According to a new report by management consulting firm, McKinsey & Company, an annual average of at least $9.2 trillion in spending would be required globally to achieve net-zero emissions by 2050.
In order to meet these targets, lower-income countries and natural resource producers – nations primarily found in Africa and Southeast Asia – would be required to spend as much as 1.5 times more than advanced economies in proportion to their GDP on physical assets to support low-carbon infrastructure and transition towards a zero-emissions economy.
Achieving net-zero emissions by 2050 would require significant investment in the energy, transit, industry, agriculture, as well as forestry and other land use sectors, with estimated spending expected to increase by as much as $3.5 trillion by the projected period.
“Many of these sectors would also incur cost increases as they decarbonize,” the report by McKinsey & Company indicated, adding, “For example, steel and cement production costs would rise by about 30% and 45%, respectively by 2050.”
The report notes that volatile energy prices as a result of the energy transition pose a risk to fossil fuel resource producing countries, where larger proportions of the workforce, GDP, and capital stock depend on carbon-emitting industries.
“One of the most immediate risks is that of a disorderly energy transition, if the ramp up of low-emissions activities does not take place fast enough to fill gaps left by the ramping down of high-emissions activities,” the report noted.
While developed nations in Europe and North America have set targets to limit carbon emissions by 2050, Nigeria’s President Muhammadu Buhari joined other natural resource producing countries, such as Saudi Arabia and Russia, in committing to a 2060-target, pledging at the COP26 summit in Glasgow last year that it would use natural gas as a transitory source of energy – in accordance with the West African country’s energy transition roadmap – to assist in reaching net-zero carbon emission targets a decade later than more industrialized nations.