The net-zero transition will cost $275 trillion globally by 2050 as low-emission activities are ramped up and high-emissions activities decrease, according to a new report from consultancy McKinsey & Company.
The increase in capital spending on physical assets for energy and land-use equates to an average $9.2tn per year or an increase of $3.5tn on today’s annual spending, McKinsey found in its latest study: The net-zero transition: What it would cost, what it could bring.
The transition will also lead to extensive labour reallocations, with about 200 million direct and indirect jobs added to the labour market by 2050, making up for the 185 million positions lost over the same period, the report found, which assessed sectors that produce 85 per cent of overall emissions, with a detailed assessment of 69 countries.
“The net-zero transition will amount to a massive economic transformation,” said Mekala Krishnan, a partner at the McKinsey Global Institute and lead author of the report.
“Actions by individual companies and governments, along with coordinated support for more vulnerable sectors, countries, and communities, would facilitate the economic and societal adjustments that will be required.”
The $3.5tn increase in spending is equivalent to half of global corporate profits in 2020, one-quarter of total tax revenue or 7 per cent of household spending in the same year, according to McKinsey.
While today 65 per cent of energy and land spending goes to high-emissions products, in the future this trend would reverse with 70 per cent going to low-emissions products and enabling infrastructure.
“Accounting for expected increases in spending, as incomes and populations grow, as well as for currently legislated transition policies, the required increase in spending would be lower, but still about $1tn,” McKinsey added.
The spending shift would also be front-loaded, the report found, rising to 8.8 per cent of global gross domestic product today to as much as 6.8 per cent of GDP between 2026 and 2030 before falling.
While these spending requirements are large and financing has yet to be established, many investments have positive return profiles and should not simply be viewed as costs, McKinsey said,
“Moreover, technological innovation could reduce capital costs for net-zero technologies faster than expected," the company added.
While the effects of the transition will be felt globally and sector-wide, the impact will be uneven with the sectors most exposed set to be those working with high-emissions products or operations.
Lower-income countries and those with large fossil fuel resources will also be heavily hit, along with communities whose local economies depend on exposed sectors.
The most exposed sectors currently account for about 20 per cent of global GDP, with another 10 per cent of GDP is in sectors whose supply chains have high emissions, such as construction.
Meanwhile, low-income households across the globe would be disproportionately affected, due to upfront costs associated with buying new heaters or electric cars.
Last week, research company Wood Mackenzie warned that an accelerated energy transition to mitigate climate risk could shave $75tn off global GDP between 2022 and 2050 as countries push to meet their climate commitments.
The global economy is set to double in size in real terms, rising to $169tn by mid-century from the current $85.6tn, Wood Mackenzie said, adding that it expects temperatures to reach 2.5-2.7°C above pre-industrial levels by mid-century.
The energy transition must accelerate to cap levels at the 1.5°C agreed in the Paris Climate Accord, but while measures to lower temperature will boost global GDP, on aggregate, by 1.6 per cent by 2050, the actions required could slash output by 3.6 per cent, leading to a net drop of about 2 per cent by 2050.
McKinsey said that a poorly managed transition comes with risks, such as energy supply shortages and price increases, particularly if the shift to net zero is delayed or abrupt, which could lead to "asset stranding and worker dislocations".
A well-co-ordinated transition. on the other hand. could deliver long-term rewards, such as a decline in energy costs, improved health outcomes, and natural capital conservation.
Areas for growth would be more efficient operations from decarbonisation and the creation of new markets for low emissions goods, but most importantly, reaching net-zero emissions and limiting warming to 1.5°C " would prevent the most catastrophic impacts of climate change".
“A more orderly transition would not only avoid the worst impacts of climate change, but also have enormous benefits such as lower energy and production costs in the longer run,” said Hamid Samandari, a McKinsey senior partner.
“And the unity of intent and action it will require bodes well for solving other global problems. At the same time, the short-term risks of a poorly-thought transition must be reckoned with.”
Ultimately, the net-zero transition will depend on the engagement of businesses, governments, institutions and individuals across the globe, McKinsey said, with “a wholesale shift in mindset” required.
“The question now is whether the world can act boldly and broaden the response and investment needed in the upcoming decade," said Dickon Pinner, senior partner at McKinsey and co-leader of McKinsey Sustainability.
