2023 marks the slowest decrease in carbon intensity in over a decade - PwC’s Net Zero Economy Index 2024

• Required annual rate of decarbonisation has risen to 20.4% to limit global warming to 1.5°C

• No G20 country has achieved a decarbonisation rate of more than 11.5% since 2000

• Despite a record 14% rise in renewable energy capacity in 2023, surging energy demand led to a 1.5% increase in fossil fuel consumption, putting progress at risk

Carbon intensity decreased by just 1.02% in 2023, the smallest drop since 2011, according to new analysis from PwC. This slowdown highlights a troubling stall in efforts to decouple economic growth from carbon emissions.

PwC’s latest Net Zero Economy Index reveals that a year-on-year decarbonisation rate of 20.4% (up from 17.2% last year) is now required to limit global warming to 1.5°C above pre-industrial levels. This means that the world must now decarbonise at a rate twenty times faster than it achieved last year (1.02%). 

To put this into perspective, since 2000, no G20 country has achieved a decarbonisation rate of more than 11.5% in a single year - the highest level was achieved by France in 2014 (-11.08%). 

Overshooting 1.5°C is fast becoming a reality and limiting warming to 2°C - the lowest end of the Paris Agreement’s ambition - would also require a big step change, with an annual decarbonisation rate of 6.9% needed. 

Emma Cox, Global Climate Leader at PwC, said:

"If we don't take bold action, we risk exceeding 1.5°C of warming and the greater the overshoot, the more severe the impact. Despite these warnings, the gap between goals and actions is growing. Without global cooperation, the possibility of keeping warming within safe limits will disappear. To achieve the necessary changes, we must expand the use of renewable energy, manage energy demand better, and increase financial and technical support for a fair transition."

Now in its 16th year, PwC’s Net Zero Economy Index tracks economic growth and energy-related CO2 emissions data, against the rates required to achieve the aims of the Paris Agreement. It assesses how economies are progressing in breaking the link between economic growth and increases in energy-related carbon emissions.

Renewable energy capacity up, but fossil fuels still dominant

Growing energy demand continues to outpace the adoption of renewables, leading to higher fossil fuel use to sustain economies. Last year, renewable energy capacity hit a record high, increasing by 14% to 3,870 gigawatts (GW) from 2022 to 2023. However, fossil fuel consumption also increased by 1.5% in 2023, reaching 16,007 GW. As a result, the global fuel factor, which measures emissions per unit of energy consumed, rose by 0.07%. This highlights a slight uptick in the proportion of fossil fuels within the energy mix, as the rise in energy demand outpaced the growth of new renewable capacity. Economic challenges like inflation, geopolitical tensions, and higher interest rates further complicate the transition away from fossil fuels, as nations grapple with short-term pressures.

Surging energy demand risks undermining growth in renewables

Renewable energy is set to become the largest electricity source by 2025, but the expected increase in energy demand from emerging economies, climate adaptation efforts, the electrification of transport systems, AI, and data centres is likely to increase energy consumption. Without better energy efficiency and demand management, these factors could undermine the gains made from scaling renewable energy by forcing a continued reliance on fossil fuels. 

Reducing energy intensity offers an opportunity to accelerate action

Reducing energy intensity and more effectively managing demand offers an opportunity for business and government to accelerate action. Our recent research with the World Economic Forum, found that current technology can enable the world to reduce its energy needs by approximately a third (31%), without reducing economic output. This could result in annual savings of up to US$2 trillion (at current energy prices) if measures were to be taken at scale by the end of this decade*.

Commenting on the opportunity, Will Jackson-Moore, Global Sustainability Leader at PwC, said: 

"Scaling public-private partnerships can help manage energy demand effectively. Businesses can take the lead in using energy-efficient technologies, adopting circular business models, and improving manufacturing processes. At the same time, governments can update their energy policies to focus on reducing demand in important areas like buildings, industry, and transport. By aligning government policies with business innovations, we can work towards a secure energy future. Collaboration will be key.”

Financial and technological support essential for a just transition

The disparity in decarbonisation rates between developed and developing nations in 2023 highlights the need for greater financial support to ensure a just transition. Last year, G7 countries reduced their carbon intensity by 5.31%, while the E7 saw a 0.04% increase. Rapidly industrialising nations face immense challenges without the resources of wealthier countries.

Looking ahead to COP29, Emma Cox, Global Climate Leader at PwC, concluded: 

“As COP29 approaches, we urgently need an ambitious New Collective Quantified Goal (NCQG) on finance to empower developing nations to meet their climate goals. Agreeing a fair and ambitious financial target is critical to support developing countries in their climate actions, enabling them to enhance their Nationally Determined Contributions (NDCs) in 2025 and beyond."

-Ends-

Notes to Editors: 

*WEF/ PwC - Transforming Energy Demand

Methodology

The primary purpose of the Net Zero Economy Index is to calculate national and global carbon intensity (CO2 / GDP), and track the rate of change needed to limit warming to 1.5°C. To do this, we use the IPCC carbon budget to calculate how much emissions need to be reduced in the future, and divide this by the projected increase in GDP. This allows us to see the amount emissions must reduce to maintain projected GDP growth, providing insight to the scale of efforts required to decouple emissions from economic growth.