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13 Sep 2023

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BCG Report Cites $18 Trillion Sustainability "Investment Gap"

A new report from Boston Consulting Group (BCG) finds that a maximum of US$19 trillion – equal to about 20% of the entire global economy – has been committed to build sustainable energy by the year 2030. But this is only about half of what will be required, according to the report.

The report details this $18 trillion “investment gap,” which it says needs to be closed if the goal of limiting global warming to 1.5 degrees Celsius is to be realized. Governments and investors "must massively accelerate substitution and abatement of fossil fuel use," according to the report, which is entitled, Blueprint for the Energy Transition.

The report lists five key actions required as part of such an effort: increased energy efficiency, the electrification of economies and processes through electric vehicles and heat pumps, decarbonizing power supplies, using lower carbon fuels in industrial sectors, and deploying carbon capture and storage (CCS) technologies.

The report notes the “tectonic” nature of such change, with the understanding that developed societies would need radical change in how they operate. Meanwhile, developing nations, with typically underdeveloped electricity grids and energy demand, would need to avoid the use of fossil fuels to drive the socioeconomic development they need.

IDCA Research has studied this situation as well. Findings show that about $1.4 trillion is needed to build fully sustainable electricity grids in developing nations that deliver 25% of the per-person electricity currently enjoyed in the developed world. This percentage compares to the 3-5% that the developing world currently produces for its 4 billion people.

IDCA Research has also found a need for about $1.7 trillion to make the developed world's existing grids fully sustainable.

These costs, for developing and developed nations, are only for the actual construction of facilities. The numbers do not include related costs for infrastructure development related to new electricity generation, for transformation to electric vehicles, for carbon capture or other programs, or for the investments that would be required in developing nations to trigger the demand for significant upgrades in the supply of electricity.

The cost of cooperation within and among governments and the investors that would support new projects is also not factored into IDCA Research's work, and presumably not into the BCG's report either.

Image from BCG.

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