Our Net Zero Economy Index 2022 assesses the progress on decarbonisation across all G20 members and in Ireland.
Economy-wide net zero ambitions continue to scale up, but progress on decarbonisation over the past 12 months has declined.
Our Net Zero Economy Index is an indicator of the progress G20 members have made in reducing energy-related CO2 emissions and decarbonising their economies. It shows that, at just 0.5%, the global rate of decarbonisation in 2021 was at its lowest level in over a decade.
With further economic headwinds and energy price challenges ahead, countries—and businesses—have important decisions to make if they are to place decarbonisation efforts at the heart of their economic futures.
The global rate of decarbonisation in 2021 was just 0.5%.
To limit warming to 1.5°C, the annual global rate of decarbonisation needs to reach 15.2%.
Global carbon intensity needs to drop 77% by 2030 against a backdrop of geopolitical and economic uncertainty.
Each country and sector will have its own route to take to achieve net zero.
The climate agenda is increasingly part of business and investor decision-making.
More than ever before, there is an urgent imperative for strategic collaboration.
PwC's Net Zero Economy Index tracks the progress G20 countries, which produce around 80% of global emissions, have made to reduce energy-related CO2 emissions and decarbonise their economies.
Seven years on from the groundbreaking Paris Agreement, our analysis shows that the world is continuing to move further from the rate of decarbonisation required to limit warming to 1.5°C above pre-industrial levels. In 2021, the global decarbonisation rate fell to its lowest level in over a decade at just 0.5%, well below the average of 1.4% per year achieved between 2000 and 2021, and far below the rates of decarbonisation required to limit warming to 1.5ºC. When compared to 2020 levels, global energy consumption and energy related emissions increased by 5.5% in 2021. Absolute levels of carbon intensity vary across the G20, as nations are at different stages of development and have very different socio-economic bases. In 2021, 266 tonnes of CO2 was emitted for every million dollars of GDP generated worldwide, ranging from an average of 189 tonnes in the G7 to 351 tonnes in the E7 (Emerging Seven).
Only 11 of the G20 managed to reduce their carbon intensity in 2021, compared to 16 of the G20 achieving a reduction in carbon intensity by reference to their pre-pandemic 2019 levels. Looking closer at how some of the world's leading economies performed in terms of decarbonisation in 2021, the US (0.1%), India (2.9%), Japan (0.6%), Germany (1.7%) and France (1.4%) all saw increases. The best-performing country was South Africa (-4.6%), ahead of Australia (-3.3%), China (-2.8%), Turkey (-2.7%) and Canada (-2.2%).
The lifting of pandemic restrictions in 2021 gave way to a much needed resurgence in economic activity, but with this, there has been a rebound in emissions. The 2021 data appears to show that the recovery from the COVID-19 pandemic has not—at least in the short-term—been a green one.
When the COVID-19 variance is removed from the data and we compare 2021 levels with pre-pandemic levels in 2019, we see a global decarbonisation rate of 3%. This suggests that, while decarbonisation has occurred over this period, there's still a long way to go. Removing noise from the data in this manner allows for a more accurate reflection of decarbonisation progress.
Although we see increasing levels of policy, business and investor commitments, real progress on decarbonisation is slow and does not yet create the confidence that promises made will be delivered. There is no single pathway to net zero with each country moving at a different pace and by different means. Ultimately, however, all nations must accelerate action with an urgent need to reduce global carbon intensity by 77% by 2030.
“The message from our Net Zero Economy Index is clear: In Ireland and around the world, we need to significantly accelerate the rate of decarbonisation at pace and at scale if we are to stand any chance of limiting global warming to 1.5°C”.
Seven years on from the ground-breaking Paris Agreement, our analysis shows that the world is continuing to move further from the rate of decarbonisation required to limit warming to 1.5°C above pre-industrial levels. In 2021, the global decarbonisation rate fell to its lowest level in over a decade at just 0.5%, well below the average of 1.4% per year achieved between 2000 and 2021, and far below the rates of decarbonisation required to limit warming to 1.5ºC. When compared to 2020 levels, global energy consumption and energy related emissions increased by 5.5% in 2021. Absolute levels of carbon intensity vary across the G20, as nations are at different stages of development and have very different socio-economic bases. In 2021, 266 tonnes of CO2 was emitted for every million dollars of GDP generated worldwide, ranging from an average of 189 tonnes in the G7 to 351 tonnes in the E7 (Emerging Seven).
Only 11 of the G20 managed to reduce their carbon intensity in 2021, compared to 16 of the G20 achieving a reduction in carbon intensity by reference to their pre-pandemic 2019 levels. Looking closer at how some of the world's leading economies performed in terms of decarbonisation in 2021, the US (0.1%), India (2.9%), Japan (0.6%), Germany (1.7%) and France (1.4%) all saw increases. The best-performing country was South Africa (-4.6%), ahead of Australia (-3.3%), China (-2.8%), Turkey (-2.7%) and Canada (-2.2%).
The lifting of pandemic restrictions in 2021 gave way to a much needed resurgence in economic activity, but with this, there has been a rebound in emissions. The 2021 data appears to show that the recovery from the COVID-19 pandemic has not—at least in the short-term—been a green one.
When the COVID-19 variance is removed from the data and we compare 2021 levels with pre-pandemic levels in 2019, we see a global decarbonisation rate of 3%. This suggests that, while decarbonisation has occurred over this period, there's still a long way to go. Removing noise from the data in this manner allows for a more accurate reflection of decarbonisation progress.
