Washington Magazine

McKinsey remains one of the world’s most influential consulting firms and the consultancy recently gave their stance on the goal of achieving net zero climate emissions by 2050, stating that it requires a “fundamental transformation of the global economy.”

The consultancy estimates that over $9.2 trillion will be needed in investment yearly for decades to limit the global temperature rise to 1.5C and put an end to climate emergency. The figures represent a 60% increase on current investment levels, equivalent to 50% of global corporate profits.

“$9.2tn is a very big number – big enough for anybody to pay attention to,” said Jonathan Woetzel at the McKinsey Global Institute, the consultancy’s in-house thinktank, and an author of the report. “But it’s not an impossible number. It’s not like we haven’t [made transformations] before in other ways”, such as the global shift to urban living.

The report issues a warning that the economic transformation will affect all countries and sectors, with the most reliant on fossil-fuel-burning experiencing the most change. McKinsey, an advisor to several governments and large companies, also stated that the transition will be front-loaded with instances like the cost of electricity rising before falling later.

The McKinsey report, however, says that it is imperative to reach net zero to avoid the most catastrophic impacts of global heating, which will undoubtedly cause harm to billions worldwide. It also stated that several low-carbon investments are opportunities for economic growth, a lower-cost, more economic efficiency, with the delayed transformation becoming more expensive by the day.

The economic transformation is from an economy that does not include the costs of environmental and social damage to one that does, according to Woetzel. “There will only be a sustainable economy, we won’t have any other kind.”

The goal of the report is to evaluate the scale of the economic transition required to reach net zero, with the assumption that action is taken quickly. “Achieving net zero would mean a fundamental transformation of the world economy.”

The McKinsey scenario suggests electricity costs could increase by as high as 25% by 2040, followed by a fall below today’s levels after 2050 due to the lower operating cost of renewable energy, with steel and cement facing cost increases of about 30% and 45% respectively.

Bob Ward, a policy director at the Grantham Research Institute on Climate Change at the London School of Economics, UK, said: “The McKinsey investment figures are not the net costs of reaching net zero globally, but instead the upfront annual costs without taking into account the benefits. Investments in clean infrastructure will generate jobs, growth and huge savings, particularly by eliminating the need to buy ruinously expensive fossil fuels, and [will] yield much bigger returns when taking into account the avoided loss of lives and livelihoods from air pollution and climate change.”

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