The global growth story of the 21st century: driven by investment and innovation in green technologies and artificial intelligence
This is a joint report from the Grantham Research Institute and Systemiq, written under the leadership of Nicholas Stern and Mattia Romani. It contends that the world has in its hands a new growth and development story driven by investment and innovation in green technology, boosted by artificial intelligence (AI) – and this is a much more attractive and inclusive story than the dirty and destructive paths followed in the past.
- In the next five years more than half of the tipping points for crucial green technologies will have been met, making them competitive in key markets. The process of structural and systemic change will be multi-decadal. But this decade is decisive to limit the risk of greater climate instability. Acceleration of action now is essential. AI is creating real opportunities for this acceleration.
- The faster growth of emerging markets and developing economies (EMDEs) relative to richer countries and the location of renewable energy sources will change the world’s industrial geography and patterns of trade. If managed well, these changes can make supply chains more diverse and less fragile; multiple sources of key products and inputs will be necessary. Countries across the world are already competing in investment support to gain dynamic comparative advantage, such as the $1 trillion US Inflation Reduction Act with its strong focus on green technologies.
- Major investment is needed for the transition to rapid, sustainable growth: some $5–7 trillion a year globally in gross investment for clean energy and digital transformation. Part of this investment will be additional; the necessary global increase in investment will be around 2–3% of GDP, less in richer countries, more in EMDEs. The aggregate world macro position makes this increase in investment possible; there is no global savings constraint. This investment can give impetus to a strong and durable recovery from the current crises and pre-empt a lost decade for development.
- The new, technology-driven, sustainable growth story represents the greatest investment opportunity since the Industrial Revolution. The private sector will provide most of this investment but public–private partnerships in policy, innovation and finance are essential. The opportunities are there for all countries.
- There are also immediate challenges of climate vulnerability. All countries are affected but poorer countries have already suffered particularly severe losses from the impacts of climate change. There should be strong international support in their efforts to build resilient economies.
- An international, shared strategic agenda, including on goals, finance and trade, will enhance the confidence necessary for investment – and for technology, particularly AI. Cooperation around the international financial system and the flow of both private and public investment in EMDEs is crucial. The substantial expansion and reform of the multilateral institutions will be at the core of this finance.
Writing team: Nicholas Stern, Mattia Romani, Amar Bhattacharya, Danae Kyriakopoulou, Hans Peter Lankes, Jeremy Oppenheim, Isha Patel, and Katherine Stodulka.