McKinsey Global Institute
Sustainability & Resource Productivity Practice
23 February, 2012
CONFIDENTIAL AND PROPRIETARY
Any use of this material without specific permission of McKinsey & Company is strictly prohibited
Resource Revolution: Meeting
the world’s resource challenges
– some implications for London
McKinsey & Company | 1
Commodity prices have increased sharply since 2000, erasing all the
declines of the 20th century
40
60
80
100
120
140
160
180
200
220
240
260
1970 20112 2000 1990 1980 1960 1950 1940 1930 1920 1910 1900
World War I
Post-war
Depression
Great
Depression
World War II
1970’s
oil shock
McKinsey Commodity Price Index (years 1999–2001 = 100)1
1 Based on arithmetic average of 4 commodity sub-indices of food, non-food agricultural items, metals and energy.
2 2011 prices based on average of first eight months of 2011.
SOURCE: Grilli and Yang; Pfaffenzeller; World Bank; International Monetary Fund; Organisation for Economic Cooperation and
Development statistics; UN Food and Agriculture Organization; UN Comtrade; McKinsey analysis
McKinsey & Company | 2
The emergence of 3 billion middle-class consumers will fuel future
demand
Global middle class1
Billions of people
Middle East and North Africa
Sub-Saharan Africa
2030
3.23 Central and South America
4.88
3 billion
Asia-Pacific
North America
Europe
0.68
0.32
0.31 0.23
0.11
2020
3.25
1.74
0.70
0.33
0.25 0.17
0.06
2009
1.85
0.53
0.66
0.34 0.18
0.11 0.03
1 Based on daily consumption per capita ranging from $10 to $100 (in purchasing power parity terms)
SOURCE: OECD
McKinsey & Company | 3
In 2007, developed region megacities dominate the
top of the list
By 2025, Beijing and Shanghai will have broken into the
top of the list, but London is still amongst the top five
London today ranks third on global GDP rankings and will
continue to be in the top five Cities in terms of GDP1
$ billion
SOURCE: McKinsey Global Institute Cityscope 1.0
366
Milan 367
Houston 375
Osaka 398
Rhein-Ruhr
Washington, D.C. 380
483
Chicago 511
362
Randstad Holland
700
Paris 736
London
New York 1,210
Tokyo 1,460
Los Angeles
925
270
277
São Paulo 284
Moscow
Belgian central metro
Boston 289
Mexico City 286
San Francisco 303
Philadelphia 322
Dallas
Developing
region
Developed
region
548
Tianjin 549
Shenzhen 551
Chicago 711
Paris
Rhein-Ruhr 624
944
Los Angeles 985
537
Dallas
1,107
London 1,235
Shanghai
Tokyo 1,697
New York 1,770
Beijing
1,243
460
469
Randstad Holland 484
Mexico City
Guangzhou
Moscow 517
Chongqing 501
São Paulo 524
Houston 528
Washington, D.C.
1 Predicted real exchange rate.
McKinsey & Company | 4
London dominates the UK’s growth prospects with 30 middleweight cities
only contributing 33% of growth
11
23
31
69
35
31
0
Megacities
Cities with over
10 million inhabitants
UK GDP growth 100 =
$0.89 trillion
Other cities and rural areas
Small middleweights
Cities 150,000–2 million
Mid-size middleweights
Cities 2 million–5 million
Large middleweights
Cities 5 million–10 million
Contribution to UK growth, 2007–251
% of total GDP growth
1
–
4
26
Number
of cities,
2007
–
34%
138
–
89
99
Per capita
GDP, indexed
100 = average
81
24
–
17
23
Share of
population,
2007 (%)
37
1 Predicted real exchange rate.
NOTE: Numbers may not sum due to rounding.
SOURCE: McKinsey Global Institute Cityscope 1.0
McKinsey & Company | 5
Fifteen groups of resource productivity opportunities
represent 75 percent of the resource savings
Power plant efficiency 106
Road freight shift 108
Irrigation techniques 115
Oil and coal recovery 115
End-use steel efficiency 132
Land degradation 134
Electric and hybrid vehicles 138
Transport efficiency 138
Smallholder farm yields 143
Iron and steel energy efficiency
Other3 892
145
Urban densification 155
Municipal water leakage 167
Food waste 252
Large scale farm yields 266
Building energy efficiency 696
Total resource benefit1
$ billion (2010 dollars)
Energy
Water
Land
Steel
1 Based on current prices for energy, steel, and food plus unsubsidized water prices and a shadow cost for carbon.
2 Annualized cost of implementation divided by annual total resource benefit.
3 Includes feed efficiency, industrial water efficiency, air transport, municipal water, steel recycling, wastewater reuse, and other
industrial energy efficiency.
