Global investments in the energy transition would need to increase to $3.5 trillion per year if the world is to become a net-zero place by 2050, a climate change think tank has said in a new report, in which it noted there were no fundamental barriers to the net-zero plan. That spending would total $110 trillion by 2050.
In its report, titled “Financing the Transition: How to make the money flow for a net-zero economy”, the UK-based Energy Transitions Commission said the massive sum of money would go towards building more wind and solar power generation capacity, plus other low-carbon generation technology. Part of the total would also go into transmission and distribution infrastructure building and another part would be spent on battery storage and seasonal storage.
“Though this report confirms that there are no big fundamental barriers to the energy transition – that was the hypothesis going in – it was striking that the numbers showed 70% of the finance that must be raised has to go [into electrification of power systems],” Mike Hemsley, deputy director of the think tank, told Recharge.
The sum that the Energy Transitions Commission says would need to be spent on net zero compares with the $1 trillion annually that is being spent today.
“This report also identifies that there are two conceptually different types of finance required: ‘classic’ investment which gives an economic return for money paid in, and concessional/grant payments, essentially paying someone to do something they might not do otherwise as there is no economic incentive,” Hemsley also told Recharge.
Those concessional or grant payments, the report notes, could reach $300 billion annually by 2030.
According to the authors of the report, some of that massive sum could be offset by a decline in investments in oil and gas, to the tune of $500 billion annually. The offset sum would reduce the annual investment bill of the world to $3 billion, which would be equal to 1.3 percent of global GDP over the next 30 years.
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