November 16, 2012
The Challenge of Climate Math
A nerd hasn't been this popular since, well, ever. Nate Silver, the creator of the election poll statistical hub FiveThirtyEight was declared the clear winner in the Presidential election. And on Fox News, election math was at the center of one of the most bizarre on-air moments in memory.
The numbers discussion then seeped over from polls to other politically charged topics such as climate change. David Frum, President George W. Bush's speechwriter, tweeted this gem: "Horrible possibility: if the geeks are right about Ohio, might they also be right about climate?"
This awakening about the math (and physics) of climate change has coincided with climate activist Bill McKibben's "Do the Math" tour, an awareness-raising series of events criss-crossing the country this month. The tour was inspired by McKibben's incredible essay in Rolling Stone magazine, "Global Warming's Terrifying New Math."
In this article, McKibben lays out 3 fundamental climate numbers: to stay below (1) 2°C of warming(the limit the world's scientists have said might help us avoid the worst of climate change), we can only burn (2) 565 more gigatons (a billion tons) of carbon dioxide, which will force a battle with the fossil fuel industry since it has (3) 2,795 gigatons in reserve. These are important numbers to wrap your head around, but what do they really mean for countries and companies? How fast do we have to change?
To answer these tough questions, we can turn to two of the world's best number crunchers, McKinsey and PwC (full disclosure: I have a consulting partnership arrangement with PwC US). Last week PwC released its Low Carbon Economy Index 2012 report, which calculated one simple, powerful number: In order to meet the 2°C warming target, we will need to reduce the global carbon intensity (how much carbon it takes to produce every unit of energy or GDP) by 5.1% every year until 2050. For perspective, in 2011 carbon intensity improved just 0.8%.
This number provided another view on some similar math from McKinsey, which concluded that the ratio of global GDP per ton of CO2 would need to rise tenfold by 2050.
OK, so the math is not pretty, but it is what it is. And it's not like the world is ignoring the challenge entirely. Here are some numbers that make me feel better:
These are great macro stats. But the brutal logic of the McKibben, PwC, and McKinsey numbers applies at the microeconomic level as well. Meaning, I believe, companies need to acknowledge the math and shoot for a 5% reduction in carbon per year.
It's not so crazy. The early leaders have a good start. Dow Chemical has reduced energy costs $9 billion since 1994. Walmart has improved the fuel efficiency of its distribution fleet by 69% since 2005. A large consumer products company — which tells me it will be going public with this story very soon — has already cut carbon in its own operations by 80%.
Of course, the entire private sector will not achieve these results on its own. We will need strong global policies and a price on carbon. But given how profitable many organizations are finding the low carbon quest to be, they shouldn't wait.
While it's a myth that companies make all decisions on ROI calculations (what was the exact return on that Super Bowl ad?), we do claim to love hard-nosed numbers. Let's not let politics or fear of the size of the task ahead get in the way of today's climate math.
Climate data has trumped politics in the past. According to Sunday's op-ed by Cass Sunstein, the Harvard professor and co-author of the great book Nudge, Ronald Reagan embraced aggressive action to solve the problem of ozone depletion because he believed the cost-benefit analysis. Basically, it was cheaper to act than not to. Similarly, the math on climate action is getting better every day as the costs of inaction rise. As Sunstein points out, Hurricane Sandy will likely cost the country $50 billion (New York's Governor Cuomo has already asked for $35 billion in federal aid).
Climate math is simply a constraint on the imaginary formula that is business as usual. But constraints drive innovation. We in the business community respect numbers and the best companies love challenges. Let's prove it.
(This post first appeared on Harvard Business Online.)