Climate change and investment considerations

Artem Burachenok
16 min readJan 17, 2022


Replacing fossil fuels as a source of energy is important for several reasons: energy independence, for places with limited reserves; climate change; and countering the inevitable increase in costs of extraction of fossil fuels.

Below we discuss multiple elements of our future transition to the net-zero emissions (NZE) world. This transition is estimated to require about $150 trillion of investments over the next 30 years and to create new markets worth trillions of USD for solar and wind generation, electric vehicles, batteries, green liquids (hydrogen and ammonia), as well as significant opportunities for carbon capture and new technologies in buildings, industry, and agriculture.

The NZE economy will require significantly more raw materials, with some potentially exceeding known reserves. Wind and solar energy generation will also require significantly more labor.

The NZE economy is also much more energy efficient. Over the last decade, energy efficiency grew by about 2% annually. The projections show we should invest in efficiency much more to achieve a 4% annual gain.

Many technologies needed for the NZE world are yet not cost-competitive and require either subsidies or other forms of stimulus (like carbon pricing) to be accepted by the markets. The accelerated implementation of these technologies despite the costs will be experienced by consumers as rising prices, leading to a shift from consumerism to environmentalism.

NZE transition will also require a lot of energy (up to 25% of total energy en use based on some calculations). This energy cannot be diverted from the economy, so we would likely need to rely on fossil fuels to provide it.

The estimates of the energy cost in the NZE economy vary, with some researchers expecting it to be meaningfully higher. In that case, the higher energy cost will work as a headwind for the overall economic growth.

While we are working on the NZE transition the planet will continue to get hotter. It is important to consider the consequences.

All these topics are discussed below, with additional links for further reading.

Clean energy

Building out clean energy infrastructure will require a dramatic ramp-up in investments. In the second half of this decade, the average annual investment in clean energy needed is estimated at $4T/year against the historical $1T/year, while overall we are looking at $60 trillion invested in generation and infrastructure over the next thirty years.

Solar and wind generation is projected to grow 15x from the current 1.5 TW to 23 TW in 2050. Utility-scale battery storage should grow from less than 20 GW in 2020 to over 3 000 GW by 2050 [1], while long-term storage capacity is projected to grow by 100 TWh and require $2T of capex investments [26].

The tailwind for clean generation is the rapidly improving efficiency of new technologies.

The transmission infrastructure will also have to be upgraded across several dimensions [2]:

  • 2x electricity. The NZE energy system relies much more on electricity. The share of electricity in final consumption grows from 20% today to 49% by 2050.
  • 2-way. Some electricity will be generated by businesses, households, and independently distributed energy generators. It should be available for use elsewhere. That leads to a much more complex system with new operational challenges.
  • Long-distance. Renewable generation is often located far from the consumers, while solar and wind are highly dependent on weather conditions. This is where long-distance connections come to place transferring energy from places of abundance to the areas of need.
  • Smart. As electricity generation becomes lumpier, more dynamic demand response will be needed, changing the energy consumption in response to changes in supply. On the grid level, a more robust electricity trading system will be needed to dynamically adjust prices and respond to supply/demand changes in the most efficient way.
  • Improving efficiency. All the changes above should happen in parallel with the ongoing work on improving grid efficiency.

Labor intensity

Despite the lowest LCOE of solar and wind electricity, the labor intensity of these approaches is significantly higher. Especially, for solar where it is an order of magnitude higher than coal or natural gas. Providing 170 EJ (160,000 trillion BTU) of electricity projected in 2050 by IEA in the NZE scenario from solar only would have required 40 million jobs. Since solar is responsible for a third of that energy, the actual requirement is about half that number.


The nuclear generation in the NZE world is projected to double from the current 415 GW to 812 GW by 2050 and provide 8% of the total electricity [1].

While most of this capacity will be provided by large-scale reactors (1000 MW), small modular reactors (300 MW) and micro-reactors (0.2–10 MW) hold a lot of promise going forward.

Small modular reactors can be assembled in the factory and transported to the final location — cutting assembly time, cost, and risk. Micro-reactors are even smaller and can be transported as fully operational units by semi-tractor trailer to provide power at the grid edge, in remote locations not easily served by the grid, or in emergencies. That said, these new reactors are still expected to be decades away from implementation at scale [2].

