Solving the net-zero equation: Nine requirements for a more orderly transition

For COP26 1, which will be held at the end of this month, the leaders of the world seem to understand the need to deal with the approaching climate crisis. More than 80 % of the world₂A 74 countries, which account for nearly 70 % of the emissions, promised Net Zero. 3. In the UK's Race to Zero campaign, more than 3, 000 companies have a vow of net zero. In the fou r-capital market, the risk of emissions to asset prices is progressing, and venture investment in migration technology is high. On the other hand, more and more companies are aware that the basis of competition is changing due to changes in investors' preferences, and changes in consumer behavior, and further strengthening global and local cooperation systems. It is being.

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However, these movements do not mean that the net zero has come to be seen. The familiar words that Winston Churchill speaks in another context seem to be true here: "It's not the end now, not the end, but it's probably the end of the beginning. Certainly, Zero online. The struggle to achieve the achievement is conservation and regenerating the natural and artificial greenhouse gas storage in order to reduce the emission of greenhouse gas (GHG) as quickly as possible and offset the unable to reduce. We are seeking to develop, but today is not enough to be reduced by Apace. In fact, while the global energy agency of the international energy agency announced earlier, the world temperature rises at 1, 5 ° C. It emphasizes that it has not yet been stabilized and has not yet achieved sustainable development goals related to energy.

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Therefore, even if the main organizations of the public, the private sector, and social sector are discussing additional and further farewells, including shor t-term goals, the world should be achieved, that is, within 30 years or before. It is necessary to promptly shift to how to realize it because it realizes a zero world. However, the transition from commitment to action was neither easy nor simple. There are five main reasons.

First, in order to achieve the Internet zero by 2050, it is necessary to significantly increase expenditures on property assets (both personal expenditures and individual spending on durable consumer goods). In fact, this expenditure is estimated to increase by about 60 % from now (estimated $ 5. 7 trillion to $ 9. 0 trillion). 6 Many such investments have a positive return, but we need to secure funds for this size. It is necessary to transform the energy and lan d-use system developed during the 1-2 centuries over the next 30 years.

Second, the migration requires collective and global actions and means difficult choice. The burden associated with the migration is not equally shared, and for some stakeholders, the burden is much heavier than other stakeholders. In fact, the impact of climate change and the transition to climate change in the short term are more likely to hit more poor local communities and residents. 7 Based on a fair spirit, if there is no true effort to deal with these impacts, the most affected stakeholders can play their own role to proceed with the transition, and they can do it. Not in. In the words of the European Committee's climate behavior committee, Frains Timelmance, it is "no transition without shift."

Third, stakeholders should act now to avoid the irreplaceable accumulation and composite of natural risks in the future, but that requires a time axis and discount rate different from guidance decisions. It will be. The 8th task is to secure future internet zero emissions and to acquire the current growth opportunity, in both recognition and reality. In fact, actions to ensure transition are often recognized as expenditures that take place today rather than investment in the future of the whole mankind.

Fourth, in order to meet these demands, it is necessary to change business practices and lifestyles that have been established for decades or more and more benefits. It has been proven so far that changing these patterns and overcoming general inertia does not necessarily give direct interests to those who change. < SPAN> First, in order to achieve net zero by 2050, it is necessary to significantly increase the expenditure to physical assets (both capital spending and individual spending on durable consumer goods). In fact, this expenditure is estimated to increase by about 60 % from now (estimated $ 5. 7 trillion to $ 9. 0 trillion). 6 Many such investments have a positive return, but we need to secure funds for this size. It is necessary to transform the energy and lan d-use system developed during the 1-2 centuries over the next 30 years.

Second, the migration requires collective and global actions and means difficult choice. The burden associated with the migration is not equally shared, and for some stakeholders, the burden is much heavier than other stakeholders. In fact, the impact of climate change and the transition to climate change in the short term are more likely to hit more poor local communities and residents. 7 Based on a fair spirit, if there is no true effort to deal with these impacts, the most affected stakeholders can play their own role to proceed with the transition, and they can do it. Not in. In the words of the European Committee's climate behavior committee, Frains Timelmance, it is "no transition without shift."

What is an orderly transition?

Third, stakeholders should act now to avoid the irreplaceable accumulation and composite of natural risks in the future, but that requires a time axis and discount rate different from guidance decisions. It will be. The 8th task is to secure future internet zero emissions and to acquire the current growth opportunity, in both recognition and reality. In fact, actions to ensure transition are often recognized as expenditures that take place today rather than investment in the future of the whole mankind.

Fourth, in order to meet these demands, it is necessary to change business practices and lifestyles that have been established for decades or more and more benefits. It has been proven so far that changing these patterns and overcoming general inertia does not necessarily give direct interests to those who change. First, in order to achieve the Internet zero by 2050, it is necessary to significantly increase expenditures on property assets (both personal expenditures and individual spending on durable consumer goods). In fact, this expenditure is estimated to increase by about 60 % from now (estimated $ 5. 7 trillion to $ 9. 0 trillion). 6 Many such investments have a positive return, but we need to secure funds for this size. It is necessary to transform the energy and lan d-use system developed during the 1-2 centuries over the next 30 years.

Second, the migration requires collective and global actions and means difficult choice. The burden associated with the migration is not equally shared, and for some stakeholders, the burden is much heavier than other stakeholders. In fact, the impact of climate change and the transition to climate change in the short term are more likely to hit more poor local communities and residents. 7 Based on a fair spirit, if there is no true effort to deal with these impacts, the most affected stakeholders can play their own role to proceed with the transition, and they can do it. Not in. In the words of the European Committee's climate behavior committee, Frains Timelmance, it is "no transition without shift."

• Third, stakeholders should act now to avoid the irreplaceable accumulation and composite of natural risks in the future, but that requires a time axis and discount rate different from guidance decisions. It will be. The 8th task is to secure future internet zero emissions and to acquire the current growth opportunity, in both recognition and reality. In fact, actions to ensure transition are often recognized as expenditures that take place today rather than investment in the future of the whole mankind.
• Fourth, in order to meet these demands, it is necessary to change business practices and lifestyles that have been established for decades or more and more benefits. It has been proven so far that changing these patterns and overcoming general inertia does not necessarily give direct interests to those who change.
• These four factors combine to highlight why a general idea of ​​(enlightened) self-interest alone is likely not enough to achieve net zero.

Finally, the central role of energy in all economic activity and the severe consequences of disruptions in energy markets highlight the importance of a smooth transition – that is, where the expansion of high-emitting assets is carefully coordinated with the expansion of low-emitting assets and supported by appropriate redundancy and resilience measures. But such a transition is non-piecemeal, both in nature and in relation to other political, economic, and social issues (see sidebar “What is a smooth transition?”). Indeed, the transition will involve transformation of key systems that underpin our lives and well-being, as well as land and land-use systems. Even small disruptions to these systems could have implications for everyday life, from increasing costs for producers and consumers to ensuring access to energy, leading to delays and social backlash.

