The Economics of the Net Zero Transition: Policy Scenarios and the Role of Trade and Cooperation
This paper examines the economic implications of achieving net zero carbon emissions by 2050, with a focus on Asia and the Pacific—the world’s largest emitter and most climate-vulnerable region. Using the Global Trade-Environment Model (GTEM), we simulate five scenarios, including broad decarbonization strategies and trade-related approaches such as carbon-leakage mitigation and environmentally focused cooperation. The results show that while the transition requires large shifts in energy use, investment, and trade patterns, the overall GDP costs are manageable and far lower than those of continued climate change. Trade emerges as a critical enabler of the transition, facilitating the diffusion of green technologies and supporting policies such as carbon border adjustments and cooperation on environmental goods and services. Achieving net zero will ultimately depend on technological innovation, effective policy design, and broad public and international support, but the pathway can generate new jobs, innovations, and investment opportunities while safeguarding the most vulnerable populations in Asia and beyond.