Known reserves of Uranium cover about 90 years of supply at the current consumption rate. As the rate doubles, accelerated mining will reduce the known reserves to only 45 years.

Nuclear generation has by far the lowest labor intensity (see the figure above), highest capacity factor (it is almost always “on” generating electricity), is one of the safest and cleanest sources of energy, and one of the least material demanding (see three following figures). The last point is critical when comparing nuclear with solar that requires significantly more inputs, some of which are facing shortages (see section “Materials” below).

Fast Reactors

Fuel reserves limit our abilities to scale current nuclear technologies more aggressively. To put things in perspective, if we decide to supply all our 2050 electricity with nuclear power using the conventional approach, we would run out of known reserves in 7 years [3].

While we can expect exploration to expand reacting to demand, there is another reason to be optimistic about the fuel — the active development of the fast-neutron reactors (FNR or fast reactors). FNR can extract up to 60 times more energy — from <1% of potentially available to about 60%, thus extending available reserves, including existing nuclear waste, to last for hundreds of years (assuming all electricity generated from nuclear at 2050 levels).

FNR also leaves significantly less waste. Virtually all long-lived heavy elements are eliminated during fast reactor operation, leaving a small amount of fission product waste that requires isolation from the environment for less than 500 years.

First commercial-scale FNRs are currently projected to go online during the 2030s.


Geothermal energy is currently expected to play a minor role, limited by existing technologies. IEA sets its contribution to electricity generation at around 1% by 2050 [1]. However, there is ongoing work to apply extraction innovations from the oil/gas industry (horizontal drilling, fracking) and new materials to expand geothermal potential.

Energy to generate energy

Building renewable generation requires a lot of energy. According to one set of projections, we will have to go from 40 EJ/year investment into generation to a peak of 160 EJ. It is 120 EJ of additional energy we will have to invest to meet our goals of transitioning to NZE electricity.

The current total final consumption is 430 EJ. So at peak, we will need an extra 25% of world energy to power transition. Can we just channel 25% of energy toward building the infrastructure by removing that energy from other areas of the economy? For context — for the world as a whole, the biggest drops in energy supply were 1.5% in 2009 [4] and 4.5% in 2020 amidst global lockdowns [5]. 25% is a massive cut, and cannot be diverted from the economy.

Where else can that energy come from? The only potential source on that scale is the good old fossil fuels running in parallel with expanding green generation for as long as the extra energy is needed (till at least mid-century).

If these calculations are correct, we may see not a pure replacement of fossils with green generation but rather a partial substitution and much bigger reliance on fossil fuels in the coming decades than is projected in the current scenarios.


Passenger and commercial vehicles. We will need to replace about 2 billion ICE vehicles currently on the roads. The electric transport will require production of about 10 TWh of batteries annually, up 50 times from the current 0.2TWh. Even accounting for declining prices it is a $500B market.

Cargo ships. The ships produce about 3% of CO2 emissions [6]. Batteries are not an option currently for this mode of transport. The weight and cost of batteries make their use uneconomical [7]. Alternatives — green liquids, specifically green ammonia, and green hydrogen. Both are currently several times more expensive than fossil equivalent. However, the small-scale production of both is growing.

Air. This is the most sensitive to the energy density mode of transportation, so liquid fuels are the only viable option at this point for most use-cases.

Railway. Thanks to its superior efficiency the railway transport is expected to take market share from the road and air modes. It has the most flexibility in terms of the supply of clean energy. It can use batteries (you connect an extra car with batteries and it does the trick [8]) or liquids [9], but also has a third option. Catenary. The catenary approach involves electrifying part or all of the rail network via overhead lines.


The industry is responsible for a third of all GHG emissions. While some of the industrial emissions can be straightforwardly removed by using fossil-free electricity, the major challenge is dealing with the process-based emissions — red and orange bars on the chart below. These emissions are a direct result of the chemical process used to create end products. Take cement. The majority of its emissions are process-related. To remove these emissions, the process should be completely reinvented or the end material should be replaced by a clean substitute.

If none of the options above is viable, GHGs capture can be implemented to avoid emissions. Current capture technologies are estimated to increase the production cost of materials by 10% (steel) to 100% (cement) [10].

