapolation from industry 2 trends/ previous estimates Wired / Share of global Greentouch 3% 7% BCG analysis subscriptions Ovum
18.1 27.9
Input Source Input Source
Global emissions 155 BCG analysis 287 BCG analysis (MtCO2e) Data centers /
Share of global 1.5% Gartner 1.7% BCG analysis installed servers
2.3 5.0 219 GeSI SMARTer 2020 15: Appendix GeSI SMARTer 2020 220 15: Appendix
15.6 Details for global abatement potential by sublever Agriculture
Abatement Addressable Savings potential emissions potential
Sublever (GtCO2e) (GtCO2e) (%) Sub-model details Sources
Addressable emissions defined as livestock-related1 with the saving potential based on the fact that cattle grazing in well- 1. EDGAR database Livestock 0.70 9.93 7% managed pastures reduces CH4 emissions by 20 percent: assume 2. BSR “Wireless and management 50% penetration in developed regions and 20% in developing, the Environment” and 50:50 split between the two in livestock emissions2
1. EDGAR database Addressable emissions defined as all agricultural emissions.1 2. “Total Factor productivity Savings potential is based on estimates of the global increase Smart farming Growth in Agriculture: A 0.25 12.4 2% in agricultural productivity (10% from 2012-2020) assuming that Malmquist Index Analysis ICT is responsible for 20% of impact.2 of 93 Countries, 1980-2000”
1. River Network, “Carbon Addressable emissions set to those from agricultural activities Footprint of Water” & IEA. (US ratio applied globally).1 Saving potential assumes 50% Smart water 2. BSR “Wireless and the 0.03 0.13 25% reduction in energy use from case studies2 and 50% penetration Environment” rate3 3. Expert interviews
Soil Addressable emissions defined as all agricultural emissions.1 1. EDGAR database monitoring/ 0.62 12.4 5% Savings potential is based on case studies and expert 2. BSR “Wireless and Weather interviews2 the Environment” forecasting
Buildings
Abatement Addressable Savings potential emissions potential
Sublever (GtCO2e) (GtCO2e) (%) Sub-model details Sources
40% reduction in retail buildings and 30% in others. Building design 0.45 N/A N/A Implementation: 60% of all new builds and 15% of retrofits SMART 2020 (except 0% for residential)
12% less in residential and retail buildings, 7% in warehouse Building and 36% in office and other emissions. management 0.39 N/A N/A SMART 2020 system Implementation: 40% of new offices and retail and 25% retrofits; 33% of all other new and 10% of retrofits
Integration 1. River Network, “Carbon Footprint of renewables Addressable emissions defined as commercial and residential of Water” & IEA in commercial building energy use.1 Savings potential based on BCG 0.50 16.52 3.0% 2. BSR “Wireless estimates.2 and residential and the Environment” buildings 3. Expert interviews
10% reduction in heating/cooling and appliance consumption. Voltage 0.24 N/A N/A Implementation: 80% of new builds, 30% of commercial retrofits SMART 2020 optimization and 20% of residential retrofits 221 GeSI SMARTer 2020 15: Appendix
Customer and service
Abatement Addressable Savings potential emissions potential
Sublever (GtCO2e) (GtCO2e) (%) Sub-model details Sources
1. IEA 2. SMART 2020 Addressable emissions updated with more recent emissions 3. Wall Street Journal: data1 and using the assumption that 20% of all private transport E-commerce http://blogs.wsj.com/ 0.09 1.14 7.5% is for shopping2. Saving potential assumes penetration rate of digits/2011/02/27/e- 15% in developed world 3 and 0% in developing commerce-will-keep- rolling-research-firm-says
1. SMART 2020; Pira “The future of global Addressable emissions from 96.6 Mt of paper use with 1 tCO e 2 printing” E-paper per ton of paper1 Savings potential determined estimated 0.06 0.10 2% 2. www.tkearth.com/ (61.5%)2 downloads/thoughts_ ereaders.pdf
Minimization 5% reduction in packaging material, leading to a 5% reduction in 0.22 N/A N/A SMART 2020 of packaging all transports and in storage
Assumes seven billion DVDs and 10 billion CDs globally sold per Online media 0.02 N/A N/A SMART 2020 year. 1 Kg CO2e per CD/DVD. Eliminates all CDs and DVDs
1. Munich Re 2. Expert interviews, Total addressable emissions estimated from average annual cost Public safety/ triangulated with World of natural disasters (based on last 5 years, split by developed Disaster Bank and the US Geological 0.03 0.12 15/25% and developing world, see additional details)1 Savings potential Survey data (www.dialog. managment estimated to be 15/25% for developed /developing world2 lk/about/responsibility/ outreach-cr/dewn)
Reduction in 24% reduction in inventory levels, 100% of warehouses and 25% 0.18 N/A N/A SMART 2020 inventory of retail are assumed to be used for storage
1. River Network, Addressable emissions set to those from Public, domestic and “Carbon Footprint wastewater treatment (US ratio applied globally).1 Saving of Water” & IEA. Smart water 0.13 0.52 25% potential assumes 50% reduction in energy use from case 2. BSR “Wireless and studies2 and 50% penetration rate3 the Environment” 3. Expert interviews
Manufacturing
Abatement Addressable Savings potential emissions potential
Sublever (GtCO2e) (GtCO2e) (%) Sub-model details Sources
Addressable emissions updated with total industrial energy Automation use minus the motor energy use (covered in next sublever) 1. IEA of industrial and industrial heating and cooling (likely little opportunity for 0.72 14.3 5.0% 2. SMART 2020 processes automation).1 A 15% reduction in energy is assumed with a 33% penetration rate2
Optimization Addressable emissions updated with total motor systems of variable 1. IEA emissions.1 A 30% increase in efficiency with a 60% penetration 0.53 2.92 18.0% 2. SMART 2020 speed motor rate is assumed2 systems GeSI SMARTer 2020 222 15: Appendix
Power
Abatement Addressable Savings potential emissions potential
Sublever (GtCO2e) (GtCO2e) (%) Sub-model details Sources
Addressable emissions based on total power capacity (6.9TW, Demand 0.55 kg CO /kWh emissions factor used) and average ratio of 1. IEA & EPRI: 0.01 0.25 4.0% 2 management energy savings as a result of DR (65 Wh/W)1 Savings potential "The Green Grid" based on penetration from case studies.1
