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Net Zero Economy Index 2021

Code Red to Go Green

Global decarbonisation was only 2.5% in 2020. Achieving the Paris Agreement goal of limiting warming to 1.5°C and delivering net zero requires more than a five times increase in the rate of global decarbonisation every year, and must start now.

The Intergovernmental Panel on Climate Change (IPCC) in their recent report issued a code red that there is more than a 50% chance that we will reach 1.5°C warming within the next two decades if emissions continue at their current rates.

Whilst many countries have strengthened their commitments, it is clear that ambition is nowhere near enough to keep global warming to 2°C let alone 1.5°C. It is in this context that this year’s Net Zero Economy Index examines the rate of decarbonisation needed to deliver a 1.5°C aligned net zero world by 2050 and examines how G20 member states are faring against what is required.

The global picture in 2020

Carbon Intensity

Figure 1: Net Zero Economy Index 2021

“COVID-19 and climate change have exposed the systemic vulnerabilities of our economies and societies. As we tackle both threats concurrently, now is the moment to take deliberate, concerted, and timely action to build a cleaner, greener, fairer, healthier, more resilient global society. We have less than a decade to halve global emissions and put us on a net zero by mid-century trajectory.”

Ian P. Milborrow, PwC Sustainability & Climate Change Partner

A 12.9% annual global rate of decarbonisation is now required to limit warming to 1.5°C. In 2020 the rate of global decarbonisation - the reduction in carbon intensity or energy-related CO2 emissions per dollar of GDP - was 2.5%. This rate represents a very slight improvement from last year’s rate of 2.4%, but is still significantly lower than the annual global rate of decarbonisation required to achieve the 1.5ºC goal. 

Whilst the impact of COVID-19 continues to be felt across the world, many countries are beginning to lift restrictions. With it we are seeing a resurgence in economic activity and a rebound in emissions. The growth in emissions during 2021 has been driven by an increase in demand for coal in electricity generation. Despite efforts by some governments to stimulate a green recovery, global energy demand is set to increase by 4.6% in 2021 – led largely by emerging markets and developing economies.

Net zero quote

G20 performance

Net Zero Economy Index 2021 - G20 performance across energy-related CO2 .

Table 1: Net Zero Economy Index 2021 - G20 performance across energy-related CO2

The PwC Net Zero Economy Index tracks the rate of decarbonisation of the G20 across energy-related CO2 emissions. Within the G20, Mexico and Indonesia recorded the highest rates of emissions reductions relative to their economic growth. Across these countries, energy-related emissions fell by 12.4% and 10.6% respectively on 2019 levels, largely due to economic restrictions in response to the pandemic. These results are expected to be an isolated occurrence rather than evidence of a longer-term trend as each country has announced plans to invest in fossil fuel production in 2021. None of the G20 member states achieved the 12.9% rate of decarbonisation now required to limit warming to 1.5°C.

COP26 cannot fail to deliver

COP26 needs to raise government ambition further

The overarching aim of the forthcoming climate summit in Glasgow - COP26 - is to mobilise stronger and more ambitious climate action from governments to keep the 1.5°C Paris Agreement goal within reach. This will require a significant strengthening of climate commitments from all countries, and especially from the G20, as without concerted action from this group the chances of limiting warming to 2°C let alone 1.5°C will all but disappear.

Energy related emissions
Average rate of decarbonisation

Time for all businesses to commit, plan and act

Making the transition to a more environmentally and socially responsible world is now an urgent business imperative. We have less than two business cycles left to deliver the necessary changes.Working alongside governments, and providing the mandate and impetus for them to go further and faster, is vital if we are to keep warming to 1.5°C and avoid catastrophic climate change. By taking firm and decisive action now to halve global emissions by 2030 and reach net zero emissions by no later than 2050, we have a chance to succeed.

Converting climate pledges into action

Governments have a pivotal role to play in creating the enabling environment for the transition to net zero through policy and regulatory reform and investment. National targets need to be underpinned by policies that will deliver change at the pace and scale required. These policies will vary by nation, depending on the socio-political and economic context, but need to set the regulatory environment that businesses and individuals operate within, and encourage capital to be deployed to the right places. This requires clear overarching strategy and ambition, long-dated policy mechanisms and the removal of fiscal or other disincentives.

Net zero figures

Private sector focus on net zero shifts from ambition to execution

We have seen an unprecedented number of net zero commitments by the private sector in the last 18 months. Over 3,000 businesses are now part of the Race To Zero Campaign, joining 733 cities, 31 regions, 173 of the biggest investors, and 622 Higher Education Institutions. Alongside 120 countries, they form the largest ever alliance committed to achieving net zero emissions by 2050 at the latest, collectively making up nearly 25% global CO2 emissions and over 50% GDP.

Over half the sectors that make up the global economy are now committing to halve their emissions within the next decade and achieve near-term emissions reductions targets. In each of these sectors, at least 20% of the major companies by revenue are aligning around sector-specific 2030 goals - in line with delivering net zero emissions by 2050.


* Global carbon budgets refer to the global estimated budget of fossil fuel emissions taken from the IPCC Special Report on Global Warming of 1.5°C. A series of assumptions underpin these carbon budgets, including the likelihood and uncertainties of staying within the temperature limits, and the use of carbon dioxide removal (CDR) technologies.

Sources - bp, World Bank, OECD, UNFCCC, PwC data and analytics
Notes - GDP is measured on a purchasing power parity (PPP) basis.

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Contact us

Ian Milborrow

Ian Milborrow

Partner, PwC United Kingdom

Tel: +44 (0)7738 845072

Kiran Sura

Kiran Sura

Assistant Director Sustainability & Climate Change, PwC United Kingdom

Claire Monkhouse

Claire Monkhouse

Senior Manager, Sustainability and Climate Change, PwC United Kingdom

Tel: +44 (0)7711 562127

Josh Huntley

Josh Huntley

Associate, Sustainability & Climate Change, PwC United Kingdom

Tel: +44 (0)7483 407354

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