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Net Zero
Economy
Index 2021

Code red to go green

Global decarbonisation was only 2.5% in 2020. Achieving the Paris Agreement goal of limiting warming to 1.5°C and delivering net zero requires more than a five-times increase in the rate of global decarbonisation every year, and must start now.

  • 2.5%

    The rate of global decarbonisation in 2020.

  • 12.9%

    The average global decarbonisation rate required to limit warming to 1.5°.

  • 4.3%

    The fall in global energy demand due to the COVID-19 pandemic.

The Intergovernmental Panel on Climate Change (IPCC) in their recent report issued a code red that there is more than a 50% chance that we will reach 1.5°C warming within the next two decades if emissions continue at their current rates.

Whilst many countries have strengthened their commitments, it is clear that ambition is nowhere near enough to keep global warming to 2°C let alone 1.5°C. It is in this context that this year's Net Zero Economy Index examines the rate of decarbonisation needed to deliver a 1.5°C aligned net zero world by 2050 and examines how G20 member states are faring against what is required.

The global picture in 2020

A 12.9% annual global rate of decarbonisation is now required to limit warming to 1.5°C. In 2020 the rate of global decarbonisation—the reduction in carbon intensity or energy-related CO2 emissions per dollar of GDP—was 2.5%. This rate represents a very slight improvement from last year's rate of 2.4%, but is still significantly lower than the annual global rate of decarbonisation required to achieve the 1.5ºC goal.

Whilst the impact of COVID-19 continues to be felt across the world, many countries are beginning to lift restrictions. With it we are seeing a resurgence in economic activity and a rebound in emissions. The growth in emissions during 2021 has been driven by an increase in demand for coal in electricity generation. Despite efforts by some governments to stimulate a green recovery, global energy demand is set to increase by 4.6% in 2021 – led largely by emerging markets and developing economies.

A photo of wind turbines over the sea at sunset.
An illustrative graph showing the rate of carbon intensity across the world.

Figure 1: Net-zero Economy Index 2021 – Rate of carbon intensity worldwide.

G20 performance

The PwC Net Zero Economy Index tracks the rate of decarbonisation of the G20 across energy-related CO2 emissions. Within the G20, Mexico and Indonesia recorded the highest rates of emissions reductions relative to their economic growth. Across these countries, energy-related emissions fell by 12.4% and 10.6% respectively on 2019 levels, largely due to economic restrictions in response to the pandemic. These results are expected to be an isolated occurrence rather than evidence of a long-term trend as each country has announced plans to invest in fossil fuel production in 2021. None of the G20 member states achieved the 12.9% rate of decarbonisation now required to limit warming to 1.5°C.

An aerial photo of from the top of a wind-powered turbine over rough seas.

Ireland's performance

The Environmental Protection Agency (EPA) provides the estimates of greenhouse gas emissions in Ireland. Their latest data shows that overall greenhouse gas emissions in Ireland decreased 3.6% in 2020 and energy industry emissions decreased by 7.9%. The decrease was primarily driven by economic restrictions imposed in response to the pandemic, reduced peat use in power generation and an increase in renewable generation. Despite the decrease in emissions, the EPA warns that Ireland is still not on the pathway required to meet future targets and a climate neutral economy. To achieve permanent emission cuts in line with the Paris Agreement, it will be vital that this decrease is not an isolated occurrence, but rather part of a long-term trend as economic activity fully resumes.

In the past year, Ireland's long-term climate ambition has been restated, and the Climate Action and Low Carbon Development (Amendment) Bill 2021 has been passed into law by the Oireachtas. The Bill sets out the 'national climate objective' to achieve a climate-neutral economy no later than 2050. This target is consistent with the Paris agreement and other international obligations.

To realise this ambition, the Climate Change Advisory Council has been tasked with proposing economy-wide carbon budgets, which will then be applied across relevant sectors by the Minister for the Environment and approved by the Government. The first carbon budget will see emissions reduced by 4.8% on average between 2021 and 2025. The second budget, running from 2026 to 2030, will see emissions reduced by 8.3% on average. The first two carbon budgets shall provide for a 51% reduction in GHG emissions by 2030 relative to 2018 levels resulting in a cut of almost 35 million tonnes of CO2.

The scale and pace of the economic and societal change and investment needed to achieve these targets are significant, but they will be necessary to reduce our emissions consistently and achieve the 1.5ºC goal set by the Paris Agreement.

An aerial photo of a winding river cutting through a golden-brown-coloured landscape dotted with trees.

COP26 cannot fail to deliver

COP26 needs to raise government ambition further

The overarching aim of the forthcoming climate summit in Glasgow—COP26—is to mobilise stronger and more ambitious climate action from governments to keep the 1.5°C Paris Agreement goal within reach. This will require a significant strengthening of climate commitments from all countries, and especially from the G20, as without concerted action from this group the chances of limiting warming to 2°C let alone 1.5°C will all but disappear.