The achievement of the net zero is, in short, reduces the GHG emissions as much as possible, while increasing the GHG storage amount and removing the remaining emissions, balance the emission source and the absorption source. It is to solve the equation. This is simply called the "Net Zero equation". In fact, this is not a single equation, but an equation that combines the equation of the emissions and the equation of the capital and the labor equation. The demand for capital and labor in the Net Zero Economy must match the time and regional supply. Then, we must solve these equations at the same time to pursue economic growth and comprehensive growth. This is not a sel f-evident task from both the abov e-mentioned reasons and many technical issues. First, the emission equation has not been completely defined yet. Until now, it has been focused on artificial emissions, but it is becoming more difficult to ignore physical emissions due to biological feedback loops. Second, this equation is a function of time, sometimes no n-linear, and depends on many variables that evolve. For example, the amount of emissions related to an economic sector or geography depends on existing technologies introduced in those categories and technologies that have not yet been developed. Third, the equation of emissions is mathematically undetermined. Theoretically, various combinations of decarbonization and offset actions can satisfy this equation. Finally, as with all the equations of the real world, these equations are affected by initial and boundary conditions, and the solution space is actually limited. For example, the years of fossil energy resources in a certain country and the recent years of use affect the ease of depletion and speed. Alternatively, the sunshine in a specific region limit the possibility of solar energy production. < SPAN> Achievement of the Internet Zero is, in short, reducing the GHG emissions as much as possible, but also increasing the amount of GHG storage and removing the remaining emissions, so that the emission source and the absorption source are the sources of absorption. It is to solve the equation to balance. This is simply called the "Net Zero equation". In fact, this is not a single equation, but an equation that combines the equation of the emissions and the equation of the capital and the labor equation. The demand for capital and labor in the Net Zero Economy must match the time and regional supply. Then, we must solve these equations at the same time to pursue economic growth and comprehensive growth. This is not a sel f-evident task from both the abov e-mentioned reasons and many technical issues. First, the emission equation has not been completely defined yet. Until now, it has been focused on artificial emissions, but it is becoming more difficult to ignore physical emissions due to biological feedback loops. Second, this equation is a function of time, sometimes no n-linear, and depends on many variables that evolve. For example, the amount of emissions related to an economic sector or geography depends on existing technologies introduced in those categories and technologies that have not yet been developed. Third, the equation of emissions is mathematically undetermined. Theoretically, various combinations of decarbonization and offset actions can satisfy this equation. Finally, as with all the equations of the real world, these equations are affected by initial and boundary conditions, and the solution space is actually limited. For example, the years of fossil energy resources in a certain country and the recent years of use affect the ease of depletion and speed. Alternatively, the sunshine in a specific region limit the possibility of solar energy production. The achievement of the net zero means that while the GHG emissions are reduced as much as possible, the GHG storage amount is increased and the remaining emissions remain in the atmosphere are balanced. It is to solve the equation. This is simply called the "Net Zero equation". In fact, this is not a single equation, but an equation that combines the equation of the emissions and the equation of the capital and the labor equation. The demand for capital and labor in the Net Zero Economy must match time and regional supply. Then, we must solve these equations at the same time to pursue economic growth and comprehensive growth. This is not a sel f-evident task from both the abov e-mentioned reasons and many technical issues. First, the emission equation has not been completely defined yet. Until now, it has been focused on artificial emissions, but it is becoming more difficult to ignore physical emissions due to biological feedback loops. Second, this equation is a function of time, sometimes no n-linear and depends on many variables that evolve. For example, the amount of emissions related to an economic sector or geography depends on existing technologies introduced in those categories and technologies that have not yet been developed. Third, the equation of emissions is mathematically undetermined. Theoretically, various combinations of decarbonization and offset actions can satisfy this equation. Finally, as with all the equations of the real world, these equations are affected by initial and boundary conditions, and the solution space is actually limited. For example, the years of fossil energy resources in a certain country and the recent years of use affect the ease of depletion and speed. Alternatively, the sunshine in a specific region limit the possibility of solar energy production.

In consideration of the stakeholders, the important step at this stage is to better understand the basic requirements for solving these equations and the interconnection between these requirements. Here is the overall framework for that. Our framework contains nine basic requirements (Chart 1). These requirements do not specify sector, but in fact, all stakeholders in public, private, and social sector need to play a role to achieve these requirements. These can be regarded as a basic ties that all needs to be solved in cooperation with all of them, whether they are not shared, in order to realize the transition to the net zero. Nine requirements can be classified into three categories:

(1) Technical innovation, (2) Building a supply chain and supporting infrastructure support, (3) The use of necessary physical resources.

Economic and social adjustments: (4) Effective capital and redistribution structure of loans, (5) management of demand shifts and shor t-term unit costs, compensation mechanisms to deal with social economic impact.

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Physical building blocks

1. Technological innovation

As a result of these requirements, five major conclusions were derived.₂First, much of the attention so far has been focused on the first category, the physical building blocks, but this needs to be expanded to the other two. In particular, understanding the socio-economic impacts of the transition and preparing to address them seems like a crucial step at this stage. Indeed, in the absence of compensatory measures, there is a real risk that the costs and consequences of the transition will be unbearable for many people, for example if companies and countries do not manage the impact of shifts in demand and costs on existing products and services, or if local communities are left behind as the world moves to a clean economy. There is also a risk that the transition itself will be derailed, for example if not enough capital is allocated to low-emitting assets or if high-emitting assets are not responsibly retired at the required rate.

Second, these nine requirements will undoubtedly be difficult to meet. Meeting them fast enough to limit warming to 1. 5°C will be even more difficult. To achieve net zero, we will need to move beyond traditional orthodoxies and ways of working and develop new ways of working collectively. The constructive actions taken during the pandemic have demonstrated the world’s capacity for large-scale innovation and intervention to support both lives and livelihoods. This challenge will require similar efforts, albeit on a much larger scale, over many years and decades.

Finally, the central role of energy in all economic activity and the severe consequences of disruptions in energy markets highlight the importance of a smooth transition – that is, where the expansion of high-emitting assets is carefully coordinated with the expansion of low-emitting assets and supported by appropriate redundancy and resilience measures. But such a transition is non-piecemeal, both in nature and in relation to other political, economic, and social issues (see sidebar “What is a smooth transition?”). Indeed, the transition will involve transformation of key systems that underpin our lives and well-being, as well as land and land-use systems. Even small disruptions to these systems could have implications for everyday life, from increasing costs for producers and consumers to ensuring access to energy, leading to delays and social backlash.

Fourth, we need clear principles to help people balance short-term outcomes with long-term benefits: minimizing the capital and operational costs of the transition; actively managing the risks of energy system failure; and supporting unequal outcomes across incomes, population groups, countries and sectors.

