The Challenge
Climate Change

Rate of decarbonisation needs to increase sixfold

PwC has released its annual ‘Low Carbon Economy Index’ publication, which tracks the progress of global decarbonisation.

In the first edition, published in 2009, PwC established that the ‘carbon budget’, i.e. the total energy-related CO2 emissions that can be emitted worldwide between 2000-2050 to have a 50% chance of limiting global warming to 2 C°, amounts to ~1,300 billion tons of CO2. (Note that the carbon budget that gives an 80% chance of staying under 2 C° is much smaller: 886 billion tons of CO2). At the time, this meant that the carbon intensity, defined as carbon emissions per $ of GDP, had to decline by 3.7% per year until 2050.

In the latest edition, PwC concludes that the actual improvement has been only 0.8% per year in 2000-2011. To stay within the carbon budget, the required rate of decarbonisation has now gone up to 5.1% per year, every year until 2050. This is more than six times faster than the current rate.

PwC decarbonization pathway

This rate has not been achieved in any year since World War 2. The two years that came closest were severe recession years (1981: 4.9%, 1999: 4.2%).

Therefore, it seems that the 2 C° goal, which was already considered by several climate scientists to be too high to avoid dangerous climate change, is almost impossible to achieve.

So how much warmer will it get? PwC estimates that, if we manage to double the rate of decarbonisation to 1.6% per year, we will end up with 6 degrees of warming by the end of the century. To limit warming to 4 C°, we would need to achieve a carbon intensity improvement of 3% per year, roughly four times the current rate.

It is clear that the stark reality of these figures has not yet sunk in among politicians, business leaders, and societies at large. However, when this happens, companies will be faced with much stricter carbon reduction legislation, and possibly quite draconic measures, which will mainly affect the value of fossil fuel related assets.