By Paul Homewood
The extra amount the world must spend each year to create a “net-zero” emissions economy is equivalent to half all profits now generated by companies globally, consultancy group McKinsey estimates in a report on the energy transition.
It said its calculation was much higher than most other estimates by economists but emphasised such investments could be lucrative and the long-term costs of not doing enough to tackle climate change would be greater.
“We find that the transition would be universal, significant and front-loaded, with uneven effects on sectors, geographies and communities, even as it creates growth opportunities,” it said.
Though time is running out, reaching net-zero carbon emissions by 2050 would give the world a chance of capping temperature rises at 1.5°C above pre-industrial levels, avoiding the worst fallout from climate change.
The report’s main finding was that this would require spending on physical assets for energy and land-use systems of about $275-trillion, or $9.2-trillion per year on average — an annual increase of $3.5-trillion on current spending.
“The increase is approximately equivalent, in 2020, to half of global corporate profits, one-quarter of total tax revenue and 7% of household spending,” it calculated.
The amount of cumulative spending would be equivalent to about 7.5% of world output from 2021-2050, far higher than the 2%-3% of global output which climate economists polled by Reuters in 2021 estimated was needed each year.
UK GDP is around £2 trillion, so 7.5% works out at £150 billion a year. On top of this of course, the developed world would be expected to pay for the rest of the world’s transition.
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January 25, 2022 at 12:03PM
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