Europe can reach net-zero emissions by 2050 at “net-zero cost,” report finds

While Australia’s Morrison government sticks doggedly to its claim that a net-zero emissions target would put a “wrecking ball” through the Australian economy, a major new report on out of Europe has found the exact opposite to be true – for the EU, in any case.

The more than 200-page report from McKinsey & Company, published on Thursday, attempts to answer the question of what it would take for the European Union to reach its goal of net-zero greenhouse gas emissions by 2050; a goal now shared by an ever growing list of nations from all corners of the globe.

After a comprehensive research effort analysing the optimal uses of more than 600 emissions-reduction levers in 75 sub-sectors and 10 regions and assessing their impact on employment and other socioeconomic factors, the report essentially finds that the more ambitious the net-zero targets, the lower the cost to reach them.

That is to say, Europe can reach net-zero emissions by 2050 at net-zero cost, while also creating 5 million new jobs and making the EU more or less energy independent, but only with firm targets for the adoption of zero-emission technologies and fuels, and only if those targets are set at the EU level and worked towards collaboratively by all member states.

“The European Union’s decarbonisation targets are ambitious, but as our analysis shows, they should be achievable and affordable,” says the report, titled Net-Zero Europe: Decarbonisation pathways and socioeconomic implications. “Success will depend on everyone taking decisive action while recognising that time is of the essence.”

The analysis finds that the most cost-efficient way to net-zero emissions would require parallel action across five key sectors: power, transportation, buildings, industry, and agriculture, with the power sector reaching net-zero emissions first, in the mid-2040s, followed by transportation in 2045, buildings in the late 2040s, industry in 2050, and agriculture.

By 2050, the report finds, consumption of oil, gas, and coal would decline by more than 90 per cent, even as power demand doubled, and renewable sources would generate more than 90 percent of electricity, up from 31 percent now.

This, in turn, would need a significant expansion of solar and wind power, with solar capacity additions required to increase from 15GW a year today to 45GW a year between 2030 and 50. Wind growth, meanwhile, would need to increase from 10GW a year in 2019 to 24GW a year during 2030-50.

Interconnections between EU power grids would need to increase threefold by 2030, according to the same scenario, and battery storage capacity would need grow to 25GW by 2030 and to more than 150GW by 2050.

Economically speaking, McKinsey says reaching net-zero by 2050 would require investment of an estimated €28 trillion ($A45.7 trillion) in clean technologies and techniques over the next 30 years. Interestingly, however, the report notes that roughly €23 trillion of that investment – an average of €800 billion a year – would come from redirecting investments that would otherwise be spent on carbon-intensive technologies.

Another €5.4 trillion (an average of €180 billion a year) would have to be tipped into clean technologies and techniques, the report adds. Of this amount, about €1.9 trillion of which would be invested in the buildings sector (29 per cent), €1.8 trillion used for power (33 per cent), €410 billion for industry (8 per cent), €76 billion for agriculture (about 1 per cent), and €32 billion in transportation (less than 1 per cent). About €1.5 trillion (28 per cent) would fund infrastructure to improve energy transmission and distribution in all sectors.

“The cost-optimal pathway is highly dependent on regulators setting targets for the adoption of zero- emission technologies and fuels,” the report says in a section outlining the “key enablers” of the net-zero scenario.

“For example, the rapid EV adoption of cars, trucks, and buses requires much more ambitious targets and other regulatory support.”

And the report notes that policymakers could make some of the more costly investments in such things as vital alternative fuels, such as renewable hydrogen, more attractive with better CO2 pricing and incentives that would allow aviation and marine players to get a fair return on their investment and stimulate R&D in equipment and fuel supply infrastructure.

“There are many possible emissions-reduction pathways. Our report describes a cost-effective scenario that illustrates specific, feasible actions that would allow the EU to achieve its emissions-reductions targets,” said Hauke Engel, a partner in McKinsey’s Sustainability Practice, who co-leads McKinsey’s work on climate change globally.

“Our report shows that decarbonising Europe can have economic benefits: It creates jobs, spurs innovation and accelerates growth,” added Tomas Nauclér, a senior partner who leads McKinsey’s Sustainability Practice in Europe.

“We hope the report will help business and government leaders to take decisive action and launch emissions-reductions projects that will secure a healthy, prosperous future for Europeans.”