Page 4 - AsiaElec Week 04 2022

AsiaElec COMMENTARY AsiaElec

Meeting 1.5 °C could cost

$75 trillion by 2050

GLOBAL LIMITING global warming to 1.5 °C could cost After 2035, global GDP growth will then
reduce global GDP by 2%, or $75 trillion, by recover and outpace Wood Mackenzie’s base
2050 as spending must increase to accelerate the case, which does not involve keeping global
energy transition. warming at 1.5°C.
The good news is that the world has the This means that lost economic output of $75
means, motive and opportunity to do so, Wood trillion from 2022 to 2050 could be recouped by
Mackenzie said in a recent report, although it the end of the century.
could take up 2100 to recoup the losses. “An accelerated transition could pay off in
However, while GDP growth could be held the end, in economic terms. It is likely to lead
by up to 2050, the report looks beyond that date to stronger economic growth rates for some
and forecasts that an accelerated energy transi- economies beyond 2030, enabling losses to be
tion will pay off both in economic and planetary recouped before the end of the century. That is
terms. the essence of transition economics – short-term
Much of the lasting economic benefits will pain for long-term gain,” Martin said.
materialise beyond our forecast horizon of 2050,
Wood Mackenzie’s suggested. Winners and losers
“While preventing more extreme warming is Some economies will feel the effects more than
likely to have a positive economic impact over others, the report warns, with the pain and gain
the next 30 years, the action required to deliver it not being shared equally across the globe.
could have an offsetting negative effect. Net, we Hydrocarbon-exporting and carbon-inten-
estimate that keeping warming to 1.5°C would sive economies are likely to see the biggest hits
shave 2.0% off our base-case gross domestic to economic output. Less developed and low-in-
product (GDP) forecast for 2050,” said Peter come economies will bear a disproportionally
Martin, Wood Mackenzie’s chief economist. high burden.
What this means is that Asian and Mid-
dle Eastern countries are could take the big-
Pain and gain gest financial hit from an accelerated energy
The report said that before 2050, preventing transition.
more extreme global warming is likely to have The report names Iraq, for example, as the
a positive economic impact by avoiding damage country most vulnerable to the transition,
caused by rising temperatures. because its hydrocarbon revenues account for
However, the investment needed to avoid 95% of all government revenue and the oil sector
damage caused by rising temperatures will have makes up 36% of its GDP.
offsetting negative effect. Wood Mackenzie put Other countries, like Saudi Arabia, have sub-
the price of keeping warming to 1.5°C as a 2% stantial financial reserves to invest in non-hy-
reduction in 2050 GDP. drocarbon sectors, and low-cost oil assets in the
In terms of numbers, Wood Mackenzie’s base Middle East are likely to retain a significant por-
case scenario puts global temperatures at 2.5 to tion of oil production that will continue through
2.7°C Celsius above pre-industrial levels by 2050, the transition.
with global GDP reaching $169 trillion. In Asia, China is in the unique position
By attempting to limit global warming to of having strong renewable energy increases,
1.5°C, global GDP would reach $165 trillion by producing more than 50% of the world’s solar
2050, which is a cumulative loss of $75 trillion and wind technology, but as the world’s largest
from 2022 to 2050. carbon emitter, it still has a long way to go in
In terms of technology, the report forecasts decarbonisation.
that the price of transition technologies, such The country would see a cumulative loss of
as electric vehicles (EVs), utility-scale batteries, $20 trillion by 2050, said Wood Mackenzie.
hydrogen and carbon capture and storage, will The most economically developed countries
come down over time. have the least to lose. France and Switzerland,
Wood Mackenzie forecasts that 2035 will be on the other hand, will have a net boost in GDP
the date when low-carbon investments are more by 2050. Europe is generally better equipped for
competitive across the world as a whole than the energy transition with its established emis-
phased-out high-carbon alternatives. sions trading system and carbon pricing already

P4 www. NEWSBASE .com Week 04 26•January•2022