Annual investment of USD 2.7trn needed for 2050 net zero
Solar plant near a wind farm. Image source: Ignitis Group (www.ignitisgrupe.lt)
The world is currently on a path towards global warming of 2.5 degrees C but achieving 1.5 degrees C is still possible, although extremely challenging, according to analyst firm Wood Mackenzie.
The company’s Energy Transition Outlook report considers three scenarios for the energy transition -- base case (2.5 degrees), country pledges scenario (2 degrees) and net zero 2050 scenario (1.5 degrees). According to the analysis, achieving net zero by 2050 would require an annual investment of USD 2.7 trillion (EUR 2.5trn), a significant increase from USD 1.9 trillion a year in the base case.
Meeting the 1.5-degree target will much depend on action in the current decade to build low carbon power supply and infrastructure at a faster pace.
Wood Mackenzie says that low carbon supply currently accounts for 42% of power generation and this share is expected to increase to 78% by 2050 in the base case, with the share of wind and solar expanding from 13% now to over 53%. In the country pledges and net zero scenarios, the combined share of wind and solar rises to 60% and 65%, respectively, by 2050.
The company noted that carbon pricing is important to drive adoption of low carbon supply in sectors like steel, cement and chemicals. Its report also highlights the growing role of emerging technologies like hydrogen and carbon capture, utilisation and storage (CCUS). The net zero scenario needs 515 million tonnes of low-carbon hydrogen by 2050, with the technology accounting for 11% of final energy demand by the middle of the century.
Electricity will become the biggest energy market. Its share in final energy demand rises from 20% to 22% by 2030, and to 30% in 2050 in the base case. The share of electricity reaches 41% and 50% in 2050 in the country pledges and net zero scenarios, respectively.
Oil and gas retain a role in a managed transition, the firm says, with gas demand projected to grow for 10 years in all scenarios.
In Wood Mackenzie’s base case, fossil fuels make up 69% of end-use energy demand in 2023 and their share declines to 53% by 2050.