Wednesday, June 12, 2024

The cost of net zero by 2050

Climate action discussions the past week have revealed the estimated costs of transition from fossil fuels- leading emitter of Green House Gases (GHG) into the atmosphere to green energy.

Getting to net zero by 2050 will cost an extra $3.5 trillion a year, according to a new study by Consultancy Firm-McKinsey. There will be need for fundamental transformation of the global economy to go truly green. This will lead to job losses, but there will be a higher number of new roles created in a low-carbon world. Business leaders need to see the transition to a green economy as an opportunity rather than just a challenge.

The McKinsey report lays out six characteristics of the transition to a green economy, starting with the point that it will affect all industries. And it says seven energy and land-use systems create all the world’s greenhouse gas emissions.

The six characteristics are: Universal-all carbon dioxide and methane emissions today come from energy and land use systems; significant capital spending; global capital spending; Uneven-developing countries and fossil fuel rich regions more exposed to the net zero transition compared to other geographies; Exposed risks- rising energy prices, energy supply volatility as well as rich opportunity-shift to a net zero emissions world will create opportunities for businesses and countries.

“The cost of the shift to zero emissions will be “significant”. Most of this will occur earlier in the transition, but it will fall unevenly on developing nations and fossil fuel producers, creating risks of disruptions to energy supply and price hikes. But there will also be new opportunities in a low-carbon world,” the report adds.

The most noticeable impacts on everyday lives will include rising energy bills, job losses in high-emission industries, changes in what people eat, and increasing outgoings to end dependence on fossil fuels to heat homes and travel, the report says.

Transitioning the energy sector to zero carbon and beefing up electricity grids to cope with an expected doubling of global demand by 2050 will push up bills by 25 percent between 2020 and 2040, the report predicts.

Botswana’s major energy supplier, Botswana Power Corporation (BPC) had its tariff increase proposal denied early April 2022.

The report highlights that even when the necessary changes have been made, electricity prices will still be 20 percent higher by 2050, although technological innovations may help to soften the price rises. Costs could be significantly higher if producers fail to build flexible and reliable low-cost power grids.

Although moving away from fossil fuels will cost 185 million jobs, the green economy will create 200 million new roles by 2050, including eight million in renewable power, hydrogen and biofuels, the report says.

Consumers will face the cost of replacing home heating systems and cars that run on fossil fuels, and will have to change their diets to avoid high-emission foods such as meat. However, the total costs of owning and running an electric vehicle will be lower than those for a petrol or diesel vehicle in most parts of the world by 2025, McKinsey says.

Botswana’s Climate change policy, which unfortunately does not fall under any new ministries as listed in the Extra ordinary gazette published in April highlights that; “The GHG emissions are increasing with time mainly as a result of an increase in the future energy demand. A comparison of the 1994 and 2000 aggregated carbon dioxide emissions shows an increase of about 74 percent. This increase is attributed to an increase in the use of biomass by households for cooking, in 1994 households only contributed about two percent of GHG emissions but in 2000 households contributed 46 percent.” It further underpins that main sectors in terms of GHG emissions and energy consumption are transport, mining, commercial sector, agriculture and residential sector. If any GHG emission reductions are to be instituted in Botswana, the above sectors would offer opportunities to enhance technology transfer, employment and foreign direct investment.


Read this week's paper