UK and China lead on clean growth, Canada’s decarbonization slows, and Paris Agreement 2-degree Celsius goal looks to be further out of reach

 
  • PwC’s Low Carbon Economy Index analysis shows that the carbon intensity of the global economy fell by 2.6% in 2016 - a clear step change from business as usual
  • Canada’s decrease in emissions intensity slowed between 2015-2016 to 2.1%, down by half from its 2014-2015 rate of 4.2%. The slow down brings Canada back in line with its average annual decrease in intensity over the last 15 years
  • UK and China lead the G20 on clean growth, decarbonizing their economies by 7.7% and 6.5% respectively in 2016 - the result of tackling coal consumption and improving energy efficiency while growing their economies

 

(Toronto, Oct. 31, 2017) Global emissions growth slowed in 2016, rising only 0.4% while global GDP growth was 3.1%. Carbon intensity has been falling at around 2.6% for the past three years.  This is a clear change from the historical rate, which averaged 1% per year up to 2014. This year’s decarbonisation rate of 2.6% is almost double the average rate since 2000 (1.4%) but less than half of what is required to limit global warming to well below two degrees.

Now in its ninth year, PwC’s Low Carbon Economy Index tracks G20 countries’ progress in reducing the carbon intensity of their economies – i.e. energy-related greenhouse gas emissions per million dollars of GDP. 

“Since signing onto the Paris Agreement in 2015, and reaffirming that commitment through the Vancouver Declaration, Canada has taken important steps at federal, provincial, territorial and municipal levels to transition our economy towards low-carbon energy,” says David Greenall, Director, Sustainable Business Solutions, PwC Canada. “This transformation is complex, and a step-change acceleration in this transition will be required to achieve our 2030 greenhouse gas reduction ambitions, let alone the reductions required to keep global warming to two degrees Celsius or below.”

“Deep emission reduction pathways – such as those as outlined in Canada’s Mid-Century Development Strategy – and the need for climate-resilient development demand a fundamental rethink of policies, regulations and capital allocation strategies and business models.  Canadian companies need to consider how they will integrate climate change into their strategic and financial risk analysis, as well as accurately price and disclose climate financial risk, and financial institutions must substantially increase their investments in low carbon development,” adds Greenall.

Canada, a fast follower, UK and China lead on clean growth:

  • Canada reduced its GHG emissions while continuing to grow its economy, although at a more moderate pace as compared to G20 leaders
  • Top performers, such as the UK, China, Mexico and Australia, all reduced their emissions while growing their economies. Countries at the bottom of the Index, including Indonesia, Argentina, Turkey and South Africa all had emissions growth which exceeded their GDP growth.

In 2015-2016 Canada achieved a year-over-year decarbonization rate of 2.1%. Energy related emissions fell 0.7% while GDP grew 1.4%. The emissions reduction is attributed to lower natural gas consumption due to a mild winter heating season, and a continued transition from coal to gas-fired power generation.

Coal production dropped to a three-decade low in 2016, at 60.4 million tonnes, a 12% decline since 2013. Approximately half of Canada’s production is thermal coal used in power generation, which is expected to see a continued steady decline as the country moves to virtually phase out coal-fired power plants by 2030. Solar and wind electricity consumption increased by 19% and 11% respectively, with hydro growing modestly at 3%.

“The decrease in emissions and intensity – both globally and here in Canada - is a good news story, and PwC’s latest LCEI findings warrant attention,” says Katie Sullivan, Managing Director, IETA. “As the report confirms, a lot of hard work and transformative change lies ahead to stay below the 2-degree Celsius warming threshold – especially in Canada, with its ambitious climate goals. More than ever, turning this low-carbon ambition into success means that Canada - and its G20 partners – must operationalize smart policy and financing frameworks that harness, not hinder, the power of markets and private sector to reach and exceed climate goals.”

Overall, Canada remains well short of the 4.5% average decarbonization rate required to achieve its 2015 Paris Agreement pledge to reduce emissions by 30% below 2005 emission levels by 2030.  Efforts by Canadian governments to accelerate the low-carbon transition and put the country on a clean growth path are in progress and include:

  • Putting a price on carbon through the Pan-Canadian Framework on Clean Growth and Climate Change (Federal)
  • Phasing out of coal-fired electricity by 2030 (Federal)
  • Capping oil sand emissions at 100Mt (Alberta)
  • Implementing a Carbon Levy (Alberta)
  • Ontario joining the Western Climate Initiative cap-and-trade regime alongside Quebec and California
  • Developing new standards for Low Carbon Fuels (British Columbia)
  • Adopting energy efficiency regulations for new commercial, institutional and residential high-rise buildings (Quebec)

The UK and China are the only countries that exceeded the decarbonization rate needed to meet the 2-degree Celsius goal.  The UK has decarbonized at almost three times the global average rate. This was driven by a fall in emissions of 6% from a switch from coal to gas and lower energy consumption. The UK has achieved the highest average decarbonization rate since 2000. China follows the UK’s position as lead. As the world’s largest energy and coal consumer, a reduction in coal of 1.6% due to new energy and environmental policies has had a significant impact on its carbon intensity.

 

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