It Could Cost $75 Trillion to Reach Net Zero Emissions

Goldman Sachs Research estimates there's a $74.6 trillion investment opportunity on the path to net zero

While global carbon emissions have risen higher than previously expected, and the goals set out in the Paris Agreement are unlikely to be achieved, an ambitious path to containing temperature increases to 2 degrees may still be attainable, according to Goldman Sachs Research. The investments to achieve net zero emissions “have the potential to not only transform the global energy ecosystem but also the economy and society’s standard of living,” Michele Della Vigna, Goldman Sachs Research’s head of Natural Resources Research for Europe, the Middle East, and Africa (EMEA), writes in the team’s report titled, “Carbonomics: The GS net zero carbon scenarios — a reality check.” The team had previously projected that $62 trillion would be required to reach net zero and envisioned reaching that level by 2060.

The roughly $75 trillion total, representing $1.5 to $2 trillion of infrastructure spending per year through 2070, spans a huge range of investment opportunities, writes Della Vigna. The forecasts include $7 trillion for power networks, another $5.1 trillion on energy storage, and $3.7 trillion for the infrastructure that will make the transition to electric vehicles (EVs) possible. There’s also $9.3 trillion needed to make industrial processes carbon neutral, and $1.3 trillion for green hydrogen plants.

The report highlights changes in the outlook for specific technologies since the team first introduced its net-zero modeling in 2021. The adoption of EVs has moved more rapidly than was forecast (mainly because of faster-than-expected penetration in China), and solar power has accelerated, with the scaling up of manufacturing capabilities. Expectations have risen for the adoption of nuclear power, and the researchers now forecast a doubling of global installed nuclear capacity by 2050 from 2020. Moving in the other direction since 2021, the adoption of clean hydrogen and carbon capture has seen slower uptake than expected. 

Global carbon dioxide emissions in the 2021 to 2023 period overshot what the researchers modeled in their 2021 assessment by about 6%, with power generation, agriculture, and transport driving the totals higher. Only emissions from buildings declined globally in that period, helped by adoption of low-carbon technologies such as heat pumps and milder temperatures.

That leads the researchers to conclude that:

• An unlikely scenario that reduces net emissions to zero by 2050 and keeps warming to 1.5 degrees would require an acceleration in decarbonization efforts, including the retirement of coal plants by the early 2030s, creating $1.7 trillion of stranded assets. It would also entail the full electrification of auto sales by 2035. The scenario that achieves net zero emissions by 2070 amid 2.0 degrees of warming would represent infrastructure investment equal to 1% to 1.5% of global GDP each year. It implies lower stranded costs for coal but a material increase, versus the 1.5-degree path, in costs to adapt to a warmer climate by 2050.
• The researchers now expect a longer life for hydrocarbon assets, with peak oil demand occurring after 2030 and demand for natural gas as a transition fuel growing until 2050. “This implies new greenfield oil and gas developments are likely to be needed beyond 2040,” Della Vigna writes.
• Natural gas is the most sensitive fossil fuel to the various scenarios for decarbonization, because of its role as a transitional fuel to renewable energy. The paths for oil and coal demand, by contrast, are relatively similar in each of Goldman Sachs Research’s three scenarios for reaching net zero.

The role of natural gas varies considerably depending on the scenario for transition to net zero emissions

Electrification of everything

The investment opportunity in renewable power generation on the path to net zero emissions by 2070 totals almost $30 trillion. That includes $11.1 trillion for solar photovoltaics, $9.5 trillion for onshore wind, and $6.6 trillion for offshore wind power. The report also sees investment of $4 trillion for nuclear power.   

The task here is not simply to eliminate the carbon emissions from the power generation that’s needed today, according to Goldman Sachs Research. Power demand is going to rise as various sectors — such as road transport, heating of buildings, and industrial manufacturing — rely on electrification to reduce their carbon footprint. The report sees power generation increasing threefold from 2023 levels in order to reach global net zero by 2070. “Power generation is the most vital component for any net zero scenario,” Della Vigna writes.

Tackling industrial emissions

While renewable power and the electrification of transport attract much more attention, industrial emissions are the second-largest contributor to global carbon emissions. They present difficult reduction challenges.

In steelmaking, for example, which relies today on coal-fired blast furnaces, the report highlights how fuel switching and process innovation will be needed. “Over the past few years, we have seen a number of innovative alternative clean steel production processes being developed, primarily focusing on the increasing use of electricity and clean hydrogen,” Della Vigna says.

Cement production is another difficult challenge. In addition to the energy needed for the intense heat in cement kilns, the chemical process that turns limestone into cement releases carbon directly. For this reason, the report finds that carbon capture technologies are likely the most promising avenue for decarbonization of this vital global building material.

Goldman Sachs Research finds that the path to net zero emissions will likely rely on four key technologies: renewable energy, clean hydrogen, battery energy storage, and finally, carbon capture. The first of these is well-established and has benefited from a declining cost curve. But the world must move from a one-dimensional decarbonization approach based on renewables to a “multi-dimensional ecosystem” that incorporates all these technologies.

“Our path consistent with net zero by 2070 calls for an evolution of the de-carbonization process from one-dimensional (renewable power) to a multi-dimensional ecosystem,” Della Vigna says.