Mckinsey: EU’s pathway to net-zero at net-zero cost
The target for the European Union to achieve net zero emissions by 2050 without compromising prosperity is explored in a new in-depth report from consultants McKinsey & Company.
This proposal comes one year after the European Commission pledged to make the bloc climate-neutral by 2050. In a bid to help with the planning efforts of business leaders and governments McKinsey & Company has outlined a cost-effective pathway for achieving the climate goal.
“This cost-optimal pathway illustrates the technical feasibility of reducing the EU’s emissions 55% by 2030 compared to 1990 levels and reaching net-zero by 2050. It also shows that decarbonising Europe can have broad economic benefits, including GDP growth, cost-of-living reductions and job creation,” comment McKinsey & Company.
“Advances over the last decades have put climate neutrality within reach. But laying the foundation in the next decade will be critical to achieving this goal.”
Reaching net-zero would require investing an estimated €28 trillion in clean technologies and techniques over the next 30 years, highlights the 204-page report, How the European Union could achieve net-zero emissions at net-zero cost.
Shift in jobs landscape
It is predicted the net-zero transition would create an estimated 11 million jobs while eliminating 6 million, resulting in a net gain of 5 million jobs. Many of the new jobs would be in renewable energy (1.54 million), agriculture (1.13 million), and buildings (1.1 million).
“Reaching net-zero emissions could require retraining up to 18 million workers, especially to fill jobs that currently do not exist (almost 3.4 million by 2050) and those lost during the transition (2.1 million by 2050).”
Five sectors emit the bulk of the European Union’s greenhouse gases GHG:
- Fossil fuel combustion is the biggest source of GHGs accounting for 80% of emissions
- 28% comes from transportation
- 26% from industry
- 23% from power
- 13% from buildings
- 13% from agriculture
“To reach net-zero, the investments and cost savings would be higher in some of these sectors than others,” says the report.
“Although implementing clean technology would require additional investment, it would ultimately lower operating costs. From 2021 to 2050, the EU would save an average of €130 billion annually in total system operating costs. By 2050, these measures would reduce total system operating expenditures by €260 billion per year, more than 1.5% of the current EU GDP. Most of these savings would be in transportation,” comment McKinsey & Company.
If the decarbonisation costs and savings were passed through to households, the report claims the aggregate cost of living for an average household in a climate-neutral EU would be the same as it is today.
Power industry quickest to decarbonise
Mckinsey & Company predict the power industry will reach the emission-reduction goals first followed by transportation, buildings, industry and finally agriculture.
“Because wind and solar power generation technologies are already available at scale, power would be the quickest sector to decarbonise, reaching net-zero emissions by the mid-2040s. The demand for power would double as other sectors switch to electricity and green hydrogen, requiring renewables production and storage capacity to be rapidly scaled,” says the report.
Agriculture is identified as the most challenging sector because more than half of its emissions come from raising animals for food and can't be reduced without significant changes in meat consumption or technological breakthroughs.
A successful decarbonisation pathway requires deploying and scaling net-zero technologies. The journey for any single technology from Research & Development (R&D) to deployment and commercial competitiveness depends on a complex system of models and stakeholders.
Achieving net-zero by 2050 would require the following actions recommend McKinsey & Company:
Rapidly scale cost-competitive technologies and business models to reduce near-term emissions. The scale-up of mature and early-adoption zero-emissions technologies is crucial to meeting targets. These include solar and wind power, EVs and charging infrastructure
Accelerate and invest
Accelerate next-generation technologies and invest in infrastructure to reduce emissions after 2030. To boost industry-wide innovation, funding mechanisms for deploying early technology should encourage collaboration.
Invest in R&D
Invest in R&D and negative emissions to close the gaps to net-zero by 2050. Invest in reorganising land use to generate negative emissions through reforestation. Lawmakers can also start passing legislation that creates glide paths for each sector to reach net-zero emissions.
McKinsey & Company is also calling on stakeholders to take decisive action and address these five hurdles to accelerate the transition:
- Shift social norms and consumer and investor expectations to zero-carbon as the new normal
- Create secure and stable policy frameworks and regulatory environment
- Encourage constructive industry dynamics
- Mobilise green capital and investment
- Accelerate net-zero technologies along their learning curves
“To achieve these benefits, the EU has a long road ahead. In 2017 the EU-27 countries emitted 3.9 GtCO2e, including 0.3 GtCO2e of negative emissions. Although this accounts for only 7% of GHG emissions, the EU achieving climate neutrality could serve as a blueprint for other regions and encourage other countries to take bolder action,” says the report.
Four CPG giants to fund sustainable accelerator programme
Breakthrough ideas can come from anywhere and anyone. That’s the premise behind the coming together of The Coca-Cola Company, Unilever and Colgate-Palmolive in the funding and support of world-leading brewer AB InBev’s 100+ Accelerator program.
These four consumer packaged goods multinationals will leverage both their size and resources to fast-track a shift toward sustainable solutions by mobilising some of the world’s sharpest thinkers to solve some of the world’s most pressing sustainability challenges.
The aim of this collaboration is to “supercharge adoption of sustainable solutions by funding the accelerating fantastic innovations that will change the world by making all of our businesses more sustainable”, says Tony Milkin, chief procurement, sustainability and circular ventures officer at AB InBev.
“Sustainable business is smart business, and we are working to solve huge problems that no one company can handle alone. With our combined global reach, we can accelerate progress towards a more sustainable future.”
What is the 100+ Accelerator program?
Originally launched in 2018, 100+ Accelerator is a global incubator program that aims to solve key supply chain challenges across water stewardship, circular economy, sustainable agriculture and climate action.
It offers size and scale to passionate entrepreneurs to help bring their solutions to market faster, and the program’s first two cohorts have already piloted 36 innovations in 16 countries, with participating startups raising more than US$200m to help them scale globally.
Among the established innovators are those already creating huge impact on sustainability, with projects including the first solar thermal plant in Africa, recycled electric vehicle batteries that store renewable electricity in China, and upcycling saved grains from the brewing process to produce nutritious foods in the US.
- The implementation of green cleaning solutions to reduce water and energy use in brewing operations in Colombia
- Solutions delivering traceability and insurance for smallholder farmers in Africa and South America
- The collection of more than 1,000 tons of glass waste in Brazil
- Piloting returnable packaging in the United States
- Recycled electric vehicle batteries that store renewable electricity in China
- The ability to upcycle saved grains from the brewing process to produce nutritious foods in the United States
- The first solar thermal system to be installed at an AB InBev plant
How will the new program work?
So, how does it work? Applications are invited from entrepreneurs or small businesses (deadline for cohort 3 is May 31 2021) and the partners will choose 20-25 ideas which are then provided with funding.
Project aligned with goals of the CPG multinationals
The participation by all three consumer packaged goods giants is in line with each of their own sustainability goals, with each passionate about transforming global supply chains towards a greener future, and knowledgeable that “we can achieve our purpose faster and more effectively with equally committed partners”, says Patricia Verduin, CTO of Colgate.
Since launching its World Without Waste sustainable packaging platform, Coca-Cola has actively engaged the startup community for inspiration and innovation and is an inaugural investor in Circulate Capital, a fund launched in 2019 focused on ventures, infrastructure and innovations preventing the flow of plastic into oceans.
The program’s social inequality component is also aligned with Unilever’s values. “This year, we made commitments to ensure that everyone who directly provides us with goods and services receives a living wage by 2030,” says Marc Engel, chief supply chain officer of Unilever. But that’s not all. “We’re increasing our spend with suppliers from underrepresented groups and committed to train 10 million young people.”