Goldman Sachs Research has indicated that achieving net zero emissions is crucial for reducing the severe impacts of climate change, yet this will necessitate substantial investments. The organization has projected that offsetting greenhouse gas emissions from human activities by the year 2070 will require an investment of approximately $75 trillion. This amount is more than two-and-a-half times the Gross Domestic Product (GDP) of the United States, which reached $29.35 trillion in the third quarter.
Under the Paris Agreement, rejoined by the United States in 2021 after its departure in 2017, leaders from nearly 200 countries committed to curbing global average temperature rise to no more than 1.5 degrees Celsius above pre-industrial levels. However, the World Meteorological Organization has warned that global temperatures could temporarily exceed this limit within the next five years due to accelerated warming.
As the feasibility of meeting the Paris Agreement’s objectives diminishes, Goldman Sachs has updated its forecasts. A $75 trillion investment is now projected to limit the global average temperature increase to 2 degrees Celsius above pre-industrial levels, a revision from previous estimates that pegged the cost of reaching net zero by 2060 at $62 trillion.
Despite the staggering investment estimate, Goldman Sachs perceives this as a significant opportunity for investors keen on participating in the global shift toward sustainable energy sources. According to their analysis, funds should be allocated to a comprehensive strategy that encompasses not only renewable energy but also clean hydrogen, enhanced battery energy storage, and improved carbon capture technologies to achieve net zero.
The investment should see approximately $30 trillion directed toward renewable energy. Goldman anticipates a need for $5 trillion to enhance energy storage with better batteries. Additionally, $9.3 trillion is earmarked for making industrial activities more environmentally sustainable, particularly through the expansion of carbon capture, utilization, and storage methods, which involves capturing carbon dioxide emissions from industrial plants for reuse or storage deep underground.
Fossil fuels are expected to remain in use for several decades. Goldman Sachs predicts that oil demand will reach its peak after 2029, which is later than the current forecast by the International Energy Agency, and envisions natural gas serving as a “transition fuel” until 2050.
Michele Della Vigna, the head of natural resources research for Goldman Sachs Research in Europe, the Middle East, and Africa, articulated in a statement that achieving net zero by 2070 entails evolving the de-carbonization process from a singular focus on renewable power to a more comprehensive, multidimensional approach.