Key questions for stakeholders:

• We need to drive the transition while sustaining growth and economic development, financing the transition, and providing prosperity and access to energy for all.
• Fifth, there is no mere silver bullet here. Reconstruction of the world and economy is a major business, and all stakeholders need to play a role. Specific actions will develop over time, but all stakeholders need to travel now. In fact, actions are beginning to accelerate in some fields. In particular, financial institutions, which play a central role in developing the funds necessary for the transition to the Internet, are working together to set goals and commitments for climate change finance. In general, leaders need to understand the basics of science and transition, and to understand the transition, including actual commitments as an expert. Evaluate and plan your actions, including the formulation of capacity building and savings plan. In accordance with these plans, the emissions are reduced and eliminated, and natural capital is conserved and regenerated, and savings are supported. Adapt to manage already fixed natural disasters and build resilience. For example, the capital is redistributed and the hig h-carbon responsibility business grows, and it is rebuilt and grows.
• The current state of climate change and its speed are the result of the tremendous technological progress of mankind, and more precisely, the external nature of economics. The originality of mankind, which was released in the relatively stable climate of 12, 000 years, has led to an unprecedented global prosperity. At the same time, this prosperity was accompanied by the form of production and consumption that could not be maintained at this level and speed. 10 However, technological innovation can accelerate recovery, as technological innovation led us to this crisis. Transformed technology, such as power, mobility, industries, buildings, agriculture, forestry, and land use systems, is essential for the world to reduce the world's overall emissions and achieve net zero emissions. An important example is that the agricultural sector needs to accelerate technological innovation to manage emissions. < SPAN> Fifth, there is no mere silver bullet here. Reconstruction of the world and economy is a major business, and all stakeholders need to play a role. Specific actions will develop over time, but all stakeholders need to travel now. In fact, actions are beginning to accelerate in some fields. In particular, financial institutions, which play a central role in developing the funds necessary for the transition to the Internet, are working together to set goals and commitments for climate change finance. In general, leaders need to understand the basics of science and transition, and to understand the transition, including actual commitments as an expert. Evaluate and plan your actions, including the formulation of capacity building and savings plan. In accordance with these plans, the emissions are reduced and eliminated, and natural capital is conserved and regenerated, and savings are supported. Adapt to manage already fixed natural disasters and build resilience. For example, the capital is redistributed and the hig h-carbon responsibility business grows, and it is rebuilt and grows.
• The current state of climate change and its speed are the result of the tremendous technological progress of mankind, and more precisely, the external nature of economics. The originality of mankind, which was released in the relatively stable climate of 12, 000 years, has led to an unprecedented global prosperity. At the same time, this prosperity was accompanied by the form of production and consumption that could not be maintained at this level and speed. 10 However, technological innovation can accelerate recovery, as technological innovation led us to this crisis. Transformed technology, such as power, mobility, industries, buildings, agriculture, forestry, and land use systems, is essential for the world to reduce the world's overall emissions and achieve net zero emissions. An important example is that the agricultural sector needs to accelerate technological innovation to manage emissions. Fifth, there is no mere silver bullet here. Reconstruction of the world and economy is a major business, and all stakeholders need to play a role. Specific actions will develop over time, but all stakeholders need to travel now. In fact, actions are beginning to accelerate in some fields. In particular, financial institutions, which play a central role in developing the funds necessary for the transition to the Internet, are working together to set goals and commitments for climate change finance. In general, leaders need to understand the basics of science and transition, and to understand the transition, including actual commitments as an expert. Evaluate and plan your actions, including the formulation of capacity building and savings plan. In accordance with these plans, the emissions are reduced and eliminated, and natural capital is conserved and regenerated, and savings are supported. Adapt to manage already fixed natural disasters and build resilience. For example, the capital is redistributed and the hig h-carbon responsibility business grows, and it is rebuilt and grows.

Solutions on the table for consideration:

• The current state of climate change and its speed are the result of the tremendous technological progress of mankind, and more precisely, the external nature of economics. The originality of mankind, which was released in the relatively stable climate of 12, 000 years, has led to an unprecedented global prosperity. At the same time, this prosperity was accompanied by the form of production and consumption that could not be maintained at this level and speed. 10 However, technological innovation can accelerate recovery, as technological innovation led us to this crisis. Transformed technology, such as power, mobility, industries, buildings, agriculture, forestry, and land use systems, is essential for the world to reduce the world's overall emissions and achieve net zero emissions. An important example is that the agricultural sector needs to accelerate technological innovation to manage emissions.
• It also includes greenhouse gases such as methane. In general, it is necessary to develop, test, improve, and increase cost effectiveness. Eventually, it is necessary to lower the unit price in order to expand the scale and spread it widely and commercially. In addition, for all technologies, new technologies are and existing infrastructure (for example, to safely integrate hydrogen into existing gas pipeline networks and manage power outages of transmission network with new renewable energy sources). A cautious plan is required so that it is securely connected.
• There are various views on how technically transfers to the net zero by 2050 are possible. According to McKinsey's survey so far, a certain view has been shown for continuous technological innovation, as needed for technology necessary to control the temperature of 1. 5 ° C from the level before the Industrial Revolution. 11, for example, McKinsey survey on European carbonization found that more than 85%of the current emissions in Europe can be reduced by already demonstrated technology, of which 28%are mature technology. 32 % are technologies in the early stages of the introduction (Fig. 2) (although the introduction routes of these technologies are still uncertain, and need to deal with many other requirements as described in the rest of this paper. It is important to keep in mind that there is). The ingenuity of 12 human beings has responded to the needs of the past, and technological innovation has the potential to solve the remaining technical issues.
• We strive to provide equal access to our website for those with disabilities. If you would like information about this content, please feel free to contact us. Please send an email to McKinsey _ website _ Accessibility@mckinsey. com. It includes not only

2. Ability to create at-scale supply chains and support infrastructure

For the real task is to develop and refine the necessary technologies and provide affordable solutions across the world under changing constraints on input resources, labor, and capital. It is also important to recognize that, as with transformative investment sectors in rail, electricity, or the Internet, there may be misalignments between countries along the way, and even between efforts and capital. But this attitude still carries significant risks, given the nature and magnitude of the socio-economic impacts of climate change. Sustainable technologies need to be developed today, and many promising technologies need to be developed further. Finally, in parallel with the development of mitigation technologies, society must prepare for the risk that solutions to limit warming to 1°C, 5°C, or even 2°C will not be forthcoming, and develop the technologies needed to manage the physical impacts that may follow. In the words of John Holdren, former president of the American Association for the Advancement of Science and an expert on energy and air conditioning, “We have essentially three choices:

What is the right mix of technologies needed to be deployed to achieve emission reductions while staying within the “carbon budget”, keeping costs down, and providing the performance standards we need (e. g. ensuring grid stability)? How does this mix differ across regions? How does it change over time?

To what extent are the technologies needed to reach net zero market-accepted and cost-effective? What are the biggest gaps to fill? How do we best prioritize these technologies in terms of scalability and impact?

What policies, financing structures, demand signals, market mechanisms, and other levers are needed to accelerate the maturation of promising early-stage technologies (e. g., those that can deliver 10x performance improvements), sustain innovation--and make currently prohibitively expensive technologies more expensive at later stages of the path to net zero?

