As world leaders and corporate representatives have returned from COP27 in Sharm el-Sheikh, a major challenge remains to bend the curve of global greenhouse-gas (GHG) emissions and mitigate the worst outcomes of climate change. While the global media’s focus will quickly shift to other, more immediate world events, continuous record-breaking and extreme weather conditions throughout 2022 are a reminder that climate change is already affecting millions of people. With the trend of global warming continuing in the coming years and decades, these impacts are expected to become increasingly visible—and the consequences increasingly dire.
This article summarizes our latest thinking on global emissions trends, based on the McKinsey Global Energy Perspective 2022 (see sidebar, “McKinsey’s Global Energy Perspective 2022”), and describes nine requirements for an orderly transition. While emissions are expected to peak in the next few years across most of our scenario outlooks, even in our most progressive scenario (which assumes that countries that currently have net-zero commitments will deliver on those targets), the world is likely to overshoot the 1.5ºC target. Indeed, an emerging take-away from Sharm el-Sheikh is that there are growing concerns that the 1.5ºC target is likely no longer realistic.1 Still, every 0.1ºC matters in trying to limit the impacts of climate warming.
Despite net-zero commitments and a global focus on increasing the rate of implementation and availability of finance, global GHG emissions are on a trajectory that leads to an expected global temperature increase of between 1.7ºC and 2.4ºC by 2100, depending on the scenario
Following a decline in 2020, global emissions showed a strong rebound and are projected to return to 2019 levels this year. The current energy crisis in Europe will at least temporarily lead to further increases in emissions as gas is replaced by oil or coal in certain applications and countries. At the same time, many countries have updated their decarbonization plans over the past two years to include more ambitious reduction targets. Across all four scenarios explored in our Global Energy Perspective 2022, global energy-related CO2 emissions are projected to peak before 2030 (see sidebar, “McKinsey’s Global Energy Perspective 2022”).2 By 2050, projected emissions are expected to be 30 to 70 percent below those in 2019. In the Achieved Commitments scenario, for example, global energy-related CO2 emissions are expected to peak around 2023 and decline by 69 percent to 11 gigatons of CO2 (GtCO2) by 2050. Across these scenarios, the global mean surface air temperature (GSAT) is expected to increase by 1.7ºC to 2.4ºC by 2100. However, given the uncertainties around the relationship between emission concentrations and global-warming impact, our scenarios show that global warming could even exceed 2.1ºC to 2.9ºC by 2100 with a one-in-six probability.3 Therefore, even though projected emissions reductions have accelerated compared to earlier outlooks, attributed in part to stakeholders’ more ambitious emissions-reduction efforts and commitments, the world remains far from achieving the 1.5º Pathway.
CO2 emissions in 2021 rebounded to historic trends alongside the global economic recovery
In 2020, the COVID-19 pandemic caused the sharpest drop in the last 20 years across numerous drivers of GHG emissions growth, including economic development, energy demand, and related emissions. As economies recovered, CO2 emissions in 2021 rebounded 4 percent after declining 5 percent in 2020. Both coal and gas emissions were higher than 2019 levels and oil emissions only partially rebounded in 2021, mainly due to the slow recovery in aviation. So, while many expected COVID-19 to cause a more structural change that could contribute to lower emissions levels, global CO2 emissions are now back to pre-COVID-19 levels.
Meanwhile, there is an ever-increasing focus on net-zero commitments
Countries that have announced, pledged, or adopted climate plans to reduce emissions in the coming decades account for over 91 percent of global GDP and around 88 percent of global CO2 emissions. Additionally, several regions and cities have adopted or pledged more ambitious targets, signaling a willingness to go beyond (supra-) national efforts.
Corporations are following governmental commitments or even outpacing them in setting targets to curb their carbon footprints: around 2,000 (multi)national companies have established science-based targets. The momentum to curb emissions has penetrated most parts of the world and global economy, indicating significant public support for addressing climate change.
Fossil-fuel consumption is projected to be replaced by electricity, hydrogen, and biofuels
Global energy consumption is expected to flatten in the coming decades: despite the rapid growth of the global economy and population growth of two billion people, energy consumption is projected to grow by only 14 percent by 2050, from 2019 levels.
