Launched in the backdrop of the G20 dialogue with the Business 20 (B20) Summit, the paper examines economic growth, inclusion, and the net zero transition as part of a connected system and outlines what it would take for G20 economies to deliver on to bold aspirations by 2030
At today’s level of emissions, the world’s carbon budget for holding to a 1.5°C path is expected to run out around the end of the decade and the G20 would need to invest upwards of an additional $35 trillion this decade above 2020 levels, cumulative to 2030 ($41 trillion in investments globally), according to a new G20 focused whitepaper published by McKinsey & Company.
The whitepaper, Driving sustainable and inclusive growth in G20 economies: Scaling initiatives on empowerment and net-zero, examines economic growth, inclusion, and the net zero transition as part of a connected system and outlines what it would take for G20 economies to deliver on to bold aspirations by 2030.
Amit Khera, senior partner, McKinsey & Company, says, “Can prosperity really be compatible with sustainability? We deeply believe it can and this analysis shows it is imperative. Meeting basic needs is existential; so is meeting our emission reduction aspirations.”
He adds, “The question for leaders worldwide is how to prioritise these aspirations while maintaining growth—and whether they can marshal the massive resources it would take to close both gaps in empowerment and net zero in a meaningful way.”
Launched in the backdrop of the G20 dialogue with the Business 20 (B20) Summit, the paper indicates that the current decade is critical for G20 economies to accelerate low-emissions investments.
According to the analysis G20 economies currently emit approximately 31 Gigatons of CO2 annually and, in an accelerated growth scenario, need to be halfway to net zero by the end of this decade. The economies would need to invest upwards of an additional $35 trillion this decade, above 2020 levels, to be on track for the world to reach net-zero emissions by 2050.
The reductions in CO2 emissions needed to reach net zero varies by country and region, with the greatest cuts needed among high-income economies, followed by upper-middle-income and lower-middle-income countries.
Economic growth and increased business-led innovation will be critical factors for all G20 economies, regardless of income level. Both could account for some 80 % of the efforts to close the empowerment gap, as well as 35 % of the increased net zero investment.
Growth can help address the net-zero gap by creating additional financing capacity, spurring reductions in technological costs, making low-emissions alternatives more cost-competitive, and enabling incremental public support in areas too challenging for markets to finance on their own.
The study states that promising examples of G20 countries attempting to close the empowerment and net-zero investment gaps exist at all levels, including national, regional, and local initiatives.
The whitepaper is a companion piece to a broader McKinsey Global Institute (MGI) study, From poverty to empowerment: Raising the bar for sustainable and inclusive growth, which examines the global economy and the interconnections between the three elements of growth, inclusion, and sustainability.