An accelerated energy transition will eventually pay off but the actions required to deliver will have an offsetting negative economic effect, a report by natural resources consultancy Wood Mackenzie said on Thursday.
While investments in technologies like solar and wind farms and advanced batteries will generate jobs, the transition will also likely cause a loss of jobs and tax revenues in fossil fuel production, said the report called "No Pain, No Gain: The economic consequences of accelerating the energy transition".
The consulting group's analysis suggests that much of the lasting economic benefits will materialize beyond the forecast horizon of 2050.
Benefits from limiting the rise in temperatures to 1.5 degrees Celsius, as called for by the United Nations, could boost global GDP, on aggregate by 1.6% in 2050. But actions required to spur the transition to keep temperatures from going above that level could cut 3.6% from GDP in 2050, resulting in the 2% hit, the report said.
"As new transition technologies – electric vehicles, utility-scale batteries, hydrogen and carbon capture and storage – come down in price over time, there will come a point when low-carbon investments are more competitive than phased-out high-carbon alternatives," said the report's authors.
"We think the turning point will be around 2035, after which global GDP growth will outpace our base case, meaning lost economic output could be recouped by the end of the century."
Some economies will feel the effects more than others, said the report, with less developed and low-income economies bearing a disproportionally high burden while economies better positioned – typically wealthier economies with a strong propensity to invest in new technologies – may even benefit economically by 2050.
"Economies that are already closer to net-zero targets will see a smaller economic impact from now to 2050. For a fortunate few, the transition need not result in economic loss at all," said the authors.
The report said an accelerated transition could pay off in the end and it is likely to lead to stronger economic growth rates for some economies beyond 2030, enabling their losses to be recouped before the end of the century.
