UK: setting records in the low carbon transition
The UK remains at the top of the G20 leaderboard for its long-term decarbonisation rate since 2000, although its rate last year was 4.7%, a little lower than the year before. In 2017, emissions fell by 2.9% as coal and gas consumption fell while oil consumption remained constant. These fossil fuels were replaced with renewable generation and there was also a marginal reduction in energy use. On 22 April 2017, Britain went a full day without using coal to generate electricity for the first time since 1882.
Another cause of the lower rate was relatively low GDP growth last year, which some suggest is the result of squeezed household spending power from inflation and uncertainty around the prospect of leaving the EU in March 2019. The UK’s GDP growth has been driven primarily by consistent and strong growth in the service sector, while construction output fell and manufacturing growth remained relatively low compared with other parts of the economy.
Fossil fuels remain the dominant source of energy and still account for 80% of the UK’s primary energy in 2017, a drop of 1% compared to 2016. Oil and gas dominated the fossil fuel share, with coal only accounting for 5% of the total energy mix due to rapid reductions recently in the use of coal for power generation.
The UK has continued to scale-up electricity supply from renewable sources. This will need to meet the growing electricity demand as the wider energy sector is electrified and to facilitate the reduction in fossil fuels. The UK saw a 33% increase in wind energy, and a 22% increase in solar capacity. On 26 May 2017, Britain generated a record amount of solar power - 8.7 GW representing 24.3% of total generation across the UK. This trend is set to continue. A second auction of contracts for difference was held last year and secured 3.3GW of capacity, mainly offshore wind, achieving record low prices. The government has said it will support up to 10GW of offshore wind in the 2020s.
Following the success in decarbonising the electricity sector, achieving the UK’s Clean Growth Strategy will depend on investments in other sectors, such as transport, buildings and industry. For example, while record growth in electric vehicle sales was seen in 2017, accelerating electrified transport will require large investments in charging infrastructure. The Road to Zero Strategy will see £1.5bn of investment into electric vehicle development in order to phase out all fossil fuel car sales by 2040.
China: leading the way in renewable investment
China is the top performer in the index, with a decarbonisation rate of 5.2%. This follows a consistent trend seen over previous years, with China reducing its carbon intensity by around half over the past 10 years.
With high GDP growth of 6.9%, China still saw energy demand rise and a 1.4% increase in emissions. This growth was largely due to the growing investment in infrastructure, real estate and heavy industry, high consumer spending and thriving exports.
Coal use in China marginally increased by 1% in 2017, following several years of reductions in consumption. Levels in 2017 still remained 3.5% below a peak reached in 2013, and the proportion of coal in the overall fuel mix also continued to decline. The rise in coal consumption is attributed to new coal-fired power generation plants being opened - a trend seen in other emerging economies. Despite this growth, political signals do not suggest that coal consumption will grow long term in China again as pollution control is at the top of the political agenda.
China also saw the highest percentage increase in use of natural gas, at 15%. This is largely associated with efforts to clean up residential heating and small industrial boilers that previously relied on coal.
Despite growth of fossil fuels, China has positioned itself as a global engine for renewable deployment. It has made significant strides toward meeting its pledge under the Paris Agreement to generate 20% of its energy in 2030 from low-carbon sources. Renewable power generation rose by 25 Mtoe in 2017, with a 71% increase in solar energy, and a 20% increase in wind energy.
China has also continued to scale research and development of renewable energy sources, and now produces 60% of all solar cells worldwide. While recent policy action to remove subsidies from solar may slow domestic investment, this could drive down the price of the technology and encourage growth elsewhere. China also intends to support investment in renewables across the world through its One Belt One Road initiative, announced in 2017.
Latin America: action on targets in the Paris Agreement
Latin American countries such as Mexico, Argentina and Brazil are moving up the index and now feature in the top five. These countries have set ambitious targets to reduce fossil fuel consumption and grow renewables and have directed investment to scale renewable power, particularly in wind and solar.
Mexico is at second place in the index this year and has seen year-on-year decarburisation rate improvements, from 4.4% in 2015, to 4.6% in 2016 and 5% in 2017. Mexico has reduced its total energy consumption by 3% this year. It's also made steps towards achieving its pledge under the Paris agreement to cut its GHG emissions by 25% compared with business as usual (BAU) levels by 2030. For example, solar output grew by 46% in 2017, whereas Mexico has reduced its total energy consumption by 3% . Following recent energy reform, Mexico has held a series of private auctions that are set to see another nine solar projects totaling 1.7 gigawatts, and now holds the record for cheapest average solar bids in the world. The additions in clean technologies would allow the mitigation of around 54 million tons of CO2eq (MtCO2eq) by 2030. Moreover, wind and solar generation would represent 70% of the total clean energy additions in 2032.
Similarly, Argentina has declared 2017 the year of renewable energy and has launched an ambitious renewable energy bidding program. While the consumption of fossil fuels fell slightly, hydroelectricity, wind and solar grew.
Brazil has the largest installed hydropower capacity in South America and is the second largest producer of ethanol globally. The country is building on this progress in renewables to scale up wind and solar power. Almost 85% of the country’s installed solar capacity is represented by 935 MW of large-scale solar plants contracted by the Brazilian government that became operational at the end of 2016. Wind power is also fast growing in Brazil, with a 28% increase in capacity 2017. This forms part of a national target for wind to account for 12% of the power mix by 2026, up from 4% in 2017.