Key questions for stakeholders:

• How should we deal with technical uncertainty? What role should the public and private sectors play?
• By providing incentives and appropriate demand signals, the development of existing lo w-carbon and zero carbon technology (eg, in geographical areas where the percentage of energy efficiency and natural energy is still small).
• Create a technical roadmap to reduce uncertainty and adjust R & D investment. In particular, we create technical roadmaps for major technologies such as hydrogen, carbon collection, use, and storage. And new forms of power storage.
• Promotes new technology innovation by making intentional and comprehensive investment in R & D; A. For this purpose, it is necessary to reach the following milestone (for example, 2025 or 2030). It is necessary to consider not only technology but also all baskets of the necessary technology for Internet Zero. To do so, it is necessary to act in parallel throughout the portfolio of technology, maintaining a complete innovation perspective, from the research institute to prototypes and commercial maturity.
• Foster industrial ecosystem, promote cooperation between value chains, and enables innovation and dissemination at the site.

Solutions on the table for consideration:

• In order to relax or remove greenhouse gas emissions, it is necessary not only to create low carbon or zero carbon technology, but also to spread it widely. To enable and spread the necessary technology, it is necessary to increase production and distribution capabilities and build global supply chains. For example, under a temperature of 1. 5 ° C, the number of solar panels per week is about eight times the current world. The installation rate of wind power is 5 times. The construction of a supply chain that supports such ste p-up changes requires not only large amounts of capital and appropriate abilities, but also wid e-range adjustments. Mismatches between stakeholders in the supply chain, which can lead to bottle necks, shortages, and price rise, but effective plans will help relieve these mismatches.
• In addition, in order to operate a lo w-carbon system, it is necessary to build a wide range of new infrastructure. Let's think about Europe. The company estimates that the installation rate of public charging stations for electric vehicles needs to be reduced by 2030 to achieve the reduction target of passenger cars. This suggests that the ability, incentive, and support measures are needed at an unprecedented speed and scale, even if they cannot be implemented uniformly. However, as the recent progress in MRN A-based vaccines indicates, it is not possible to be unprecedented. As in the case of pandemic, important actions along the value chain are taken in accordance with the appropriate demand signal.
• Established Green Academy
• As mentioned above, it is important to accelerate the development of lo w-carbon technology and zero carbon technology. In fact, the development and expansion of technology enables continuous improvement over time in both efficiency and cost.

3. Availability of necessary natural resources

Based on existing abilities, ease of building new abilities, and existing abilities, where is the most likely to have a bottleneck in the supply chain and infrastructure?

In each field and the country, how can the results differ depending on the path to the Internet (for example, a combination of technology introduced)?

If a bottleneck such as a shortage of supply or a rise in price occurs, what effect is expected? Is there a specific sector or region with the highest risk? What kind of preparations and insurance are possible to relieve potential bottlenecks in advance?

What kind of incentives, demand signals, capacity construction, and more measures are useful to expand the ability of new technology at a fast pace?

Key questions for stakeholders:

• When a new supply chain is born, what is the impact on the flow of trade, imports, and national competitiveness?
• Set a consistent goal among industry officials and create predictions and mult i-value chain roadmaps according to the size of the necessary technology development to support mult i-stakeholders cooperation and cooperation.
• In order to expand the production scale, encourage and enable cooperation between the supply chain and the ecosystem (such as matching with new technology suppliers, capital providers, and guaranteed buyers). < SPAN> In order to operate a lo w-carbon system, it is necessary to build a wide range of new infrastructure. Let's think about Europe. The company estimates that the installation rate of public charging stations for electric vehicles needs to be reduced by 2030 to achieve the reduction target of passenger cars. This suggests that the ability, incentive, and support measures are needed at an unprecedented speed and scale, even if they cannot be implemented uniformly. However, as the recent progress in MRN A-based vaccines indicates, it is not possible to be unprecedented. As in the case of pandemic, important actions along the value chain are taken in accordance with the appropriate demand signal.
• Established Green Academy
• As mentioned above, it is important to accelerate the development of lo w-carbon technology and zero carbon technology. In fact, the development and expansion of technology enables continuous improvement over time in both efficiency and cost.
• Based on existing abilities, ease of building new abilities, and existing abilities, where is the most likely a bottleneck in the supply chain and infrastructure?
• In each field and the country, how can the results differ depending on the path to the Internet (for example, a combination of technology introduced)?
• If a bottleneck such as a shortage of supply or a rise in price occurs, what effect is expected? Is there a specific sector or region with the highest risk? What kind of preparations and insurance are possible to relieve potential bottlenecks in advance?

Solutions on the table for consideration:

• What kind of incentives, demand signals, capacity construction, and more measures are useful to expand the ability of new technology at a fast pace?
• When a new supply chain is born, what is the impact on the flow of trade, imports, and national competitiveness?
• Set a consistent goal among industry officials and create predictions and mult i-value chain roadmaps according to the size of the necessary technology development to support mult i-stakeholders cooperation and cooperation.
• In order to expand the production scale, encourage and enable cooperation between the supply chain and the ecosystem (such as matching with new technology suppliers, capital providers, and guaranteed buyers). In addition, in order to operate a lo w-carbon system, it is necessary to build a wide range of new infrastructure. Let's think about Europe. The company estimates that the installation rate of public charging stations for electric vehicles needs to be reduced by 2030 to achieve the reduction target of passenger cars. This suggests that the ability, incentive, and support measures are needed at an unprecedented speed and scale, even if they cannot be implemented uniformly. However, as the recent progress in MRN A-based vaccines indicates, it is not possible to be unprecedented. As in the case of pandemic, important actions along the value chain are taken in accordance with the appropriate demand signal.
• Established Green Academy
• As mentioned above, it is important to accelerate the development of lo w-carbon technology and zero carbon technology. In fact, the development and expansion of technology enables continuous improvement over time in both efficiency and cost.
• Based on existing abilities, ease of building new abilities, and existing abilities, where is the most likely to cause a bottleneck in the supply chain and infrastructure?

Net zero or bust: Beating the abatement cost curve for growth

Economic and societal adjustments

4. Effective capital reallocation and financing structures

In each field and the country, how can the results differ depending on the path to the Internet (for example, a combination of technology introduced)?

If a bottleneck such as a shortage of supply or a rise in price occurs, what effect is expected? Is there a specific sector or region with the highest risk? What kind of preparations and insurance are possible to relieve potential bottlenecks in advance?

What kind of incentives, demand signals, capacity construction, and more measures are useful to expand the ability of new technology at a fast pace?

When a new supply chain is born, what is the impact on the flow of trade, imports, and national competitiveness?

