According to a report by McKinsey & Company, achieving net zero emissions by 2050 requires a "radical transformation of the global economy."
McKinsey: Ending the climate crisis requires $9.2 trillion in annual investment
McKinsey estimates that $9.2 trillion in annual investment is needed over the next few decades to limit global warming to 1.5°C and end the climate crisis. This represents a 60% increase in current investment, equivalent to half of global corporate profits and a quarter of global tax revenue in 2020.
The report warns that economic transformation will affect every country and every industry, with those most dependent on fossil fuels set to experience the most dramatic changes. However, McKinsey, which advises many governments and major companies, also warns that the transition will be difficult at first but will be rewarding later, with electricity costs, for example, expected to rise before falling.
The report states that achieving net-zero emissions is imperative to avoid the worst impacts of global warming on billions of people, and that many low-carbon investments are actually opportunities for economic growth, potentially leading to a more cost-effective and efficient economy. The report also states that the longer the delay, the higher the cost of the transition.
"$9.2 trillion is a massive number that should grab everyone's attention," said Jonathan Woetzel, a McKinsey Global Institute researcher and author of the report. "But such a massive investment is not impossible. Societies have undergone major transformations in the past," such as global urbanization.
According to Vosow, the so-called economic transformation here refers to an economic model that begins to take environmental and social costs into consideration, that is, a "sustainable economy."
Transformation will be difficult at first but sweet later; total investment will rise to 8.8% before falling
The report said a key question in the economic transition, which will be a bitter-first, sweet-later period, is who will pay for more expensive electricity, steel and cement, whether these costs will be passed on to the people and whether low-income earners will be protected by the government.
The report, which aims to assess the scale of the economic transformation needed to achieve net zero immediately, concludes: "To achieve net zero, the world economy must be radically transformed."
The report estimates that investment in energy, transport, buildings, industry, and agriculture will need to increase by $3.5 trillion, with an additional $1 trillion in current spending shifting from high-carbon goods to low-carbon ones, such as electric vehicles and heat pumps. The total investment required for the transition will be 6.8% of global GDP, rising to as high as 8.8% between 2026 and 2030 before declining again.
In McKinsey's scenario, electricity costs could rise 25% by 2040 due to the lower operating costs of renewable energy, before falling below today's levels after 2050. Steel and cement costs would rise by about 30% and 45%, respectively.
McKinsey: Solving climate change requires courage and determination
"The investment figures McKinsey calculates are not the net cost of getting the world to net zero, but the upfront annual costs before any benefits are taken into account," said Bob Ward, policy director at the Grantham Research Institute on Climate Change at the London School of Economics.
"Investments in clean infrastructure will create jobs, economic growth, and substantial savings; and these investments will pay off even more when we consider the avoided loss of lives and livelihoods from air pollution and climate disasters."
Swiss Re recently estimated that losses from a 2.6°C global temperature rise by 2050 would reduce global GDP by 14%.
“While the task ahead may seem daunting, human ingenuity can ultimately achieve net zero, just as humanity has solved other seemingly intractable problems over the past 10,000 years,” the McKinsey report said. “The key question is whether the world can muster the necessary courage and resolve.”
"We think this is a hopeful message that makes people realize that there is a need and a capacity to create greater global cooperation," said Vosow.
Source: Environmental Information Center (https://e-info.org.tw/node/233301)
