A report by the New Energy Outlook research group shows that achieving climate neutrality by 2050 will cost 19 percent more. more than expected in the baseline scenario. This means sectors from electric vehicles and renewable energy to energy networks and carbon capture need additional support.
Climate policy is a flashpoint
The transition to clean energy has faced increasing resistance in recent years because climate policy has become a political flashpoint in both the US and Europe. At the same time, companies implementing renewable energy projects had to face… higher interest rates and high inflation, making the potential return on investment less attractive.
Earlier this year, BNEF reported that Global investment in the transition to a low-carbon economy increased by 17% in 2023. to the level of USD 1.8 trillion. Unfortunately, due to faster climate change, this is definitely not enough. Tuesday's report showed that the pace of this spending needs to accelerate significantly. “It's somewhat encouraging that we're so close, but at the same time so far, because many of these investments won't be fully profitable without further action,” said David Hostert, global head of economics and modeling at BNEF.
Emissions for the BNEF net zero emissions scenario and the economic transformation scenario / Bloomberg
Two BNEF scenarios
In the base case, governments rely solely on economically competitive technologies, putting the world on a 2.6°C warming path compared to pre-industrial times. This path, named economic transformation scenario (ETS)is still slightly better than what governments are currently committed to, but would lead to catastrophic climate impacts as the world would breach the 2°C target set out in the Paris Agreement.
Net Zero Scenario (NZS) assumes governments will double down on emissions-cutting technologies with the goal of reaching net zero by 2050. If the world follows this path, it may still fall short of the more ambitious Paris goal of keeping warming below 1.5°C. Estimates show warming will instead approach 1.75°C. However, this would still avoid irreversible climate damage.
The path to net zero will cost $215 trillion by 2050. BNEF states that achieving net zero will cost 19% overall. more than the base case / Bloomberg
Major changes needed
The report indicates that major changes will be necessary to achieve net zero. Kevery new car sold from 2034 will have to be an electric vehicle. Technologies carbon dioxide capture will have to capture emissions not only from industry but also from the energy sector. This will require an investment of $6.8 trillion.
Investment in power grid projects will peak at around $1 trillion per year in the 2040s. The same will be true for renewable energy investments this decade.
It is clear from BNEF's analysis that the era of fossil fuels currently dominating the energy system is coming to an end. Regardless of whether countries pursue the policies needed to achieve net zero emissions by 2050 or not, the share of renewable energy sources in the global electricity mix could still exceed 50% by the end of the decade.
In a net zero scenario, fossil fuel spending will still amount to hundreds of billions a year / Bloomberg
