Counting the cost of carbon: Low Carbon Economy Index 2011

In terms of carbon productivity, the G20 economies have moved from travelling too slowly in the right direction, to travelling in the wrong direction. For the first time we have made no improvement in our rate of decarbonisation. We have in fact increased the carbon intensity of growth. The economic recovery, where it has occurred, has been ‘dirty’.

So concludes PwC’s counting the cost of carbon: Low carbon economy index 2011. In this third edition of our report, we:

  • assess the G20 countries’ achievements in reducing their carbon intensity levels - defined as the ratio of emissions to GDP - since 2000, and
  • analyse the distance each nation must still go to meet carbon reduction targets by 2050.

Leo Johnson and Jonathan Grant from PwC’s Sustainability and Climate Change team discuss the finding of the report and their implications.

Video transcript

Key findings:

  • Most G20 countries saw an increase in carbon intensity – a dirty recovery from the recession of 2009.
    Many of the G20 countries (both developed and developing) saw an increase in carbon intensity: a dirty recovery for those economies that were in recession in 2009.  This trend towards higher carbon intensity may have several explanations including the cold winters in the northern hemisphere at the beginning and end of 2010, the fall in the price of coal relative to gas, and a drop in renewable energy deployment.
  • Carbon intensity will have to reduce at 4.8% each year until 2050 to achieve the 2 degrees Celsius goal
    The decarbonisation goal required to limit warming to 2 degrees, will now require reductions in carbon intensity of at least 4.8% every year until 2050.  This compares with a 2% per year reduction in carbon intensity had we started in 2000.  Only in exceptional circumstances have countries sustained a rapid reduction in their carbon intensity.
  • From 1980-2010, no country has sustained decarbonisation rates close to 4.8% per year
    Over the period 1980-2010, no country has sustained decarbonisation rates even close to the 4.8% that is now required. Except for China in the 1990s, none of the G20 countries achieved the 4.8% reduction per year in any decade since 1980.  The six countries that did reduce carbon intensity by more than 3% during individual decades have done so in unique circumstances only. For example, among the developed countries, France decarbonised at 4.2% per year during the 1980s by increasing the share of nuclear in their energy mix from 7% to 33%. The UK decarbonised at 3.0% per year in the 1990s during a ‘dash’ for gas power generation which replaced coal generation.
  • Innovative financing is key to achieving a low carbon economy
    Many countries are trying to scale up the deployment of renewable generation.  But their high cost and the financing challenge are significant barriers to the transition to a low carbon economy.  Addressing some of the institutional and risk-related barriers to these technologies is necessary, but not sufficient for large scale economy-wide deployment.  Innovative financing mechanisms which leverage private finance with public funding, and other targeted incentives are necessary to make the transition to a low carbon economy viable and affordable.