Low Carbon Index

Poor GDP growth and continued reliance on fossil fuels means SA needs to start thinking about building climate change resilience

Emissions are on the rise again as the transition to a low carbon energy mix lags behind global economic growth. PwC’s Low Carbon Economy Index (LCEI) 2018, now in its 10th year, finds that the goal of limiting global warming to two degrees looks even further out of reach as national decarbonisation rates fail to match up to the Paris Agreement.  

PwC’s 2018 LCEI also reveals that:

  • China leads the Index, decarbonising its economy by 5.2% in 2017. China has nearly halved the carbon intensity of its economy in ten years.
  • The top performers in the Index this year are China, Mexico, Argentina and the UK.
  • South Africa managed to reduce its carbon intensity above the global average but still remains lowly ranked in terms of carbon emissions produced per GDP.

Last year, global GDP grew by 3.8%, largely due to rapid growth in emerging economies such as China and India. This economic growth went hand in hand with a rise in global energy demand of 2.1%; more than twice the rate in 2016. As most of the increased energy demand was met with fossil fuels, global emissions are now on the rise again - by 1.1% - having plateaued for the past three years.

Carbon intensity continued to fall at a rate consistent with the previous few years, at 2.6%. But even this falls short of the 3% average decarbonisation rate needed to meet the national targets pledged in the 2015 Paris Agreement. The gap between the current decarbonisation rate and that needed to limit global warming to two degrees is widening.  It’s now 6.4% per year for the rest of this century.  There seems to be almost zero chance of limiting warming to well below two degrees (the main goal of the Paris Agreement), though widespread use of carbon capture and storage technologies, including Natural Climate Solutions, may make this possible. Each year that the global economy fails to decarbonise at the required rate, the two-degree goal becomes more difficult to achieve.

As the realisation of not meeting the two degrees goal is starting to become more apparent, it is becoming even more important that companies and business begin developing climate resilience strategies to protect the communities and natural systems on which they depend which are most at risk from climate change impacts.

South Africa

South Africa managed to achieve 7th position in the G20 rankings for its decarbonisation rate of 3.6% last year. This is almost double South Africa’s annual average change in carbon intensity for the period 2000-2017 (a decrease of 1.9%).

While South Africa saw a large decrease in its carbon intensity for 2016-2017, the county has consistently been rated at the bottom of the list for its overall carbon intensity - which measures the tons of CO2 emitted versus the country’s GDP. As the country is now in a technical recession and has an increasingly poor GDP outlook, it is important to realise that South Africa is not making the progress needed and is unlikely to achieve its decarbonisation commitments. In order to promote economic growth, it is unlikely that the currently heavily fossil fuel dependent energy mix will change anytime soon. Therefore, while the country still needs to continue to make efforts towards achieving its decarbonisation goals it is becoming more important that government and business start planning for and implementing resilience plans to protect those most at risk from climate change impacts.

Added to the need to develop and implement effective resilience plans, companies will be under even more pressure as the Task Force on Climate Related Financial Disclosures (TCFD) begins to publish its results on climate related risk disclosures. Investors want to understand how companies are monitoring and responding to climate change risks, so that they are able to make sound decisions regarding which businesses will remain successful in the long term.

China

China, the world’s largest emitter, is outperforming its G20 peers and has demonstrated the highest decarbonisation in 2017 of 5.2%. China has reduced the carbon intensity of its economy by 41% in the past ten years putting it on track to achieve its national target (NDC). However, despite these impressive statistics, there was still a 1.4% increase in emissions in China in 2017, and its carbon intensity remains above the E7 average.

China has also retained its top position as an engine for renewable growth, and has made significant strides toward meeting its pledge under the Paris Agreement to generate 20% of its energy in 2030 from low-carbon sources.

Still not enough

While many countries have cut carbon intensity of their economies over the past four years, the average 2.6% per year drop remains less than half of what is required to limit warming to two degrees. Not one country is on track this year with the decarbonisation rate needed to achieve the Paris Agreement goal. Without a dramatic step up in decarbonisation efforts, the report warns that at this rate the two degrees carbon budget will run out in less than 20 years.

Jayne Mammatt, Director of Sustainability and Climate Change at PwC South Africa, says: “There seems to be almost zero chance of limiting warming to well below two degrees - the main goal of the Paris Agreement. Given the gap between talk and action on climate, the risks to business are obvious: fragmented, knee-jerk regulation and physical impacts of climate change. There are many solutions to this problem - we just need to get on with implementing them.”

 

Contact us

Sanchia Temkin
Senior Manager, PwC South Africa
Tel: +27 (0)11 797 4470
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