The AI revolution mirrors the green transition

The AI revolution and the green transition are reshaping the global economy, requiring trillions in upfront investments for long-term benefits. AI promises cost cuts and productivity gains, while the green transition aims to contain climate change and eliminate economic risks from fossil fuel shocks.

CHICAGO/NEW YORK — The artificial intelligence AI race is already generating forces that are transforming the global economy. That makes it surprisingly similar to the green transition, given the potential of both to upend traditional industries, labor markets, and geopolitical balances. Both call for trillions of dollars in upfront investments in exchange for significant benefits over the medium and long term. The promise of AI is that it will cut unnecessary costs, boost labor productivity, and help humans solve previously intractable problems. Equally, the green transition would do nothing less than contain climate change, the mother of all global externalities. It would eliminate the risk of both “climateflation” higher prices caused by climate-driven supply shocks and “fossilflation” when hydrocarbon supply shocks, like the one caused by the current closure of the Strait of Hormuz, reverberate through the world economy . It would also improve public health, increase economic resilience, create jobs, preserve fragile ecosystems, and deliver many additional benefits.