AI may lower emission costs by $2tn – World Bank

The World Bank has revealed that Artificial Intelligence could help reduce the capital requirements for transitioning to a net-zero economy by as much as $2tn.

In its latest “Net-Zero Industry Tracker 2024 Edition” report, the bank stated that AI, particularly generative AI, could improve capital efficiency by 5-7 per cent, offering substantial savings for hard-to-abate sectors like cement, steel, and heavy manufacturing.

The international lender report underscores the need for an estimated $30tn in additional capital investment by 2050 to achieve global net-zero emissions targets. However, AI’s role in reducing capital requirements could be a game-changer.

“The potential of AI to reduce capital needs by $1.5 trillion to $2tn is a significant development for sectors that are crucial to the global economy but are also challenging to decarbonise,” the report highlighted.

AI-driven innovations, such as energy efficiency improvements, asset management, and accelerating research and development, were identified as key levers for reducing costs in industries that face both high operational expenses and limited commercially viable emissions reduction technologies.

“The integration of AI can lower the costs of transitioning to low-carbon alternatives, providing a much-needed boost for sectors struggling to absorb the significant costs of decarbonisation,” the World Bank added.

However, the report also cautioned that while AI offers vast potential, it could lead to an increase in electricity demand, which could compete with the energy needs of hard-to-abate sectors for access to low-carbon power.

“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 bank noted.

In light of these potential risks, the World Bank stressed the importance of enhanced policy support and international collaboration to maximise AI’s benefits.

“AI is a powerful tool, but its full potential can only be realised if supported by stronger policy frameworks and cross-regional cooperation,” said the World Bank.