How ambitious is the EU's 40% target?
March 06, 2015
The EU's Environment Council announced its 'Intended Nationally Determined Contribution' or emissions target in early March. It will require a step change in decarbonisation according to analysis by Jonathan Grant and Rob Milnes.
The EU committed to at least a 40% reduction in emissions on 1990 levels by 2030. The target is no surprise, as it is the one the Council agreed last October in the 2030 climate and energy package.
Although carbon intensity in the EU has fallen by 2% per year on average since 2000, PwC expects economic growth to pick up in the EU, with GDP rising to 62% higher above 2000 levels in 2030. This rate of GDP growth means that if the EU continues on its current modest decarbonisation path, emissions will be only 16% below 1990 levels by 2030.
In this light 40% looks ambitious. The EU will need to nearly double its current rate of decarbonisation to achieve the 40% reduction target by 2030. By 2022 European countries will need to have the same carbon intensity as France today, and then cut this by a quarter by 2030.
France currently has the lowest carbon intensity of the G20 countries with 38% of its energy demand met by nuclear. The EU’s longer term target is an even more ambitious 80-95% reduction by 2050.
In other words, business can expect a step change in climate policy and regulation in the short term to achieve this goal. Climate impacts on operations, people and markets should be anticipated in the longer term. This is likely to stimulate an increase investor concern and engagement.
Our Low Carbon Economy Index model focuses on historic and projected changes in carbon intensity or emissions per million dollars of GDP. Looking at carbon intensity puts the challenge of reducing emissions in the context of expected, or hoped for, economic growth.