Countries recognising Palestine
France, UK, Canada, Australia, Portugal, Belgium, Malta, Luxembourg, San Marino and Andorra
If you go...
Fly from Dubai or Abu Dhabi to Chiang Mai in Thailand, via Bangkok, before taking a five-hour bus ride across the Laos border to Huay Xai. The land border crossing at Huay Xai is a well-trodden route, meaning entry is swift, though travellers should be aware of visa requirements for both countries.
Flights from Dubai start at Dh4,000 return with Emirates, while Etihad flights from Abu Dhabi start at Dh2,000. Local buses can be booked in Chiang Mai from around Dh50
Key findings of Jenkins report
- Founder of the Muslim Brotherhood, Hassan al Banna, "accepted the political utility of violence"
- Views of key Muslim Brotherhood ideologue, Sayyid Qutb, have “consistently been understood” as permitting “the use of extreme violence in the pursuit of the perfect Islamic society” and “never been institutionally disowned” by the movement.
- Muslim Brotherhood at all levels has repeatedly defended Hamas attacks against Israel, including the use of suicide bombers and the killing of civilians.
- Laying out the report in the House of Commons, David Cameron told MPs: "The main findings of the review support the conclusion that membership of, association with, or influence by the Muslim Brotherhood should be considered as a possible indicator of extremism."
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FIXTURES
Thu Mar 15 – West Indies v Afghanistan, UAE v Scotland
Fri Mar 16 – Ireland v Zimbabwe
Sun Mar 18 – Ireland v Scotland
Mon Mar 19 – West Indies v Zimbabwe
Tue Mar 20 – UAE v Afghanistan
Wed Mar 21 – West Indies v Scotland
Thu Mar 22 – UAE v Zimbabwe
Fri Mar 23 – Ireland v Afghanistan
The top two teams qualify for the World Cup
Classification matches
The top-placed side out of Papua New Guinea, Hong Kong or Nepal will be granted one-day international status. UAE and Scotland have already won ODI status, having qualified for the Super Six.
Thu Mar 15 – Netherlands v Hong Kong, PNG v Nepal
Sat Mar 17 – 7th-8th place playoff, 9th-10th place playoff
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
War 2
Director: Ayan Mukerji
Stars: Hrithik Roshan, NTR, Kiara Advani, Ashutosh Rana
Rating: 2/5
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Ferrari 12Cilindri specs
Engine: naturally aspirated 6.5-liter V12
Power: 819hp
Torque: 678Nm at 7,250rpm
Price: From Dh1,700,000
Available: Now
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Essentials
The flights: You can fly from the UAE to Iceland with one stop in Europe with a variety of airlines. Return flights with Emirates from Dubai to Stockholm, then Icelandair to Reykjavik, cost from Dh4,153 return. The whole trip takes 11 hours. British Airways flies from Abu Dhabi and Dubai to Reykjavik, via London, with return flights taking 12 hours and costing from Dh2,490 return, including taxes.
The activities: A half-day Silfra snorkelling trip costs 14,990 Icelandic kronur (Dh544) with Dive.is. Inside the Volcano also takes half a day and costs 42,000 kronur (Dh1,524). The Jokulsarlon small-boat cruise lasts about an hour and costs 9,800 kronur (Dh356). Into the Glacier costs 19,500 kronur (Dh708). It lasts three to four hours.
The tours: It’s often better to book a tailor-made trip through a specialist operator. UK-based Discover the World offers seven nights, self-driving, across the island from £892 (Dh4,505) per person. This includes three nights’ accommodation at Hotel Husafell near Into the Glacier, two nights at Hotel Ranga and two nights at the Icelandair Hotel Klaustur. It includes car rental, plus an iPad with itinerary and tourist information pre-loaded onto it, while activities can be booked as optional extras. More information inspiredbyiceland.com
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More on animal trafficking
Without Remorse
Directed by: Stefano Sollima
Starring: Michael B Jordan
4/5
How to help
Send “thenational” to the following numbers or call the hotline on: 0502955999
2289 – Dh10
2252 – Dh 50
6025 – Dh20
6027 – Dh 100
6026 – Dh 200
Full Party in the Park line-up
2pm – Andreah
3pm – Supernovas
4.30pm – The Boxtones
5.30pm – Lighthouse Family
7pm – Step On DJs
8pm – Richard Ashcroft
9.30pm – Chris Wright
10pm – Fatboy Slim
11pm – Hollaphonic
