You read it right! $2.7 trillion investment is required annually to mitigate climate change.
In a pivotal report released by consultancy firm Wood Mackenzie, it has been underscored that the world is in dire need of $2.7 trillion investment annually to reach the crucial goal of net-zero emissions by 2050. This imperative target is essential to prevent global temperatures from surpassing a 1.5 degrees Celsius rise this century, a threshold beyond which catastrophic climate change effects become increasingly likely.
Climate scientists have long emphasized the significance of limiting global average temperature increases to 1.5 degrees Celsius. Achieving this would significantly mitigate the risks of climate-related disasters. Consequently, numerous governments have committed to achieving net-zero emissions by the middle of this century to contribute to this vital objective.
However, the sobering reality is that most countries are currently falling short of meeting their emissions reduction targets, even for the nearer-term goal of 2030, let alone the more ambitious target for 2050, as revealed in the Wood Mackenzie report.
Net zero emissions entail reducing greenhouse gas emissions to the lowest possible levels, with any residual emissions being offset by natural processes such as ocean absorption and forest growth.
Regrettably, the emission reduction pledges made by governments across the world thus far are insufficient to stave off a temperature increase of 1.5 degrees Celsius. Instead, they are on a trajectory that could result in a 2.5-degree Celsius temperature rise by 2050, a scenario filled with dire consequences, according to assessments by the United Nations. The United States recently passed a law to help in mitigating climate change but it comes nowhere near the $2.7 trillion investment globally required. China, India and other major world economies will need to pool resources together to get to the level of $2.7 trillion investment.
The cornerstone of this global effort hinges on the decarbonization of the energy sector, necessitating an annual investment of approximately $1.9 trillion. To successfully limit global warming to 1.5 degrees Celsius, this investment must escalate by a staggering 150%, equating to $2.7 trillion investment per year. It’s worth noting that a significant portion of this financial commitment, three-quarters, needs to be directed towards the power and infrastructure sectors, which are pivotal in transitioning to a more sustainable energy landscape.
Simon Flowers, Chairman and Chief Analyst at Wood Mackenzie, commented, “Achieving 1.5 degrees Celsius is going to be extremely challenging, but it is possible and greatly depends on actions taken this decade.” This underscores the critical role that the current decade plays in determining the trajectory of global emissions and their potential impact on the climate.
Renewable energy sources, such as wind and solar power, are poised to assume a central role in reshaping the global energy landscape. These sources must become the primary suppliers of power to facilitate the electrification of transportation and the production of green hydrogen, as advocated in the Wood Mackenzie report.
It’s important to note that while renewables are on the ascent, traditional energy sources like oil and gas will still have a role to play in the transition to a low-carbon and ultimately net-zero carbon future. Prakash Sharma, Vice President at Wood Mackenzie and the principal author of the report, emphasized that while low and zero-carbon alternatives naturally gain prominence, there remains a vital need to continue replenishing our energy supply during the transition towards achieving net-zero emissions.
Achieving a $2.7 trillion investment globally will be a gigantic task given the complexity of fossil fuel companies lobbying against it plus the politics involved.
This report serves as a stark reminder of the pressing need for unprecedented global cooperation and concerted efforts to marshal the necessary financial resources and implement transformative policies. It underscores that the clock is ticking, and the actions taken in this pivotal decade will have far-reaching implications for the world’s ability to avert the worst impacts of climate change and work toward a sustainable, net-zero carbon future. While $2.7 trillion investment annually may look like a huge number at the moment, the cost of not doing it will be exponentially more.