Don’t give up on net-zero — It’s necessary and it’s achievable

“We will have to live with some climate impacts but can reduce further risk by moving away from fossil fuels” — Joeri Rogelj, Imperial College London

• “The cost of inaction is an immediate one[, but] the cost of inaction, while deferred, is significantly greater.” -Thierry Philipponnat, Finance Watch
• Net-zero is technologically and economically viable; it requires alignment and will

In recent years, net-zero targets have come under increasing scrutiny. There are reasonable concerns regarding high costs, disruptive policies and immediate shocks. Yet, this backlash often overlooks a critical truth: The cost of inaction on climate change is far greater — economically, socially and environmentally. More importantly, achieving net zero is not only feasible but also economically rational and technologically within reach. The real challenge lies not in capability, but in coordination, political will and public trust on climate action.

The economic case for climate action

A growing body of research makes a compelling economic case for climate action: A new report from the University of Cambridge’s climaTRACES Lab and Boston Consulting Group indicated that “allowing global warming to reach 3°C by 2100 could reduce cumulative economic output by 15% to 34%. Alternatively, investing 1% to 2% in mitigation and adaptation would limit warming to 2°C, reducing economic damages to 2% to 4%. This net cost of inaction is equivalent to 11% to 27% of cumulative GDP — equivalent to three times global health care spending, or eight times the amount needed to lift the world above the global poverty line by 2100.” Another study from ETH Zurich, IIASA and the University of Delaware revealed that “limiting global warming to 1.5ºC could reduce the global economic costs of climate change by around two-thirds.”

These are not abstract numbers. Climate change is already eroding productivity, damaging infrastructure and threatening food and water security. From wildfires in California to floods in Germany, the economic toll is mounting. The longer the delay, the more expensive and irreversible the damage becomes.

Limiting global warming to +1.5°C reduces GDP losses by two thirds. Source: ETH Zürich

Where does the backlash come from?

Despite the clear economic rationale, net-zero policies face growing resistance. This backlash is rooted in several factors:

• Short-term costs vs. long-term gains: Many of the investments required for climate action must be made before 2050, while the economic benefits will mostly materialize after that. This temporal mismatch makes it politically difficult to justify upfront spending.
• Uneven distribution of costs and benefits — “Tensions between global and local priorities”: Some countries and communities bear more of the transition burden than others. Fossil fuel-dependent regions and lower income countries — many of which are the most vulnerable to climate change — face job losses, economic restructuring and would require spending about 1.5 times more in physical assets than advanced economies.
• Populist exploitation: Populist movements have capitalized on public anxiety, framing climate policies as elitist or economically harmful. Even modest green policies, like low-emission zones, have sparked political upheaval in parts of Europe.
• Communication failures: Policymakers have often failed to clearly articulate the benefits of climate action — such as job creation, energy security, and public health improvements — leaving the public sceptical or indifferent.

Developing countries and fossil fuel-producing regions would invest more in a transition relative to GDP. Source: McKinsey Sustainability

The challenges to overcome

Reaching net-zero emissions demands sweeping changes across multiple sectors, especially the energy industry, which is the largest contributor to global greenhouse gases. Transitioning to renewable sources like wind and solar requires major infrastructure upgrades and new technologies. Nature-based solutions such as reforestation and carbon credits offer promise but need robust regulation and long-term investment. Carbon capture technologies, though still developing, could play a vital role. Setting science-based targets aligned with climate goals requires global cooperation and standardized methods. Finally, the path to net zero must address social and political complexities, including equity and environmental justice, to ensure inclusive and practical solutions.

Small and medium-sized enterprises (SMEs) face distinct hurdles in the transition to net-zero, with cost being the most significant barrier — many lack the budget for green investments, especially post-pandemic. Supply chain emissions pose another challenge, as SMEs often struggle to influence emissions beyond their direct operations. Lastly, measuring environmental impact remains difficult, with few SMEs actively tracking their carbon footprint. Despite these obstacles, opportunities exist: Consumer demand for sustainable businesses is rising, and tools like carbon calculators and advisory support are increasingly available to help SMEs navigate the shift toward a low-carbon economy.

