A decarbonisation rate of 11.7% per annum is now required to keep warming within 1.5°C – five times greater than what was achieved prior to the pandemic (2.4%), according to new analysis from PwC.
The PwC Net Zero Index shows that, based on current trends in energy consumption and CO2 emissions generation, the century’s global carbon budget would be used up by the end of this decade. It sets the scene for a decade requiring unprecedented progress in solutions, investment, skills and technology transformation across business, government and society. As global economies plan their emergence from the pandemic, the Index provides a warning sign of the risks of a return to “business as usual” in the race to recover and generate new growth.
For the last 10 years, PwC UK’s Index has modelled economic growth and energy-related CO2 emissions data, against the rates required to achieve the aims of the Paris Agreement. It tracks how economies are progressing in breaking the link between economic growth and increases in energy-related carbon emissions.
Tracking a complete year of energy and economic data from 2019 (the most recent available), this year’s Index shows that progress in decoupling energy-related CO2 emissions growth from economic growth slowed. In 2019 global energy-related CO2 emissions increased by 0.5% with economic growth of 2.9%. Carbon intensity fell by 2.4% which is above the long term average decarbonisation rate of 1.5%, but falls way short of the progress required to keep global temperature rise below 1.5°C .
Dr Celine Herweijer, Global Climate Change Leader, and Partner at PwC UK, said:
“Every year we underachieve on cutting carbon, the task gets tougher and the transition required is more radical. We now need decarbonisation and ultimately transformation of companies, industries and geographies at an unprecedented scale and speed. The good news is that when public policy, public interest, technological innovation and investment line up, we can see how fast systems can transform – the automotives industry today being a case in point.
“The pandemic-related dip in global emissions this year will rebound quickly as economies emerge and fully open up, but swift action is needed to rebuild with the clean infrastructure, technologies, and solutions that are fit for the future. The wave of businesses, investors, and governments committing to ambitious net zero targets in 2020, is a promising sign that a shared sense of urgency is emerging. We have just over two business cycles to transform every sector of the global economy to halve global emissions. Put simply, we are in the pivotal decade.”
The UK can lead by example to raise the global ambition
The UK has had the highest long term level of decarbonisation in the analysis, maintaining a decarbonisation rate of 3.7% over the duration of the 21st century, and achieving a high rate of reduction of emissions relative to economic growth in 2019. The country tracked a decrease in consumption of coal, natural gas and oil, whilst expanding production of renewable energy, most notably wind, which is a key part of the UK government’s 10-point plan for a green recovery.
However, to deliver on its net zero emissions target, the UK will need to continue to invest heavily, to the tune of £400 billion in green infrastructure and renewable energy sources. A simultaneous decarbonising of the rest of the economy, including the hard to abate sectors such as aviation and maritime, will also be necessary.
With the UK preparing to host heads of state for the next climate summit in Glasgow, and the Climate Change Committee (CCC) presenting the world’s first detailed route map for a fully decarbonised nation in its Sixth Carbon Budget, the UK has the chance to position itself as a true climate leader.
Commenting on the UK’s climate efforts, Kiran Sura, Assistant Director in the Sustainability & Climate Change team at PwC UK, said:
“We need to up our emissions reduction game significantly and quickly. Rapid reductions now consistent with 1.5°C emissions trajectory, would not only mitigate longer term climate risk but could also deliver benefits before mid-century. The UK’s new 10-point plan for a green industrial revolution and enhanced nationally determined contribution to reduce emissions by 68% by 2030 against 1990 levels, are big steps forward in delivering the ambition required. These recent commitments reaffirm the UK’s climate credentials and give it strength as joint COP26 President to guide the international community to collectively do more.”
Emissions and energy consumption
As global economies plan their emergence from the pandemic, the Index provides a warning sign of the risks of a return to “business as usual” in the race to recover and generate new growth.
Going into 2020, across the world, fossil fuels continued to dominate, with 57% of the increase in energy consumption met by natural gas and oil alone. Energy-related CO2 emissions were up 0.5%, as global energy consumption increased by 1.3%.
2019 saw a decline in coal consumption for the first time since 2016 (0.6% decline). There were steady increases in the consumption of oil (0.8% growth) and natural gas (2.0% growth). On renewables, despite record growth rates in wind (12.1%) and solar (23.8%), overall they accounted for just 11% of global energy consumption.
The Net Zero Economy Index also reveals that:
- For the second year in a row, Germany recorded the highest decarbonisation rate of the G20 (6.6%). However, this rate would still need to be roughly doubled to be consistent with a 1.5°C trajectory.
- Korea, the US and the UK also succeeded in reducing their emissions while growing their economies – but far behind the decarbonisation rate needed to limit warming to 1.5°C.
- South Africa and Indonesia reported an increase in carbon intensity for consecutive years.
- The EU has made good progress in decarbonising power systems through renewable energy technologies, notably offshore wind and solar. But meeting enhanced targets under the European Green Deal and Paris Agreement will require more significant systems transformation.
- With GDP growth of 6.1% in 2019, energy-related CO2 emissions in China grew by 3.2%, while carbon intensity fell by 2.8%. China is growing across all energy sources. Solar and wind output in China makes up 29% of the overall global share, growing tenfold since 2010.
- Structural shifts in natural gas and renewable energy costs in the US drove a decarbonisation rate of 4.7%.
COVID-19 recovery packages now present a unique opportunity to focus and accelerate cleaner and more sustainable infrastructure and industry, while generating new business and employment opportunities.
Dr Celine Herweijer, Global Climate Change Leader, and Partner at PwC UK, added:
“Net zero transition needs to be mainstreamed into spending and policies as part of the pandemic recovery. Where “green spending” for example on clean energy or transport infrastructure, is accompanied by substantial investment into higher-carbon legacy infrastructure and technologies, decarbonisation efforts will be dragged down. Net zero commitments – whether from nations, companies or investors – will require integrating the transition into all decision-making. It’s about backing the future.”
Looking ahead, Celine concluded:
“To put the world on a path to reach net zero latest by 2050, COP 26 in 2021 needs to be the pivot point for stronger commitments matched with practical action from industry, finance and government. There’s no time to waste, and with focused innovation, skills development, and investment there’s huge opportunities to build back sustainable growth.”