The transition to clean energy, needed to keep the temperature from rising rapidly, could reduce global GDP by 2% by 2050, but could be recoverable before the end of the century, a report by the natural resources consultancy said. Wood Mackenzie this Thursday (20).
While investments in technologies such as solar, wind and advanced batteries create jobs, the transition is also likely to cause job losses and tax revenue from fossil fuel production, said the report titled “No Pain, No Gain: The Economic Consequences of Accelerating energy transition”.
“It’s by no means a way of saying that we shouldn’t pursue the transition or delay it,” said Peter Martin, chief economist at WoodMac. “This short-term pain will pay off in the long-term.”
The benefits of limiting the temperature rise to 1.5 degrees Celsius, as required by the United Nations, could raise global GDP by 1.6% in 2050, according to the report. But the actions needed to stimulate the transition to prevent temperatures from exceeding that level could cut 3.6% of GDP by 2050, resulting in a 2% impact, according to the document.
The impacts will not be felt uniformly. China will feel about 27% of the cumulative economic impact of $75 trillion on global GDP by 2050, followed by the United States at around 12%, Europe at 11% and India at around 7%.
Wealthy economies with deep capital markets that already have large investments in energy transition technologies, or a propensity to invest in new technologies, will be better positioned.
The economic benefits of the energy transition are expected to begin to show after 2035, and lost economic output would eventually be recovered before the end of the century, according to the report.
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