Low Carbon Economy Index 2016: UK maintains its position as a climate change leader

The UK has maintained its position as one of the world’s leaders on climate action, outperforming decarbonisation levels in the US, Germany, France and the EU group.

The findings from PwC’s Low Carbon Economy Index (LCEI), which tracks the progress G20 countries have made to decarbonise their economies since 2000, show the UK posted a reduction of 6% in its carbon intensity between 2014 and 2015.

The UK now produces 157 tonnes of Co2 per million dollars of GDP, which is the third lowest carbon intensity of all the G20 countries. South Africa (583 tonnes per $m) and China (475 tonnes per m) have the highest carbon intensity, however these two countries made significant headway in decarbonising their economies in the Index, with China topping the Index overall for the first time.  

The UK is one of a number of notable country performances in the Index including China, the US and South Africa, to push global decarbonisation levels to record levels in the PwC index.

The UK’s efforts form part of a step change in the decarbonisation of the global economy, the report shows. The collective 2.8% reduction in carbon intensity for the G20 is now more than double the 1.3% average for the last 15 years as China, the UK, and the US led the way.

 

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

 

“The decarbonisation of the UK’s economy is well established now, and underlined by recent government announcements on adopting the fifth carbon budget, the approval of the Hinkley C nuclear power project and confirmation of the government’s intent to ratify the Paris Agreement.

“For the second year running, the UK’s consumption of coal has fallen by over 20%, the LCEI report also found.”

 

This decrease is largely the result of the EU’s Large Combustion Plant directive and a UK policy to close all coal-fired power plants by 2025. Coal now makes up around 12.2% of the UK energy mix. This trend is accompanied by a 31% increase in renewables generation, which has now reached 9.1% of the energy mix. Only two years ago coal’s share of the energy mix was more than three times that of renewables.

While changes in coal and renewables have played significant roles in the reductions in carbon intensity, changes in the UK economy have also been important. The service sector has been the primary driver of the UK economic recovery since the recession in 2008. Services now account for 80% of total UK jobs and is expected to continue growing. Manufacturing on the other hand has suffered, with outputs falling in 2015 after being relatively flat since early 2011.

This year’s LCEI also shows a much wider range of risks now need to be considered by businesses, linked to their ability to deal with issues including extreme weather, natural resource availability, policy, regulatory, or reporting changes, and the link between long term climate change, financing and investment.

Climate policy such as the EU Emissions Trading Scheme (EU-ETS) could drive up costs of production, whilst supply chains need to become more resilient to unpredictable or extreme weather events. Technological responses to combat climate change could also shift demand curves for example, increasing demands for electric cars.

 

Lit Ping Low, climate economist, PwC comments:

 

“Sustaining its high decarbonisation rate is a crucial part of the UK’s climate strategy, however the progress made in other countries are also exciting as they signal new waves of opportunities for the UK in terms of exports of low carbon technologies and services.

“For example, low carbon vehicles make up of 60% of UK’s exports on low carbon goods and services, and 10% of its total vehicle exports in 2014. This is a sector set to grow rapidly around the world and the UK is well positioned to capitalise on this opportunity.”

Issues for international financing and climate change have come to the fore in the past year, with Mark Carney, head of the Bank of England, leading the Financial Stability Board Task Force.

 

Jon Williams, partner and co-chair of the Financial Stability Board Task Force said:

 

“Financial services organisations are coming to terms with a much wider definition of risk and how it transfers to them from far down the investment chain. The challenge is not just understanding where the money is flowing to, and what the risk is. It’s also crucial to isolate the metrics which they can use to monitor and take action on.”

PwC Low Carbon Economy Index 2016   

 
ENDS

For more information please visit PwC's LCEI portal

Notes to editors

 

1. Carbon budget: The target is an estimate of how much countries need to reduce their energy related emissions by, while growing their economy, in order to limit global warming to 2°C. 2°C of warming is the limit scientists agree is needed to ensuring the serious risks of runaway climate change impacts are avoided.
2. Under the UN climate negotiations process, countries have made emissions pledges (Intended Nationally Determined Contributions or INDCs) with the collective aim of reducing greenhouse gas emissions globally to limit the potential for global warming to 2°C by 2100.Global emissions were flat in 2015 while GDP grew by a respectable 3.1%. Coal consumption fell by 1.8%, with a switch to lower carbon gas (+1.7%) as well as oil (+1.9%). Wind and solar energy output grew at 17.4% and 32.6% last year, but are still tiny fractions of the whole energy system. (Source IMF, BP).
3. As China looks to rebalance its economy, the service sectors have experienced significant growth, with average annual services exports growth of 14.3% since 2010. Financial services dominated this growth, as the financial intermediation industry’s share of Chinese GDP grew 1.5 times over 5 years: from 6.2% in 2010 to 9.2% in H1 2016.
4. For the second year running, the UK’s consumption of coal has fallen by over 20% and has maintained its position as a leader in our index.
5. A 3°C world is one in which the IPCC’s Fifth Assessment Report describes potential impacts including ocean acidification and frequent heatwaves and drought challenging global food supply and trade, with knock on effects for migration and conflict. Furthermore there is potential that rising numbers of species face extinction, and more frequent extreme weather events will cause infrastructure damage, loss of life and business disruption
6. About The Low Carbon Economy Index (LCEI): The LCEI model combines energy-related carbon dioxide emissions with historic and projected GDP data, and the IPCC’s carbon budgets. The model covers energy and macroeconomic data from individual G20 economies, as well as world totals. Details of our model structure are available the Appendix of the LCEI report. The analyses of the Paris targets are based estimates of the decarbonisation rates implied by the INDCs submitted to UNFCCC and include the full national inventory of emissions (i.e. emissions from energy as well as land use change, forestry, and industrial process).

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