BrazilEurope’s path to climate-neutral by 2050 costs roughly €28 trillion
A new report by strategic consulting firm McKinsey & Company suggests that Europe’s ambition to become climate-neutral by 2050 would cost the continent roughly €28 trillion over the course of the next 30 years. Beyond helping save the planet, the green investment windfall would deliver several socio-economic benefits.
The EU’s Green Deal, which was first presented in 2019, aims to turn its 27 member states into the world’s first climate-neutral bloc by 2050. While European emissions have decreased by roughly one quarter since 1990, current measures are nowhere near enough for the bloc to reach net zero by mid-century, which is why the Green Deal is paramount.
There are numerous possibilities to achieving a net-zero Europe, but not all are cost effective. The report by McKinsey & Company outlines what the firm describes as the ‘cost optimal pathway’, which could reduce the EU’s emissions 55% by 2030 while also creating broad economic benefits, including the net creation of five million jobs.
The consultancy breaks its analysis down by sector, region, technology as well as energy and land-use system. As per the report, the majority of the EU’s greenhouse gases are emitted by five sectors, including the biggest emitter, transportation, followed by industry, power, buildings, and lastly, agriculture.
The key to decarbonization for each of these sectors is the necessary technology. But as technological innovation within each of these sectors has occurred to varying degrees, the report indicates that “some sectors could meet the target more quickly than others”. Consequently, acceleration and industrialization of technological innovation is crucial, especially if costs are to be kept as low as possible.
Currently, the power sector seems the most likely to reach net-zero emissions by the mid-2040s first, as “as wind and solar power generation technologies are already available at scale.”
In contrast, there is still relatively little technology available for (heavy) industry to reduce its emissions. Techniques, such as carbon capture and storage (CCS) which, according to the Guardian, can amass, transport and bury up to 90% of CO2 emissions from power stations and industrial sites and prevent them from escaping into the atmosphere, already exist. However, they still require more time and investment to fully “mature”, says McKinsey’s report.
The acceleration of technological innovation, of course, rests on investments from policy makers and business leaders. “To get to net zero, industry and governments would need to invest roughly €28 trillion over the next 30 years,” said Hauke Engel, a partner at McKinsey.
Out of that sum, €23 trillion – €800 billion annually – would be re-allocated from carbon-intensive to zero-carbon technologies, while the remaining €180 billion would come from an additional capital outlay. Eventually, this increase in capital spending would be recovered, however, as the EU would save an average of €130 billion annually in total system operating costs.
In addition to the investment, the researchers suggest that Europe would benefit from greater collaboration across states. In fact, the latter could help lower costs and speed up decarbonization as countries benefit from different climates, CO2 storage opportunities and technological savoir-faire. For instance, the Nordics have better conditions for wind power, while the South European climate facilitates solar power.
For policymakers and green allies the good news is clear: “The analysis shows that net-zero is achievable and has broad economic benefits,” said Engel. However, the profound changes required by the European Green Deal will not come without their challenges, meaning that politicians, executives and others will need to step up their game to deliver on Europe’s ambitious, but also much-needed climate plans.
