The net-zero transition: What it would cost, what it could bring

Governments and companies worldwide are pledging to achieve net-zero emissions of greenhouse gases. What would it take to fulfill that ambition?

In a new report, we look at the economic transformation that a transition to net-zero emissions would entail—a transformation that would affect all countries and all sectors of the economy, either directly or indirectly. We estimate the changes in demand, capital spending, costs, and jobs, to 2050, for sectors that produce about 85 percent of overall emissions and assess economic shifts for 69 countries.

Each of the six articles highlighted on this page provides a detailed look at aspects of the net-zero transition. The full report, The net-zero transition: What it would cost, what it could bring, as well as a PDF summary, can be downloaded for free here.

Six characteristics define the net-zero transition

Six characteristics define the net-zero transition

The transformation of the global economy needed to achieve net-zero emissions by 2050 would be universal and significant, requiring $9.2 trillion in annual average spending on physical assets, $3.5 trillion more than today. To put it in comparable terms, that increase is equivalent to half of global corporate profits and one-quarter of total tax revenue in 2020. Accounting for expected increases in spending, as incomes and populations grow, as well as for currently legislated transition policies, the required increase in spending would be lower, but still about $1 trillion. Spending would be front-loaded—the next decade will be decisive—and the impact uneven across countries and sectors. The transition is also exposed to risks, including that of energy supply volatility. At the same time, it is rich in opportunity. The transition would prevent the buildup of physical climate risks and reduce the odds of initiating the most catastrophic impacts of climate change. It would also bring growth opportunities, as decarbonization creates efficiencies and opens markets for low-emissions products and services. Our research is not a projection or prediction and does not claim to be exhaustive. It is the simulation of one hypothetical and relatively orderly pathway toward 1.5°C using the Net Zero 2050 scenario from the Network for Greening the Financial System (NGFS).

Reaching net-zero emissions by 2050
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Report authors and leading voices summarize this research and discuss what it would take to transition to net-zero

The net-zero challenge: Accelerating decarbonization worldwide

The net-zero challenge: Accelerating decarbonization worldwide

The seven energy and land-use systems that account for global emissions—power, industry, mobility, buildings, agriculture, forestry and other land use, and waste—will all need to be transformed to achieve net-zero emissions. Effective actions to accelerate decarbonization include shifting the energy mix away from fossil fuels and toward zero-emissions electricity and other low-emissions energy sources such as hydrogen; adapting industrial and agricultural processes; increasing energy efficiency and managing demand for energy; utilizing the circular economy; consuming fewer emissions-intensive goods; deploying carbon capture, utilization, and storage technology; and enhancing sinks of both long-lived and short-lived greenhouse gases.

Emissions would need to fall across the whole economy.
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The economic transformation: What would change in the net-zero transition

The economic transformation: What would change in the net-zero transition

On the basis of this scenario, we estimate that global spending on physical assets in the transition would amount to about $275 trillion between 2021 and 2050, or about 7.5 percent of GDP annually on average. The biggest increase as a share of GDP would be between 2026 and 2030. Demand would be substantially affected. For example, manufacturing of internal combustion engine cars would eventually cease as sales of alternatives (for example, battery-electric and fuel cell-electric vehicles) increase from 5 percent of new-car sales in 2020 to virtually 100 percent by 2050. Power demand in 2050 would be more than double what it is today, while production of hydrogen and biofuels would increase more than tenfold. The transition could lead to a reallocation of labor, with about 200 million direct and indirect jobs gained and 185 million lost by 2050—shifts that are notable less for their size than for their concentrated, uneven, and re-allocative nature.

Capital spending would be highest in the next ten to 15 years to build out a net-zero economy.
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Sectors are unevenly exposed in the net-zero transition

Sectors are unevenly exposed in the net-zero transition

All sectors of the economy are exposed to a net-zero transition, but some are more exposed than others. The sectors with the highest degree of exposure are those which directly emit significant quantities of greenhouse gases (for example, the coal and gas power sector) and those which sell products that emit greenhouse gases (such as the fossil fuel sector and the automotive sector). Approximately 20 percent of global GDP is in these sectors. A further 10 percent of GDP is in sectors with high-emissions supply chains, such as construction. Each of the most exposed parts of the economy will be differentially affected. The total cost of ownership of EVs could be lower than ICE cars by about 2025 in most regions, even as costs for steel and cement production could rise. Job gains would be largely associated with the transition to low-emissions forms of production, such as renewable power generation. Job losses would particularly affect workers in fossil fuel–intensive or otherwise emissions-intensive sectors.

Sectors most exposed to the net-zero transition generate about one-fifth of GDP globally.
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How the net-zero transition would play out in countries and regions

How the net-zero transition would play out in countries and regions

To decarbonize, lower-income countries and fossil fuel resource producers would spend more on physical assets as a share of their GDP than other countries—in the case of sub-Saharan Africa, Latin America, India and other Asian nations, about 1.5 times or more as much as advanced economies to support economic development and build low-carbon infrastructure. Developing countries also have relatively greater shares of their jobs, GDP, and capital stock in sectors that would be most exposed; examples include India, Bangladesh, Kenya, and Nigeria. And countries like India would also face heightened physical risk from climate change. The effects within developed economies could be uneven, too; for instance, more than 10 percent of jobs in 44 US counties are in fossil fuel extraction and refining, fossil fuel–based power, and automotive manufacturing. At the same time, all countries will have growth prospects, from endowments of natural capital such as sunshine and forests, and through their technological and human resources.

Developing countries and fossil fuel-producing regions would invest more in a transition relative to GDP.
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Managing the net-zero transition: Actions for stakeholders

Managing the net-zero transition: Actions for stakeholders

The findings of this research serve as a clear call for more thoughtful and decisive action, taken with the utmost urgency, to secure a more orderly transition to net zero by 2050. Economies and societies would need to make significant adjustments in the net-zero transition. Many of these can be best supported through coordinated action by governments, businesses, and enabling institutions. Three categories of action stand out: catalyzing effective capital reallocation, managing demand shifts and near-term unit cost increases, and establishing compensating mechanisms to address socioeconomic impacts. The economic transformation required to achieve net-zero emissions by 2050 will be massive in scale and complex in execution, yet the costs and dislocations that would arise from a more disorderly transition would likely be far greater, and the transition would prevent the further buildup of physical risks. It is important not to view the transition as only onerous; the required economic transformation will not only create immediate economic opportunities but also open up the prospect of a fundamentally transformed global economy with lower energy costs, and numerous other benefits—for example, improved health outcomes and enhanced conservation of natural capital.

The shift to a net-zero emissions world will create opportunities for businesses and countries.
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