The rate of decarbonisation required to achieve the 1.5°C objective set out in the Paris Agreement is even more challenging, following a short-lived covid related decline in global emissions.
PwC’s latest Net Zero Economy Index finds that a decarbonisation rate of 12.9% (up from 11.7% last year) is now required to achieve the 1.5ºC climate goal - more than five times greater than what was achieved over the last year (2.5%) and eight times faster than the global average over the course of the 21st century.
Tracking a complete year of energy and economic data from 2020, PwC’s Net Zero Index shows that, in 2020, due to the impact of Covid, energy demand fell by 4.3%, leading to a reduction in energy related emissions of 5.6% (from 2019 levels) and a fall in total global emissions. There was a notable 4.6% reduction in coal consumption and 9.3% reduction in oil consumption. However, as economic activity rebounds worldwide, so do emissions, driven by an increase in demand for coal in electricity generation in particular.
In last year’s report we asked if 2020 would be an inflection point that provides the opportunity for businesses and governments to reset and invest for the long-term goal of net zero emissions, as they emerged from the pandemic. While we have seen trillions of dollars poured into environmentally relevant stimulus, support has also been provided to fossil fuels and energy-intensive industries.
Kiran Sura, Assistant Director in the Sustainability & Climate Change at PwC UK, said:
“Although some of the stimulus to help economies recover from covid has targeted a green recovery - such as measures to improve energy efficiency, the uptake of electric vehicles and investment in green infrastructure - the opportunity has largely been missed. The response fails to match the scale and urgency of the climate crisis. We are already seeing a sharp rebound in emissions as things return to business-as-usual in a decade where aggressive reductions are needed to keep the 1.5°C goal alive .”
The UK can lead by example and raise global ambition
The UK achieved a 6.5% rate of decarbonisation in 2020. This was linked to a significant reduction of 15.7% in energy related emissions as a result of the pandemic. For the UK to deliver on its climate commitments and align with the 1.5°C Paris goal it will need to significantly accelerate progress on decarbonising the economy.
Commenting on the UK’s climate efforts, Kiran added:
“The UK has pledged a world-leading target to cut emissions by 78% by 2035 and it will need to employ every lever at its disposal to make good on this commitment. This includes bold climate policy reform, providing clear signals to the market through stronger regulation and using fiscal and monetary policy levers to not only accelerate the transition, but critically to also deliver a just transition.”
The Net Zero Economy Index also reveals that:
Mexico and Indonesia recorded the highest rates of emission reductions relative to their economic growth at 12.4% and 10.6% respectively. These results are expected to be an isolated occurrence rather than evidence of a longer-term trend as economic activity resumes and both countries have announced plans to invest in fossil fuel production in 2021.
No country in the G20 was able to achieve the 12.9% rate of decarbonisation required to limit warming to 1.5°C
COP26 needs to mobilise stronger and more ambitious climate action from governments to keep the 1.5°C goal within reach. This will require a significant strengthening of climate commitments from all countries, and especially from the G20.
Commenting on the risk and opportunity, Ian Milborrow, sustainability and climate change partner at PwC, said:
“Covid 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. The net zero transition presents both risk and opportunities. Continued inaction will expose business to the loss of markets, reputational damage, regulatory pressure or the physical risks of climate change itself, all with associated costs. However early actions can help businesses to capitalise on new opportunities and enhance long term strategic resilience.”
Looking ahead, Kiran Sura concluded:
"World leaders need to heed what the climate science is telling us - we need higher ambition and an acceleration of action to keep 1.5°C in striking distance. The window of opportunity is narrow so it’s imperative we see more decisive action from world leaders. We also need to ramp up efforts to enhance adaptation and build resilience globally to manage the impacts of climate we have already locked in, especially for those countries on the frontlines of climate change who are least able to adapt. COP26 needs to deliver action on all fronts.”
Notes to editors
About the Net Zero Economy Index: The Net Zero Economy Index tracks the decarbonisation of energy-related CO2 emissions worldwide. The analysis is underpinned by the BP Statistical Review of World Energy, which reflects carbon emissions based on the consumption of oil, gas and coal for combustion related activities. The analysis does not consider emissions from other sectors (e.g. AFOLU) or from any other greenhouse gases, and does not allow for any carbon that is sequestered. As a result, this data cannot be compared directly with national emissions inventories.
The report estimates the rate of global decarbonisation needed to deliver a 1.5°C aligned net zero world by 2050. The analysis compares the current rates of decarbonisation of G20 member states - representing 80% of global GDP and around 75% of global emissions - against what the science tells us is required. The report examines some of the recent climate policy announcements of the G20 and considers the potential for these to accelerate rates of decarbonisation and their implications for business.
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