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, McKinsey looks 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.
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).
