What are the 5 transformative changes required to achieve net zero in 2050?

MAS Chief Ravi Menon said the world is still far from a net-zero emissions trajectory. 

Monetary Authority of Singapore’s (MAS) Ravi Menon unveiled five transformative changes that countries need to undergo between 2020 to 2030 for the world to achieve its net-zero goal by 2050.

In his speech, Menon said 2020 to 2030 is the “critical decade for climate action” and that “necessary policies and the associated investments” must be made during this period.

“While a growing number of countries and companies have set net-zero targets, very few have credible plans to meet them.  The problem is that countries and companies alike are pledging to hit targets in almost three decades without committing to action for which they can be held accountable in the short term,” Menon said.

To kickstart decarbonisation, Menon said companies should first get the carbon price right because “most sustainability efforts will not make economic sense and not gain traction” without doing so.

“A meaningful carbon price is the single most important measure to help decarbonise the economy…The right carbon price sends a powerful signal across the entire economy: it induces consumers to reduce demand for carbon-intensive goods and services; firms to move to low carbon technologies; innovators to invent and develop new low carbon products and processes; and investors to fund and commercialise them,” Menon said.

“The invisible hand of the carbon price incentivises and coordinates emissions-reduction efforts in ways that regulation cannot achieve,” Menon added.

The MAS chief underscored that carbon pricing needs to be higher and applied more broadly. 

“Less than 5% of emissions covered by a carbon pricing initiative are priced at a level consistent with achieving the goals of the Paris Agreement, namely US$40-80 per tonne of carbon dioxide by 2020 and US$50-90 per tonne by 2030,” said Menon. 

In Singapore, carbon taxes will be progressively raised from 2024. 

Step two

The next step to decarbonisation is a decisive shift towards cleaner energy. According to Menon, the growth in renewable energy is not sufficient to meet growing energy demand which is why fossil fuels continue to account for more than 80% of global primary energy consumption.

Menon said fossil fuels will still play “an important role in meeting the energy demands of Asia and Africa,” even after achieving net-zero, but solar and wind power should be the largest energy source in the world.
Countries can also look into hydrogen as an energy source, said Menon.
 
“Hydrogen can be burnt as a fuel emitting only water vapour or be put into a fuel cell to make electricity on demand. It can also be used as a feedstock to make more energy-dense compounds such as ammonia, which can serve as a fuel itself,” said Menon.

“Hydrogen and ammonia can be critical to the transition to a net-zero world given their potential role in decarbonising hard-to-electrify sectors, such as steel production; fuelling trucks, ships, and other heavy vehicles. All of this is technologically possible but making it economically efficient will require further innovation,” he added.

Third step

The third imperative for the net zero transition is to green the economy, said the MAS chief.

According to Menon, a green economy will rely much more on electricity and the cheapest and easiest  way to decarbonise several sectors of the economy is to “electrify them and ensure that the electricity is generated from zero or low carbon sources.”

Greening the economy also involves major adjustments in the labour market, added Menon.

“Jobs will be lost in traditional carbon-intensive sectors but new jobs will be created in carbon-neutral industries. It is estimated that about 200 million jobs would be created and 185 million lost globally by 2050 from a net-zero transition,” he said.

“There will be a period of net job losses during the transition: foundry workers will not instantaneously be transformed into building-insulation experts.  Worker reskilling and redeployment will thus be crucial. Identifying skills adjacencies will be a key part of worker retraining programmes,” he added.

Fourth enabler

What will also enable the path to net zero is transition finance, said Menon. Citing a McKinsey report, Menon said achieving net zero will require about US$9.2t of investment per year, which is US$3.5 trillion per year more than is currently being invested today.

“As incomes grow and transition policies are legislated, expected spending will increase and narrow the gap.  But there will still be a gap in annual spending of about US$1 trillion,” said Menon.

Menon said the  industry should do better in transition finance, and not just green finance, meaning it has to provide more funding support for  “companies that are not so green, to become greener.”

“This includes financing, for instance, early retirement of coal-powered plants and decarbonising hard-to-abate activities,” Menon said.

The MAS chief also highlighted the need to “synergise public and private capital through blended finance for green and transition projects.”

“Many sustainability projects in emerging markets pose financial and political risks that are not commensurate with their expected returns. Catalytic or concessionary capital from multilateral development banks, national authorities, and philanthropic organisations can help to share the risk and improve project bankability, thereby attracting private sector capital,” Menon said.

Final key

The final key to achieving net zero is a sustainable lifestyle, according to the MAS chief.

“While many of the changes necessary to mitigate climate change are in the realm of public policies, business practices, financial decisions, and technological advances, people will also need to make lifestyle adjustments,” he said.

“People across the world are increasingly concerned about climate change and want to do something about it.  Climate change is inspiring people to step up to a higher cause, to take collective action for the common good of our planet,” he added.

Amongst things the individuals can do to help minimise their impact on the climate include reducing food and plastic waste, shifting towards more plant-based protein, driving less and taking public transport.

“The climate crisis demands collective action: nothing short of a whole-of-society effort across countries will suffice. And the time for action is now, not tomorrow,” Menon said.

“We wish we can postpone carbon taxes, costly investments in energy efficiency, restructuring of business processes, mandatory reporting of climate risks until economic conditions are better.  But the planet cannot wait, it is continuing to warm up.  The cost of delay is having to make sharper and more painful adjustments later amid a worsening climate,” he added.