Overall, the NZE transition of the industry is estimated to cost tens of trillions USD over the next 30 years [11].


Unlike electricity generation, most of the agriculture-related emissions come in the form of methane (CH4) and nitrous oxide (N2O). Cattle belching (CH4) and the addition of natural or synthetic fertilizers and wastes to soils (N2O) represent the largest sources, making up 65 percent of agricultural emissions globally. Smaller sources include manure management, rice cultivation, field burning of crop residues, and fuel use on farms [12].

It is important to keep in mind that plants or animals in nature are carbon-neutral. They consume carbon while growing and release it after death. However when we apply fertilizers created with fossil fuels (N2O), use fossil energy to power our machines (CO2), use more land to grow crops (CO2), and grow a lot of animals that produce methane in the process of digestion (CH4), we change this neutral equation and saturate the atmosphere with GHGs.

CH4 and N2O are 28 and 265 times more potent, as greenhouse gases, than CO2 (when measured using the GWP100 metric [24]). These and other GHGs combined with the CO2, measured across the supply chain [25], and expressed as CO2 equivalent for different products listed below. Note that top positions in the chart can have emissions of tens of kilograms of CO2e per one kilogram of the final product. and

Some of the technologies that reduce agricultural emissions already cost less than the ones they replace, leading to net savings for farmers. They include zero-emission on-farm machinery and equipment, improved water management, enhanced animal health monitoring. Other technologies are still not cost-competitive and need additional work [13].

GHG capture

It seems a bit unnatural to first emit the GHGs and then turn around and spend energy to capture them. And it definitely is. Unlike photosynthesis, where carbon is captured by plants and transformed into temporary energy storage, pure capturing and storing of GHGs is a net waste of energy.

However, in some cases, it allows for a cheaper path to reducing emissions. For example, based on the IEA estimates, it is significantly more cost-effective to apply carbon capture use and storage (CCUS) when producing steel, ammonia, and methanol, than changing the production processes.

The other important consideration is the opportunity to use the captured elements in some way, like producing synthetic fuels or materials. The trick is to make the unit economics work, using revenue streams from both, capture and sales of synthetic products to cover production expenses.

IEA projects about 1 Gt of CO2 captured annually by 2050, which at $100/t would translate into a $100B/year opportunity that will continue to grow.

Residential transition

NZE transition will need households to install hundreds of millions of rooftop photovoltaic solar systems [14] and heat pumps [15]. Cooking will also need to become clean, based mostly on electricity or green fuels.

Taken together, these technologies create a $1T+/year global market with several different types of players:

  • Solution providers — companies providing an end-to-end solution for the homeowner. They deal with defining the scope of the installation, permissioning, customer service, warranty, as well as coordination of the subcontractors.
  • Financing/Insurance — since some of the solutions require significant upfront investments (tens of thousands of USD), affordable financing becomes an important piece of the equation. Insurance, on the other hand, helps cover the costs in case of accidents.
  • Installation/maintenance — often performed by independent subcontractors to increase geographical reach and accelerate expansion.


Clean electricity generation and transportation require a lot more materials. Some calculations show that silver, tin, and a few other materials are required in quantities that are significantly higher than estimated reserves.

It is important to keep in mind though, that exploration and discovery of new reserves usually come as a response to high demand and can dramatically alter these ratios. Another response is substitution. Both happened before, and there is no reason to expect that this time will be different.

Carbon pricing

Carbon pricing can be implemented in several ways, like a carbon tax, emission trading system (ETS), or crediting mechanism. While these tools work differently, the outcomes are similar — higher incentives to switch to clean technologies, additional revenues for the government, and higher prices for the consumers. Governments can then turn around and return the money to citizens (the ones most in need or everyone) and/or use the funds to invest in R&D, infrastructure, and other initiatives that will accelerate the green transition.

Some schemes also provide an additional source of revenues for the green innovators.

Currently, there are 64 carbon pricing instruments (CPIs) in operation and three scheduled for implementation [16] (see picture below). 21.5% of global GHG emissions are covered by carbon pricing instruments in operation. It is a 6.4 percentage point increase from 2020 largely driven by the launch of China’s national ETS in 2021.

