Global economies must lower carbon emissions at five times the levels currently achieved

carbon tax 5PwC analysis of economic growth rates and greenhouse gas emissions data for G20 economies

PwC’s climate change analysts estimate that the global economies need to cut their energy related carbon emissions for every $ of GDP by 6.2% every year from now to 2100. That is more than five times the rate currently achieved.

The annual PwC Low Carbon Economy Index, 2 degrees of separation – ambition & reality, analyses the risers and fallers in terms of carbon efficiency of the G20 nations, with an analysis of the E7 and G7 group of nations. The PwC Low Carbon Index calculates the rate of decarbonisation of the global economy that is needed to limit warming to 2⁰C. The analysis is based on the carbon budget estimated by the Intergovernmental Panel on Climate Change (IPCC) for 2⁰C.

The annual PwC Low Carbon Economy Index, 2 degrees of separation – ambition & reality, analyses the risers and fallers in terms of carbon efficiency of the G20 nations, with an analysis of the E7 and G7 group of nations. The PwC Low Carbon Index calculates the rate of decarbonisation of the global economy that is needed to limit warming to 2⁰C. The analysis is based on the carbon budget estimated by the Intergovernmental Panel on Climate Change (IPCC) for 2⁰C.

The reduction target is an estimate of how much countries need to reduce their energy related emissions by, while growing their economy, in order to limit global warming to 2⁰C. 2⁰C of warming is the limit scientists agree is needed to ensuring the serious risks of runaway climate change effects are avoided.

For the sixth successive year of analysis, the Low Carbon Economy Index, finds that the global carbon intensity (greenhouse gas emissions per $GDP) reduction target has been missed. The gap between what countries are doing and what’s needed continues to grow.

Current total annual energy-related emissions are just over 30GtCO2 and rising, on the back of GDP growth of 3.1%. In the same period, carbon intensity was reduced by only 1.2%, a fraction of what was needed. As a result the global challenge going forward is tougher than before – averaging 6.2% every year, to 2100.

Australia tops the Index for the second year in a row recording a decarbonisaton rate of 7.2% over 2013. The Index finds the UK is the most improved nation in terms of reducing carbon emissions per unit of GDP, after rising from almost the bottom of the table last year. China, South Africa and Italy also perform well – achieving a decarbonisation rate of between 3% and 5%. But the US, Germany, Brazil, France and India fall in the ranking in that they increased their carbon intensity over 2013. A revival of the use of coal in the US, driven by falling coal prices and rising gas prices, is a major factor in the low US position.

Current rates of carbon intensity mean the total amount of carbon the IPCC have advised the world can emit this century to limit climate change to 2⁰C, will be depleted within 20 years.

The report comes just two weeks before a UN summit on climate change in New York (23 September) to be attended by world leaders, aiming to up the ante on national commitments to reduce GHG emissions.

Jayne Mammatt, a Partner within PwC’s Sustainability and Integrated Reporting Department, says: “It is welcoming to note that South Africa is recorded as one of the top performers in fifth place on the Index for a developing country, – the country records a decarbonisation rate of 3% over 2013. Although there is a genuine attempt on the part of businesses to reduce their carbon emissions, and an overall awareness in climate change and in renewable energy, more needs to be done by business to reduce carbon emissions. Although as yet there is no legislation in South Africa that governs the reduction of carbon emissions, taxation that supports the country’s reduction of emissions is on the horizon and will be implemented in 2016.”

South Africa is regarded as one of the dirtiest energy producers due to its heavy reliance on coal. The county is responsible for 1.3% of global energy emissions, and is the 12th largest emitter of CO2 emissions in the world. The country is responsible for nearly half the CO2 emissions for the entire continent of Africa.  The Government has pledged to the UN an emission reduction target of 34% by 2020 and a further 42% by 2025 from a ‘business as usual’ trajectory.

 

Growth in renewable energy is emerging as a core part of the national energy mix. Across the world, the use of renewable energy, excluding hydroelectricity, grew this year by 16%. The largest rates of renewables growth are observed in air and wind energy. Wind energy witnesses strong growth, particularly in Africa, Latin America and Asia. These regions account for one-third of global wind energy generation.

Mammatt comments: “After a decade of carbon inertia, globally we are way behind, and now need to decarbonise at more than five times our current rate to avoid 2⁰C. However, there are reasons for optimism. The E7 has woken up to the business logic of green growth, decarbonising faster than the G7 for the first recorded time. And globally renewables are emerging fast. As they approach cost parity the stage is set for a policy framework that shifts subsidies away from fossil fuels and accelerates the renewables rollout.

“Making up for the inadequacy to date will be technologically harder, financially costlier, and climatically riskier in the future.”

However, the analysis shows encouraging signs that momentum is building in critical areas for low carbon economic growth:

  • The E7 outperformed G7 in carbon reduction (1.7% vs. 0.2%) for the first time in six years, indicating how it can be possible to maintain economic growth while slowing the rate of growth in emissions.
  • Renewable electricity generation, excluding hydroelectricity, grew at 16% – a continuing trend for the last decade with double digit growth every year. Renewables now account for nearly 10% of total energy mix in six of the G20 economies.

The research also shows the disconnect between the global climate negotiations aiming for a 2⁰C limit on global warming, but national pledges may only manage to limit it to 3⁰C, and current trajectory actually is on course for 4⁰C.

The analysis describes as “unforgiving”, the timeline to achieve what is now necessary in terms of carbon emissions reduction:

  • Annual energy-related emissions in the G20 bloc need to fall by one-third by 2030 and just over half by 2050 to stay within the 2⁰C budget.
  • Collectively, the G7 group needs to almost double its decarbonisation to 3.9% annually between 2014 and 2020. They have achieved an average decarbonisation rate of 2.3% between 2010 and 2013. Absolute carbon emissions (i.e. not just those related to energy) need to fall by 44% by 2030 and 75% by 2050 compared to 2010 levels.
  • For the E7, a carbon intensity reduction of 8.5% per annum is required from 2020, followed by further reductions of 5.3% a year from 2030 to 2050 to stay within the 2⁰C budget.

 

Mammatt, comments: “What we’ve seen over the past 12 months is a subtle change in the carbon rhetoric. The costs of climate inaction – from flooding to energy costs to commodity pricing, to food insecurity – appear to be growing stronger. A broader recognition is needed by both business and political leaders that taking decisive action to avoid the extremes of climate change is a pre-condition for sustained economic growth.”

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