Achieving net zero greenhouse gas emissions by 2050 is possible but will cost $1 trillion to $2 trillion a year, according to a new report, which warns that the cost of unmitigated climate change will be much higher.
The Energy Transitions Commission, a coalition of senior executives from 45 energy producers, financial institutions and environmental groups, said Wednesday that it is “technically and economically possible” to achieve net zero emissions by the middle of the century at an annual cost of about 1% to 1.5% of global GDP.
Limiting global temperature increases to 1.5 degrees Celsius, a goal of the Paris Climate Agreement, will require net zero emissions by around 2050.
The required additional investments are “easily affordable,” given current global savings and sustained low interest rates, and are dwarfed by the amount of public spending dedicated to stimulating the economy after the coronavirus pandemic, the ETC added.
ArcelorMittal, Bank of America, BP and Royal Dutch Shell are among companies represented on the ETC. Individuals from the European Climate Foundation and World Resources Institute are also members, although none of the organizations were asked to endorse the report.
“There is no doubt that it is technically and economically possible to reach the zero-carbon economy which we need by 2050; and zero must mean zero, not a plan which relies on the permanent and large-scale use of ‘offsets’ to balance continued greenhouse gas emissions,” ETC co-chair Adair Turner said in a statement.
“Action in the next decade is crucial, otherwise it will be too late,” he added.
As governments and businesses continue to grapple with the fallout of the coronavirus pandemic, focus is once again turning to the climate crisis, which has been freshly highlighted by raging wild fires in California and damage to glaciers in Antarctica, following several other extreme weather events in the United States.
The pandemic has demonstrated the “unpreparedness of the global economy to systemic risks,” according to the ETC, which said unprecedented government spending on coronavirus recovery efforts provides an opportunity to invest in a more resilient economy.
Organizations such as the International Energy Agency and the United Nations have also urged governments to ensure that efforts to boost the economy support clean energy and climate goals.
But the pandemic has hurt global energy investment, which is expected to plummet by a fifth this year compared to 2019. Renewable energy has fared better than fossil fuels, but investment in large wind and solar projects in the first quarter of 2020 fell back to the levels of three years ago, according to a report earlier this year from the IEA.
The IEA said last week that achieving net zero CO2 emissions by 2070 will require additional investments of $31 trillion above commitments already made by governments. Separately, the International Renewable Energy Agency said last year that total investment in the energy system would need to increase by $15 trillion above current plans.
Failure to tackle climate change, however, could cost much more in the long run. The International Renewable Energy Agency found that climate-related savings would be worth as much as $160 trillion cumulatively over the next three decades.
“Recent research estimates that since 2000, warming has already cost both the US and EU at least $4 trillion in lost output, and tropical countries are 5% poorer than they would have been without warming,” according to the ETC.
The ETC said that most new investment will need to go towards scaling up zero-carbon electricity provision.
To boost renewable power supply, the average annual pace of wind and solar capacity increases will need to be about five to six times the increase achieved in 2019.
Government policy and regulation should facilitate private investment and innovation, while discouraging the use of fossil fuels through carbon pricing mechanisms.
Buildings, transport and industry will need to be electrified and hydrogen used in cases where that is not possible. Remaining energy use in sectors that cannot be electrified should be decarbonized with carbon capture and storage and sustainable bioenergy, the ETC said.
It identified the building, aviation and shipping industries as facing the highest costs relating to decarbonization. Coal mining, car manufacturing and livestock farming are most at risk of job losses. Governments will need to manage their energy transition strategies to offset unemployment and possible increased costs in these areas, the ETC said.
The report said that China has the resources and technology leadership to become a developed zero-carbon economy by 2050. All developing nations would be able to reach net zero emissions by 2060 at the latest, it added, but require development finance to de-risk and attract private green investment.
The ETC report comes a week after the US Commodity Futures Trading Commission warned in a separate study that climate change poses a systemic risk to America’s financial system and could impair the economy’s ability to generate income and employment.