BBVA Research | Real time estimations by Carbon Monitor for 2023 reveal that worldwide carbon dioxide (CO2) emissions have exhibited a marked stability, registering a slight increment of 0.1% (vs. 1% in 2022). This global overview masks profound disparities among nations and sets a new record high for CO2 emissions. China and India have increases in emissions of 3% and 4.5% respectively, in stark contrast to the European Union and the United States, which have reported reductions in emissions of 5.1% and 2.2% respectively.
This diminished rate of growth can be attributed to several key factors. Elevated interest rates and geopolitical uncertainties have exerted a significant dampening effect on economic activities, thereby influencing emission levels. Concurrently, the expedited integration of renewable energy sources into the energy mix and a discernible decrease in coal consumption have played pivotal roles in mitigating the extent of emission growth. Despite these developments, the trajectory of emission increases remains considerably divergent from the reductions necessary to align with established transition scenarios towards a net-zero future.
According to Carbon Monitor’s projections, the trend towards reduced emission intensity would have persisted into 2023, albeit with the transport sector continuing to exert upward pressure on emission levels. (…).
specifically, the emission intensity ratio has adhered to its well established trend, registering an enhancement of approximately 2.7% in 2023. This figure slightly surpasses the average annual improvement rate of 2.2% observed over the preceding 11-year period. Notwithstanding this progress, the expansion of global GDP (recorded at approximately 2.6% in constant dollars and 3% when adjusted for PPP) has led to a resurgence in emissions, propelling them to a zenith that surpasses pre- pandemic benchmarks by a margin of approximately half a percentage point. It merits attention that, within the framework of a net-zero scenario akin to that posited by the NGFS, annual CO2 emissions would necessitate an annual reduction of approximately 6%, a target markedly distant from the levels presently recorded.
(…) The rise in emissions is predominantly attributable to a marked increase in the transport sector, encompassing both aviation and terrestrial transport. Conversely, industrial emissions have seen a decline, facilitated by reduced coal usage and the dampening effect of high interest rates and geopolitics that have decelerated economic activities. Similarly, emissions associated with the energy sector and residential domain have also diminished, concurrently benefitting from a shift towards a greener energy mix.
Despite the numerous geopolitical challenges that impacted the global economy in 2023, including the ongoing wars in Ukraine and Gaza and the tensions in the Red Sea, prices of major fossil fuels have decreased. This reduction can be attributed to lower supply pressures as compared to those experienced in 2022 and a stagnated demand. Factors contributing to this stagnation include higher than anticipated temperatures, elevated interest rates, and the progression of renewable energy sources in electricity generation.
The prices for gas, coal, and oil all declined in 2023. Focusing on China, the USA, and the EU, it becomes evident that the situation regarding emissions varies significantly across these geographies. (…) CO2 emissions in the USA have declined by 2.2%, while the EU saw a more substantial reduction of 5.1%. Conversely, China’s emissions escalated by 3%, alongside real GDP annual growth rates of approximately 2.5%, 0.5%, and 5.2% for the USA, EU, and China, respectively. In the United States, the power and residential sectors were the primary contributors to this decline, contributing reductions of 1.3% and 1.5% respectively to the overall decrease. In the European Union, significant reductions were noted in the power sector (5.5%) and industry (0.5%), the latter clearly impacted by lower activity. An illustrative example of this dynamic is observed in the EU Emissions Trading System (ETS), where prices peaked at €93 per ton in March 2023, only to close the year at €66, indicating a reduced demand for emission allowances from the first quarter onwards (…) highlights a marked decrease in coal usage for electricity generation in both the USA and the EU, by approximately 20%. This, coupled with a 15% reduction in gas usage in the EU, has facilitated a cleaner electricity mix. Additionally, both countries have witnessed positive trends in solar energy development (around 8%) and a decrease in total electricity demand. China has been also investing heavily in green energy, it being a key driver to its economic growth in 2023, including solar power and electric vehicles. Despite these efforts, China reported an increase in emissions, attributed to a significant rise in transport-related emissions (returning to pre-COVID patterns) and power due to increased electricity demand and higher coal usage. In summary, emission intensity saw a reduction of 4.5% in the USA, 5.5% in the EU, and 2.1% in China. It is pertinent to note that, for example, achieving a 3% GDP growth while reducing emissions by 6% annually, requires improvements in emission intensity close to 9%, surpassing even the achievements of the world’s most advanced and committed economies, such as the EU and the USA.
Focusing on Spain, Carbon Monitor’s estimations reveal a 1% reduction in emissions for 2023, thereby halting the upward trend in CO2 emissions observed over the past two years. With a GDP growth of 2.4% in 2023, Spain has enhanced its emission intensity by 3.3%, which is half a percentage point above its average of the last decade at 2.7%. This improvement is largely attributable to the reduction of emissions within the power sector, which has significantly contributed to the overall CO2 decrease with a 4.1% reduction and a 21.4% decrease relative to 2022, thereby offsetting the rise in emissions from the transport sector. The decline in emissions is partly driven by a nearly 50% reduction in coal usage for electricity, a 15% decrease in gas, and a substantial increase in hydro and solar power (28% and 12% respectively, according to Carbon Monitor data).
