- Global emissions grew by 2% in 2023 according to the latest EDGAR data – reaching the highest level ever recorded
- China, the US and India are the worlds largest emitters, but also account for over 45% of global GDP
- 25 out of the 27 EU countries reduced their emissions in 2023
With renewable energy capacity sharply on the rise in recent decades, one might be forgiven for assuming this would translate directly into lower global greenhouse gas emissions in the here and now. According to the latest global data, emissions rose by 2% last year – a figure that was positively contributed to by each of the BRIC countries (Brazil, Russia, India and China), whose economic growth has historically been linked to commodity consumption and negatively contributed to by Europe, who posted weaker industrial activity over the period. We have seen transport emissions increase by the highest amount year on year, largely due to increased global goods and travel mobility – a sector that accounts for over 25% of the UK’s total emissions.
Changes in sector emissions over time
Source: EDGAR, 2024
China
Having been recently released from COVID lockdowns, China ramped up economic activity in 2023 and posted a 5% year on year increase in emissions. The caveat is that a lot of its manufacturing output went into low-carbon energy installations. China installed 210 gigawatts of solar power in 2023, twice the total solar capacity of the US and four times what China installed before the pandemic in 2020.
Looking ahead, we believe that China’s emissions are nearing their peak and close to a turning point. C02 emissions are expected to fall in 2024 as they begin their rotation into low carbon electricity generation. Their world leading manufacturing of green goods, renewable power sources and electric vehicles is likely to temper emissions in years to come – and we expect this to begin reflecting in the data during the 2030’s, and make a meaningful reduction (over 30%) throughout the 2040’s.
The EU
In 2023, EU emissions decreased by 7.5%, reducing their share of global emissions to 6.1% from 6.8% in 2022. Germany, known for their dominant car manufacturing sector remained the largest emitter and was followed by France, Italy and Poland. This fall was largely due to generally weaker industrial activity in the region and targeted efforts to reduce fossil fuel use (and dependency) since the Russian invasion of Ukraine. As we see in the chart below, electricity generation from renewable sources has overtaken fossil fuels for the first time.
EU electricity generation
Source: Capital Economics
Bowmore portfolios
Emissions are an important environmental factor when considering and monitoring allocations within our ESG mandate (environmental, social and governance). We endeavour to take a balanced approach, in turn building portfolios that capture opportunities in building sustainable growth.
An example of a fund within the UK equity space, a market which is dominated by large oil and gas companies is the Royal London Sustainable Leaders fund. The fund applied a ‘do no significant harm’ avoidance criteria to companies that it invests in. Examples of themes that the fund typically avoids are fossil fuel extraction and nuclear power generation, giving the allocation a weighted average carbon intensity c.40% lower than the UK equity index. While following this investment process, the fund has returned 15.3% over the last year.
