The incremental cost of achieving a net-zero carbon economy by 2050 could be as much as $300 billion through 2030, according to a report from the National Academies of Sciences, Engineering, and Medicine.
The report, Accelerating Decarbonization of the U.S. Energy System, the first of two, said that achieving the 2050 goal is feasible and presented a technical blueprint and policy road map for the next 10 years.
The report also found that immediate action would be required to achieve the greenhouse gas emission reduction goals and that most near-term reductions would come from the electricity sector, electrification of vehicles, and home heating.
In breaking down the potential costs of decarbonization, the report looked at three categories of costs: net present value, capital costs, and needed congressional appropriations. The authors stressed, however, that only the net present value represents a “true cost” of transitioning the United States to an economy with zero carbon dioxide (CO2) emissions because capital costs and congressional appropriations can be considered investments that could provide long-term returns to private and public sectors.
In a survey of recent studies, the National Academies report found that the transition to a net zero economy by 2050 could be achieved using only commercial and near-commercial technologies and spending a smaller fraction of the nation’s gross domestic product (GDP) on energy than the country has in the past, however, expenditures during the transition period would be “significantly greater” than the business-as-usual case.
The studies indicated that cumulative energy expenditures during the transition to a net-zero carbon economy would be between $100 billion and $300 billion through 2030 – a roughly 3 percent increase relative to a business-as-usual baseline of approximately $9.4 trillion – and $4 trillion to $6 trillion through 2050 beyond the $22.4 trillion in a business-as-usual baseline.
The authors of the National Academies report noted, however, that if emissions mitigation technologies improve faster than modeled in recent studies, the cost of decarbonization could be lower.
The report’s authors also pointed out that any direct costs could be offset by public and private benefits such as avoided health impacts from improved air quality, new economic and employment opportunities, downward pressure on global oil prices, and, potentially, the avoidance of “some planet-altering climate change-related damages.” Those benefits could amount to “hundreds of billions of dollars annually” and offset “some, all, or more than the cost of the transition,” the report found.
In terms of capital investment, the National Academies report said roughly $2 trillion in incremental investments would need to be mobilized over the next decade to bring projects online in 2030 in order to put the United States on track to reach net zero carbon dioxide emissions by 2050.
The $2 trillion in incremental capital investments identified in the report includes roughly $0.9 trillion in investment in supply-side sectors and networks and $1.2 trillion in incremental demand-side investments in buildings, vehicles, and industrial efficiency.
The needed capital investments during the current decade are much larger than the direct costs that would be borne by taxpayers or energy consumers because capital investments are paid back through energy expenditures over many years and investments in renewable electricity, efficient buildings and vehicles, and other capital-intensive measures offset annual expenditures on consumption of fuels, the report said.
The authors said they included capital investment estimates in the report because policies will be needed to “directly finance some projects and de-risk others, given that private capital markets are not currently set up for the net-zero transition.”
The report estimates that $350 billion in federal appropriations over 10 years would be needed to fund the required package of net-zero transition policies. Those appropriations could be offset, however, by about $2 trillion raised between 2021 and 2030 from a proposed carbon dioxide price.
The report proposed an economy wide price on carbon dioxide emissions beginning at $40 per ton of CO2 and rising by 5 percent per year. A price on CO2 would unlock “innovation in every corner of the energy economy, send appropriate signals to myriad public and private decision makers, and encourage a cost-effective route to net zero,” the report said, but the authors also noted that the proposed carbon price was set at a level lower than would be needed to fully fund a 30-year transition to a net zero economy out of concerns about “equity, fairness, and competitiveness.”
They said, for example, an economy wide price on carbon would “fall disproportionately on people with the lowest incomes and the fewest choices.” The report also noted that if the United States were to implement a carbon price before “key trade competitors, a mechanism that levels the playing field for domestic firms and avoids emissions leakage will be necessary.”