Achieving net zero emissions by mid-century would cost an estimated $1 trillion-$2 trillion a year of additional investments, or 1-1.5% of global gross domestic product, a report by the Energy Transitions Commission (ETC) said on Wednesday.To limit global warming to 1.5 degrees Celsius this century, global greenhouse gas emissions will need to reach net zero.

When this is achieved, the reduction in 2050 living standards in developed and developing countries would amount to less than 0.5% of global GDP, the report said.

Since 2000, global warming has cost the United States and the European Union at least $4 trillion in lost output and tropical countries are 5% poorer than they would have been without climate change impacts, according to research by Stanford University.

The ETC is a global coalition of 40 energy producers, industrial companies and financial institutions, including ArcelorMittal, HSBC, BP, Shell, Orsted and Bank of America, which are committed to achieving a carbon-free economy by 2050.

It said the additional investments required “are easily affordable, given current global savings and investments, particularly in the prevailing macroeconomic context of sustained low interest rates”.

The report said dramatic improvements in energy efficiency will have to be made; annual global electricity supply will have to grow four to five times to reach 90,000-115,000 terawatt hours and the annual pace of wind and solar capacity will need to be five to six times the increase achieved in 2019.

Buildings, transport and industry sectors also need to be electrified and hydrogen should be used in cases where that is not possible. Any remaining energy use should be decarbonised using carbon capture and storage, and sustainable bioenergy.

“There is no doubt that it is technically and economically possible to reach the zero-carbon economy which we need by 2050; and zero must mean zero, not a plan which relies on the permanent and large-scale use of ‘offsets’ to balance continued emissions,” said co-chair of the ETC, Adair Turner.

“But action in the next decade is crucial – otherwise it will be too late,” he added.

As a result of the energy transition needed, oil demand could be slashed from 100 million barrels per day (bpd) in 2019 to around 10 million bpd by mid-century, and thermal coal use would be totally phased out, the report said.

China has the resources and technology to become a rich, developed carbon-free economy by 2050. All developing nations should be able to reach net-zero emissions by 2060 at the latest but will require development investment to attract private green investors, it added.

On Wednesday, the European Commission said the bloc should commit to deeper emissions cuts over the next decade, requiring huge investments in transport, heavy industry and energy – where businesses will also face higher carbon costs under EU plans to revamp its carbon market.