Achieving “Net Zero” leads to the Collapse of the World Economy?

It is widely accepted that global climate change has had a significant impact over the past few decades, with major changes in weather patterns, sea level rises etc. impacting the socio-economy lifestyle of millions around the world. Scientists believe that burning of fossil fuel for energy generation and some other human activities emitting excess greenhouse gases has contributed to global warming which has led to an increased rate of climatic changes. 

As a response to global warming , the world leaders accepted “The Net Zero Policy” at Paris climate summit in 2015 and pledged to dedicate to mitigate the emission of greenhouse gases to near to the zero within the framework of certain timelines. However, there are certain misleading claims among the public as well as on cyberspace which say that “Net Zero” Policy, will not be a solution to climate change and it`s not good for the world economy. Such an article can be read from here. Archived.  

This is our investigation over the issue.

CLAIM: Achieving “Net Zero Policy” will not be a solution to climate change and it`s not healthy for the economy too.

FACT: “Net zero” policy can be considered as one of the solutions for the impacts of climate change impacts and is a holistic approach which would not have negative impacts on the long run.

What is Net Zero Policy

“Net Zero” simply means reducing the net emissions of greenhouse gases to the environment near to the zero level. In other words, the term refers to the balance of the amount of greenhouse gases produced and the amount removed from the atmosphere. We can reach net zero when the amount we produced is no more than the amount taken away. Details about this can be taken from here. Archived.

Significant Nature of “Net Zero“

To keep this earth as a livable planet, the temperature rise should not be above 1.5 Celsius than pre industrialized world in 1800`s.Even now, the temperature rise is around 1.1 Celsius. Thinking about this critical condition, at the Paris climate summit which was held in 2015, world leaders agreed to reduce the emissions up to 45% by 2030 and reach the net zero target in 2050.  

The way forward with “Net Zero”

However, reaching towards the net zero target is challengeable as it is essential to change our ways of life. Production, consumption, supply chain and every possible thing should be modified to reach net zero. Yet, there is a big global coalition to reach the target. As many as 70 countries, over 1200 companies, over thousand cities, educational institutions as well as financial institutions have pledged to reach the target net zero by 2050 from reducing the emission of greenhouse gases by resorting to rigorous course of actions.

UN Intervention

Net Zero commitments are difficult to turn into realities. Frequent monitoring process is needed to reach those targets. To this monitoring process related with non-state entities who pledged to set net zero targets, the secretary of United Nations (UN), Antonio Guterres appointed a high-level committee to make recommendations in 2022 March and the report being prepared by them will be handed over to the UN secretary general before the end of this year.

Reaching these targets is not easy. According current statistics available, only 14% reduction of greenhouse gas emissions can be expected in 2030 and UN urging the countries who signed the Paris convention to fulfill NDTs (Nationally Determined Targets ).The details about this can be reached from here.Archived

From the above-mentioned details, it`s clear that the Net Zero policy helps to reduce the emission of greenhouse gases at least to a certain percentage and contribute to combat against climate change as a sustainable solution.

Economy- Jobs and Investments

One of the most important points of the net zero policy is reduction or elimination of jobs and investmentment opportunities related to the fossil fuel energy sector. But there is a creation of a new wave of jobs in the renewable sector. Can the creation of new jobs and investment opportunities fulfill the vacuum of job loss?  We studied it using a report released by the International Labor organization (ILO) in collaboration with the International Renewable Energy Agency (IRENA).

According to the report released in 2021 named as Renewable Energy and Jobs: Annual Review 2021, the International Labor Organization (ILO) says that in 2020 there were 12 million renewable energy related jobs worldwide and it`s a 0.5 million increment from 2019. From those renewable energy jobs in 2020, 4 million jobs were solar energy based and 1.25 million jobs were wind energy related.

The Director General of International Renewable Energy Agency (IRENA) Francesco La Camera says that renewable energy`s ability to create jobs and meet climate goals is beyond doubt and because of it country leaders should try to reach net zero target. 

The director general of ILO, Guy Ryder also says there wasn’t any contraction between creating jobs and environmental sustainability related with renewable energy, as renewable energy has a potential to create new jobs.

IRENA and ILO findings show that while there are some job losses in the transition to the renewable energy sector, in the longer run, there is a capability for creating new job opportunities as compared to job losses. More details about this can be read from here. Archived.

Investment Opportunities in Green Energy Sector

The findings of a research released by a reputed academic and research institution, Imperial college, London in collaboration with International Energy Agency (IEA) in 2020 revealed that investing in renewable energy gains significantly higher profit margin as compared to traditional fuel-based industries.

Their study concerned with the number of developed nations shows the following data. When it comes to Germany and France, the five-year long investment plan of fossil fuel-based industries gives -20.7% loss, while the same investment plan in new energy-based industries gives 178% profit. In the United Kingdom, green energy generates 75% profit while fossil fuel generates only 8% profit in a five-year investment plan. In the USA, green energy generates 200% profit while fossil fuel related investments only generate 97% profit.

There has been some misconception in society which tries to convince the public that investing in fossil fuel gives more profits than investing on new energy. However, it`s not true according to the above-mentioned findings. Details about the above research can be taken from here. Archived

When we consider about the economy of the United Kingdom (UK), and it`s effort to reduce the emissions, the gross domestic product of UK increased by 75% while emissions were fallen by 43% in 29-year time period (1990-2019). Not only in United Kingdom, even other members of G7 group, the emission has been reduced and the GDP value being increased with time. So, it`s a clear fact that the reduction of emission doesn`t contribute to the economic downfall. Details about this can be taken from here. Archived.

 According to a research study, published by Mckinsy, to reach the net zero target in 2050, US$ 275 trillion should be spent and it`s US$ 9.2 trillion per year on average. But we should not misunderstand that it`s only a cost because the money invested in new energy or renewable energy projects give a lot of profits as a return. McKinsey estimates that getting the net zero by 2050 will cost 187 million jobs, but will create around 202 million new jobs. It’s a good opportunity to invest in new dimensions like renewable energy, hydrogen production, etc. However, there are some difficulties in implementing net zero policies. Because poor countries and countries who depend so much on fossil fuels, have to spend a considerable amount of their GDP for this transformation. Details about this can be taken from here. Archived.  

Is Net-zero growth an oxymoron?

In the fast-moving world humans have become accustomed to overconsumption. Net zero means shift behaviors to remove inefficiencies and it’s not about oxymoron. People are free to consume but not overconsumption. So, it is a method to leave something for future generations.  As well as the net zero concept closes the vast investment gap required to fund decarburization. Net-zero growth is not an oxymoron; the desired decrease in emissions does not inevitably translate into economic contraction  .

Michael and Waka of Victoria University of Wellington explains that we must find ways of using and wasting less energy and raw materials. It is good to argue that the concept of a green economy might be the next oxymoron.  Green economy seems to have the potential to become the new leading strategy in political discourse – like sustainable development in Rio 1992. More information can be gained here.

Despite a lot of controversial views regarding the “Net Zero “concept, it’s mostly financially sustainable and can also be considered as a solution to global climate change.