1. IEA Sublever addresses all emissions related to electricity 2. PNNL: Time-of-day 0.21 21.48 1.0% generation1 with a conservative total savings potential taken "The Smart Grid: An pricing from report on smart grid2 Estimation of the Energy
and CO2 Benefits"
Addressable emissions equals non-base electricity generation 1. IEA Power-load 0.38 0.64 60.0% (those associated with oil)1 – saving potential based on 2. BCG Perspectives: balancing penetration of storage2 "Revisiting Energy Storage"
Addressable emissions based on those associated with T&D 1. The Energy and Power grid 0.33 1.10 30.0% losses (7% of all electricity)1 - 30% savings estimation from Resources Institute optimization previous SMART 2020 report "T&D Losses" & IEA
Integration of Addressable emissions based on change of emissions due renewables to greening of power grid based on IEA 2 degree scenario1 0.85 3.40 25.0% 1. IEA ETP in power – savings potential based on prior SMART 2020 estimation, generation represents contribution of ICT technology
Total addressable emissions is based on future VPP capacity 1. Pike Research: Virtual power 0.04 0.14 26.0% (30GW)1 with an estimate that a typical VPP incorporates 25% "Virtual Power Plants" plant renewables and reduces energy demand by 1%2 2. Expert interviews
Integration 1. BCG Perspectives: of storage BCG estimates there are 600 GW of installed fleet of diesel "Revisiting Energy Storage" 0.20 600 GW 400 hr/yr generators running ~400 hr/yr for island or off-grid applications into off-grid & Power Systems Research applications 223 GeSI SMARTer 2020 15: Appendix
Transportation
Abatement Addressable Savings potential emissions potential
Sublever (GtCO2e) (GtCO2e) (%) Sub-model details Sources
12% reduction in carbon intensity owing to improved driving Eco-driving SMART 2020 0.25 N/A N/A style
1. IEA Addressable emissions determined from the total emissions from 2. US DOE: (www1.eere.energy. road transportation1 and the savings potential is based on the gov/vehiclesandfuels/facts/2009_ Real-time fact that about 1.6% of total fuel use is wasted due to congestion fotw581.html) & BCG "The 0.07 9.56 0.7% (in US, figured assume to be similar for world congestion) with traffic alerts Internet’s New Billion: Digital a penetration rate depending on availability of communication Consumers in Brazil, Russia, technology2 India, China, and Indonesia "
Apps for Addressable emissions determined from emissions from intermodal 1. IEA passenger transportation.1 Savings potential from previous 0.07 7.17 1.0% 2. SMART 2020 travel/public report.2 transportation
Asset sharing/ Addressable emissions determined from passenger road 1. IEA Crowd 0.14 7.17 2.0% transportation1 with savings potential based on case study with 2. RAND Corporation: sourcing the assumption that it applied to a global average2 "Energy Services Analysis"
30% of passenger air and rail travel is business travel; Video- 0.08 N/A N/A globally 30% of business travel can be avoided through SMART 2020 conferencing videoconferencing
Assumes that work-related car travel in urban and non-urban areas decreases by 80%, while non-work-related car travel increases by 20%. In developed countries 10% of existing Tele- vehicles are affected, equivalent to 20% of people and 30-40% of 0.26 N/A N/A SMART 2020 commuting working population, and 7% in developing countries. Assumes a 15% increase in residential building emissions and a 60% reduction in office emissions, applied to 10% of residential buildings and 80% of office buildings
Optimization Addressable emissions updated with commercial road 1. IEA of truck route 0.19 3.88 5.0% transportation1 with the savings potential from prior report2 2. SMART 2020 planning
Optimization Addressable emissions updated with commercial road 1. IEA of logistics transportation/all other transportation emissions1 with the 0.57 3.88/2.2 14/1% 2. SMART 2020 network savings potential taken from prior report2
1. IEA Addressable emissions determined from all road transportation.1 2. New York Times: The savings potential is calculated from average reduction Integration "How green are electric cars in emissions of 30% in the US, number assumed to be fairly 0.20 9.56 2.1% depends on where you plug in" of EVs constant world-wide (although there are some differences due 3. BCG Perspectives: to different generation mix)2 and a 7% penetration3 "Batteries for Electric Cars"
1. IEA Addressable emissions determined from the total emissions from 2. US DOE: (1.eere.energy.gov/ road transportation1 and the savings potential is based on the Intelligent vehiclesandfuels/facts/2009_ fact that about 1.6% of total fuel use is wasted due to congestion traffic fotw581.html) & BCG "The 0.03 9.56 0.4% (in US, assume fuel use to be similar for world congestion) with Internet’s New Billion: Digital management a penetration rate depending on availability of communication Consumers in Brazil, Russia, technology2 India, China, and Indonesia "
Fleet Addressable emissions determined by commercial road 1. IEA transportation.1 savings potential determined by 10% of 2. BSR “Wireless and management 0.08 3.88 2.0% transportation that is “out-of-route” 2 with a 20% penetration the Environment” and telematics rate.3 3. Expert interviews GeSI SMARTer 2020 224 15: Appendix
15.7 Details of abatement calculation by country
15.7.1 United Kingdom
Buildings
Abatement Addressable Savings potential emissions potential
Sublever (MtCO2e) (MtCO2e) (%) Sub-model details Sources
SMART 2020; Since US and UK have similar building characteristics: scaled Building EIA "Buildings"; previous SMART 2020 results in US addendum by ratio of UK/ 9.8 UK Department of Energy design US building emissions (7.5%) and Climate Change
SMART 2020; Building Since US and UK have similar building characteristics: scaled EIA "Buildings"; management previous SMART 2020 results in US addendum by ratio of UK/ 3.6 UK Department of Energy US building emissions (7.5%) system and Climate Change
Integration of 1. UK Department of renewables in Addressable emissions defined as commercial and residential Energy and Climate Change commercial 6.6 220 3.0% building energy use.1 Savings potential based on BCG 2. BCG Perspective, and residential estimates.2 "What's Next for buildings Alternative Energy?"
