India’s annual capital spending on net-zero transition to be 11% of GDP: Report

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It has been reported that India’s annual capital spending on the net-zero transition would be about 11 percent of the GDP in the Net Zero 2050 scenario. This is higher than the global average of about 7.5 percent of GDP as per the new report ‘The net-zero transition: What it would cost, what it could bring’ by McKinsey & Company.

The report states that the annual capital spending on physical assets in India would rise from around $300 billion in 2020 to an average of $600 billion between 2021 and 2050.

Of this, much of that capital would be used to reduce the use of existing coal power and expand renewable- electricity capacity. In India, almost 40 percent of spending would be in power.

In addition to capital spending on low-emissions technologies, India may also have to invest more heavily than other countries in climate adaptation measures, given their relatively high physical risk exposure to climate change.

Net Zero Emissions

According to the report’s findings, despite India’s physical and transition risk exposure, the country has an abundance of low-emission or critical transition resources and is geographically positioned to become a leader in the transition.

India has a high solar potential (5.1 kWh/m2/day) and potential for CO2 abatement through reforestation and afforestation (16 tonnes/km2). The country is also poised to become a leader for producing the talent and technologies required to achieve net-zero; India has a relatively high number of climate change mitigation-related patents (511) and a share of STEM graduates across India’s population with college or graduate-level degrees (29%).

“The economic transition to achieve net-zero will be complex and challenging, but India’s abundance of low-emission or critical transition resources and geographical position could allow it to become a leader in the transition. Our findings serve as a clear call for a well-considered, urgent, national plan, as an imperative for India to secure an orderly transition to net zero,” said Rajat Gupta, Senior Partner at McKinsey and Asia leader of McKinsey Sustainability.

As an increasing number of countries commit to reaching net-zero emissions of greenhouse gases by 2050, spending on physical assets for energy and land-use systems would total around $275 trillion globally through 2050.

Economic Transformation

As high-emissions activities are ramped down and low-emissions activities ramped up, the spending will rise by $3.5 trillion per year for the next 30 years to approximately $9.2 trillion annually.

“The net-zero transition will amount to a massive economic transformation. Actions by individual companies and governments, along with coordinated support for vulnerable sectors, countries, and communities, could facilitate the economic and societal adjustments that will be required,” said Mekala Krishnan, a partner at the McKinsey Global Institute and lead author of the report.

The report has taken a look at the implications for demand, capital spending, production costs, and jobs in sectors that produce 85 percent of overall emissions, with an in-depth analysis of 69 countries. (Business Today)