Global emissions are increasing faster than economic growth, reversing a slow, but gradual, reduction in carbon emissions intensity.

The findings, from new analysis in the PwC Low Carbon Economy Index released today, show that for the first time since 2004, no improvement has been made in reducing the carbon intensity (which reflects the fuel mix, energy efficiency and the balance of industry and services) of the G20, despite modest economic recovery globally.

The results call into question the likelihood of global decarbonisation ever happening rapidly enough to limit global warming to 2 degrees Celsius. With three weeks to the UN Climate Summit in Durban, the report also highlights the scale of the low carbon financing challenge yet to be resolved.

During the recession, many countries including the UK, saw carbon emissions fall quicker than GDP, because manufacturing output fell. But 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. 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.

Globally, carbon intensity now needs to reduce by 4.8% a year, over twice the rate required in 2000. The UK needs to reduce carbon emissions intensity 5.6% per year, with broad low-carbon reforms across every sector needed to reduce emissions, the current equivalent of turning off power to the entire UK for a third of the year, every year, until 2020 to stay within our carbon budget.

The report warns that unless the tie between economic and emissions growth is severed , the prospect of achieving the 2 degrees goal stated by governments less than twelve months ago in Cancun, appears remote.

Leo Johnson, partner, sustainability and climate change, PwC said:

“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.”

“The G20 economies have moved from travelling too slowly in the right direction, to travelling in the wrong direction. 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.”

Jonathan Grant, director, PwC sustainability and climate change said:

“The economic recovery, where it has occurred, has been a dirty one. Even where there has been growth in OECD countries during the global financial crisis, it is too carbon intensive, and hasn’t increased carbon productivity.”
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.

Jonathan Grant, director, PwC sustainability and climate change commented:

“Achieving the rates of carbon productivity needed requires a revolution in the way the world produces and uses energy. Married to that, and in the midst of a global financial crisis, we need a transformation in financing to achieve the transition at the scale and speed needed.“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.

“Already consumers are objecting to higher fuel and electricity bills, and may not be prepared to pay the extra required to meet climate change goals. Yet delaying action to break the link between high carbon and economic growth means that the reductions required in future are steeper, and will be more costly, threatening even greater consumer impacts in the future."