SMART 2020; Since US and UK have similar building characteristics: scaled Voltage EIA "Buildings"; previous SMART 2020 results in US addendum by ratio of UK/ 3.0 UK Department of Energy optimization US building emissions (7.5%) and Climate Change 225 GeSI SMARTer 2020 15: Appendix
Service and consumer
Abatement Addressable Savings potential emissions potential
Sublever (MtCO2e) (MtCO2e) (%) Sub-model details Sources
1. UK Department of Energy and Climate Change Addressable emissions updated with more recent emissions 2. SMART 2020 data1 and using the assumption that 20% of all private transport E-commerce 3. Wall Street Journal: http:// 1.6 10.50 15.0% is for shopping2. Saving potential assumes penetration rate of blogs.wsj.com/digits/2011/02/27/e- 15% in developed world3 commerce-will-keep-rolling- research-firm-says/
1. SMART 2020; Pira Addressable emissions from 4.8 Mt of paper use with 1 tCO e 2 "The future of global printing" E-paper per ton of paper1 Savings potential determined estimated 3.0 4.80 61.5% 2. www.tkearth.com/downloads/ (61.5%)2 thoughts_ereaders.pdf
Minimization Based on calculation in previous report but scaled by percent 8.4 SMART 2020 of packaging of global GDP (~3.8%) to determine contribution in UK
Based on calculation in previous report but scaled by percent Online media SMART 2020 0.8 of global GDP (~3.8%) to determine contribution in UK
1. Munich Re Public safety Total addressable emissions estimated from average annual 2. Expert interviews, triangulated cost of natural disasters (based on last 5 years, UK scaled from with World Bank and the US / Disaster 0.2 1.12 15% Europe emissions by GDP)1 Savings potential estimated to be 15 Geological Survey data (www. management percent.2 dialog.lk/about/responsibility/ outreach-cr/dewn/)
Reduction in Based on calculation in previous report but scaled by percent 6.8 SMART 2020 inventory of global GDP (~3.8%) to determine contribution in UK
Addressable emissions set to those from Public, domestic and 1. River Network, "Carbon wastewater treatment (US ratio of water emissions to total Footprint of Water" & IEA. Smart water 1.1 4.36 25% emissions applied to UK).1 Saving potential assumes 50% 2. BSR "Wireless and the reduction in energy use from case studies2 and 50% penetration Environment" rate3 3. Expert interviews GeSI SMARTer 2020 226 15: Appendix
15.7.2 China
Power
Abatement Addressable Savings potential emissions potential
Sublever (MtCO2e) (MtCO2e) (%) Sub-model details Sources
Addressable emissions based on total power capacity in China Demand in 2020 (2.0TW, 0.8 kgCO /kWh emission factor is used) and 1. IEA 4.2 104 4.0% 2 management average ratio of energy savings as a result of DR (65 Wh/W)1 2. EPRI: "The Green Grid" Savings potential based on pentration from case studies.2
1. IEA Sublever addresses all emissions related to electricity Time-of-day 2. PNNL: "The Smart generation1 with a conservative total savings potential taken 79.2 7917 1.0% Grid: An Estimation of the pricing from report on smart grid2 Energy and CO2 Benefits"
Addressable emissions equals non-base electricity generation 1. IEA Power-load 8.6 14.3 60.0% (those associated with oil)1 – saving potential based on 2. BCG Perspectives: balancing penetration of storage2 "Revisiting Energy Storage"
Addressable emissions based on those associated with T&D 1. The Energy and Power grid 142.5 475.0 30.0% losses (6% of all electricity)1 - 30% savings estimation from Resources Institute "T&D optimization previous SMART 2020 report Losses" & IEA; SMART 2020
Integration of renewables 152.8 152.8 100% Based on IEA projections for the integration of renewables IEA in power generation
Total addressable emissions is based on future VPP capacity 1. Based on Pike Research: Virtual 1.8 7.01 26.0% (1GW)1 with an estimate that a typical VPP incorporates 25% "Virtual Power Plants" power plant renewables and reduces energy demand by 1%2 2. Expert interviews
Integration BCG estimates there are 78 MW of installed fleet of diesel 1. BCG Perspectives: of storage generators are available for replacement with renewables/ "Revisiting Energy Storage" 0.5 0.55 100% storage for island or off-grid applications (please see report for into off-grid & Power Systems Research applications additional details)1
Manufacturing
Abatement Addressable Savings potential emissions potential
Sublever (MtCO2e) (MtCO2e) (%) Sub-model details Sources
Addressable emissions updated with total industrial energy Automation (estimated to be 33% of all CO emissions – conversion to include 2 1. IEA; WorldBank Databank of industrial all GHG required applying global ratio of GHG to CO ) minus the 165.4 3308 5.0% 2 2. SMART 2020 processes motor energy use (from data in second lever).1 A 15% reduction in energy is assumed with a 33% penetration rate2
Optimization Addressable emissions is total motor systems emissions 1. IEA; "Raising China’s electric of variable 347.0 1928 18.0% (calculated from estimated 2410TWh electricity use).1 A 30% motor efficiency" speed motor increase in efficiency with a a 60% penetration rate is assumed2 2. SMART 2020 systems 227 GeSI SMARTer 2020 15: Appendix
15.7.3 Brazil
Transportation
Abatement Addressable Savings potential emissions potential
Sublever (MtCO2e) (MtCO2e) (%) Sub-model details Sources
Scaled from global SMART 2020 report based of ratio of Brazil Eco-driving SMART 2020 3.0 N/A N/A transportation emissions to global total (1.2%)
1. IEA Addressable emissions determined from the total emissions 2. US DOE: (www1.eere. from road transportation1 and the savings potential is based energy.gov/vehiclesandfuels/ on the fact that about 1.6% of total fuel use is wasted due to Real-time facts/2009_fotw581.html) & congestion (based on US average, figure assumed to be similar 1.2 166 0.7% BCG "The Internet’s New traffic alerts a likely higher for world congestion, thus our estimation is Billion: Digital Consumers in conservative) with a penetration rate depending on availability Brazil, Russia, India, China, and of communication technology2 Indonesia "
Apps for Addressable emissions determined from emissions from intermodal 1. World Bank passenger transportation.1 Savings potential from previous 1.2 118 1.0% 2. SMART 2020 travel/public report.2 transportation
Asset sharing/ Addressable emissions determined from passenger road 1. World Bank Crowd 2.4 118 2.0% transportation1 with savings potential based on case study 2. RAND Corporation: sourcing with the assumption that it applied to a global average2 "Energy Services Analysis"
Video- Scaled from global SMART 2020 reported based of ratio 2.3 N/A N/A SMART 2020; World Bank; IEA conferencing of Brazil transportation emissions to global total (2.9%)
