October 2, 2008 – It’s easy to mock little efforts to save the environment: reusing grocery bags, buying a Prius, putting an energy-efficient refrigerator in an energy-eating mansion. The big gains to curb greenhouse emissions, the argument goes, will come from controlling big industrial companies that spew millions of tons of heat-trapping gases every year.
But consumers — especially American consumers — have more influence over climate change than they might think.
U.S. consumers have direct or indirect control over 65% of the country’s greenhouse-gas emissions, according to new statistics tallied by consultant McKinsey & Co. The figure for consumers in the rest of the world is just 43%. Americans, largely because of how they drive and how they build and use their homes and offices, lead some of the most energy-intensive lives in the world.
“We in the U.S. have a much greater ability to influence this issue than perhaps people recognize,” says Jon Creyts, a McKinsey principal who assembled the numbers.
But harnessing people power won’t be easy. There are big practical constraints, notably costs.
It’s hardly surprising that Americans burn more energy than their counterparts elsewhere in the world. With just 5% of the world’s population, the U.S. burns 23% of the world’s oil. What’s striking about the McKinsey numbers is less the size of America’s “carbon footprint” than its makeup.
Industry — including oil, steel, chemicals and cement — produces 23% of U.S. greenhouse-gas emissions, according to the McKinsey study. But a handful of other emission sources more directly controlled by consumers far outweigh industry when those sources are pooled together.
Passenger cars account for 17% of U.S. emissions — something consumers could affect by driving more-efficient cars or by driving less. Residential buildings and appliances contribute another 17% of emissions, underscoring the impact consumers could have if they lived in smaller buildings, or added more insulation, or bought a more energy-efficient model next time they replaced their washing machine.
Consumer behavior affects virtually all man-made greenhouse-gas emissions because consumers drive the economy. So assessing which pollution sources can be most easily controlled by consumers is “subjective,” McKinsey’s Mr. Creyts notes.
For example, saying auto emissions are under the direct control of consumers may put too much onus on individuals, letting industry off too easily. People can choose only products that are available to them.
“The landscape is already laid out in the U.S. Most people live in suburban areas,” notes Pankaj Bhatia, a director at the World Resources Institute, a Washington environmental group. Slashing automotive and residential emissions, he says, will require prodding manufacturers to build more-efficient cars and houses. “I would just hope that technologies will come to help us through some of these choices.”
Those technologies will have to be affordable to make a difference. Even with gasoline near $4 a gallon, buying a hybrid gasoline-and-electric car still doesn’t make economic sense for the average American driver. Statistics suggest he’ll sell the hybrid long before he saves enough at the pump to recoup the premium he’ll have to pay to buy the car.
That calculus applies to buildings and appliances too. A more energy-efficient refrigerator, studies show, often does pay for itself within a few years in reduced electricity costs. But bigger purchases — say, replacing windows in an old house with more-efficient models — are harder to financially justify because they take longer to pay for themselves.
One way to overcome this cost barrier would be to tax energy consumption more heavily, making energy inefficiency more expensive. Europe has done this for decades, notably by levying heavy taxes on gasoline. High gas taxes give consumers a strong reason to buy more-fuel-efficient vehicles — and, in turn, give auto makers a strong reason to build them.
That largely explains why cars are more miserly in Europe than in the U.S. The average household car or truck on the road in Europe gets about 29 miles per gallon. In the U.S., it’s about 21 mpg, according to Lee Schipper, a researcher at the University of California at Berkeley, who has long studied fuel-economy trends.
One of the biggest boosters of the idea that consumers can help the planet by changing their behavior is industry. Why? It doesn’t want to shoulder the full environmental burden.
Over the past three years, European governments have imposed limits on greenhouse-gas emissions for much of industry. Those limits amount to additional taxes on fossil-fuel use, because they force companies that emit more than their quotas to buy extra government-sanctioned pollution “permits” from companies that emit less. With European governments pledging to tighten those limits, industry worries it will get stuck with an increasing bill for the climate cleanup. So it wants others — particularly consumers — to help pick up the tab.
Last November, the Confederation of British Industry, a business group, issued a report concluding that 60% of U.K. greenhouse-gas emissions are “under direct consumer control” or are “influenced” by consumers — findings in line with McKinsey’s new analysis of emissions in the U.S.
Consumers aren’t likely to behave in a more environmentally friendly way unless doing so saves them money, says Rhian Kelly, head of climate change for the British group. “We haven’t got to the point where consumers are willing to go out of their way to make low-carbon choices,” she says. “In order to effect this sea change, we need to be talking to government about incentivizing solutions.”
The U.S. has long resisted European-style intervention to curb energy use. That may be changing.
Both Barack Obama and John McCain say they’ll support a mandatory limit on U.S. greenhouse-gas emissions from industry if elected president. That explains why some of America’s biggest companies are pushing the government for tax breaks to defray the cost of developing new energy-saving technologies. Americans will pay — either at the store or by shouldering the tax breaks.
The current economic difficulties crystallize the challenge of finding environmental solutions that don’t break the bank. Some believe Americans need relief from high energy prices. This summer, some presidential contenders proposed a temporary “holiday” from the federal gasoline tax, which would have likely increased consumption. That idea died in part because polls showed voters didn’t think it would do much to mitigate their pain at the pump.
Others argue now is the time to tighten, not loosen, pressure on Americans to change their consuming ways. High gasoline prices already have begun curbing U.S. demand. Americans are buying smaller, more-efficient cars, and they’re driving less. Some suggest raising the gasoline tax — particularly given signs the price of oil is trending back down below $100 a barrel. To that stick they would add carrots such as more-generous federal tax breaks for personal use of wind and solar energy.
The great dream is to come up with affordable technologies that will minimize Americans’ environmental damage and the need to alter their behavior. The dilemma is “whether to change our personality or whether to change our choices” of products, says the World Resources Institute’s Mr. Bhatia. “My personal view is that we need both.”
Write to Jeffrey Ball at
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