Climate change – strategy and opportunities

Economics Times interviews Martin Stuchtey, a global expert on climate change, and partner with McKinsey.


We have done 160 studies over the last 12 months on climate change. Very few are for CSR and sustainability guys. Most of them are being funded straight out of the boards, and typically we talk to the head of strategy when we discuss them. It is not about making the CSR story headlines today; it’s about making your business viable in the long-term, to make your business fit for the low-carbon economy.
Almost all of them agreed that there is a huge upside to managing this transition.We were surprised to see that almost 30% of the carbon reduction in our own cost curve actually has a negative cost — you actually profit from it! For many companies 60-70% of their emissions can be reduced at net zero cost.
We estimate the market (carbon trading) to be about $1.0-1.6 trillion by 2030, which is about the size of today’s oil market!

It’s a new commodity market that has to be developed from scratch, and that means infrastructure — you need a world carbon bank, lots and lots of certification bodies, many controls. Without that, it is going to be very difficult, and you can’t only rely on local governments coming back with their fuel economy standard or taxes on this or that.
Then there is green urbanisation. New cities are coming up, new SEZs are coming up. Can we really start focusing on these? Renewable energy and generation have already seen a big leap. In both solar and wind, I think we can be the front runners, as is the case in bio-fuels. We feel that 10-20% of the top companies will profit from it, and position themselves completely on the cost curve. Overall, Indian companies see it more as an opportunity rather than a threat. In the next 12-18 months, you will see a big change.


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