OREANDA-NEWS. McKinsey Global Institute, the research arm of consulting firm McKinsey, has described a hypothetical model of the massive economic and social changes that would occur if the world were to achieve carbon neutrality by 2050.

The study was based on a scenario developed by the Network for Greening the Financial System (NGFS), an organisation set up by central banks and supervisors in December 2017 to provide a rapid global response to climate change (the Bank of Russia joined in 2019). To prevent global temperatures from rising by more than 1.5 degrees Celsius relative to 1850-1900 levels, most of the world agreed when they signed the Paris Climate Agreement in 2016. In November 2020, countries participating in the UN Framework Convention on Climate Change signed a climate pact at a conference in Glasgow, which requires states to reduce their use of coal. Other agreements reached between countries included ending deforestation and reducing methane emissions.

The study suggests that the transition to zero emissions can only be universal, i.e. affecting all economic sectors and countries: the energy and land-use systems that underpin the global economy and are responsible for CO2 emissions will be overhauled.

From 2021 to 2050, the total capital cost of the physical assets needed to move to carbon neutrality would amount to $275 trillion, or 7.5 per cent of cumulative global GDP over the period. This would involve, for example, replacing conventional coal-fired power plants with carbon-capture coal-fired plants or moving away from internal combustion engines in vehicles. The average annual cost of decarbonisation would have to rise from today's $5.7 trillion to $9.2 trillion.