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- Reaching Net Zero remains possible
Greenhouse gas emissions (GHG) and planetary temperatures continue to rise unabated. In Europe, South America and Africa, people have experienced the warmest August since weather records began, with earth surface temperatures only just below an increase of 1.5 Celsius degrees in relation to the planetary average of the pre-industrial age.[1]
In view of the meteorological, political and economic headlines, one could become pessimistic about whether a net zero scenario that limits the global temperature increase to 1.5-2.0 degrees is still realistic. The fact that the European Union (EU) could miss its ambitious carbon dioxide (CoO2) savings targets by 2030 based on the current reduction paths is not encouraging when one considers the EU’s Sustainable Finance Plan efforts of recent years.[2]
Required annual investments needed globally to reach Net Zero
Sources: Bloomberg NEF, as of 9/24/24
However, the EU represents little more than 10 percent of global GHG emissions. Europe was never going to be able to reverse the climate crisis on its own, despite all its ambition. According to findings of an IPCC-linked (Intergovernmental Panel on Climate Change) investment scenario undertaken by Bloomberg New Energy Finance (BNEF) the net zero transition requires between US$5 trillion to US$8 trillion per year in worldwide investments over the next few decades. Dicing the numbers, this means that up to 2030, average annual global investments of US$5.37 trillion are required. After that, in every year between 2031 and 2040, this rises to nearly US$8 trillion per annum. This compares to approximately US$1.77 trillion of global transition investments in 2023.
Does this mean all is lost? Not quite. Energy transition investments, which include renewable energy investments, power grids investments, and electrified transport have increased significantly in the Americas and Asia Pacific (APAC) in recent years and are comparable or even larger than comparable investments taking place in the EU. In 2023, the EU invested approximately $550 billion in energy transition, compared to $400 billion in the Americas and $800 billion in the APAC region.[3]
There is room for optimism that limiting the temperature rise to the IPCC scenarios and raising the required investment amounts are not as unrealistic as they sound at first glance.[3] If investments would continue at this clip each year, it would imply them reaching US$9.7 trillion in 2030 which would lead to an average from 2024-2030 of US$5.24 trillion – relatively close to the investment needs under the Bloomberg scenario. And from there, annual spending would not have to increase and could even be scaled back over the following decade.
Even if the current absolute gap appears enormous, the rate of recent progress makes it probable that the world can meet its net zero investment needs.
