The world is heading for 2.5 degrees Celsius warming by 2100 and needs to increase total investments by 50 per cent to decarbonise the energy sector to be able to limit global warming to below 1.5 degrees Celsius under the Paris Agreement, a new report said.
While net-zero pledges announced by countries around the world now cover 88 per cent of annual global emissions, no major country is on track to meet their 2030 emissions reduction goals, according to consulting company Wood Mackenzie in its 2023 Energy Transition Outlook published on Thursday.
Only the European Union (EU) and the United Kingdom (UK) come close to meeting their emissions reduction targets by 2030, with the United States (US), Japan, and South Korea falling behind. On the other hand, China and India are on course to increase their emissions by the end of the decade, according to the consultancy.
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“The pathway to net zero was always going to be challenging, but Russia’s invasion of Ukraine has made it more difficult especially in the near term,” said Simon Flowers, chairman and chief analyst at Wood Mackenzie. “Supply security fears increased around the world, and higher prices across energy and mining commodities have fuelled inflation.”
For China, the world’s largest carbon dioxide emitter accounting for nearly 30 per cent of global emissions, the main challenge for it to meet its carbon reduction goals is its current significant level of emissions and huge reliance on coal, said Prakash Sharma, vice-president of scenarios and technologies research at Wood Mackenzie, and lead author of the report.
“The main challenge for China is its starting point ... so in order for China to quickly decarbonise and reduce emissions, especially by 2030, is going to be very tricky,” said Sharma.
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China, which has announced its target to peak emissions before 2030 and reach net-zero emissions by 2060, has been expanding coal power at a frantic pace citing energy security concerns, and a recent report found that China’s coal power emissions per capita grew more than any G20 countries between 2015 and 2022.
“The biggest challenge for China would be to move away from coal, and that’s where the role of gas becomes very important, because gas can allow China to decarbonise but also make it meet its growing energy demand,” said Sharma.
Achieving the 1.5 degrees Celsius target is going to be “extremely challenging”, but it is possible and greatly depends on actions taken this decade, said Flowers.
The total investment needed to decarbonise the energy sector is estimated to cost US$1.9 trillion a year under the 2.5 degrees Celsius scenario, while this needs to increase by 50 per cent to US$2.7 trillion a year if the world wants to meet the 1.5 degrees target, according to Wood Mackenzie.
And more than 75 per cent of this investment is needed in the power and infrastructure sectors, to build low carbon power supply and infrastructure at a faster pace, according to Sharma.
The share of wind and solar should increase from 13 per cent today to over 65 per cent by 2050 to reach the 1.5-degree target, according to Wood Mackenzie. It also requires 515 million tonnes of low-carbon hydrogen by 2050, as the technology will see 11 per cent share in final energy demand by mid-century to phase out fossil fuels in chemicals, steel, cement, and heavy-duty mobility, the report showed.
For electric vehicles, global stocks should rise from 43 million cars today to 1.02 billion cars by 2050 to limit global warming by 2.5 degrees, and an additional 60 per cent growth in stock is needed to reach 1.5 degrees, according to the report.
“China has strong potential there, especially in the long term, by being the biggest market for renewable capacity addition, and the biggest market for battery manufacturing and critical minerals manufacturing. So China can really quickly play an important role in lowering the cost of new technologies, just because of the size of its market,” said Sharma.
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