Key questions for stakeholders:

• Set a consistent goal among industry officials and create predictions and mult i-value chain roadmaps according to the size of the necessary technology development to support mult i-stakeholders cooperation and cooperation.
• In order to expand the production scale, encourage and enable cooperation between the supply chain and the ecosystem (such as matching with new technology suppliers, capital providers, and guaranteed buyers).
• From the consumer under the river, the demand for new lo w-emission materials and products in each difficult sector (for example, retailers seeking green steel, retailers seeking to provide low emission logistics), until 2030 We make larg e-scale investments in these sectors and do this at a sufficient level to create incentives that reach the limit cost reduction point.
• Consider the combination of the demand signals and economic measures needed to create appropriate incentives and build the certainty of supply chains and infrastructure.
• The development of technology, maintaining and establishing a supply chain and support infrastructure are often large, but only when sufficient physical resources are available. Especially three forms are important.
• One is both raw materials, which are currently used in large quantities (such as copper, nickel, etc.), and those that are now considered relatively special (lithium, cobalt, rare earth, etc.). According to McKinsey's analysis, the transition to the net zero needs to significantly increase the use of these raw materials. As a result, for example, the expansion of the production scale may be restricted, which may lead to temporary deficiency and price rise.
• The second resource is land, which is essential to build renewable energy capacity. Compared to fossil fuels, renewable energy requires more land per unit of energy. For example, replacing a typical gas power plant of about 1 gigawatt with solar PV producing the same amount of electricity increases the total land use from about 350 acres to about 40. 000 acres. 14 Even if we take into account the land associated with the entire value chain of fossil fuel generation, such as fossil fuel extraction, transportation, and storage, the total land use increases by 5-10. Land is also essential as a reservoir and sink for coal, such as forests, peat, and mangroves. On the other hand, forest land can increase emissions if not properly managed, such as through deforestation and forest fires. This suggests that the conservation and restoration of natural capital should go hand in hand with the technological solutions mentioned above. Importantly, high-quality natural sinks are highly concentrated geographically in some areas, and land is often used for competing uses, such as food production and housing development. Proper management therefore requires careful planning.
• Third, water will also be a critical resource. Building a partially hydrogen-powered economy will require large amounts of water. It is also essential for the extraction of essential minerals. Thus, a net-zero transition will only increase our dependency on water, and water supplies are likely to become scarce due to increased demand for other uses and reduced rainfall in some regions due to climate change.

Solutions on the table for consideration:

• What natural resources will a net-zero transition require, and by how much will their use increase? How might this vary under different scenarios, across geographic regions, and over time, depending on the pathway to net-zero (e. g., the mix of technologies developed)?
• Where are the “hard” resource constraints that limit the scalability of certain technologies? Where are the “soft” constraints that could lead to temporary shortages and excess prices? How does this vary across geographic regions and over time?
• Where is it feasible to use technological innovations to “design” the use of certain raw materials?
• How can we address worker safety issues and local environmental impacts associated with the extraction of key mineral resources?
• How can we manage land and water between regions and regions to restrict the restrictions on ne t-zero transition while satisfying other basic needs (such as population concentration and food production)?
• What kind of incentives, demand signals, and more measures are needed, both in the national and global levels, to enable efficient balance of natural resources that spans multiple needs?

5. Management of demand shifts and near-term unit-cost increases

How will the new technology affect the flow of production areas and products? For example, is it possible to place green oral mining and steel facilities near the sources of iron ore, rather than transporting iron ore to a port where coal is available as it is now?

What is the new global transaction ecosystem that supports the transition to the Internet so that abundant solar, wind power, land and regions with land can trade with countries and regions that require these resources. Can it be redefined and built?

Develop a global and detailed view of natural resources needs by technology, and identify places where major bottlenecks are likely to occur, including time passing and various internet zero routes.

Finally, the central role of energy in all economic activity and the severe consequences of disruptions in energy markets highlight the importance of a smooth transition – that is, where the expansion of high-emitting assets is carefully coordinated with the expansion of low-emitting assets and supported by appropriate redundancy and resilience measures. But such a transition is non-piecemeal, both in nature and in relation to other political, economic, and social issues (see sidebar “What is a smooth transition?”). Indeed, the transition will involve transformation of key systems that underpin our lives and well-being, as well as land and land-use systems. Even small disruptions to these systems could have implications for everyday life, from increasing costs for producers and consumers to ensuring access to energy, leading to delays and social backlash.

Key questions for stakeholders:

• Adjust the development plan for the additional ability of major minerals, build mechanisms for cooperation between countries and companies, and begin to expand their abilities in areas that do not regret. In order to improve the balance between the possibility of resources and the need, explore the opportunity to adjust in the region.
• Incorporate potential resource constraints into technology development so that difficult raw materials and costly raw materials can be saved.
• Examine the combination with the incentives and other economic measures that help increase the possibility of resources, and consider the elements required for planning, permission, funding, and expanding production scale.
• It encourages social support for the use of renewable energy land. Technical possibilities may be ahead of social support.

Solutions on the table for consideration:

• Build a base line and accounting system to measure the effects of workers, including the safety of workers and the impact on a wider range of environments, in order to manage wid e-range results and conceptualize trad e-off. < SPAN> How can we manage land and water between regions and regions to restrict the restrictions on the transition to the Internet and zero while satisfying other basic needs (such as population concentration, food production, etc.) Is it?
• What kind of incentives, demand signals, and more measures are needed, both in the national and global levels, to enable efficient balance of natural resources that spans multiple needs?
• How will the new technology affect the flow of production areas and products? For example, is it possible to place green oral mining and steel facilities near the sources of iron ore, rather than transporting iron ore to a port where coal is available as it is now?
• What is the new global transaction ecosystem that supports the transition to the Internet so that abundant solar, wind power, land and regions with land can trade with countries and regions that require these resources. Can it be redefined and built?
• Develop a global and detailed view of natural resources needs by technology, and identify places where major bottlenecks are likely to occur, including time passing and various internet zero routes.
• Create global and detailed views for areas that hold the main resources (mineral, hydrogen potential, carbon recovery / storage [CCS] potential, etc.) and areas that do not own them.
• Adjust the development plan for the additional ability of major minerals, build mechanisms for cooperation between countries and companies, and begin to expand their abilities in areas that do not regret. In order to improve the balance between the possibility of resources and the need, explore the opportunity to adjust in the region.

6. Compensating mechanisms to address socioeconomic impacts

Incorporate potential resource constraints into technology development so that difficult raw materials and costly raw materials can be saved.

Examine the combination with the incentives and other economic measures that help increase the possibility of resources, and consider the elements required for planning, permission, funding, and expanding production scale.

It encourages social support for the use of renewable energy land. Technical possibilities may be ahead of social support.

Build a base line and accounting system to measure the effects of workers, including the safety of workers and the impact on a wider range of environments, in order to manage wid e-range results and conceptualize trad e-off. How can we manage land and water between regions and regions to restrict the restrictions on ne t-zero transition while satisfying other basic needs (such as population concentration and food production)?

Key questions for stakeholders:

• What kind of incentives, demand signals, and more measures are needed, both in the national and global levels, to enable efficient balance of natural resources that spans multiple needs?
• How will the new technology affect the flow of production areas and products? For example, is it possible to place green oral mining and steel facilities near the sources of iron ore, rather than transporting iron ore to a port where coal is available as it is now?
• What is the new global transaction ecosystem that supports the transition to the Internet so that abundant solar, wind power, land and regions with land can trade with countries and regions that require these resources. Can it be redefined and built?
• Develop a global and detailed view of natural resources needs by technology, and identify places where major bottlenecks are likely to occur, including time passing and various internet zero routes.