Tele- Scaled from global SMART 2020 reported based of ratio of 7.5 N/A N/A SMART 2020; World Bank; IEA commuting Brazil transportation emissions to global total (2.9%)
Optimization Addressable emissions updated with commercial road 1. World Bank of truck route 3.6 71 5.0% transportation1 with the savings potential from prior report2 2. SMART 2020 planning
Optimization Addressable emissions updated with commercial road 1. World Bank of logistics transportation/all other transportation emissions1 with the 11.2 71/128 14/1% 2. SMART 2020 network savings potential taken from prior report2
1. World Bank Addressable emissions determined from all road transportation.1 2. New York Times: The savings potential is calculated from average reduction Integration "How green are electric cars in emissions of 30% in the US, number assumed to be fairly 3.5 166 2.1% depends on where you plug in" of EVs constant world-wide (although there are some differences due 3. BCG Perspectives: "Batteries to different generation mix)2 and a 7% penetration3 for Electric Cars"
Addressable emissions determined from the total emissions 1. World Bank; 2. US DOE: from road transportation1 and the savings potential is based (http://www1.eere.energy.gov/ Intelligent on the fact that about 1.6% of total fuel use is wasted due to vehiclesandfuels/facts/2009_ traffic 0.6 166 0.4% congestion (in US, assume fuel use to be similar for world fotw581.html) & BCG "The management congestion, likely slightly higher in Brazil, thus we present a Internet’s New Billion: Digital conservative estimate) with a penetration rate depending on Consumers in Brazil, Russia, availability of communication technology2 India, China, and Indonesia "
Fleet Addressable emissions determined by commercial road 1. World Bank transportation.1 savings potential determined by 10% of 2. BSR "Wireless management 1.4 71 2.0% transportation that is "out-of-route" 2 with a 20% penetration and the Environment" and telematics rate.3 3. Expert interviews GeSI SMARTer 2020 228 15: Appendix
Agriculture
Abatement Addressable Savings potential emissions potential
Sublever (MtCO2e) (MtCO2e) (%) Sub-model details Sources
1. World Bank: http://sdwebx. Addressable emissions defined as livestock-related1 with worldbank.org/climateportalb/ Livestock 17.9 256 7% the saving potential based on the fact that cattle grazing in doc/ESMAP/FINAL_LCCGP_ Management well-managed pastures reduces CH4 emissions by 20 percent: Brazil.pdf assume 35% penetration rate 2. BSR "Wireless and the Environment"
1. World Bank: http://sdwebx. worldbank.org/climateportalb/ Addressable emissions defined as all agricultural emissions.1 doc/ESMAP/FINAL_LCCGP_ Savings potential is based on estimates of the global increase Brazil.pdf Smart farming 7.0 349 2% in agricultural productivity (10% from 2012-2020) assuming 2. "Total Factor productivity that ICT is responsible for 20% of impact.2 Growth in Agriculture: A Malmquist Index Analysis of 93 Countries, 1980-2000"
Addressable emissions set to those from agricultural activities. 1. River Network, "Carbon Brazil estimated emissions taken from applying ratio of Brazil Footprint of Water" & IEA. Smart water 0.5 1.95 25% ag water use (1.15%) by total global water emissions1 Saving 2. BSR "Wireless and potential assumes 50% reduction in energy use from case the Environment" studies2 and 50% penetration rate3 3. Expert interviews
1. World Bank: http://sdwebx. Soil worldbank.org/climateportalb/ Addressable emissions defined as all agricultural emissions.1 Monitoring/ doc/ESMAP/FINAL_LCCGP_ Savings potential is based on case studies and expert 17.5 349 5.00% Brazil.pdf Weather interviews2 forecasting 2. BSR "Wireless and the Environment"
1. National Institute of Space; Average Forest lost projected by taking 2008 deforestation levels1 2. "Under pressure from rising and assuming -1% CAGR (average decline in deforestation Deforestation deforestation, Brazil's IBAMA between 1990-2008). Assumes that savings potential is 10% 47.5 475.1 10.0% establishes 'Zero Deforestation prevention because of limited number of IBAMA agents and difficulties Policy' in the Amazon " Imazon; posed by rural law enforcement 2, 3 3. "ICT-Based 229 GeSI SMARTer 2020 15: Appendix
15.7.4 United States
Power
Abatement Addressable Savings potential emissions potential
Sublever (MtCO2e) (MtCO2e) (%) Sub-model details Sources
Addressable emissions based on total power capacity in US Demand in 2020 (1.0TW, 0.55 kgCO /kWh emission factor is used) and 1. EIA & EPRI: 1.4 35.8 4.0% 2 management average ratio of energy savings as a result of DR (65 Wh/W)1 "The Green Grid" Savings potential based on penetration from case studies.1
Sublever addresses all emissions related to electricity generation 1. EIA Time-of-day (3937 TWh. 0.55 kgCO /KWh emission factor)1 2. PNNL: "The Smart Grid: 21.7 2165 1.0% 2 pricing with a conservative total savings potential taken from report An Estimation of the Energy on smart grid2 and CO2 Benefits" Addressable emissions equals non-base electricity generation 1. IEA Power-load 13.1 21.8 60.0% (those associated with oil)1 – saving potential based on 2. BCG Perspectives: balancing penetration of storage2 "Revisiting Energy Storage"
Addressable emissions based on those associated with T&D Power grid 1. The Energy and Resources losses (7% of all electricity)1 - 30% savings estimation from 45.5 151.6 30.0% Institute "T&D Losses" & IEA optimization previous SMART 2020 report
Integration of renewables 84.7 84.7 100.0% Based on EIA projections for the integration of renewables EIA in power generation
Total addressable emissions is based on future VPP capacity 1. Pike Research: Virtual power 6.3 24.1 26.0% (5GW)1 with an estimate that a typical VPP incorporates 25% "Virtual Power Plants" plant renewables and reduces energy demand by 1%2 2. Expert interviews
Integration of storage Little opportunity for off-grid storage/renewables because 0.0 0 0 into off-grid of nearly 100% availability of modern grid applications
Agriculture
Abatement Addressable Savings potential emissions potential
Sublever (MtCO2e) (MtCO2e) (%) Sub-model details Sources
Building design 130 No update from previous US report SMART 2020 – US addendum
Building 48 No update from previous US report SMART 2020 – US addendum management system
Integration of 1. EIA – "Buildings" Addressable emissions defined as commercial and renewables in 2. BCG Perspective, residential building energy use.1 Savings potential 87 2900 3.0% "What's Next for commercial and based on BCG estimates.2 residential buildings Alternative Energy?"
