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UK and China leading G20 on low carbon transition but global emissions still rising

Now in its 10th year, PriceWaterhouse Coopers (PwC) Low Carbon Economy Index (LCEI) 2018 finds the top G20 performers in this year's Index are China, Mexico, Argentina, and the UK. China has nearly halved the carbon intensity of its economy in ten years. The UK has had the fastest low carbon transition since 2000 of all G20 countries with its absolute carbon intensity comparable with France, Brazil, and Italy.

However, the 2018 Index also shows that emissions are on the rise again as the transition to a low carbon energy mix lags behind global economic growth finds that the goal of limiting global warming to two degrees looks even further out of reach as national decarbonisation rates fail to match up to the Paris Agreement.

PwC’s Low Carbon Economy Index (LCEI) model combines energy-related CO2 emissions with historic and projected GDP data and the Intergovernmental Panel on Climate Change’s (IPCC’s) carbon budgets. The model covers energy and macroeconomic data from individual G20 economies, as well as world totals.

Fossil fuels still dominate UK primary energy

The Index shows the UK remains at the top of the G20 leaderboard for its long-term low carbon transition since 2000, decarbonising at 3.7 percent per year. It has reduced emissions by 29 percent since 2000 while growing the economy by 34 percent.

In the electricity sector, emissions per MWh generated have been cut by 29 percent in the last decade, due to a combination of policies. Following the publication of the Government’s ‘Ultra Low Emission Vehicles’ strategy, the number of these cars on the road has grown by 40 percent per year on average.

Although still at a low base compared to other countries, there are more than 140 000 low emissions vehicles on the road at the end of 2017 compared to 10 000 in 2010. Early figures for 2018 suggest the trend will continue for both electric vehicles and the shift towards renewables.

The UK’s decarbonisation rate last year was 4.7 percent, a little lower than the year before. In 2017, emissions fell by 2.9 percent as coal and gas demand fell while oil consumption remained constant. These fossil fuels were replaced with renewable generation 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.

A view of the wood pellet storage silos at Drax Power.

A view of the wood pellet storage silos at Drax Power, Europe’s largest decarbonisation project.

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. There has been a 33 percent increase in wind energy across the UK over the past year and a 22 percent increase in solar generation

However, fossil fuels remain the dominant source of energy and still account for 80 percent of the UK’s primary energy in 2017, a drop of 1 percent compared to 2016.

The UK is a global leader in driving the low carbon transition. Renewables, energy efficiency and dominant growth of the services sectors all contributed to the UK’s top performance compared with other G20 countries. Following success in decarbonising the electricity sector, achieving the UK’s Clean Growth Strategy, which was launched last year, will now depend on faster progress in other sectors, such as transport and industry, said Jonathan Grant, Director of Climate Change and co-author of the LCEI at PwC UK.

China outperforms peers but emissions increased

China, the world’s largest emitter, is outperforming its G20 peers and has demonstrated the highest decarbonisation in 2017 of 5.2 percent. China has reduced the carbon intensity of its economy by 41 percent in the past ten years putting it on track to achieve its national target (NDC).

However, despite these impressive statistics, there was still a 1.4 percent increase in emissions in China in 2017, and its carbon intensity remains above the E7 average.

China has also retained its top position as an engine for renewable growth and has made significant strides toward meeting its pledge under the Paris Agreement to generate 20 percent of its energy in 2030 from low-carbon sources.

Still not enough

While many countries have cut the carbon intensity of their economies over the past four years, the average 2.6 percent per year drop remains less than half of what is required to limit warming to two degrees. Not one country is on track this year with the decarbonisation rate needed to achieve the Paris Agreement goal.

Without a dramatic step up in decarbonisation efforts, the report warns that at this rate the two degrees carbon budget will run out in less than 20 years.

There seems to be almost zero chance of limiting warming to well below two degrees – the main goal of the Paris Agreement. Given the gap between talk and action on climate, the risks to business are obvious: fragmented, knee-jerk regulation and physical impacts of climate change. There are many solutions to this problem – governments just need to get on with implementing them. Recent reforms to the EU Emissions Trading System that raised the price of carbon this year are a good example of what’s needed, commented Jonathan Grant.

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