Solutions on the table for consideration:

• Create global and detailed views for areas that hold the main resources (mineral, hydrogen potential, carbon recovery / storage [CCS] potential, etc.) and areas that do not own them.
• Adjust the development plan for the additional ability of major minerals, build mechanisms for cooperation between countries and companies, and begin to expand their abilities in areas that do not regret. In order to improve the balance between the possibility of resources and the need, explore the opportunity to adjust in the region.
• Incorporate potential resource constraints into technology development so that difficult raw materials and costly raw materials can be saved.
• Examine the combination with the incentives and other economic measures that help increase the possibility of resources, and consider the elements required for planning, permission, funding, and expanding production scale.
• It encourages social support for the use of renewable energy land. Technical possibilities may be ahead of social support.

Governance, institutions, and commitment

7. Governing standards, tracking and market mechanisms, and effective institutions

Build a base line and accounting system to measure the effects of workers, including the safety of workers and the impact on a wider range of environments, in order to manage wid e-range results and conceptualize trad e-off.

A normal transition to Net Zero requires significant changes in capital distribution. Financial system greening network (NGFS), a scenario that keeps warming to 1. 5 ° C to 1. 5 ° C and a scenario that achieves online zero by 2050 It has been suggested that the expenditure has increased significantly and shifts more than today. In the current estimation, the 2050 Net Zero Scenario requires a 9. 2 trillio n-dolla r-based physical asset annually for the energy and the entire land use system by 2050. This should be spending 3. 5 trillion dollars more than the current annual spending in these areas, and will be expanded in low emissions in the future. This increase is equivalent to about half of the world's corporate profits and 7 % of household expenditures, accounts for on e-quarter of the total tax revenue, and the annual average rate of government debt observed from 2005 to 2020. About 20 % higher. Considering how this expenditure will change in consideration of the population growth, GDP growth, and the current momentum toward the transition to the net, capital spending will decrease, but it is still a big spending. No. In fact, if the NGFS's "Current Policy" scenario is the following contrast, capital spending will decrease.

Key questions for stakeholders:

• Asset management (early removal and underestimation of existing tangible fixed assets) is also an important factor in ensuring effective capital redistribution. Depending on the area, it is more affected by other regions based on the useful life of assets. Coa l-fired power plants have a useful life of 40 to 60 years, but there are differences depending on the country, for example, an average of 13 years in India, but 39 years in the United States. In addition, about 300 gigawatts of coa l-fired power generation (equivalent to 15 % of the world's equipment capacity) are under construction or approval. 15 < Span> Normal transition to net zero requires significant changes in capital distribution. Financial system greening network (NGFS), a scenario that keeps warming to 1. 5 ° C to 1. 5 ° C and a scenario that achieves online zero by 2050 It has been suggested that the expenditure has increased significantly and shifts more than today. In the current estimation, the 2050 Net Zero Scenario requires a 9. 2 trillio n-dolla r-based physical asset annually for the energy and the entire land use system by 2050. This should be spending 3. 5 trillion dollars more than the current annual spending in these areas, and will be expanded in low emissions in the future. This increase is equivalent to about half of the world's corporate profits and 7 % of household expenditures, accounts for on e-quarter of the total tax revenue, and the annual average rate of government debt observed from 2005 to 2020. About 20 % higher. Considering how this expenditure will change in consideration of the population growth, GDP growth, and the current momentum toward the transition to the net, capital spending will decrease, but it is still a big spending. No. In fact, if the NGFS's "Current Policy" scenario is the following contrast, capital spending will decrease.
• Asset management (early removal and underestimation of existing tangible fixed assets) is also an important factor in ensuring effective capital redistribution. Depending on the area, it is more affected by other regions based on the useful life of assets. Coa l-fired power plants have a useful life of 40 to 60 years, but there are differences depending on the country, for example, an average of 13 years in India, but 39 years in the United States. In addition, about 300 gigawatts of coa l-fired power generation (equivalent to 15 % of the world's equipment capacity) are under construction or approval. A normal transition to 15 net zero requires significant changes in capital distribution. Financial system greening network (NGFS), a scenario that keeps warming to 1. 5 ° C to 1. 5 ° C and a scenario that achieves online zero by 2050 It has been suggested that the expenditure has increased significantly and shifts more than today. In the current estimation, the 2050 Net Zero Scenario requires a 9. 2 trillio n-dolla r-based physical asset annually for the energy and the entire land use system by 2050. This should be spending 3. 5 trillion dollars more than the current annual spending in these areas, and will be expanded in low emissions in the future. This increase is equivalent to about half of the world's corporate profits and 7 % of household expenditures, accounts for on e-quarter of the total tax revenue, and the annual average rate of government debt observed from 2005 to 2020. About 20 % higher. Considering how this expenditure will change in consideration of the population growth, GDP growth, and the current momentum toward the transition to the net, capital spending will decrease, but it is still a big spending. No. In fact, if the NGFS's "Current Policy" scenario is the following contrast, capital spending will decrease.
• Asset management (early removal and underestimation of existing tangible fixed assets) is also an important factor in ensuring effective capital redistribution. Depending on the area, it is more affected by other regions based on the useful life of assets. Coa l-fired power plants have a useful life of 40 to 60 years, but there are differences depending on the country, for example, an average of 13 years in India, but 39 years in the United States. In addition, about 300 gigawatts of coa l-fired power generation (equivalent to 15 % of the world's equipment capacity) are under construction or approval. 15
• At the same time, the huge public expenditure over the past two years to alleviate the economic and social impact of COVID-19 is a size of resources that can be mobilized when the risk is clearly identified. 16 In addition, economic adjustments associated with achieving the Internet zero in a planned way can prevent additional costs for further accumulation of physical risks and more random transitions. As the European Central Bank stated in recent reports, "the shor t-term costs for the migration are insignificant compared to the cost of climate change in the medium to long term." 17
• In fact, in terms of lon g-term and overall views, the pr e-capital spending for the transition to the Internet and zero is to reduce fuel consumption, improve materials and energy efficiency, and reduce maintenance and costs. Connect to. Many of these investments are already expensive and can be collected. However, in the short term, the procurement of capital and funding on this scale, the management of investment technical uncertainty, the trad e-off of risks and returns, and the flow of capital leads to both developed and developing countries. It is necessary to deal with several issues. According to McKinsey's analysis, for example, in lo w-income countries, GDP's investment is higher than other countries, and in Africa and India, it is about 1. 5 to 2. 5 times in Europe and North America. It is also more difficult for a specific sector or region to procure and develop capital.
• What are the biggest capital needs over all sector and region? How does these needs differ depending on the combination of technology introduced for the migration of the Internet?