Voltage optimization 40 No update from previous US report SMART 2020 – US addendum GeSI SMARTer 2020 230 15: Appendix
15.7.5 Germany
Power
Abatement Addressable Savings potential emissions potential
Sublever (MtCO2e) (MtCO2e) (%) Sub-model details Sources
Addressable emissions based on total power capacity in US in 2020 (1.0TW, 0.55 kgCO /kWh emission factor is used) Demand 2 1. EIA & EPRI: and average ratio of energy savings as a result of DR 1.4 35.8 4.0% "The Green Grid" management (65 Wh/W)1 Savings potential based on penetration from case studies.1
Sublever addresses all emissions related to electricity 1. EIA Time-of-day generation (3937 TWh. 0.55 kgCO /KWh emission factor)1 2. PNNL: "The Smart Grid: 21.7 2165 1.0% 2 pricing with a conservative total savings potential taken from report An Estimation of the Energy 2 on smart grid and CO2 Benefits"
Addressable emissions equals non-base electricity 1. IEA Power-load 13.1 21.8 60.0% generation (those associated with oil)1 – saving potential 2. BCG Perspectives: balancing based on penetration of storage2 "Revisiting Energy Storage"
Addressable emissions based on those associated with T&D Power grid 1. The Energy and Resources losses (7% of all electricity)1 - 30% savings estimation from 45.5 151.6 30.0% Institute "T&D Losses" & IEA optimization previous SMART 2020 report
Integration of renewables in 84.7 84.7 100.0% Based on EIA projections for the integration of renewables EIA power generation
Total addressable emissions is based on future VPP capacity 1. Pike Research: Virtual power 6.3 24.1 26.0% (5GW)1 with an estimate that a typical VPP incorporates "Virtual Power Plants" plant 25% renewables and reduces energy demand by 1%2 2. Expert interviews
Integration of Little opportunity for off-grid storage/renewables because storage into off- 0.0 0 0 of nearly 100% availability of modern grid grid applications
Manufacturing
Abatement Addressable Savings potential emissions potential
Sublever (MtCO2e) (MtCO2e) (%) Sub-model details Sources
Automation Addressable emissions updated with total industrial energy 1. SMART 2020 Germany of industrial minus the motor energy use (from data in second lever).1 A 15% 6.0 119.2 5.0% 2. SMART 2020 processes reduction in energy is assumed with a 33% penetration rate2
Optimization Addressable emissions is total motor systems emissions of variable 1. Dena (calculated from estimated 260TWh electricity use).1 A 30% 27.1 150.8 18.0% 2. SMART 2020 speed motor increase in efficency witha a 60% penetration rate is assumed2 systems 231 GeSI SMARTer 2020 15: Appendix
15.7.6 Canada
Buildings
Abatement Addressable Savings potential emissions potential
Sublever (MtCO2e) (MtCO2e) (%) Sub-model details Sources
SMART 2020 US Addendum; Building 10.9 Previous US results scaled by ratio of Canada/US building "CANADA’S EMISSIONS design emissions (8.4%) based on similarities in housing market TRENDS" Canada Environment
Building SMART 2020 US Addendum; Previous US results scaled by ratio of Canada/US building "CANADA’S EMISSIONS management 4.0 emissions (8.4%) based on similarities in housing market TRENDS" Canada system Environment
Integration 1. Environment Canada of renewables Addressable emissions defined as commercial and 2. BCG Perspective, in commercial residential building energy use.1 Savings potential 7.3 244 3.0% "What's Next for based on BCG estimates.2 and residential Alternative Energy?" buildings
SMART 2020 US Addendum; Voltage 3.4 Previous US results scaled by ratio of Canada/US building "CANADA’S EMISSIONS optimization emissions (8.4%) based on similarities in housing market TRENDS" Canada Environment GeSI SMARTer 2020 232 15: Appendix
Transportation
Abatement Addressable Savings potential emissions potential
Sublever (MtCO2e) (MtCO2e) (%) Sub-model details Sources
SMART 2020 US Addendum; Scaled from global SMART 2020 reported based of ratio of Eco-driving "CANADA’S EMISSIONS 11.3 N/A N/A Canada's transportation emissions to global total (4.5%) TRENDS" Canada Environment
1. "CANADA’S EMISSIONS Addressable emissions determined from the total emissions TRENDS" Canada Environment; from road transportation1 and the savings potential is based 2. US DOE: (www1.eere.energy. Real-time 1.2 169 0.7% on the fact that about 1.6% of total fuel use is wasted due to gov/vehiclesandfuels/facts/2009 traffic alerts congestion (in US, assume to be similar for Canada congestion) _fotw581.html) & BCG "The with a penetration rate depending on availability Internet’s New Billion: Digital of communication technology2 Consumers in Brazil, Russia, India, China, and Indonesia "
Apps for Addressable emissions determined from emissions from 1. "CANADA’S EMISSIONS intermodal 0.7 73 1.0% passenger transportation.1 Savings potential from previous TRENDS" Canada Environment travel/public report.2 2. SMART 2020 transportation
Asset sharing/ 1. "CANADA’S EMISSIONS Addressable emissions determined from passenger road TRENDS" Canada Environment Crowd 1.5 73 2.0% transportation1 with savings potential based on case study2 2. RAND Corporation: "Energy sourcing Services Analysis"
SMART 2020 US Addendum; Video- Scaled from global SMART 2020 reported based of ratio of "CANADA’S EMISSIONS 3.6 N/A N/A Canada's transportation emissions to global total (4.5%) conferencing TRENDS" Canada Environment
SMART 2020 US Addendum; Tele- Scaled from global SMART 2020 reported based of ratio of "CANADA’S EMISSIONS 11.7 N/A N/A Canada's transportation emissions to global total (4.5%) commuting TRENDS" Canada Environment
Optimization 1. "CANADA’S EMISSIONS Addressable emissions updated with commercial road of truck route TRENDS" Canada Environment 4.8 96 5.0% transportation1 with the savings potential from prior report2 planning 2. SMART 2020
Optimization Addressable emissions updated with commercial road 1. "CANADA’S EMISSIONS of logistics 14.3 96/86 14/1% transportation/all other transportation emissions1 with the TRENDS" Canada Environment network savings potential taken from prior report2 2. SMART 2020
1. "CANADA’S EMISSIONS Addressable emissions determined from all road transportation.1 TRENDS" Canada Environment The savings potential is calculated from average reduction 2. New York Times: "How green Integration 3.5 169 2.1% in emissions of 30% in the US, number assumed to be fairly are electric cars depends on of EVs constant in Canada (although there are some differences due where you plug in" to different generation mix)2 and a 7% penetration3 3. BCG Perspectives: "Batteries for Electric Cars"
1. "CANADA’S EMISSIONS Addressable emissions determined from the total emissions TRENDS" Canada Environment 1 Intelligent from road transportation and the savings potential is based 2. US DOE: (www1.eere.energy. on the fact that about 1.6% of total fuel use is wasted due to gov/vehiclesandfuels/facts/2009_ traffic 0.6 169 0.4% congestion (in US, assume fuel use to be similar for world fotw581.html) & BCG "The management congestion) with a penetration rate depending on availability Internet’s New Billion: Digital of communication technology2 Consumers in Brazil, Russia, India, China, and Indonesia "
1. "CANADA’S EMISSIONS Addressable emissions determined by commercial road Fleet TRENDS" Canada Environment transportation.1 savings potential determined by 10% of management 2. BSR "Wireless and the 1.9 96 2.0% transportation that is "out-of-route"2 with a 20% Environment" and telematics penetration rate.3 3. Expert interviews 233 GeSI SMARTer 2020 15: Appendix
15.7.7 India
Power
Abatement Addressable Savings potential emissions potential
Sublever (MtCO2e) (MtCO2e) (%) Sub-model details Sources
Addressable emissions based on total power capacity in India in 2020 (0.39TW, 0.8 kgCO /kWh emission factor is Demand 2 1. IEA & EPRI: used) and average ratio of energy savings as a result of DR 0.8 20.3 4.0% "The Green Grid" management (65 Wh/W)1 Savings potential based on pentration from case studies.1