Addressing the scepticism

To counter the backlash, it is possible to reframe the narrative and focus on tangible, relatable benefits:

• Focus on effectiveness: Policies that target high-emission sectors should deliver measurable results as well. Investments in grid infrastructure, clean transport and building efficiency can offer high returns and visible improvements.
• Make costs manageable: Governments may offer incentives like green mortgages, scrappage schemes and affordable financing for heat pumps and electric vehicles (EV). A demand-led transition may result more politically acceptable than one driven by bans and penalties.
• Tell better stories: By highlight success stories — factories reopened for cleantech, jobs created in renewable energy and communities revitalized through green investment — climate policy would be seen not as a burden, but as a path to prosperity.

The real cost of doing nothing

The economic risks of inaction are staggering. Studies estimate that climate-related damages could reduce global GDP by up to 24% by 2100, and have already cost $3.6 trillion in damage since 2000. Simulations show ecological damage will result in sovereign credit ratings downgrading by 2030, increasing borrowing costs for nations. Biodiversity loss, water scarcity and extreme weather events are not just environmental issues — they are economic time bombs. A study in Nature shows reliance on ‘natural carbon sinks’ to offset emissions will not stop global warming.

“We need to stop dumping carbon dioxide into the atmosphere and scale up our ability to get rid of it permanently. We can’t take credit for the absorption of carbon which would happen naturally — the carbon we remove must be in addition to that.” — Professor Myles Allen, University of Oxford

Moreover, the social costs — ranging from health impacts to forced migration — are harder to quantify but equally devastating. Pollution alone causes over 9 million premature deaths annually. Rising sea levels and droughts threaten to displace 1.2 billion people globally by 2050, fuelling conflict and instability.

Net-zero is technologically and economically viable

Contrary to claims that net zero is unrealistic, the technologies needed to decarbonize are largely available. Renewable energy is now cheaper than fossil fuels in many regions. Electric vehicles, heat pumps and energy-efficient buildings are becoming mainstream. Carbon capture, while still developing, holds promise for hard-to-abate sectors.

The transition will require massive investment — estimated at $275 trillion globally by 2050 — but this is not a sunk cost. It’s an investment in a more resilient, efficient and equitable economy. In fact, many of these investments will pay for themselves through energy savings, job creation and avoided climate damages.

The role of business and finance

Businesses that act now can gain a competitive edge. Climate leaders are already seeing returns of $2 to $19 for every dollar invested in adaptation. Green industries are growing faster than the broader economy, and sustainable companies enjoy lower capital costs and stronger brand loyalty. Operational benefits include attracting investment, reducing costs, engaging customers, brand and growth development.

Yet, many firms remain hesitant, citing regulatory uncertainty and fragmented data. Governments can step in to provide clear frameworks, incentives and support for innovation, while providing safety nets for employees. By aligning their portfolios with climate goals, financial institutions help mobilize capital for the transition.

The University of Oxford’s Net Zero has a list of net zero innovation, policies and business tools for the following sectors: Land use & agriculture, oceans, energy, transport, buildings, industry, healthcare, education, goods & services, law, finance, information technology, equity & equality and resilience & recovery.

10 key solutions needed to mitigate climate change. Source: WRI

Conclusion: A question of alignment to avert foreseeable disaster

The path to net zero is not blocked by technological or economic barriers. The economic case is clear, and the tools are available, and the stakes could not be higher.

Achieving alignment that builds action is a huge challenge. Having the information and conversations on risks and responses, with communities at all levels — political, corporate and civic –, is key to progress.

The Climate Transition Pillar, a collaboration between the Cambridge Centre for Risk Studies (Systemic Risk Hub), AXA XL and AXA Research Fund, aims to map out systemic risks of climate transition to businesses, in turn creating tangible tools such as taxonomies and scenarios to help build resilience during the transition. We explore economic (GDP), environmental and social metrics to promote a just transition that considers the interconnectedness of systems and cascading risks.

Reaching net zero is technically and economically feasible. Source: Energy Transitions Commission