Clean energy spending must ‘more than double’ for net zero

Reaching net zero by 2050 will require up to a huge $173tn in investment in the energy transition globally, according to BloombergNEF’s New Energy Outlook (NEO) 2021 report. For reference, the total GDP of the United States, the world’s largest economy, was nearly $21.5tn in the year 2019. 

Regardless of the technology mix, BNEF estimates that annual investment will need to more than double to achieve carbon neutrality, rising from around $1.7tn per year today, to somewhere between $3.1tn and $5.8tn per year on average over the next three decades.

The NEO constructs sector-by-sector emissions budgets to align with net zero by 2050 with what it calls an ‘orderly transition’ away from fossil fuels. The report shows that global energy-related emissions need to drop 30% below 2019 levels by 2030, and 75% by 2040, to reach zero ten years later. BNEF says the power sector needs to make the greatest progress over the next decade – reducing emissions by 57% from 2019 levels by 2030, and then by 89% by 2040. 

Emissions reductions in the power sector are driven primarily by new wind and solar, which provide between 59% and 65% of the cuts in BNEF’s three scenarios (labelled green, red and gray). Getting to net zero in the green scenario, which prioritises the use of clean energy and green hydrogen, requires 1,400 GW of renewables to be deployed every year, on average, for the next three decades. For comparison, it took 20 years to deploy the first 1,000 GW of wind and solar.

In the red scenario – which prioritises the use of nuclear resources for hydrogen production –  atomic energy makes up 66% of primary energy in 2050. It accounts for just 5% today. The gray scenario sees widespread use of carbon capture and storage (CCS), and the continued combustion of gas and coal. However, it does not foresee a future for oil, as this is predominantly used in transport, where CCS can have little impact. 

‘The energy transition is inherently uncertain,’ says Matthias Kimmel, BNEF’s Head of Energy Economics. ‘This is why we have modeled three distinct pathways to net zero this year. Hydrogen, nuclear and carbon capture could all play an important role in helping the world reach net-zero, and each of these technologies must be further developed and brought to market in the coming decade, if they are to realize their potential.’

Longer-term scenarios aside, BNEF states that several milestones will need to be reached by 2030 in order to be on track for reaching net zero at all. These include adding 505 GW of new wind capacity each year (5.2 times the 2020 total) and adding 455 GW of solar PV annually (3.2 times the 2020 total). In addition, 18mn heat pumps need to be deployed every year to 2030, and 35mn EVs must be added to global roads annually.

‘There is no time to waste. If the world is to achieve or get close to meeting net zero by mid-century, then we need to accelerate deployment of the low-carbon solutions we have this decade. That means even more wind, solar, batteries, and electric vehicles, as well as heat pumps for buildings, recycling and greater electricity use in industry, and redirecting biofuels to shipping and aviation,’ says BNEF Chief Economist Seb Henbest.