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Decarbonizing Our Toughest Sectors Can Be Profitable
New paper by Amory Lovins shows how cutting carbon emissions from harder-to-abate sectors can create new strategic opportunities for business.
AUGUST 4, 2021 (BASALT, CO)—As corporations and industries face rising public, policy, and market pressure to cut carbon emissions, the need for evidence-based solutions balancing carbon consciousness with profitability grows ever more intense. A surprising new synthesis published today by RMI co-founder and chairman emeritus Amory Lovins in the noted management publication MIT Sloan Management Review lays out the path to cutting carbon emissions from harder-to-abate sectors—not at a cost but at a profit, while creating strategic opportunity.
In “Decarbonizing Our Toughest Sectors—Profitably,” Dr. Lovins outlines five innovative strategies for businesses in such carbon-intensive industries as heavy-duty trucking, aviation, steel, and cement. These new models can both provide early wins toward a net-zero goal by 2050 and amplify financial benefits from the clean energy transition across multiple economic sectors:
- Rapidly scale green technologies to outcompete legacy rivals and supplant obsolete technologies. Tesla and others are racing to replace diesel 18-wheelers with highly competitive electric trucks that can transform logistics, paying for their costly recharging infrastructure from grid benefits and from fuel savings by haulers big and small.
- Create novel incentives and business models, such as “golden carrot” purchase commitments, that reward innovative competitors challenging incumbent industries with breakthrough technologies. Combining the same battery improvements as electric cars and trucks with superefficient airplanes can enable clean fleets of smaller electric planes flying point-to-point—and transform aviation by offering a more convenient, flexible alternative to big fueled planes flying hub-and-spoke routes.
- Integrate new design methods, technologies, materials and manufacturing techniques to disrupt legacy industrial ecosystems. For example, carbon-fiber composites made the body of BMW’s i3 electric city car lighter, so it needed fewer batteries. This, plus savings from simplified manufacturing, offset the cost of its pricier materials, quadrupling its efficiency at competitive cost and without compromise.
- Relocate basic materials industries using cheaper production unlocked by clean energy. Making metals was always about location. Now some steel producers are setting a new trend by co-locating production with iron ore and locally abundant renewable energy, rather than shipping ore to fossil-fueled plants far away.
- Harmonize customers’ and providers’ incentives by rewarding frugal structural design and “servitizing” basic materials. Making cement and steel releases 15 percent of the world’s CO2, yet these materials are now at least half wasted by inefficient structural design. Combining frugal design with a service model could instead reward both providers and customers for doing more and better with less for longer. Thus, the owner of a bridge built with far fewer tons of materials could get paid for the traffic that the bridge safely carries—not for the physical asset or its materials.
“Decarbonizing these industries isn’t only feasible—companies will be amply rewarded for strategically adopting new technologies, designs, and practices,” said Dr. Lovins. “Serious entrepreneurs and smart investors understand climate change is bad for business and bad for the planet. New classes of solutions can now make climate solutions create trillions of dollars in durable value.”
An earlier report released by Dr. Lovins on July 20, Profitably Decarbonizing Heavy Transport and Industrial Heat, showed with real-world images and careful documentation how recent advances in emissions-heavy industries—including trucking, aviation, metallurgy, and cement—have almost certainly tipped the economic balance of decarbonization from cost to profit.
Of the global fossil-fuel carbon emissions to be halved by 2030 and eliminated by 2050, 35 percent come from big trucks, ships, planes and buses and from producing such materials as steel, cement, chemicals and aluminum. These two companion papers assemble strong new evidence of profitable decarbonization potential and of practical ways to capture it.
RMI is an independent nonprofit founded in 1982 that transforms global energy systems through market-driven solutions to align with a 1.5°C future and secure a clean, prosperous, zero-carbon future for all. We work in the world’s most critical geographies and engage businesses, policymakers, communities, and NGOs to identify and scale energy system interventions that will cut greenhouse gas emissions at least 50 percent by 2030. RMI has offices in Basalt and Boulder, Colorado; New York City; Oakland, California; Washington, D.C.; and Beijing.
Dr. Lovins’s background is at https://rmi.org/people/amory-lovins/.
About MIT Sloan
At MIT Sloan Management Review (MIT SMR) we explore how leadership and management are transforming in a disruptive world. We help thoughtful leaders capture the exciting opportunities—and face down the challenges—created as technological, societal, and environmental forces reshape how organizations operate, compete, and create value.