The World Bank has revealed that Artificial Intelligence (AI) could significantly reduce the capital requirements for transitioning to a net-zero economy by as much as $2 trillion.
In its latest “Net-Zero Industry Tracker 2024 Edition” report, the international lender highlighted how AI, particularly generative AI, could enhance capital efficiency by 5-7 percent, providing substantial savings in hard-to-abate sectors such as cement, steel, and heavy manufacturing.
The report stresses that achieving global net-zero emissions targets will require an estimated $30 trillion in additional capital investment by 2050.
However, AI’s role in cutting capital costs is seen as a potential game-changer for industries that are both crucial to the global economy and challenging to decarbonize.
“The potential of AI to reduce capital needs by $1.5 trillion to $2 trillion is significant, especially for sectors that face high operational costs and limited commercially viable emissions-reduction technologies,” the World Bank noted.
AI-driven innovations, including improvements in energy efficiency, asset management, and accelerating research and development, were identified as key factors in reducing costs for these industries.
These advancements are particularly critical for sectors that have both high operational expenses and limited options for reducing emissions in a commercially viable way.
The report also acknowledged the potential risks of widespread AI adoption, particularly the likely increase in electricity demand.
This could compete with the energy needs of sectors undergoing decarbonization, placing additional strain on energy systems.
“The widespread adoption of AI technologies will likely place additional pressure on energy systems, creating a new challenge in balancing the power needs of the transition,” the World Bank cautioned.
Despite these challenges, the World Bank emphasized the need for stronger policy frameworks and international cooperation to fully harness AI’s potential in the transition to a low-carbon economy.
“AI is a powerful tool, but its full potential can only be realized if supported by enhanced policy frameworks and global cooperation,” the report concluded.