1. IEA Sublever addresses all emissions related to electricity Time-of-day 2. PNNL: "The Smart Grid: generation1 with a conservative total savings potential 13.8 1378 1.0% An Estimation of the Energy pricing taken from report on smart grid2 and CO2 Benefits"
Addressable emissions equals non-base electricity 1. IEA Power-load 9.6 16.0 60.0% generation (those associated with oil - 19TWh)1 – saving 2. BCG Perspectives: balancing potential based on penetration of storage2 "Revisiting Energy Storage"
Addressable emissions based on those associated with T&D Power grid 1. The Energy and Resources losses (22% of all electricity)1 - 30% savings estimation from 91.0 303 30.0% Institute "T&D Losses" & IEA optimization previous SMART 2020 report
Integration of renewables in 23.8 95.2 25.0% Based on IEA projections for the integration of renewables 1. IEA power generation
Virtual power 0.0 0.0 26.0% Likely little technical potential for VPP in India 1. Expert interviews plant
BCG estimates there are 290 MW market size of diesel Integration of 1. BCG Perspectives: generators are available for replacement with renewables/ storage into off- "Revisiting Energy Storage" 2.0 2.0 100% storage for island or off-grid applications (please see report & Power Systems Research grid applications for additional details)1 GeSI SMARTer 2020 234 15: Appendix
Transportation
Abatement Addressable Savings potential emissions potential
Sublever (MtCO2e) (MtCO2e) (%) Sub-model details Sources
Eco-driving 12.1 N/A N/A Scaled from global SMART 2020 reported based of ratio SMART 2020 of estimated India transportation emissions to estimated global total in 2020 (4.8%)
Real-time 2.6 375.3 0.7% Addressable emissions determined from the total emissions 1. Energy & Emissions Outlook traffic alerts from road transportation1 and the savings potential is based for the Transport Sector in India, on the fact that about 1.6% of total fuel use is wasted due to Dr. Sarath Guttikunda; ICT's congestion (in US, figured assume to be similar for world Contribution to India's National congestion) with a penetration rate depending on availability Action Plan on Climate Change, of communication technology2 Digital Energy Solutions Consortium; 2. US DOE: (http://www1.eere. energy.gov/vehiclesandfuels/ facts/2009_fotw581.html) & BCG "The Internet’s New Billion: Digital Consumers in Brazil, Russia, India, China, and Indonesia "
Apps for 2.3 231 1.0% Addressable emissions determined from emissions from 1. Energy & Emissions Outlook intermodal passenger transportation.1 Savings potential from previous for the Transport Sector in India, 2 travel/public report. Dr. Sarath Guttikunda; ICT's transportation Contribution to India's National Action Plan on Climate Change, Digital Energy Solutions Consortium; 2. SMART 2020
Asset sharing/ 4.6 231 2.0% Addressable emissions determined from passenger road 1. Energy & Emissions Outlook Crowd transportation1 with savings potential based on case study for the Transport Sector in India, 2 sourcing with the assumption that it applied to a global average Dr. Sarath Guttikunda; ICT's Contribution to India's National Action Plan on Climate Change, Digital Energy Solutions Consortium; 2. RAND Corporation: "Energy Services Analysis"
Video- 3.9 N/A N/A Scaled from global SMART 2020 reported based of ratio of SMART 2020 conferencing India transportation emissions to global total in 2020 (4.8%)
Tele- 12.5 N/A N/A Scaled from global SMART 2020 reported based of ratio of SMART 2020 commuting India transportation emissions to global total in 2020 (4.8%)
Optimization 7.6 151 5.0% Addressable emissions updated with commercial road 1. Energy & Emissions Outlook of truck route transportation1 with the savings potential from prior report2 for the Transport Sector in India, planning Dr. Sarath Guttikunda; ICT's Contribution to India's National Action Plan on Climate Change, Digital Energy Solutions Consortium 2. SMART 2020
Optimization 22.4 151/130 14/1% Addressable emissions updated with commercial road 1. Energy & Emissions Outlook of logistics transportation/all other transportation emissions1 for the Transport Sector in India, 2 network with the savings potential taken from prior report Dr. Sarath Guttikunda; ICT's Contribution to India's National Action Plan on Climate Change, Digital Energy Solutions Consortium 2. SMART 2020 235 GeSI SMARTer 2020 15: Appendix
Transportation continued
Abatement Addressable Savings potential emissions potential
Sublever (MtCO2e) (MtCO2e) (%) Sub-model details Sources
Integration 7.9 375 2.1% Addressable emissions determined from all road transportation.1 1. Energy & Emissions Outlook of EVs The savings potential is calculated from average reduction for the Transport Sector in India, in emissions of 30% in the US, number assumed to be fairly Dr. Sarath Guttikunda; ICT's constant worldwide (although there are some differences Contribution to India's National due to differenet generation mix)2 and a 7% penetration3 Action Plan on Climate Change, Digital Energy Solutions Consortium; 2. New York Times: "How green are electric cars depends on where you plug in". 3. BCG Perspectives: "Batteries for Electric Cars"
Intelligent 1.3 375 0.4% Addressable emissions determined from the total emissions 1. Energy & Emissions Outlook traffic from road transportation1 and the savings potential is based for the Transport Sector in India, management on the fact that about 1.6% of total fuel use is wasted due to Dr. Sarath Guttikunda; ICT's congestion (in US, assume fuel use to be similar for world Contribution to India's National congestion) with a penetration rate depending on availability Action Plan on Climate Change, of communication technology2 Digital Energy Solutions Consortium; 2. US DOE: (http://www1.eere. energy.gov/vehiclesandfuels/ facts/2009_fotw581.html) & BCG "The Internet’s New Billion: Digital Consumers in Brazil, Russia, India, China, and Indonesia "
Fleet 3.0 151 2.0% Addressable emissions determined by commercial road 1. Energy & Emissions Outlook management transportation.1 savings potential determined by 10% of for the Transport Sector in India, 2 and telematics transportation that is “out-of-route” with a 20% penetration Dr. Sarath Guttikunda; ICT’s rate.3 Contribution to India’s National Action Plan on Climate Change, Digital Energy Solutions Consortium 2. BSR “Wireless and the Environment”. 3. Expert interviews GeSI SMARTer 2020 236 15: Appendix
15.8 Experts consulted and/or interviewed
Experts consulted
Name Organization
David Carroll AT&T Cecil Lara AT&T John Schulz AT&T Gunar Hering BCG Andrew Mack BCG Holger Rubel BCG Pattabi Seshadri BCG Rory Wang BCG Dan Kilper Bell Labs Steve Korotky Bell Labs Marshall Chase BSR Peter Nestor BSR Dinesh Chand Sharma Ericsson Jens Malmodin Ericsson Manka Mishra Ericsson Alexandra Degher HP Carl Eckerseley HP David Fuqua HP National Renewable Chuck Powers Energy Laboratory
Helena Castren Nokia
Chen Min Alice Nokia Pranshu Singhal Nokia Marc Bettzüge University of Cologne Rod Tucker University of Melbourne 237 GeSI SMARTer 2020 15: Appendix
to 9.1 GtCO e in the current version of the 15.9 Comparison of 2 report. These difference was influenced by abatement potential three main factors:
in this report with A Removing obsolete or repetitive sub- levers (-0.1 GtCO e) SMART 2020 report 2 B Adding new sublevers (+3.1 GtCO2e) In this appendix section we will describe in C Refining estimations on previous quantitative detail the differences in the sublevers (-1.7 GtCO2e) sublevers used compared to the prior SMART 2020 report and the impact this had on the total calculated abatement potential.
