Princeton University Study Finds the Low-Carbon Future is a Low-Cost Future

To reduce net greenhouse gas emissions to zero, the U.S. will need to invest in and build new energy infrastructure at an unprecedented scale over the next three decades. This is one of the conclusions of a new Princeton University analysis, which examines granular scenarios for how the country could reach net-zero greenhouse gas emissions by 2050. While the required scale of infrastructure build-out and technology deployment is significant, the study’s findings show it is  technically feasible and economically affordable. 

That last point–that a net-zero economy will be affordable–is critical. The energy  transition cost is frequently cited as a reason to be wary of carbon prices, regulations, or climate action generally. But the idea that a modern and productive economy can run without emitting greenhouse gases is evolving from an obscure notion to something that rigorous analysis can show will be affordable. This study shows, along with less detailed precursors, that a full transition to net-zero would not dramatically increase the cost of energy for the economy. 

The researchers modeled five different pathways to achieve net-zero GHG emissions by midcentury, each with varying levels of renewable energy deployment, building and vehicle electrification, biomass, nuclear energy, and carbon capture and storage technologies. For each scenario, they evaluated the infrastructure and fuel demands that would meet consumer demand for electricity and transportation, and maintain industrial production but eliminate emissions from the economy. Even as the researchers surveyed a wide variety of scenarios, they found that the costs of the transition to net-zero were small. 

As the figure above demonstrates, all decarbonization pathways have energy system spending between 4-6 percent of GDP, well-within the historic range of what the country spends on energy each year. While these costs are non-negligible, claiming that a net-zero transition will require a wartime mobilization of resources is a misrepresentation of the task at hand. According to the study, a business-as-usual pathway with no concerted effort to decarbonize would see the U.S. spend $9.4 trillion on energy over the next decade, and total annualized energy system costs across all scenarios modeled were estimated to be only about 3 percent ($300 billion) more over the next decade. Additionally, all pathways resulted in an increase in net-energy sector employment and a decrease in premature mortality from air pollution, relative to the business-as-usual reference case.   

The affordability of the transition to a low-carbon economy is largely due to the precipitous cost reductions achieved by low-carbon technologies such as wind and solar generating technologies, increased energy-efficiency improving end-use productivity, and reduced spending on fuels, such as coal and natural gas. These costs could shrink further if oil and gas prices are higher than anticipated or low-carbon technologies experience further breakthroughs. 

While a range of technology options and pathways exist to decarbonize the U.S. economy, the study highlights common near-term objectives that the U.S. would need to achieve over the next decade to help ensure the country meets its net-zero target in the next 30 years. These include accelerating the deployment of wind and solar electricity generating capacity to approximately 600 gigawatts (dwarfing total installed renewable energy capacity), expanding high-voltage transmission capacity by roughly 60 percent, doubling the share of electric heat pumps in homes and triple their use in commercial buildings, and getting roughly 50 million electric cars on the road, a significant increase from the 1 million currently deployed in the U.S. This  scale-up of existing technology deployment must also be paired with investment in enabling infrastructure and innovative technologies to complete the net-zero transition beyond 2030. These include constructing a vast network of CO2 pipelines and underground storage basins, developing carbon capture for various industrial processes, and producing renewable hydrogen from clean energy sources. The researchers estimate that accomplishing these near-term targets will require $2.5 trillion in up-front additional capital investment over the next decade. 

The groundwork to implement these changes must begin today. This means deploying the low-carbon technologies that exist today, and investing in the less mature technologies that will be critical for future emission reductions. Ensuring the low-carbon energy transition is in fact the low-cost future requires that we replicate the cost-reductions achieved by the renewable energy industry for other technologies that are in their infancy. This means large investments now, to have them at reasonable costs later, and this requires proactive policy.

Although the study avoids prescribing specific policies, its findings underscore that climate policy in the U.S. must be ambitious, encourage a wide-variety of low-carbon technologies, and create a robust marketplace where investment is directed towards low-carbon innovations and infrastructure. While the costs of a net-zero transition are affordable, they are not negligible. Thus, it is important that policy strikes the right balance among reducing costs through innovation, minimizing the costs of the transition, and providing mechanisms to compensate those who bear these costs, while boosting economic growth. 

There is no better policy for accomplishing these objectives than carbon pricing. An economy-wide price on carbon is the most cost-effective tool for managing the risks of climate change. It harnesses the innovative power of the market to direct investment towards a variety of low-carbon technologies and products, and is unique in its ability to raise revenue that can be used to reduce the costs of the net-zero transition. The task of building a decarbonized economy is undoubtedly challenging and requires immediate action, but this report provides confidence that a low-carbon U.S. is achievable and economically beneficial. Policymakers should use the technologies and policies already at their disposal to ensure the low-carbon future is in fact the low-cost future.