Megatrends: The failure to decarbonise presents multiple risks for society
31 October 2016
Is there light at the end of the carbon tunnel? The bad news, lost in the celebrations of the UN’s 21st Conference of Parties (COP21), is that even with the record breaking levels of decarbonisation in 2015, we remain on course for levels of global warming that will have profound and systemic impacts.
The 2016 PwC Low Carbon Economy Index shows that although the global economy decarbonised by a record 2.8% in 2015, this represents less than half the 6.5% annual reductions in carbon intensity required to avoid more than two degrees of warming. Our current growth trajectory takes us towards a world more than 3 degrees warmer.
This failure to decarbonise, set in the context of the global megatrends already confronting society, presents multiple risks. In terms of physical risk, rising sea levels will make uninhabitable a number of densely populated mega-cities that are low-lying or below sea level. This will increase levels of distressed migration, with climate change expected to create up to 200 million additional refugees by 2050.
For business, there are mounting risks from climate impacts and climate policies. Part of this is physical risk to assets, including the risk of extreme weather events and water scarcity. For fossil fuel based sectors, there is also the risk of technological obsolescence, as renewables approach cost parity with fossil fuels.
But there are rays of hope. China's 6.4% decarbonisation in 2015, topping the index, and the 70% growth in China's solar sector (even if is from a very low absolute base), represent a remarkable success story and evidence of the increasing economic viability of the low carbon economy in both developed and emerging markets.
The pressure is now on for a regulatory framework to accelerate the decoupling of growth from emissions.
For more information, please see the 2016 Low Carbon Economy Index or please get in touch with me directly.
 How many migrants will there be? BBC News, 2 September 2013 : http://www.bbc.co.uk/news/magazine-23899195