The figure below illustrates that the total estimated abatement potential increased 1.3
GtCO2e from 7.8 GtCO2e in the previous report
Figure 2020 abatement potential (GtCO2e) Revised estimate of abatement 12 +1.3 potential from previous report 3.1 -1.7
10 C B 9.1
8 7.8 -0.1 A
6
4
2
0 2008 report Obsoletesublevers New sublevers Sublevers refined 2012 refresh
14.2% Share of global emissions 16.5% GeSI SMARTer 2020 238 15: Appendix
A
A Obsolete Obsolete sub-levers from prior report Figure (or renamed/combined) sublevers • Reduction in ground fuel • In-flight fuel eff iciency Table illustrating the removed, transportation • Optimization of ship consolidated, or renamed These sublevers were already covered in a • Reduction in unnecessary flight operations time • Reduction of damaged - 2esublevers from the previous similar lever or renamed to better describe • Maximization of ship load factor good s report potential and thus removed. In other cases, it Renamed or consolidated sub-levers was found the impact from this sublever was • Reduce T&D losses Power grid optimization • Benchmarking and building decommissioning Building • Reduced building space through design very small or the abatement potential from design • Intelligent commissioning the sublever was already realized. • HVAC automation Building • Lighting automation management • Ventilation on demand system • Reduce consumption through user info rmation TODp ricing
Total change: -0.1 GtCO2e
B
B Added sublevers Added sub-levers Figure Several sublevers have been added to the new Integration of EVs Time-of-day Abatement potential & bio-fuels 0.20 pricing 0.21 Intelligent traffic Real-time of added sublevers version of the report. Many of these are a management 0.03 traffic alerts 0.07 Fleet management Soil 0.08 0.62 result of innovation within the last few years. and telematics monitoring New solutions and technologies have increased Island grids 0.20 Smart water 0.16 Disaster Asset sharing 0.14 0.03 2e the scope of possible sublevers, adding a total management Power-load VPP 0.04 balancing 0.38 of 3.1 GtCO e to the total abatement potential Livestock 2 Smart farming 0.25 management 0.70
0.10.0 0.30.2 0.0 0.5 1.0
GtCO2e
Total change: +3.1 GtCO2e
C
C Refinement to sublevers Sub-levers refined Figure Finally, there have been refinements to the Change in 2020 abatement Differences in refined sublevers between 2008 and 2012 reports sublevers than generally decreased the from SMART 2020 report and Demand response estimates from the previous report. These 0.01 SMARTer 2020 Integration of renewables 0.85 refinements are a result of more recent Optimization of truck route planning 0.10 estimates by segment of global GHG emissions, Optimization of logistics network 0.34 -1.7 GtCO e recent trends in technological applications, Automation of industrial processes 0.29 2 Optimization of variable speed generally more updated data, and an approach motor systems 0.68 E-commerce that takes a slightly more conservative 0.03 E-paper 0.07 Power gird estimate than those used in the previous op timization 0.33 Buildi ng management report. sys tem(1) 0.39 2008 report Buildi ng design(1) 0.45 2012 report
0.0 0.5 1.0 GtCO2e
Total change: -1.7 GtCO2e 239 GeSI SMARTer 2020 15: Appendix
15.10 Glossary Carbon sink Natural entity that has the ability to absorb and hold carbon from the atmosphere, such as A/V a forest or body of water. The destruction of Audio/video equipment such a carbon sink releases the carbon it holds
as CO2 Bandwidth Rate of data transfer, measured in bits per second CCC (Committee on Climate Change) An advisory body in the U.K. that informs the BAU government on the level of carbon budgets Business as usual and areas in which cost-effective abatement can be realized Biofuel A fuel directly derived from living matter Center of Excellence An international body that exists to help share Broadband best practices (e.g. sharing information and Wide band of frequencies used to transmit analysis) through effective communication telecommunications information and among various parties
BRT (bus rapid transit) Climate Change Act 2008 A bus system that utilizes many of the features A 2008 law passed in the United Kingdom that of a metro system to increase efficiency and sets clear targets for GHG emissions reductions decrease transit time and provides a carbon budgeting system that caps emissions over five-year periods, with Building Regulations 2010 three budgets set at a time Energy efficiency regulations for both residential and non-residential buildings in the U.K. Cloud computing System of computing in which the computing CAFÉ (Corporate Average Fuel Economy) resources being accessed are typically owned Regulations in the United States that require and operated by third-party providers on a that the average fuel economy of a consolidated basis in data centre locations manufacturer’s vehicles meet a certain fuel economy standard CO2 Carbon dioxide CAGR Compound annual growth rate CO2e Carbon dioxide equivalent Carbon footprint Impact of human activities on the environment Contained animal feeding measured in terms of GHG produced, operation (CAFO) measured in CO2e an institution that concentrates cattle in one area for feeding and raising, most typically Carbon intensity found in developed nations. More commonly
Quantity of CO2e emitted per unit of energy known as a feedlot produced by the burning of a fuel GeSI SMARTer 2020 240 15: Appendix
CRC Energy Efficiency Scheme Externality A mandatory cap and trade system in the Something that is generated during the United Kingdom; still in its earliest phases of production of a good or provision of a service development that bears a cost on society but is not borne directly by an individual; most frequently in DEC (Display Energy Certificate) this report, the externality of GHG emissions A certificate prominently displayed on buildings to give more underlying information to Feed-in tariff consumers about the building’s energy usage An amount of money given to a producer of renewable energy based on the amount of Decarbonization production in kWh; this amount is dependent Removing fuel sources from the fuel mix that on the type of power generated lead to the release of CO2 and other GHGs Flex fuel Dematerialization A vehicle that can run off gasoline, ethanol, The substitution of high carbon activities or a blend of the two or products with low carbon alternatives Fracking E-commerce (electronic commerce) A process that results in the creation of fractures Buying and selling of products and services in rocks, the goal of which is to increase the over the internet and other computer networks output of a natural gas well
EV (electric vehicle) FYP (Five-Year Plan) a vehicle that operates using electricity Centralized economic planning conducted by the Chinese government to set the direction of EERS (energy efficiency the economy over the coming five years resource standards) establish specific, long-term targets for energy GDP savings that utilities or non-utility program Gross domestic product administrators must meet through customer energy efficiency programs GHG Greenhouse gas Emissions factor Carbon footprint of any energy source, expressed GIB (Green Investment Bank) for example as kgCO2/kWh The UK-based financial organization that has a mission to provide financial solutions to Emissions intensity accelerate private sector investment in the
CO2 produced in kilograms per U.S. dollar of green economy GDP generated GIS Energy Act 2011 (Geographic[al] information system, also UK law that seeks to bring about a step change known as geospatial information system) in the provision of energy efficiency measures System for capturing, storing, analyzing, to homes and businesses managing and presenting data and associated attributes that are spatially referenced to Earth 241 GeSI SMARTer 2020 15: Appendix
