Bending the curve: can climate ambition and reality still converge?

Net Zero Economy Index 2023

Windmills in a field

The decarbonisation challenge

Our Net Zero Economy Index is an indicator of the progress G20 members have made in reducing energy-related CO2 emissions in their economies. It shows that the world achieved a decarbonisation rate of just 2.5% in 2022. A year-on-year decarbonisation rate of 17.2% is now required to meet the 2050 goal of limiting warming to 1.5°C.


A fundamental shift in the pace and scale of action is required. Policy-makers and business leaders must work together to unlock the full power and scale of business, capital markets and competition to accelerate emissions reductions, spur breakthrough innovation and stimulate mass behavioural change.

Ireland’s performance

The most recent emissions inventory and projections published by the Environmental Protection Agency (EPA) show that national greenhouse gas emissions fell by just ~ 2% (1.19MtCO2e) in 2022. Ireland faces significant challenges in meeting its short-term and medium-term climate targets. While emissions reductions were observed in some key sectors—notably agriculture, energy, residential and manufacturing—the reductions combined with rising emissions in the transport sector are incompatible with the emissions pathway required to deliver Ireland’s 2030 51% reduction enshrined in the Climate Act. Based on current trends and full implementation of planned climate policies and measures, the EPA projects that Ireland will only achieve a 29% reduction by 2030.

“Ireland will miss its 2030 climate targets unless all sectors of the economy deliver emission reductions in the short-term and sustain this delivery into the future… A continued lack of delivery of large-scale practical actions to decarbonise activities in all sectors will see us exceed our carbon budget.”

— Laura Burke, Director General at the EPA.

Carbon budgets

The Government’s carbon budgets were designed to align with Ireland’s 2030 emissions target. A 51% reduction in greenhouse gas emissions will result in a cut of almost 35 million tonnes of CO2. The first carbon budget envisioned emissions reducing by 4.8% on average between 2021 and 2025. The second budget, running from 2026 to 2030, required emissions to be reduced by 8.3% on average. The severity of Ireland’s challenge was evidenced by EPA data highlighting that Ireland has already used 47% of its first carbon budget (2021–2025) within two years. It is expected to exceed the first two carbon budgets by between 24% and 34%. The EPA notes that compliance with the first carbon budget requires an annual decarbonisation rate of 12.4%, a six-fold increase on the most recent reduction.

Sectoral ceilings

To support the delivery of the carbon budgets, the Government established a series of legally binding sectoral emissions ceilings. The ceilings set out the maximum greenhouse gas emissions permitted in different sectors for each carbon budget and associated reduction targets (relative to 2018). EPA projections identify all sectors, except residential buildings, overshooting their sectoral ceilings for 2025 and 2030. The exceedance level is projected to be greater during the second budget period for all sectors except agriculture.

Key actions businesses can take today

1. Establish an accurate emissions baseline

With the increased focus on decarbonisation, organisations recognise the need to develop or enhance existing net zero strategies. Before determining how quickly you can move to net zero, accurately assess your full carbon footprint. This can be done using accepted methodologies to determine your scope 1, 2 and 3 emissions and understand the material factors driving these emissions. This will provide clarity as to where the challenges lie.

2. Understand your operating environment

Once you have clarity on your emissions, it is important to consider your regulatory/commercial operating environment. What commitments are your peers making? What do your customers expect? How are investors within your sector aligning with net zero? Are regulatory or policy changes anticipated? How soon do you need to start preparing for incoming CSRD requirements? This will inform how quickly you will need to adapt.

3. Set ambitious emissions reduction targets

Set an ambitious target. It will not always be possible to know precisely how you will achieve your net zero target. A robust review of your operating environment and a detailed examination of your emissions profile will allow you to set achievable ‘stretch’ targets. Set long-term and short-term targets to provide appropriate milestones for your decarbonisation and net zero journey. It is important to understand the risks and opportunities resulting from these targets.

4. Develop a climate transition plan and strategy

Climate transition plans help organisations navigate the complex shift to a low-carbon economy. These plans are gaining momentum globally as they not only contain climate commitments and targets, they also explain how those objectives fit strategically into an organisation’s overall business strategy. An effective transition plan can provide an organisation with a roadmap for driving sustained business outcomes as market dynamics change and society’s expectations shift.

5. Senior leadership and aligning your corporate strategy to net zero

Ensuring full senior leadership sponsorship is critical to a successful decarbonisation journey. Corporate strategies should be reviewed to ensure complete alignment with your net zero ambition. This will require decoupling the business from carbon-intensive assets and activities. Companies must target climate-related opportunities while ensuring sustainable growth in the short- to medium-term. For this to happen, businesses must integrate net zero targets with strategic planning and risk management frameworks.

We are here to help you

With the increased focus on decarbonisation, companies increasingly recognise the need to develop or enhance existing net zero strategies. Companies must ensure that they proactively address these issues head-on. Whatever point your company is at in its net zero journey, PwC Ireland is here to help you develop, implement and enhance your net zero strategy. We work with businesses in all sectors to future-proof their 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 today.

Net Zero Economy Index 2023

Can climate ambition and reality still converge?

Follow PwC Ireland