Converting climate pledges into action

Governments have a pivotal role to play in creating the enabling environment for the transition to net zero through policy and regulatory reform and investment. National targets need to be underpinned by policies that will deliver change at the pace and scale required. These policies will vary by nation, depending on the socio-political and economic context, but need to set the regulatory environment that businesses and individuals operate within, and encourage capital to be deployed to the right places. This requires clear overarching strategy and ambition, long-dated policy mechanisms and the removal of fiscal or other disincentives.

Private sector focus on net zero shifts from ambition to execution

We have seen an unprecedented number of net zero commitments by the private sector in the last 18 months. Over 3,000 businesses are now part of the Race To Zero Campaign, joining 733 cities, 31 regions, 173 of the biggest investors, and 622 Higher Education Institutions. Alongside 120 countries, they form the largest ever alliance committed to achieving net zero emissions by 2050 at the latest, collectively making up nearly 25% global CO2 emissions and over 50% GDP.

Over half the sectors that make up the global economy are now committing to halve their emissions within the next decade and achieve near-term emissions reductions targets. In each of these sectors, at least 20% of the major companies by revenue are aligning around sector—specific 2030 goals—in line with delivering net zero emissions by 2050.

Time for all businesses to commit, plan and act

Making the transition to a more environmentally and socially responsible world is now an urgent business imperative. We have less than two business cycles left to deliver the necessary changes.Working alongside governments, and providing the mandate and impetus for them to go further and faster, is vital if we are to keep warming to 1.5°C and avoid catastrophic climate change. By taking firm and decisive action now to halve global emissions by 2030 and reach net zero emissions by no later than 2050, we have a chance to succeed.

An aerial photo of tall trees surrounded by a circular, concrete motorway.

*Global carbon budgets refer to the global estimated budget of fossil fuel emissions taken from the IPCC Special Report on Global Warming of 1.5°C. A series of assumptions underpin these carbon budgets, including the likelihood and uncertainties of staying within the temperature limits, and the use of carbon dioxide removal (CDR) technologies.

Sources: bp, World Bank, OECD, UNFCCC, PwC data analytics.

Notes: GDP is measured on a purchasing power parity (PPP) basis.

Key actions businesses can take now

Although there is a huge uptick in momentum across the private sector, not all businesses are on board yet, and progress needs to happen at a much more accelerated pace. All businesses need to respond—and quickly—if we are to halve emissions before the end of this decade. We have less than two business cycles left to deliver the necessary changes.

Making such fundamental changes is big and complex. But fortunately, this is not all new ground. Some businesses have been leading the way and there is a lot to learn and build on as we move forward. The PwC Building Blocks for Net Zero Transformation (PDF, 3MB), commissioned by Microsoft, provides a practical guide for functional heads across a business to embed the necessary actions to achieve net zero business transformation. These include:

  • Setting a science-based target to achieve net zero emissions across the value chain by no later than 2050;
  • Embedding net zero emissions within the broader company strategy;
  • Assessing and disclosing climate-related risks and opportunities in alignment with the TCFD;
  • Investing in reskilling and upskilling employees to deliver a just transition;
  • Considering the impacts associated with carbon pricing, trading and taxes, including carbon border adjustment taxes;
  • Investing in R&D and innovation in new technologies to help to deliver net zero

Making the transition to a more environmentally and socially responsible world is now an urgent business imperative. Working alongside governments, and providing the mandate and impetus for them to go further and faster, is vital if we are to keep warming to 1.5°C and avoid catastrophic climate change. By taking firm and decisive action now to halve global emissions by 2030 and reach net zero emissions by no later than 2050, we have a chance to succeed.

An aerial photo of a hydro-powered dam.

We are here to help you

We support organisations to help them develop and implement concrete plans for how to get to net zero. We realign corporate strategy, governance and accountability and operating models with ESG principles in mind. We support their transformation efforts in innovation and research, tax strategy and supply chain planning.

We work with businesses across all sectors and bring our insights into climate and sustainability considerations. We aim to future-proof organisations by making them more resilient and sustainable. We are helping businesses make the transition to the net zero carbon emissions economy of the future.

Contact us

Kim McClenaghan

Partner, PwC Ireland (Republic of)

Tel: +353 1 792 6912

Fiona Gaskin

Partner, PwC Ireland (Republic of)

Tel: +353 1 792 6923

Luke Redmond

Senior Manager, PwC Ireland (Republic of)

Tel: +353 1 792 7649

Ciarán O'Carroll

Manager, PwC Ireland (Republic of)

Tel: +353 1 792 8147

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