Goldman Sachs Research

Carbonomics: Innovation, Deflation, and Affordable De-carbonization

19 OCT 2020
TOPICS: Carbonomics | Clean Tech and Renewables | Sustainable Finance Innovation

Net zero is becoming more affordable as technological and financial innovation, supported by policy, are flattening the de-carbonization cost curve. We update our 2019 Carbonomics cost curve to reflect innovation across c.100 different technologies to de-carbonize power, mobility, buildings, agriculture and industry, and draw three key conclusions:

  1. low-cost de-carbonization technologies (mostly renewable power) continue to improve consistently through scale, reducing the lower half of the cost curve by 20% on average vs. our 2019 cost curve;
  2. clean hydrogen emerges as the breakthrough technology in the upper half of the cost curve, lowering the cost of de-carbonizing emissions in more difficult sectors (industry, heating, heavy transport) by 30% and increasing the proportion of abatable emissions from 75% to 85% of total emissions; and
  3. financial innovation and a lower cost of capital for low-carbon activities have driven around one-third of renewables cost deflation since 2010, highlighting the importance of shareholder engagement in climate change, monetary stimulus and stable regulatory frameworks.

The result of these developments is very encouraging, shaving US$1 tn pa from the cost of the path towards net zero and creating a broader connected ecosystem for de-carbonization that includes renewables, clean hydrogen (both blue and green), batteries and carbon capture.

Goldman Sachs Research

Carbonomics: Innovation, Deflation, and Affordable De-carbonization

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