The Low Carbon Economy Index 2018

Time to get on with it

Emissions are on the rise again as the shift towards low carbon energy lags behind global economic growth. The Paris Agreement target of limiting warming to two degrees looks even further out of reach. There's no shortage of solutions - governments and business just need to implement them.

Last year, global GDP grew by 3.8%, largely due to rapid growth in emerging economies such as China and India. This economic growth went hand in hand with a rise in global energy demand of 2.1%; more than twice the rate in 2016. As most of the increased energy demand was met with fossil fuels, global emissions are now on the rise again - by 1.1% - having plateaued for the past three years.

Carbon intensity continued to fall at a rate consistent with the previous few years, at 2.6%. But even this falls short of the 3% average decarbonisation rate needed to meet the weak national targets pledged in the 2015 Paris Agreement. The gap between the current decarbonisation rate and that needed to limit global warming to two degrees is widening.  It’s now 6.4% per year for the rest of this century. There seems to be almost zero chance of limiting warming to well below two degrees (the main goal of the Paris Agreement), though widespread use of carbon capture and storage technologies, including Natural Climate Solutions, may make this possible. Each year that the global economy fails to decarbonise at the required rate, the two degree goal becomes more difficult to achieve.

The IPCC is launching a special report in mid-October on the impacts of global warming of 1.5 degrees above pre-industrial levels and related emissions pathways. Our Low Carbon Economy Index shows just how challenging it will be to achieve an emissions pathway to 1.5 degrees.  The carbon budget for 1.5 degrees is even smaller and the reduction trajectory even steeper.

New technologies have the potential to bring about disruptive systemic economic and social change and reduce emissions. For example, our analysis on A-EVs shows that, in one scenario, a systemic deployment of Autonomous-Electric Vehicles alone could bridge one third of the emissions gap needed to limit warming to two degrees. But this would also require a paradigm shift in vehicle ownership models. Other 4IR technologies such as Blockchain also have the potential to disrupt the existing high carbon economic model.

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Back to black

Coal consumption returned to growth, rising by 1%. This has been the biggest factor in emissions changes in recent years and, in China, grew by 3.5 Mtoe. Although it remains below the 2013 peak, growth in coal demand was also driven by countries such as Turkey (12.7%), Indonesia (7.4%) and India (5%) - where coal still remains the largest energy source. All three of these countries have seen high GDP growth, as well as growth in their heavy industrial sectors.

Scaling renewables

Wind, solar and other renewable energy sources grew rapidly, increasing by 17%. Solar energy was the fastest growing energy source, with an overall growth of 35%, including 41% in the US, 76% in China and 87% in India. This was largely driven by falling prices and increased government investment, particularly in China, which accounted for almost half the solar panels installed.

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The Holy Grail? Some countries are sustaining the low carbon transition

China has retained its leading position among the G20 with a decarbonisation rate of 5.2%. This takes it to a 41% reduction in carbon intensity over the past ten years, and demonstrates the potential for economies to drive year-on-year progress. GDP growth in China was driven primarily by growth in services, high-tech and equipment manufacturing as well as technological upgrading, while investment in energy intensive industries fell, thereby making growth greener.

The remaining top performers - Mexico, Argentina, the  UK and Brazil - were all able to reduce emissions while growing their economies. This year, the UK has sustained progress with a decarbonisation rate of 4.7%. The Latin American countries were able to move up the index due to growth in renewables. Mexico achieved a 5% reduction in carbon intensity in 2017, building on solid decarbonisation rates seen in previous years.

but no one is on track for two degrees…

In contrast with our report last year, not one of the G20 countries achieved the 6.4% rate required to limit warming to two degrees this year. That goal is slipping further out of reach - at current levels of decarbonisation, the global carbon budget for two degrees will run out in 2036.


Explore how countries perform on the 2018 index

Our Low Carbon Economy Index tracks the rate of the low carbon transition in each of the G20 economies and compares this with their national targets. Top performers in 2017 are China, Mexico, Argentina and the UK, as they exceeded their NDC targets. However, these countries are the exceptions rather than the rule - the rest of the G20 didn’t do so well.

Please select an indicator from the first menu to view the results across all G20 countries or use the second menu to view all the indicator data for a single country.

 

 

 

A closer look at the best performing countries

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.  

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 demand fell while oil consumption remained constant. These fossil fuels were replaced with renewable sources and there was also a marginal reduction in energy use. Another cause of the lower rate was relatively low GDP growth in 2017, 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.
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 demand fell while oil consumption remained constant. These fossil fuels were replaced with renewable sources and there was also a marginal reduction in energy use. Another cause of the lower rate was relatively low GDP growth in 2017, 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.

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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.

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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.

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Contact us

Jonathan Grant

Director, Sustainability & Climate Change, PwC United Kingdom

Tel: +44 (0)20 780 40693

Lit Ping Low

Assistant Director, Sustainability & Climate Change , PwC United Kingdom

Tel: +44 (0)20 7804 0345

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