Some Fairly Pleasant CO2 Arithmetic

Posted by Tom Bozzo

From last week’s Conference on Postal and Delivery Economics, a paper [*] on Bank of America Corporation’s environmental footprint offered the following observations:

  • BAC’s U.S. CO2 footprint is approximately 2.2 million metric tons per year.
  • Most of that is from electricity and natural gas use (for lighting, heating, and computing).
  • One of their corporate sustainability goals has been to reduce emissions by 9% from 2004 levels by 2009 (ca. 200,000 MT/year).

Now, the authors put their economist caps on, and in a pretty good demonstration that some useful economics requires no advanced math at all, looked at the cost of picking the low-hanging fruit instead of the high-hanging fruit:

  • The three lowest-cost mitigation methods could reduce emissions by 280,000 MT and save them $2.5 million per year on net. None of these involve carbon credits (which are also relatively cheap but have positive cost).
  • Their four highest-cost options could cut out 313,000 MT at a cost of $78 million/year.
  • However, the fourth highest-cost option — the carbon credits — would, added to the three low-cost options, let them reduce their footprint by more than 20% without significantly denting the low-cost method’s savings.
  • For the most part, BAC doesn’t seem to be especially uniquely situated to capture these savings.

In contrast, we have the possibly endangered Mitch McConnell arguing on the Senate floor that the

“cap and trade” approach to cutting carbon dioxide emissions would unleash “the largest restructuring of the American economy since the New Deal.”

The implication, of course, is that requiring even modest emissions reductions would impose large costs on the U.S. economy. For at least the first 10-20% or so, the BAC case shows that’s just totally untrue; the first few percent can be extracted just by reducing gross wastes (like improving the light/heat production ratio for lighting) and lot more isn’t especially expensive with proper planning, i.e. rolling energy efficiency improvements into the processes of replacing or refreshing fixed capital.

And I can’t help but say that with the McCain campaign trying to suggest that He Cares (if not as much as about selling McCain ’08 golf apparel), I’d like to see the roll call on the measure. (Update: a cloture motion failed in the Senate, with surrogates expressing support for the bill on behalf of the absent presidential candidates. The 84-vote total makes me think some senators didn’t want their preferences recorded.)

[*] Jody Berenblatt, Lawrence Buc, and Peter Soyka, “Bank of America, Mail, and the Environment.” BAC is their employer or client, and not mine.