A majority of carbon prices remain far below the USD 40–80/tCO2e range needed, according to World Bank, to meet the 2°C temperature goal. Only 4% of global emissions are covered by a carbon price at and above this range [16].

However, the prices are growing, as is the number of countries that implement these mechanisms.

Energy efficiency

Efficiency gains needed for the NZE transition are much higher than historical. The energy intensity of the global economy (energy used per unit of GDP) has to decrease by more than 4% per year between 2020 and 2030 — more than double the average rate of the previous decade [1].

Some of that will happen naturally, for example, electric cars require 3–4 times less energy than ICE [17], but the rest will require innovation and policy actions.

In a more broad sense, everything that brings efficiency (like videoconferencing instead of travel) will only grow in importance in the world transitioning to the NZE future.


While some of the NZE technologies are more efficient than the ones currently in use, overall the clean way of living is right now more expensive, and likely will stay this way for at least a decade.

Without the urgency of global warming, we would experience a slow and natural transition to green technologies, led by their cost-competitiveness.

However, we are not in a position to take our time and wait. Green technologies will be implemented even if not yet fully cost-competitive and we are very likely to experience it through higher costs across the board when compared to business-as-usual.

This means we cannot just look at the past and project the same trends in the future. Higher costs will create significant pressure on consumerism: buying more, buying bigger (homes, cars), traveling more, and so on.

Instead, we should expect environmentalism: buying less, buying smaller and more efficient, traveling less — everything that can help reduce consumption or make it more efficient in the face of growing costs.

This trend will not be distributed equally geographically but will touch everyone.

Global economy growth

Affordable energy is one the most important pillars of the modern economy’s growth. When energy gets more expensive, it creates a headwind for economic expansion.

Some researchers argue that green energy generation is significantly more expensive if judged by how much of existing energy we need to invest to extract a unit of new energy (the measure is called energy return on investment or eROI). The more green generation we add the less efficient our overall energy industry becomes, meaning less new energy per the same amount of used energy [18].

Note that the NZE scenario assumes an annual 0.6% decline in final energy use so that by 2050 the three times bigger world economy consumes 20% less energy than in 2019 [1]. This incredible feat is expected to be achieved by 4% annual efficiency gains. However, if 4% isn’t achieved, and we are serious about getting to NZE, the economy cannot grow at 3–4% annually. Using historical efficiency gains of about 1.5% annually over 2000–2020 [21], to achieve a 0.6% decline in energy consumption the global economy should grow at 0.9% per year. At that pace, the total economic growth over the next 30 years will be only 30%.

What if the governments around the world prove to be less serious about NZE when faced with the adverse impact on growth? The situation with fossil fuels may be no better. It looks like eROI is falling there too. As long as the overall efficiency of the energy sector is declining we should prepare for the slowdown of global economic growth [18, 22, 23].

It is a tough spot to be, but there are at least two potential paths forward. One — human ingenuity proved to be able to engineer astonishing breakthroughs in many areas, including discovering new sources of energy. We are currently only scratching the surface regarding the possibilities of the solar energy flow (which is about 10,000 world’s total energy use [20]) and continually improving efficiency there. Nuclear fusion is another area offering us an abundance of energy if we figure out how to apply it. Other technologies may also emerge.

On the other hand, we can deal with the energy consumption, moving from energy-intensive products/services driving GDP (like big homes and extensive travel) to energy-efficient ones. The path there lies through virtual reality. In VR you can travel as much as you want and have a house as big as you like, and still consume very little energy, while your physical home is very compact and energy-efficient. The technologies for such VR are not there yet, but eventually, they will be available.

Climate change

Finally, the climate change effects should also be considered.

More frequent and more severe extreme weather events will make ownership of physical assets more expensive (higher construction, maintenance, and insurance costs).

Water shortages will affect agriculture and water-sensitive infrastructure (like nuclear reactors, that need an abundant water supply for cooling).

The rising sea level will threaten local real estate and infrastructure objects, like airports, and claim lands currently used in agriculture.

Melting Arctic ice will create new opportunities for navigation in that region.








[7] See to appreciate the scale of the problem. However, there are new interesting ideas too:

















[24] table 8.7]

[25] page 4

[26] Exhibit 13