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Global ambitions to reduce emissions are becoming a bit like the resolutions we make to give something up at new year: the intention is sincere, but we don’t always deliver.
For the sixth successive year of the PwC Low Carbon Economy Index, the global carbon target has been missed. And inadequate action today means that even steeper reductions are needed in the future. The target is based on projections of economic growth and the global carbon budget set out by the Intergovernmental Panel on Climate Change (IPCC) which gives a reasonable probability of limiting warming to 2C.
Globally, annual reductions need to be five times current levels, averaging 6.2% a year, every year from now to 2100, compared with 1.2% today. At the national level, Australia is at the top of our decarbonisation league of G20 nations, followed by the UK. Both countries had a strong increase in renewable generation, albeit from a low base, combined with slight a reduction in coal use. The US was nearer the bottom as coal use bounced back, retaking a share of the electricity mix from shale gas.
The world is currently on track to burn this century’s IPCC carbon budget within 20 years, and a pathway to 4C of global warming by 2100. For many of us, 2034 is within our working lifetime. It’s within the timeframe of decisions being made today, on long-term investments, on the location of factories and their supply chains. So businesses are making those decisions faced with uncertainty about climate policy and potential impacts of climate change.
It is clear that the gap between what governments are saying about climate change and what they are doing about it continues to widen. While they talk about two degrees at the climate negotiations, the current trend is for a 4C world.
There is little mention of these two degrees of separation in the negotiations, in policy documents, in business strategies or in board rooms. Operating in a changing climate is becoming a very real challenge for UK plc. Some of the biggest names in business are mapping the risks posed by a changing climate to their supply chain, stores, offices and people.
But while the findings question the reality of the 2C target in negotiations, consider two situations in the analysis that demonstrates the strong case for the negotiations’ role in focusing everyone on co-ordinated action on climate change.
First, our analysis shows that the top 10 destinations for the UK’s foreign direct investment in 2011 were exposed to almost $100bn worth of extreme weather losses in 2013. Multi-billion pound UK investments are wrapped up in transport, technology, retail, food and energy sectors, making this an issue on everyone’s doorstep.
Second, co-ordinated, ambitious action to tackle emissions growth should protect business in the long term. It could even be a boost to growth. It would avoid inevitable short-term decisions that may look attractive, such as shutting down a steel operation in a country with a high cost of carbon to move it to another with a lower cost, but merely relocate emissions. And take jobs with them.
The concern about short-term costs and impacts on investment is paralysing our ability to address the long-term climate risks. Perhaps competitiveness is the new climate scepticism. Businesses call for a level playing field on carbon pricing, when it should be seen in the wider context of labour and energy prices, the skills market and wider legislative environment.
There’s a danger when we talk in small numbers – whether they are one or two degrees, or the 6% now required in annual decarbonisation (every year for the next 66 years, by the way), that they sound manageable. The 6% figure is double the rate the UK achieved when we dashed for gas in the 1990s. A shale gas revolution might help, but would need to be accompanied by a revolution in carbon capture and storage and revolutions in renewables, in electric transport, in industrial processes and in our buildings.
The UK’s results are encouraging, even if they fall short of the overall target necessary. Leadership in low carbon for the UK is down in part to policies and investment, partly the structure of our economy, and partly traditional factors such as skills and education. But it’s notable that while the Low Carbon Economy Index shows that the UK’s carbon intensity is lower than many, it is still higher than in France, Argentina or Brazil. It’s a neat encapsulation of a view of the world through a low carbon economy lens, not just a GDP one. The UK’s competitiveness or attractiveness today needs investment to hold on to it for tomorrow.
Jonathan Grant is director, sustainability and climate change, PwC
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