Net zero - at what cost?
Tony OwensView bio
With COP26 around the corner, it is worth looking back at some of the COP21 objectives agreed by the parties. The COP26 summit is an opportunity for the parties to commit to the goals of the Paris Agreement and the UN Framework Convention on Climate Change. Since the 2015 Paris Agreement, many countries have made commitments on climate action and many have committed to reach Net Zero emissions by 2050.
Most of the global community have agreed to work together to limit global warming to well below 2 degrees, adapting to the impacts of a changing climate and to make finance available to assist with the transition from fossil fuels to alternative energy sources. The International Energy Agency predicted that carbon emissions would reduce by just 40% by the middle of the century based on current progress.
To realise the objectives of COP21, developed countries must deliver on their promise to provide climate finance and reduce dependencies on fossil fuels.
Significant investment is required to facilitate the transition to a low-carbon economy. Scaling up investments to finance the transition from fossil fuels to renewables, as well as smart power networks, energy efficiency measures, and electrification in sectors including transportation, buildings, and industry, will be required to transform the world's energy systems.
According to the International Energy Agency, worldwide energy investments are currently over $2 trillion per year, or 2.5 percent of global GDP (IEA). To achieve Net Zero CO2 emissions by 2050, this must climb to $5 trillion, or 4.5 percent of GDP, by 2030 and remain there until at least 2050. The bulk of this money will go towards decarbonising electricity generation and infrastructure and to make power networks better suited to much higher volumes and variability of renewable energy.
Funding for technologies in the research stage and under development is critical for the decarbonisation of the world’s electricity grids. Technologies currently under development will make the biggest impact on reducing the worlds GHG emissions by 2050. Industrial decarbonisation will require new and innovative technologies. These technologies are in the early stages of development and are not mature or competitive when compared to existing technologies so need to be supported financially.
Governments can assist in the mobilization of private capital by improving investment frameworks and utilizing international public financing to reduce perceived risks and lower the high cost of capital, particularly in emerging and developing economies.
Without a global climate policy and a joint commitment by all, today's minor emitters will develop into significant emitters as their populations and incomes rise. These are also the countries that are typically most hit by the effects of climate change, making transition costs more difficult to bear due to rapidly rising energy demands and limited financial flexibility to finance green projects.
Green or climate finance to fund emissions reduction investments in developing countries would allow the burden to be more evenly shared and help the global economy achieve Net Zero emissions. Many developing countries are ready to speed up their NDCs when they get climate finance, and with many of the lower-cost containment options in emerging and developing countries, it is in the global interest to ensure that they are used.
China, the EU, Japan, Korea, and the United States have all pledged to achieve net zero emissions by the middle of the century, yet the current energy crises in some of these regions suggest that the transition from fossil fuels will not happen in time. Investment in renewable energy projects is essential if the COP21 commitments are to be achieved.
As the world starts to recover from the pandemic, it must now tackle climate change and make the commitment to change for everyone’s future. The alternative cost is unimaginable.