HVAC IPCC (Intergovernmental Panel Heating, ventilation and air conditioning on Climate Change) Scientific intergovernmental body set up to assess Green Deal the scientific, technical and socio-economic A new UK framework to enable financing of information relevant to understanding the energy efficiency improvements in domestic scientific basis of risk of human-induced climate and non-domestic properties change, its potential impacts and options for adaptation and mitigation HMI (human machine interface) The user interface where interaction between IRR the human and the machine occurs Internal rate of return, the discount rate often used in capital budgeting that makes the net Hydroelectric power present value of all cash flows from a Electricity that is generated using the gravitational particular project equal to zero. A higher IRR force of moving water fed through a turbine indicates more desirability
IBAMA IT Brazilian Institute of Environment and Information technology Renewable Natural Resources, the federal Brazilian agency charged with the protection ITU of the environment International Telecommunications Union
ICT (Information and communications kWh technology) Kilowatt hour Combination of devices and services that capture, transmit and display data and Kyoto Protocol information electronically Legally binding agreement of the UNFCCC in which industrialized country signatories will ICT company reduce their collective GHG emissions by 5.2% GeSI constitution definition – “Any company on 1990 levels. Negotiated in December 1997 or organization which, as a principal part of in Kyoto, Japan, and came into force in its business, provides a service for the point-to- February 2005 point transmission of voice, data or moving images over a fixed, internet, mobile or LCA (life cycle assessment) personal communication network, or is a Investigation and evaluation of the supplier of equipment which is an integral environmental impacts of a given product or component of the communication network service caused or necessitated by its existence infrastructure, or procedures equipment or software associated with the electronic storage Leapfrogging processing or transmission of data.” Theory of development in which developing countries may accelerate development by IEA skipping inferior, inefficient, expensive or International Energy Agency. polluting technologies and industries, moving directly to more advanced ones IP (Internet protocol) Data-oriented protocol used for communicating data across a packet-switched internetwork. GeSI SMARTer 2020 242 15: Appendix
LEED (Leadership in Energy NPV and Environmental Design) The difference between the present value of cash Green building rating system established by inflows and the present value of cash outflows the US Green Building Council OECD Lever Organization for Economic Co-operation and In this report refers to a device, application or Development mechanism whose use or implementation brings about a reduction in GHG emissions Payback period The length of time required for an investment FOA (Food and Agriculture to recover its initial outlay in terms of profits Organization of the UN) or savings UN agency that works on international efforts to defeat hunger by helping developing Peak load or peak generation countries modernize and improve agriculture, Maximum power requirement of a system at a forestry and fishery practices given time, or the amount of power required to supply customers at times when need is greatest Gt (gigaton) A billion (109) tons Peak power plant Power plants that are only brought online HVAC (heating, ventilation, when demand for electricity is the highest; and air conditioning) these plants tend to be the dirtiest and emit Systems in a building that control interior large quantities of GHG emissions environmental conditions; these systems are a major contributor to a building’s emissions Prosumer People that both produce and consume electricity IP (intellectual property) PTC (production tax credit) IPCC (Intergovernmental A sum deduced from the total amount Panel on Climate Change) a taxpayer owes to the state for producing International organization charged with a certain quantity of a good coordinating a global response to climate change PUC (power usage effectiveness) ITC (investment tax credit) A measure of how efficiently a computer data A sum deducted from the total amount center uses its power; specifically, how much of a taxpayer owes to the state for investment the power is actually used by the computing for technology equipment (in contrast to cooling and other overhead) Mt Megaton (1 million tons). PV (photovoltaic) Solar cells that generate electricity from light NDVI from the sun (normalized difference vegetation index) A graphical indicator that uses remote sensing Rebound effect measurements to determine changes in vegetation Increases in demand caused by the introduction of more energy efficient technologies. This increase NGO in demand reduces the energy conservation Non-governmental organization effect of the improved technology on total resource use 243 GeSI SMARTer 2020 15: Appendix
Replacement rate T&D Rate at which a particular device or application Transmission and distribution is replaced by another Tar sands RFID (Radio-frequency identification) A mixture of clay, water and sand that is Automatic identification and data capture saturated with petroleum method, relying on storing and remotely retrieving data using devices called RFID tags Tax credit An amount of money that can be offset against RPS (renewable portfolio standard) a tax liability A requirement set by the state that utilities must generate a certain percentage of their Telematics energy from renewable sources Information technology that deals with the long-distance transmission of computerized Smart building information Group of embodied ICT systems that maximize energy efficiency in buildings THC (thermohaline circulation) A large-scale ocean circulation that is driven Smart grid by global density gradients created by surface Integration of ICT applications throughout the heat and freshwater fluxes grid, from generator to user, to enable efficiency and optimization solutions Tilling (or tillage) Using machinery to churn the soil to draw Slash and burn agriculture more nutrients to the surface When forests are cut down using rudimentary methods and the field remains burned to clear UNFCCC (United Nations Framework the field for crop production or the raising Convention on Climate Change) livestock International environmental treaty negotiated at the United Nations Conference on SME Environment and Development; the objective Small and medium enterprises of the treaty is to stabilize greenhouse gas concentrations in the atmosphere at a level Soil erosion that would prevent dangerous anthropogenic The washing away of soil by the flow of water interference with the climate system
Split incentives WCI (Western Climate Initiative) A situation that results because of the A regional cap and trade market for emissions principal-agent problem, which arises through being developed in western North America; the difficulties in one party (agent) motivating includes California, Montana, New Mexico, another party (principal) to act on their Oregon, Utah, and Washington as well as the behalf. A classic example is the landlord- Canadian provinces of British Columbia, tenant relationship, in which the tenant is Manitoba, Ontario, and Quebec often paying for the energy costs, but does not have the control to install energy efficient 4G LTE (4th generation long term evolution) upgrades Most advanced high-speed mobile networks to date v6