A study from Oxford Economics and Arup estimates that green industries could add $10.3 trillion (£8.5trn) to the world’s economy by 2050 under a net zero scenario.
The report made the case that governments and businesses, under increasing pressure from climate-related events, may begin to see a rapid transition away from fossil fuels as a net positive as well as a way to avoid climate disruptions.
“Fear is a compelling reason to act on climate change, but we believe human ambition can be another critical driver of environmental action,” Brice Richard, global strategy skills leader at Arup, wrote. “This report shows the green transition is not a burden on the global economy, but a substantial opportunity to bring about a greater and more inclusive prosperity.”
The report found the switch to clean energy will create new areas of competition, that green markets will emerge, and that the world could benefit from higher productivity relative to a scenario in which insufficient action is taken on climate change.
However, realising that £8 trillion requires that governments enact measures to incentivize private-sector investment, such as research tax credits and co-financing. It is estimated that hundreds of trillions of dollars in public and private capital will need to be deployed to reach net zero.
“As economists, we have to be honest about the fact that mitigating climate change will be expensive,” Adrian Cooper, Oxford Economics CEO, said in a statement. “But the transition to a carbon-neutral global economy also presents compelling opportunities.”
Just 16% of climate investment needs are being met, according to the Rockefeller Foundation. This gap in investment has also led to the world falling short of its pledges to cut carbon emissions and limit climate change.
In order for the world to generate $10 trillion (£8.2trn) from green industries the world needs to reach net zero by 2050, a goal set out in the Paris Agreement to keep global heating to 1.5 °C by the end of the century.
Currently, the world is on track to warm by 2.6-2.9 °C by 2100, relative to pre-industrial levels.
“The transition will be costly and painful for certain enterprises, industries, and economies,” the authors wrote. “But in a transition to a net zero emissions environment by 2050, under a rapid transition away from carbon-intensive activities, a new competitive landscape will emerge. In many sectors, this requires a fundamental shift to consuming renewable fuels and energy. In others, new green equipment and technology will be needed in production. All sectors will experience short-term costs but the chance of earning large rewards over the medium- and long-term horizons.”
Electric vehicles represent a £2.8 trillion opportunity by 2050, the report found. Specifically, the authors noted that EV production — which includes motorbikes, cars, and industrial vehicles — will contribute £1.21 trillion by 2050 while the supply chains for these manufacturers will add £1.54 trillion by that year.
Other new markets include renewable electricity production (worth £4.37 trillion by 2050), renewable fuels (£906 billion) ), clean energy equipment (£260 billion), and green finance (£74 billion).
“There will be fortunes made, crudely, solving these problems,” Will Day, fellow at the Cambridge Institute for Sustainability Leadership, wrote. “There will be fortunes lost by those who don’t understand the context and don’t invest wisely or stay too late.”