Solutions on the table for consideration:

• Where is the capital already flowing for the necessary investment? Where is the biggest gap?
• What are the types of capital required (eg, public capital, public debt, private equity, project finance, public warranty, etc.) based on the wide range of characteristics of risk return profiles, investment recovery periods, and capital investment Is it going to be a combination? What is the role that private finance and public finance (for example, government funds and multilateral development banks) should play? < SPAN> At the same time, a huge public expenditure over the past two years to alleviate the economic and social impact of COVID-19 is a size of resources that can be mobilized when the risk is clearly identified. be. 16 In addition, economic adjustments associated with achieving the Internet zero in a planned way can prevent additional costs for further accumulation of physical risks and more random transitions. As the European Central Bank stated in recent reports, "the shor t-term costs for the migration are insignificant compared to the cost of climate change in the medium to long term." 17
• In fact, in terms of lon g-term and overall views, the pr e-capital spending for the transition to the Internet and zero is to reduce fuel consumption, improve materials and energy efficiency, and reduce maintenance and costs. Connect to. Many of these investments are already expensive and can be collected. However, in the short term, the procurement of capital and funding on this scale, the management of investment technical uncertainty, the trad e-off of risks and returns, and the flow of capital leads to both developed and developing countries. It is necessary to deal with several issues. According to McKinsey's analysis, for example, in lo w-income countries, GDP's investment is higher than other countries, and in Africa and India, it is about 1. 5 to 2. 5 times in Europe and North America. It is also more difficult for a specific sector or region to procure and develop capital.
• What are the biggest capital needs over all sector and region? How does these needs differ depending on the combination of technology introduced for the migration of the Internet?
• Where is the capital already flowing for the necessary investment? Where is the biggest gap?
• What are the types of capital required (eg, public capital, public debt, private equity, project finance, public warranty, etc.) based on the wide range of characteristics of risk return profiles, investment recovery periods, and capital investment Is it going to be a combination? What is the role that private finance and public finance (for example, government funds and multilateral development banks) should play? At the same time, the huge public expenditure over the past two years to alleviate the economic and social impact of COVID-19 is a size of resources that can be mobilized when the risk is clearly identified. 16 In addition, economic adjustments associated with achieving the Internet zero in a planned way can prevent additional costs for further accumulation of physical risks and more random transitions. As the European Central Bank stated in recent reports, "the shor t-term costs for the migration are insignificant compared to the cost of climate change in the medium to long term." 17
• In fact, in terms of lon g-term and overall views, the pr e-capital spending for the transition to the Internet and zero is to reduce fuel consumption, improve materials and energy efficiency, and reduce maintenance and costs. Connect to. Many of these investments are already expensive and can be collected. However, in the short term, the procurement of capital and funding on this scale, the management of investment technical uncertainty, the trad e-off of risks and returns, and the flow of capital leads to both developed and developing countries. It is necessary to deal with several issues. According to McKinsey's analysis, for example, in lo w-income countries, GDP's investment is higher than other countries, and in Africa and India, it is about 1. 5 to 2. 5 times in Europe and North America. It is also more difficult for a specific sector or region to procure and develop capital.

8. Commitment by, and collaboration among, public-, private-, and social-sector leaders globally

What are the biggest capital needs over all sector and region? How does these needs differ depending on the combination of technology introduced for the migration of the Internet?

Key questions for stakeholders:

• Where is the capital already flowing for the necessary investment? Where is the biggest gap?
• What are the types of capital (eg, public capital, public debt, private equity, project finance, public warranty, etc.) based on the wide range of characteristics of risk return profiles, investment recovery periods, and capital investment Is it going to be a combination? What is the role that private finance and public finance (for example, government funds and multilateral development banks) should play?
• What financial innovations and structures (e. g. new financial instruments, carbon markets, blended finance) could direct capital to sectors and regions with the greatest need and opportunity, facilitating the brown-to-green transformation of carbon-intensive companies? Where could the creation of additional, efficient compliance markets to facilitate the necessary capital allocation be further useful?
• How can voluntary carbon markets help facilitate capital reallocation (e. g. investments in carbon removal and avoidance/reduction assets) and how can these markets be expanded? How can the integrity and depth of these markets be ensured?
• What is the potential value of assets across sectors and regions? How can associated risks be actively managed?
• What financing structures could create incentives to retire and preserve carbon-intensive assets rather than simply sell them?
• What new metrics and analytics are needed to inform capital planning and drive capital reallocation (e. g. carbon performance, portfolio heating, stress testing)?

Solutions on the table for consideration:

• Improve transparency, robust emissions disclosure and scenario-based assessment of natural and transition risks to inform capital allocation decisions.
• Develop and scale new financial instruments and structures to help companies complete legacy assets and grow new low-emission assets. Solutions could include special purpose vehicles that allow companies to ring-fence legacy emission assets and depreciate them according to zero-zero science pathways, financing structures such as long-term purchase agreements from renewable energy plants (with lower total life cycle costs) to replace carbon-generating assets, and new financial instruments (e. g. for negative emissions and nature-based solutions).
• Develop and expand voluntary carbon markets in the short term and compliance markets in the long term. Voluntary carbon markets would include markets for both avoided credits (e. g. prevented deforestation) and removal credits (e. g. reforestation and direct air capture).
• It has a positive effect, but it is planned and carefully utilized in Japan and overseas for major infrastructure investment (for example, electric car charging station, hydrogen replenishment station, carbon recovery, etc.) that has difficulty in financing through the market. 。 .
• Derisk Private Fund reduces climate change risks through public guarantee and other ris k-off sets, for example, to provide development financial institutions and multilateral developing banks to provide first loss and flash y-rate risk hedging. By doing so, the purpose is to support sectors with large funding gaps and the inflow of funds into the region.

9. Support from citizens and consumers

To manage the increase in asset flights and minimize the risk value generated by potential assets, a new or government fund will be established, or existing funds will be reorganized.

Due to the changes in policies, technology, consumer and investors' preferences, the demand will go away from high carbon goods and services due to changes in policies, technologies, consumers and investors. The change in energy mixes is the largest, and the demand for fossil fuels decreases, and the demand for low emission energy, hydrogen, and bi o-fuels is likely to increase. Energy shift also affects products that use fossil fuels, for example, shifts to lo w-pollution vehicles and shifts to lo w-pollution heating and cooking systems. Similarly, the demand for products manufactured using carbo n-intensive processes may decrease by switching to alternatives and reducing consumption. On the other hand, the industry that manages carbon through CCS technology will benefit and grow. For example, a manufacturing industry, climate change finance, environmental assessment and risk management services that support the development of new technology. This suggests that companies and nations need to respond to these changes in demand, maintain their competitiveness and consider adaptation measures to catch opportunities. < SPAN> The main infrastructure investment (for example, electric vehicle charging stations, hydrogen replenishment stations, carbon recovery, etc.) that have a positive effect but difficult to raise funds through the market is planned and carefully financial. Utilizes. .

Derisk Private Fund reduces climate change risks through public guarantee and other ris k-off sets, for example, to provide development financial institutions and multilateral developing banks to provide first loss and flash y-rate risk hedging. By doing so, the purpose is to support sectors with large funding gaps and the inflow of funds into the region.