Although we see increasing levels of policy, business and investor commitments, real progress on decarbonisation is slow and does not yet create the confidence that promises made will be delivered. There is no single pathway to net zero with each country moving at a different pace and by different means. Ultimately, however, all nations must accelerate action with an urgent need to reduce global carbon intensity by 77% by 2030.
The Environmental Protection Agency (EPA) shows that overall greenhouse gas emissions in Ireland increased by 4.7% in 2021, with energy industry CO2 emissions increasing by 18.2%. This increase is primarily driven by the recovery from the COVID-19 pandemic, with the easing of lockdown restrictions and the return of economic activity. Given the unique circumstances of 2020, this increase in emissions, while disappointing, is not surprising. Relative to 2019 pre-pandemic emission levels, 2021 greenhouse gas emissions and energy industry CO2 emissions were 1.1% and 9.4% higher.
Government agreement this summer on Ireland's sectoral emissions ceilings represents the most significant climate policy development of 2022 to date. The sectoral ceilings, detailed below, establish maximum limits on greenhouse gas emissions for each sector of the Irish economy to the end of the decade. Complying with the sectoral ceilings will require significant transformation within all sectors of the economy.
2030 sectoral emissions ceilings or reductions (versus 2018):
EPA projections (June 2022) also highlight the need for an acceleration in the pace and scale of Ireland's decarbonisation efforts. EPA analysis finds that Ireland faces a significant challenge to achieve its legally binding 51% emissions reduction targets by 2030 (in line with the Climate Action Plan 2021). Urgent implementation of "all climate plans and policies, plus further new measures" will be needed to realise the 2030 ambition. Ireland is currently on track for a 9-28% reduction by 2030. The EPA's analysis also identifies a significant gap between the carbon budgets and the projected emissions over the budget periods.
“In Ireland, urgent action is needed to decarbonise our economy and realise the 2030 ambition. There also remains much work to be done to decarbonise our economy and, in particular, to meet our carbon-neutral and net zero commitments”.
The Net Zero Economy Index tracks the decarbonisation of energy related CO2 emissions worldwide. The analysis is underpinned by bp's Statistical Review of World Energy, which reflects energy consumption per fuel type per country and CO2 emissions based on the consumption of oil, gas and coal.
Global carbon budgets refer to the global estimated budget of fossil fuel emissions taken from the IPCC Special Report on Global Warming of 1.5°C. A series of assumptions underpin these carbon budgets, including the likelihood and uncertainties of staying within the temperature limits, and the use of carbon dioxide removal (CDR) technologies.
AFOLU (agriculture, forestry and other land use) emissions and non-CO2 emissions are excluded from this analysis. No carbon sequestration is accounted for in the Net Zero Economy Index analysis. As a result, this data cannot be compared directly with national emissions inventories.
The primary purpose of the Net Zero Economy Index is to calculate national and global carbon intensity (CO2/GDP) and track the rate of change needed to limit warming to 1.5°C. To do this, we use the IPCC carbon budget to calculate how much emissions need to be reduced in the future, and divide this by the projected increase in GDP. This allows us to see the amount by which emissions must be reduced to maintain projected GDP growth, providing insight into the scale of efforts required to decouple emissions from economic growth.
The fuel factor (CO2/energy) measures how much CO2 is emitted per unit of energy consumed. Put simply, how green the energy consumption is. It indicates a country's shift in energy mix towards renewable energy sources and can reflect movements away from the most highly emitting fossil fuels (such as coal). For each unit of energy consumed, different fossil fuels will release differing amounts of CO2 emissions. For each unit of energy consumed from a renewable source, emissions will be reduced to negligible, or zero, therefore reducing the fuel factor toward zero.
Energy intensity (energy/GDP) measures the amount of energy consumed per unit of GDP generated. It shows us how much energy is needed to generate a given amount of GDP. Energy intensity is impacted by a range of factors, including energy efficiency in the form of policies, standards and technological advances, pricing and behavioural change, the sectoral composition of an economy, investment in more efficient technology and infrastructure, and climatic influences on energy usage.
The return to the 'new normal' has evidently not been green in Ireland or globally, at least in the short-term. The recovery from the COVID-19 pandemic and increased reliance on fossil fuels to power urgent economic growth provides a cautionary tale.
As the climate agenda competes with other priorities, there is a real risk to future progress. In light of the war in Ukraine and the ongoing energy crisis, as well as rising inflation, governments and economies must respond to fiscal, security, affordability and inflationary challenges. We cannot afford to become distracted from the ultimate and irreversible catastrophe of climate change. Decisive climate action by key players is required if we are to maintain a habitable world and a just society:
The spirit of collective action must be central to decarbonisation and achieving net zero. More than ever before, there is an urgent imperative for strategic collaboration—between nations and by businesses and investors at global and national levels. Our analysis demonstrates the critical importance of a long-term vision, a steadfast net zero commitment and a robust decarbonisation plan that can withstand the immediate threats posed at international, national, local and sectoral levels. The world is in our hands. It's time to take bold steps and turn environmental, social and governance (ESG) theory into action if we are to limit warming to 1.5°C.
With the increased focus on decarbonisation, we increasingly see companies recognise the need to develop or enhance existing net zero strategies. Companies must ensure that they proactively address these issues head-on. Whatever point your company is at in its net zero journey, PwC Ireland is here to help you develop, implement and enhance your net zero strategy. We work with businesses in all sectors to future-proof their organisations by making them more resilient and sustainable. We are helping businesses make the transition to the net zero carbon emissions economy of the future. Contact us today.
