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Mission net zero – part two: economics

Soaring government debt relative to GDP in wake of Covid-19 leaves economists divided over best approach to funding the transition

The first part of this three-part series for Transition Economist explored the scale and cost of transforming the global energy system to net-zero emissions by 2050. Part two looks at whether governments around the world can afford to cover their share of the cost, especially after taking on massive debt to counter the negative economic impact of Covid-19. Mainstream economic theory—Keynesian and monetarist alike—suggests it will be difficult, as it will require the reprioritisation of spending from a smaller overall pool of discretionary funds, since governments will have to repay their Covid debt over time to restore debt-to-GDP ratios to more reasonable levels on a historical basis. B

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