The Low Carbon Economy Index 2017

Is Paris possible?

Tracking the progress G20 countries have made to decarbonise their economies since 2000. Join the conversation on Twitter: #LCEI

Is Paris possible?

Not at this rate

In 2016, global GDP growth was 3.1% but emissions showed signs of stabilising, growing by only 0.4%. This means carbon intensity – emissions per dollar of GDP – fell by 2.6% in 2016.  Carbon intensity has fallen at approximately this rate since 2014 - a clear step change from the historical rate.   While the recent decarbonisation rate is nearly double the average since 2000, it falls just short of the 3% average decarbonisation rate required to achieve the national targets pledged in the 2015 Paris Agreement. 

More importantly, this rate is less than half of the 6.3% decarbonisation rate needed to limit global warming to well below two degrees - the main objective of the Paris Agreement.

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Some countries are leading the pack

There are signs that some countries are sustaining a low carbon transition. The leaders in our Index - UK, China, Mexico and Australia - all reduced emissions while growing their economies.  In UK and China this is particularly driven by policies to reduce coal consumption.

But progress is inconsistent

Although countries such as the UK and China substantially reduced their use of coal, this was offset by increases in coal demand in India, Indonesia and Turkey.  As a result, coal consumption, which provides one third of the world’s energy, fell modestly by 1.4%. Demand for gas and oil both continued to grow by 1.8% in 2016. Solar and wind output grew at 30.0% and 15.9% respectively last year, but these still only account for a small share of the global energy system.

Paris is only possible with accelerated action

In future we project global average economic growth of 2.1%, so carbon emissions need to fall by over 4% every year average to hit the two degrees target.  The considerable gaps between current progress, the national targets and the global goal highlight the risks to business and society.


Explore how countries perform

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 2016 are the UK and China, who reduced their carbon intensities by 7.7% and 6.5%. Both exceeded their NDC targets and the annual global decarbonisation rate required to limit warming to two degrees. However, these countries are the exceptions rather than the rule - the rest of the G20 didn’t do so well.

Explore this year’s Index using the interactive tool below:
  • Select a benchmarking option to compare country performance:

 

 

A closer look at the best performing countries

UK: leading the low carbon revolution

The UK is strongly outperforming its peers in the G20, achieving a decarbonisation rate of 7.7% that places it at the top of this year’s LCEI.  This is almost three times the global average of 2.6%.

Emissions fell 6% in 2016 while GDP grew modestly at 1.8%. The emissions reduction is mainly attributed to a decrease in total energy consumption and a continued transition from coal to gas.

Despite higher demand for heating as a result of cooler temperatures in 2016, total energy consumption fell by 2% as a result of efficiency improvements.

More importantly for carbon reduction, however, were the plans to close all coal power stations by 2025. Three major coal plants shut down in 2016. Coal production in the UK dropped from 2,784,000 tonnes in 2015 to 22,000 tonnes in 2016, as the last deep coal mine in the UK closed in December 2015. Low global gas prices meant that the gap in power demand is served by gas; gas imports increased by 7% and domestic production by 2%.  

Output of renewable electricity generation was mixed in 2016. Solar generation increased by 36% in 2016 and exceeded coal generation between April – September 2016, but hydro and wind power fell, due to low rainfall and wind speeds respectively. 

The UK also leads the G20 in having the highest average decarbonisation rate since 2000. The carbon intensity of the UK has fallen this century by 3.7% a year on average, the highest of the G20 countries.  Whilst impressive, the British transition away from coal is almost complete. To maintain its position as a climate leader, the UK will need to tackle other emission sources, in particular in heating and transport.  

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China: tackling coal consumption

China has maintained its position as one of the top performers of the Index. This is the result of reductions in coal use and structural changes in the economy. As the world’s largest energy consumer, China accounts for 50% of global coal consumption. In 2016, coal consumption in China fell by 1.4% or 26 Mtoe (million tonnes oil equivalent). That is equivalent to the entire energy consumption for Portugal in 2016.

China’s energy policies have shifted in recent years. Its new energy and environmental policies, as part of the “war on pollution”, halted construction of coal fired power stations between 2016 and 2020 and has supported renewables. China maintained its lead in installing the most renewable energy power capacity and overtook the US as the world’s largest consumer of renewables. Solar generation increased by 72% and wind by 22%.

However the continued shift in the composition of China’s economy also played a role, as China’s services sector grew faster (7.8%) than the secondary (6.1%) and primary (3.3%) sectors.  These lower carbon services sectors now account for 49% of China’s GDP. 

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Bracing for disruption

The global average decarbonisation rate is less than half of what’s needed. So where does this leave us? The gaps between current progress, the national targets and the two degree global goal indicate the potential for major disruptions: 

There is increasing evidence that recent extreme weather events could be attributable to climate change. Many of these are projected to increase in severity and frequency. Businesses will need to increase their resilience to protect assets, supply chains, operations and people in anticipation of physical disruptions; and to recover when they occur.

Countries with strong climate ambition are implementing policies to accelerate the low carbon transition.  These range from applying a carbon price to setting emissions or efficiency standards for products and buildings.  The falling cost of low carbon technology costs allows policymakers to consider options that weren’t viable just a few years ago.  But for those yet to act, there is the risk of knee-jerk climate policy responses at some point in future.  Investors are also now using their voting power to demand that companies disclose how they are managing these emerging policy risks.

Technology innovation and deployment will determine whether countries can achieve the Paris Agreement goal. Emerging technologies and new business models are already disrupting the energy system.  These technologies include smart power and heating systems in buildings, autonomous electric vehicles, advanced biofuels and 3D printing.  Our Innovation for the Earth report highlights the potential of these 4IR technologies to disrupt current business models.

Contact us

Jonathan Grant
Director, Sustainability & Climate Change
Tel: +44 (0)20 780 40693
Email

Lit Ping Low
Assistant Director, Sustainability & Climate Change
Tel: +44 (0)20 7804 0345
Email

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