According to PwC analysis, the world is on track to blow the 2°C carbon budget, estimated by the Intergovernmental Panel on Climate Change (IPCC) for the next 89 years, within 21 years. This puts the world on a path consistent with potential global warming of around 4°C by 2100, the most extreme scenario presented in the recent IPCC 5th Assessment Report on climate science.

The results, from the 5th annual PwC Low Carbon Economy Index, examine the amount of energy-related carbon emitted per unit of GDP needed to limit global warming to 2°C. The report warns that this level of warming “will have serious and far reaching implications.” Current investment planning cycles for major business and infrastructure investments now need to factor this into their decision making.

It finds that policies and low carbon technologies have failed to break the link between growth and carbon emissions in the global economy. The world’s energy mix remains dominated by fossil fuels:

  •     Reductions in carbon intensity globally have averaged 0.7% per year over the past five years – a fraction of the 6% reductions now required every year to 2100
  •     The G7 averaged a 2.3% reduction while the E7 – which includes much of the manufacturing base of the global economy – only managed 0.4%
  •     US, Australia and Indonesia achieved significant reductions in carbon intensity in 2012, but no country has sustained major reductions over several years
  •     While the fracking revolution has helped lower emissions in US, cheaper coal contributed to higher coal usage elsewhere, for example in the EU, raising concerns that decarbonisation in one country can just shift emissions elsewhere.

If the world continues at current rates of decarbonisation, the carbon budget outlined by the IPCC for the period 2012 to 2100 would be spent in less than a quarter of that time, and be used up by 2034. Emissions over and above that budget would be increasing the chances of dangerous climate change, with average warming of surface temperature projected to be beyond 2°C.

Jonathan Grant, director, PwC Sustainability & Climate Change said:

“G20 countries are still consuming fossil fuels like there’s no tomorrow. Despite rapid growth in renewables, they still remain a small part of the energy mix and are overwhelmed by the increase in the use of coal. The results raise real questions about the viability of our vast fossil fuel reserves, and the way we power our economy. The 2 degrees carbon budget is simply not big enough to cope with the unmitigated exploitation of these reserves.”

“A number of the technological silver bullets, the big bets banked on for heavy duty decarbonisation, appear to be failing – we read from Leo Johnson’s foreword to the report – nuclear power, despite the UK’s announcement of its first new plant in twenty years, is in retreat in Japan and Germany. The deployment of carbon capture and storage appears to have stalled, with no commercial scale projects integrating CCS with power generation. Shale gas has displaced coal in the US, but cheaper coal contributed to higher coal consumption in Europe last year. Our model shows that 92% of the small reduction in carbon intensity achieved last year is primarily down to one factor, improvements in energy efficiency. While this is positive, there is the possibility that incremental efficiency improvements will tail off once the low hanging fruit has been picked”.

But there are also grounds for optimism: “At the national level, countries like Brazil, France and Argentina present examples of economies with significantly lower carbon emissions per unit of GDP. China provides the example of using carbon pricing to underwrite risk and stimulate innovation in clean tech sectors. At the level of the city, a number of cities and councils globally have delivered high levels of decarbonisation while enhancing liveability. At the level of technology, finally, the costs of renewables continue to decrease and at an accelerating rate. What would be a game-changer? One would be this. Six years after Copenhagen’s COP-15, with renewables proving their capacity to reach cost parity, a global climate deal in 2015 could provide the regulatory framework and financial stimulus to catalyse a low carbon transition.”