The cost of reaching net-zero carbon emissions by 2050 will be US$9.2tn a year – 40% higher than current investment levels and roughly half of global corporate profits, a new report claimed.
McKinsey, one of the world’s top consulting firms, said a “fundamental transformation of the global economy” was needed to cap the global temperature rise to 1.5C.
This change will impact every country and sector, with costs only increasing before tapering off.
“While the immediate tasks ahead may seem daunting, human ingenuity can ultimately solve the net-zero equation, just as it has solved other seemingly intractable problems over the past 10,000 years,” the report read.
Becoming net-zero is essential to avoid the most severe impact of global warming and help prevent harm to billions of people, McKinsey said – and the cost will only increase the longer nothing is done.
The total investment needed is 6.8% of world GDP, but this will rise to 8.8% between 2026 and 2030, the report said.
“US$9.2tn is a very big number – big enough for anybody to pay attention to,” Jonathan Woetzel, an author of the report at the McKinsey Global Institute, said.
“But it’s not an impossible number - it’s not like we haven’t [made transformations] before in other ways,” he added, referring to the global shift to urban living, for example.
A “critical question” is raised surrounding who will pay for the higher costs – will it be the consumers or the Governments?
Swiss Re, an insurance firm, expects a 2.6C increase in global temperature by 2050 to cut global GDP by 14%.
“Investments in clean infrastructure will generate jobs, growth and huge savings, particularly by eliminating the need to buy ruinously expensive fossil fuels, and [will] yield much bigger returns when taking into account the avoided loss of lives and livelihoods from air pollution and climate change,” Bob Ward, a policy director on climate change at the London School of Economics, said.