THE EXTRA amount the world must spend each year to create a “net-zero” emissions economy is equivalent to half all profits currently generated by companies globally, consultancy group McKinsey estimated in a report on the energy transition.

It said its calculation was much higher than most other estimates by economists but stressed such investments could be lucrative and the long-term costs of not doing enough to tackle climate change would be greater.

“We find that the transition would be universal, significant, and front-loaded, with uneven effects on sectors, geographies, and communities, even as it creates growth opportunities,” it concluded.

Although time is running out, reaching net-zero carbon emissions by 2050 would give the world a chance of capping temperature rises at 1.5 degrees Celsius above pre-industrial levels — avoiding the worst fall-out from climate change.

The report’s main finding was that this would require spending on physical assets for energy and land-use systems of about $275 trillion, or $9.2 trillion per year on average — an annual increase of $3.5 trillion on current spending.

“The increase is approximately equivalent, in 2020, to half of global corporate profits, one-quarter of total tax revenue and 7 percent of household spending,” it calculated.

The amount of cumulative spending would be equivalent to about 7.5% of world output from 2021-2050, far higher than the 2-3% of global output which climate economists polled by Reuters in 2021 estimated was needed each year.

McKinsey put the difference down to the fact that it was including a broad view of spending by households, businesses, agriculture and forestry as well as some continued spend on high-emissions assets like fossil fuel–based vehicles.

“While these spending requirements are large and financing has yet to be established, many investments have favorable return profiles and should not be seen as merely costs,” it added. Gernot Wagner, a climate economist at New York University not involved with the report, welcomed its attempt to come up with a comprehensive view of the investments needed.

“Climate policy means massive investment, and a massive rejigging of market forces from the current high-carbon and low-efficiency path onto a low-carbon and high-efficiency one,” said Wagner.

“We just spent trillions of dollars because of COVID relief. So, would it be feasible? Yes. Would it involve massive changes? Of course, that too. Where is the money coming from? Ratepayers, taxpayers or shareholders?”

The McKinsey report noted large uncertainties relating to how such a transition would play out and that some populations and sectors would be more exposed than others to disruption, notably poorer countries and those reliant on fossil fuels.

It added: “The economic and social costs of a delayed or abrupt transition would raise the risk of asset-stranding, worker dislocations, and a backlash that delays the transition.” — Reuters

AS MILLIONS of Hong Kongers prepare to hand out packets stuffed with cash to mark the lunar new year, the hottest envelopes are coming from an unlikely source: global investment banks.

The red packets, often embossed with gold or signs from the Chinese zodiac, are in huge demand on a vibrant secondary market even though banks give them away for free. This year’s design from UBS Group AG is commanding the highest price, selling for more than HK$10 ($1.30) per envelope on Facebook Marketplace and Carousell Pte. That’s more than 50% above second-ranked Credit Suisse Group AG and almost triple the price being paid for those from local rival HSBC Holdings Plc.

Red envelopes containing cash are an annual tradition across much of Asia as a way to bring good luck for the upcoming year of the tiger. Known as laisee in Cantonese and hongbao in Mandarin, they are handed out to everyone from colleagues and customers to friends and family. Designs can take months to evolve with banks often including classic emblems like flowers and goldfish. The ritual is taken so seriously that the final layout usually requires approval from the top executive ranks.

Zodiac symbols, such as the tiger used by Credit Suisse, are even more attractive for collectors because they only come around once every 12 years. Hong Kong companies are estimated to spend as much as HK$300 million ($38.5 million) annually on red packet printing.

While the era of electronic payments has seen the rise of so-called e-laisee, giving out delicately designed paper envelopes remains part of a decades-long practice to pay respect to local customs. Close to 7,000 packet listings were created in the first half of January, double the pace of the year earlier, said Kevin Huang, managing director of Carousell Hong Kong in an email response. The most popular bank searches were for UBS, HSBC and DBS Group Holdings Ltd.

Most buyers online are purchasing them as keepsakes. Saby Cheng, a buyer and seller on Carousell, said she has been collecting banks’ packets for at least four years. While she expected the branded items’ price to rise over the time, she kept most of them and would only resell the surplus.

Spokespeople for UBS, Credit Suisse, Goldman Sachs Group Inc., Deutsche Bank AG, DBS and Morgan Stanley declined to comment while representatives of HSBC and BNP Paribas SA didn’t respond to requests for comment. — Bloomberg