Key questions for stakeholders:

• To manage the increase in asset flights and minimize the risk value generated by potential assets, a new or government fund will be established, or existing funds will be reorganized.
• Due to the changes in policies, technology, consumer and investors' preferences, the demand will go away from high carbon goods and services due to changes in policies, technologies, consumers and investors. The change in energy mixes is the largest, and the demand for fossil fuels decreases, and the demand for low emission energy, hydrogen, and bi o-fuels is likely to increase. Energy shift also affects products that use fossil fuels, for example, shifts to lo w-pollution vehicles and shifts to lo w-pollution heating and cooking systems. Similarly, the demand for products manufactured using carbo n-intensive processes may decrease by switching to alternatives and reducing consumption. On the other hand, the industry that manages carbon through CCS technology will benefit and grow. For example, a manufacturing industry, climate change finance, environmental assessment and risk management services that support the development of new technology. This suggests that companies and nations need to respond to these changes in demand, maintain their competitiveness and consider adaptation measures to catch opportunities. It has a positive effect, but it is planned and carefully utilized in Japan and overseas for major infrastructure investment (for example, electric car charging station, hydrogen replenishment station, carbon recovery, etc.) that has difficulty in financing through the market. 。 .
• Derisk Private Fund reduces climate change risks through public guarantee and other ris k-off sets, for example, to provide development financial institutions and multilateral developing banks to provide first loss and flash y-rate risk hedging. By doing so, the purpose is to support sectors with large funding gaps and the inflow of funds into the region.

Solutions on the table for consideration:

• To manage the increase in asset flights and minimize the risk value generated by potential assets, a new or government fund will be established, or existing funds will be reorganized.
• Due to the changes in policies, technology, consumer and investors' preferences, the demand will go away from high carbon goods and services due to changes in policies, technologies, consumers and investors. The change in energy mixes is the largest, and the demand for fossil fuels decreases, and the demand for low emission energy, hydrogen, and bi o-fuels is likely to increase. Energy shift also affects products that use fossil fuels, for example, shifts to lo w-pollution vehicles and shifts to lo w-pollution heating and cooking systems. Similarly, the demand for products manufactured using carbo n-intensive processes may decrease by switching to alternatives and reducing consumption. On the other hand, the industry that manages carbon through CCS technology will benefit and grow. For example, a manufacturing industry, climate change finance, environmental assessment and risk management services that support the development of new technology. This suggests that companies and nations need to respond to these changes in demand, maintain their competitiveness and consider adaptation measures to catch opportunities.
• Companies, especially in the short term, have to deal with changes in production costs that can increase in some sector. In some cases, capital costs increase due to hig h-priced pr e-lines to increase production capacity. In addition, operating costs have been greatly increased due to the transition to carbon zero technology, such as when carbon collection, use, and storage devices are added, or when sectors such as steel and cement are used, more expensive carbon raw materials are used. Sometimes. In many cases, these costs decrease over time as the technical learning curve progresses. It has already occurred in the case of wind power and solar power, and is currently occurring in offshore wind power and batteries. 18 In the long term, technological innovation may be useful for cost reduction in other fields.
• But today, according to our analysis, in some difficult fields, additional costs for savings are still large. For example, the production cost of green steel is more than 40 % higher than the conventional production route, and is expected to be 20 to 30 % higher even in 2050 (Chart 3). Therefore, in the short term, various interventions may be required to encourage the transition in these fields. As a behavior to encourage savings, it is possible for producers to switch to those involved in the value chain (including final consumers) and distribute costs. Changes in product design for cost reduction, improvement of productivity by improving energy efficiency and capital efficiency, provision and abolition of subsidies, introduction of regulation measures such as new performance standards and zero carbon allocation. Such adjustments are especially intended to pay "Green Premium", facing competition with areas where producers are trading internationally, such as steel, and in the case of more ambitious climate change policies. It is not easy for companies that provide services to customers with low abilities. < SPAN> companies, especially in the short term, have to deal with changes in production costs that can increase in some sector. In some cases, capital costs increase due to hig h-priced pr e-lines to increase production capacity. In addition, operating costs have been greatly increased due to the transition to carbon zero technology, such as when carbon collection, use, and storage devices are added, or when sectors such as steel and cement are used, more expensive carbon raw materials are used. Sometimes. In many cases, these costs decrease over time as the technical learning curve progresses. It has already occurred in the case of wind power and solar power, and is currently occurring in offshore wind power and batteries. 18 In the long term, technological innovation may be useful for cost reduction in other fields.
• But today, according to our analysis, in some difficult fields, additional costs for savings are still large. For example, the production cost of green steel is more than 40 % higher than the conventional production route, and is expected to be 20 to 30 % higher even in 2050 (Chart 3). Therefore, in the short term, various interventions may be required to encourage the transition in these fields. As a behavior to encourage savings, it is possible for producers to switch to those involved in the value chain (including final consumers) and distribute costs. Changes in product design for cost reduction, improvement of productivity by improving energy efficiency and capital efficiency, provision and abolition of subsidies, introduction of regulation measures such as new performance standards and zero carbon allocation. Such adjustments are especially intended to pay "Green Premium", facing competition with areas where producers are trading internationally, such as steel, and in the case of more ambitious climate change policies. It is not easy for companies that provide services to customers with low abilities. Companies, especially in the short term, have to deal with changes in production costs that can increase in some sector. In some cases, capital costs increase due to hig h-priced pr e-lines to increase production capacity. In addition, operating costs have been greatly increased due to the transition to carbon zero technology, such as when carbon collection, use, and storage devices are added, or when sectors such as steel and cement are used, more expensive carbon raw materials are used. Sometimes. In many cases, these costs decrease over time as the technical learning curve progresses. It has already occurred in the case of wind power and solar power, and is currently occurring in offshore wind power and batteries. 18 In the long term, technological innovation may be useful for cost reduction in other fields.
• But today, according to our analysis, in some difficult fields, additional costs for savings are still large. For example, the production cost of green steel is more than 40 % higher than the conventional production route, and is expected to be 20 to 30 % higher even in 2050 (Chart 3). Therefore, in the short term, various interventions may be required to encourage the transition in these fields. As a behavior to encourage savings, it is possible for producers to switch to those involved in the value chain (including final consumers) and distribute costs. Changes in product design for cost reduction, improvement of productivity by improving energy efficiency and capital efficiency, provision and abolition of subsidies, introduction of regulation measures such as new performance standards and zero carbon allocation. Such adjustments are particularly intended to pay "Green Premium", facing competition with areas where producers take climate change policies, especially for products that are traded internationally, especially in steel. It is not easy for companies that provide services to customers with low abilities.

An agenda for leaders

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An interdependent world

What demand shifts are expected for different products and how will they change over time by sector and region? How will costs increase or decrease across sectors and regions in the transition to net zero? How will costs change depending on the mix of technologies that are developed?

• How will shifts in demand and costs affect the competitiveness of companies and countries? What are the effects on trade flows?
• What new opportunities do companies and countries need to weather these shifts? How can uncertainty about the pace and magnitude of demand and cost shifts be better managed?
• How can companies, countries and stakeholder groups (public and private) work together to manage demand shifts and cost changes along a net zero pathway, and how can such pressures be mitigated?
• Provide ongoing opportunities to assess risks and opportunities. Develop a detailed, scenario-based understanding of demand and cost changes by sector, value chain and region.
• Map existing capacities and consider how they can best be leveraged to capture new growth opportunities. Identify new capacities needed and how to build them.
• Identify new opportunity areas from the clean economy, taking into account end-to-end transition needs.
• Identify different offset mechanisms where removal measures increase costs and understand which instruments are most effective in different circumstances and constraints (e. g. standards and regulations, carbon content certificates, domestic and international subsidies, a global general-purpose fund to support the economic transition of carbon-dependent countries).