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The Net Zero Transition

Mar 22, 2022

Unless you have avoided political news and social media, you know the cornerstone of every Biden Administration initiative is the transition to “Net Zero” by 2050. The Administration has mandated that every government action must be evaluated upon its carbon dioxide and other greenhouse gas emissions and its contribution to reducing emissions to net zero by 2050. It is no longer good enough for government actions to help people, provide jobs or build infrastructure – these actions now must contribute to the net zero goal.

In January, McKinsey & Company, a respected global research firm, produced a comprehensive report titled, “The net-zero transition: What it would cost, what it could bring.” The report is more than 200 pages.

The preface to the report contains a sobering statement (or maybe a warning). “At present, though, the net zero equation remains unsolved: greenhouse gas emissions continue unabated and are not counterbalanced by removals, nor is the world prepared to complete the net-zero transition. Indeed, even if all net zero commitments and national climate pledges were fulfilled, research suggests that warming would not be held to 1.5°C above pre-industrial levels, increasing the odds of initiating the most catastrophic impacts of climate change, including the risk of biotic feedback loops. Moreover, most of these commitments have yet to be backed by detailed plans or executed.”

Such a statement means that, although a number of countries have made commitments to hold greenhouse gas emissions to net zero, those commitments are merely empty promises, and almost nothing is being done to reach net zero. There are no plans by the world’s governments to achieve net zero.  Other than the United States and a few other countries closing coal-fired electric generating plants, there is little preparation or effort toward net zero commitments. Also, the report cites research suggesting that, even if all the net zero commitments were completed, limiting the increase to 1.5°C from pre-industrial levels likely would not be achieved.

The report anticipates capital spending of $275 trillion on physical assets for energy and land-use systems in the net zero transition between 2021 and 2050. Although much of the spending will be required in early years, averaging $9.2 trillion per year, an annual increase of as much as $3.5 trillion from today. To put this increase in comparative terms, the $3.5 trillion is approximately equivalent, in 2020, to half of global corporate profits, one-quarter of total tax revenue, and 7 percent of global household spending. The transition would require the single largest investment made in any industry in history, and could result in a loss of about 185 million jobs, mostly in the fossil fuel extraction and power sectors by 2050. That loss could be offset by a gain of about 200 million jobs, including jobs in operations and construction of physical assets, renewable power, hydrogen, and biofuels, says McKinsey. It is important to recognize the U.S. total workforce in 2020 was about 165 million workers. More sobering is the report’s projection that the scale of workforce reallocation may be smaller than that of other trends, such as automation. Again, no small feat to reorganize, retrain, deploy, and employ a workforce larger than the current total U.S. workforce.

The report also predicts the global average delivered cost of electricity would increase by about 25% from 2020 until 2040 and still be about 20% higher in 2050. Global electric prices would then decline from that peak back to 2020 levels, although the pricing would vary across global regions as the power sector builds renewables and transmission and distribution capacity. However, the report warns that near-term cost increases could be significantly higher if grid intermittency issues are not well managed.

These changes are not nearly comprehensive of all that will be required to achieve net-zero. The report states major systemic changes must be made in the carbon-emitting energy and land-use systems: power, industry, mobility, buildings, agriculture, forestry, and waste. That means we all will have to make significant changes in our jobs, and our lives– the energy we use, the food we eat, the transportation we use, how we travel, and the freedoms we have.

Most importantly, the report acknowledges no exploration of the critical question of who pays for the transition. It establishes that such a move will require collective and global action, particularly as the burdens of the transition would not be evenly felt. The prevailing notion of enlightened self-interest alone is unlikely to be sufficient to help achieve net zero, and the transition would challenge traditional orthodoxies and require unity, resolve, and ingenuity from leaders.

This means all the governments and world leaders must work together to achieve such ambitious goals. That includes the governments that are currently threatening to invade neighbors and disrupting global commerce.

With all due respect to those that see net-zero as the only path to an inhabitable world, the chances of world leadership doing anything other than messing this up and disrupting everyone’s lives are less than my chances of jumping to the moon. We would be better advised to spend our time on issues that make sense, actually help people, and to invest in nuclear power, the only practical net zero solution.

I hope you have a good month.             

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