SOURCE: McKinsey analysis
Societal perspective, 2030
McKinsey & Company | 6
Developing countries account for 70 to 85 percent of the
productivity opportunities
% of total productivity opportunity by resource and region
1387
11
Energy
Steel Water
Land
820
1610
3214
1040
315
221
SOURCE: McKinsey analysis
1 Rest of developing Asia includes Central Asia (e.g., Uzbekistan), South Asia (e.g., Bangladesh), Southeast Asia (e.g., Laos),
and North Korea.
2 Includes water savings from water-specific levers as well as water savings from improved agricultural productivity.
3 For steel, the chart represents all the demand-side levers and the scrap recycling lever, but excludes supply- and conversion-
side levers.
322
8
61414
5
63
55
10879
810
83
6987
5
United States
and Canada
India
China
Africa
Developed
Asia-Pacific
Rest of deve-
loping Asia1
Middle
East
Europe
(OECD/EU-27)
Russia and
Eastern Europe
Latin
America
Global air
and sea
(energy only)
83 17
73
Developed Developing
27
Land
Water2
Energy 71
84
29
16
Steel3
Total
opportunity
%
McKinsey & Company | 7
About half of these resource productivity opportunities
are relevant for London
Electric and hybrid vehicles 138
134 Land degradation
143 Smallholder farm yields
138 Transport efficiency
155 Urban densification
145 Iron and steel energy efficiency
252 Food waste
167 Municipal water leakage
696 Building energy efficiency
266 Large scale farm yields
Other3 892
Power plant efficiency 106
Road freight shift 108
Irrigation techniques 115
Oil and coal recovery 115
End-use steel efficiency 132
Total resource benefit1
$ billion (2010 dollars) Relevance for London
Energy
Water
Land
Steel
1 Based on current prices for energy, steel, and food plus unsubsidized water prices and a shadow cost for carbon.
2 Annualized cost of implementation divided by annual total resource benefit.
3 Includes feed efficiency, industrial water efficiency, air transport, municipal water, steel recycling, wastewater reuse, and other
industrial energy efficiency.
SOURCE: McKinsey analysis
Societal perspective, 2030
McKinsey & Company | 8
London's environmental footprint is comparatively low on some
dimensions
1 Footnote
SOURCE: Sustainable urban infrastructure: London
Text
McKinsey & Company | 9
The biggest contribution to London’s abatement potential
comes from buildings
SOURCE: Sustainable urban infrastructure: London
Text
McKinsey & Company | 10
Fresh water consumption per day and capita differs multiple 100 percent
Source: Nakheel; DEWA; Dubai municipality; News reports; Australian
National University; Autonomous University of Barcelona; GCC water economics team
135
Singapore
Muscat 203
156
Sydney 277
Riyadh 300
Canberra 320
Dubai 339
Phoenix 410
Berlin 118
London 156
Masdar City target 80
Barcelona
Residential freshwater consumption
Litres per capita per day
Cities with water scarcity
Less-water scarce cities
McKinsey & Company | 11
Technologies for water-demand reduction could achieve
20% savings in London by 2025
SOURCE: Sustainable urban infrastructure: London
Text
McKinsey & Company | 12
Tax measures can make EVs TCO-positive, as is already
the case in Denmark
Annual subsidies
One-time subsidies
70
Italy 2,100
Sweden 170
Germany
2,800 Spain
29,500
France 11,000
Japan 16,800
Denmark
9,000
U.S. 7,500
Great Britain 8,200
Portugal 8,900
China1
Tax benefits for EVs compared with ICEs, 2009
$ per vehicle for whole life cycle
▪ Purchase subsidy
▪ Vehicle tax waiver (5
y)
▪ VAT waiver
▪ Vehicle tax waiver
▪ Tax credit for pur-
chase
1 At present commercial vehicles only
SOURCE: McKinsey EVMC team
ILLUSTRATIVE
McKinsey & Company | 13
6 16 9 1
Megacities can achieve significant EV demand
within 10 years
xEV demand % of new car sales
xEV fleet no of vehicles, % of total fleet
~ 70,000 4%
~ 26,000
~ 108,000
~300,000
~ 62,000
5 5
6 15 9
9 7 2
8 21 13
Plug-in hybrid electric vehicle
Battery electric vehicle
Electric city car (only tested in Shanghai & NY)
Sh
an
gh
ai
Pa
ris
N
ew
Yo
rk
2%
2%
2015
2015
2020
2015
2020
(NY study focused on 2015 only)
7%
8%
SOURCE: McKinsey EVMC team
