PwC Low Carbon Economy Index 2011

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Counting the cost of carbon

In terms of carbon productivity, the G20 economies have moved from travelling too slow in the right direction, to travelling in the wrong direction.

So concludes PwC’s Low Carbon Economy Index 2011, a report assessing the G20 countries’ progress in reducing their carbon intensity levels—the amount of carbon emissions per unit of GDP —since 2000, and analysing the distance each nation must still go to meet G20 carbon reduction targets by 2050.

PwC pre-Durban webcast

Richard Gledhill, Celine Herweijer and Jonathan Grant from our sustainability and climate change team will be discussing developments in climate policy since the last global conference 12 months ago in Cancun, and what we can expect from Durban in the following weeks.

They also plan to share recent findings from the Low Carbon Economy Index. Watch now

Key findings

For the first time since 2000, no improvement has been made in reducing carbon intensity.

Emissions in the G20 are increasing faster than economic growth, reversing a slow, but gradual, reduction in carbon emissions intensity seen since 2000.

Globally, carbon intensity now needs to reduce by 4.8% a year, over twice the rate required in 2000.

During the recession, many countries saw carbon emissions fall quicker than GDP, because manufacturing output fell. That trend was reversed during 2010, when global GDP growth was 5.1%, but emissions growth was higher at 5.8%. The increase in carbon intensity of 0.6% was the first time in many years that carbon intensity has risen.

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Global Low Carbon Challenge (2010)

During the recession, many countries saw carbon emissions fall quicker than GDP, because manufacturing output fell: the increase reflects a number of factors at play.

The rapid growth of high carbon intensive emerging economies during 2010 including China, Brazil and Korea; colder winters at the beginning and end of the year; the fall in the price of coal relative to gas; and a drop in energy renewable deployment, all contributed to increase carbon intensity last year.

Unless the link between economic and emissions growth is severed, the prospect of achieving the 2 degrees goal stated by governments at the 2010 Cancun Climate Summit, appears remote.

The results are the starkest yet. Our analysis points unambiguously towards one conclusion, that we are at the limits of what is achievable in terms of carbon reduction, when you consider the growth cycles predicted for developed and developing nations, versus what is required in terms of carbon reduction to stay within the 2 degrees scenario. It is only in exceptional circumstances that countries have come close to removing 4.8% emissions from their economies over the course of a decade.

Video

Roundtable on the Low Carbon Economy Index

The scale of the low carbon financing challenge yet to be resolved.

In the UK, the annual capital expenditure of the six largest utilities would need to triple by 2020 to reach the government’s low carbon targets, with a cumulative investment of £199bn needed by then. Germany also plans to increase low carbon power generation, and estimates that it needs €20bn per year to meet its 2050 targets. However, the trade-off between cost and carbon is not inevitable. In the developing world particularly, where countries do not have an existing grid infrastructure, renewables may be competitive with the fossil fuel alternative. The report examines opportunities in Europe and Africa for innovative financing mechanisms, and the wider impacts.