What it will take to decarbonise the economy

Low Carbon Economy Index 2014 | 2 degrees of separation: ambition and reality

In the 6th year of our Low Carbon Economy Index, we face an unmistakeable trend in the data, which is that each year, the global economy has failed to decarbonise beyond business-as-usual, and that economic growth remains entwined with carbon. With each year of delay in addressing climate change, the decarbonisation challenge increases.

With current trends leading to a 4oC world, Jonathan Grant looks at what it takes to decarbonise the economy.


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All governments are signed up to the goal of limiting warming to 2 degrees. So each year we track their emissions per unit of GDP, or carbon intensity, and each year we find they’re coming up short, leaving more and more to do.

On current trends, a 4 degree world is a real possibility – raising the threat of significant costs of climate impacts in the longer term. While governments still talk about 2 degrees, currently, their pledges aren’t nearly ambitious enough, and put us on track with 3 degrees of warming. And even this risks more extreme weather and food price shocks.

The numbers show that carbon intensity is falling at around 1% each year, mostly the result of energy efficiency improvements. In 2012 we calculated that the decarbonisation rate should be 5.1%. Last year it was 6.0%, and this year it has risen to 6.2%.

6.2% may not sound much – it’s roughly what the U.S. managed to achieve one year during its shale gas revolution, and France achieved 4% when it switched to nuclear power in the eighties – but this rate needs to be maintained every year for decades, requiring a revolution in power, transport, buildings and industrial processes.

One revolution is in electricity, where there are positive signs that investment in renewables is outpacing investment in coal, and that prices of renewable generation are coming down. And in the transport sector we are finally seeing electric cars in the market that we'd really like to drive.

But the real challenge will be in decarbonising the energy intensive sectors such as steel, cement, glass and chemicals, which are the main building blocks of our economy. Renewables may have a more limited role here, so perhaps carbon capture is the most viable option. Either way, decarbonising these sectors will add significant costs in the short term, which would be a drag on economic growth. We appear to be caught between large near term costs of mitigation or extremely large costs of climate impacts in the longer term. So, either pay now for 2 degrees, or pay more later, in a 4 degree world?