Continued reductions in the energy intensity of GDP are a key driver, triggered by greater end-use efficiency in buildings, transport, and industry. Electrification also plays a role in reducing energy intensity as a shift to electrical solutions tends to come with a step change in efficiency in many segments, such as space heating and passenger cars.
As a result of declining fossil-fuel consumption, energy-related CO2 emissions are projected to decline at similar rates, with coal and oil emissions declining first and natural gas emissions toward 2050.
While reducing energy-related CO2 emissions will be key to decarbonization, the abatement of other GHGs is also needed.
In addition to energy-related CO2 emissions, other greenhouse gases need to be abated to achieve climate targets
While CO2 emissions across the board are expected to decline due to strong policy support and technology improvements, non-energy related CO2 emissions (which constitute 12 percent of 2019 CO2 equivalents [CO2e] and include, for example, emissions from agriculture and deforestation) are projected to decline at a slower pace than energy-related emissions.
Methane contributes the greatest share of non-CO2 emissions. In 2021, over 100 major emitting countries committed to the Global Methane Pledge that aims to reduce methane emissions by 30 percent by 2030. Achieving this target requires deployment of new technologies, like high-resolution satellite imagery that can help identify the most polluting sources.1
However, countries that have given no indication that they will commit to the Pledge are expected to increase their methane emissions, which may result in a total net reduction of just over 10 percent by 2030 in the Achieved Commitments scenario. Given methane’s significant warming impact, methane emissions need to be reduced by 34 percent by 2030 to achieve the 1.5° Pathway.
Despite the growing focus on increasing the rate of implementation and availability of finance, as well as adoption of net-zero commitments, the current trajectory of global GHG emissions could lead to a global temperature increase of 1.7ºC to 2.4ºC by 2100, depending on the scenario
CO2 emissions are expected to peak in the mid-2020s across scenarios. In the Achieved Commitments scenario, emissions are expected to decline by around 69 percent by 2050—compared to 55 percent in the Further Acceleration scenario and 35 percent in the Current Trajectory scenario.
Depending on the scenario, the global mean surface air temperature could increase by more than 1.7ºC to 2.4ºC with 50 percent probability. This global mean increase implies that certain regions could experience even higher temperature increases. Given significant uncertainty around temperature increases, the average global increase could even exceed 2.1ºC to 2.9ºC, with a one-in-six probability. Even if countries achieve their net-zero commitments, we could exceed 2ºC global warming with a higher probability than throwing six with a die.
To keep global warming below 1.5ºC, the global energy system would need to accelerate its transformation significantly, shifting from fossil fuels toward efficiency, electrification, and new fuels—even more rapidly than the net-zero commitments that have been announced.
The 1.5º Pathway is getting out of sight, given the short time frame that remains to keep emissions within the carbon budget
Cumulative CO2 emissions are the main driver of global warming, not just the timeline to net zero, thus every year of continued emissions reduces the remaining carbon budget to stay within 1.5°C warming.
Time is of the essence—the longer it takes before emissions peak, the steeper the downward trajectory needed to limit global warming.
The next years will be decisive. If action is delayed, an even faster pace of transition will be required and thus the transition will likely be more disorderly.
Limiting global warming will require a joint effort from private companies, public institutions, and citizens
Given the complexities involved, a critical step at this juncture is to better understand the fundamental requirements to solve the net-zero equation. Nine requirements can be grouped into three categories:
Physical building blocks: These encompass technological innovation, the ability to create at-scale supply chains and support infrastructure, and availability of necessary natural resources.
Commitments and enabling mechanisms: These consist of governing standards, tracking and market mechanisms, and effective institutions; commitment by, and collaboration among, public-, private-, and social-sector leaders globally; and support from citizens and consumers.
Economic and societal adjustments: These comprise effective capital reallocation and financing structures, management of demand shifts and near-term unit cost increases, and compensating mechanisms to address socioeconomic impacts.
The next decade of the energy transition will be crucial. Even as reaching a 1.5º Pathway is becoming increasingly infeasible, the physical and societal impact of global warming increases with every additional 0.1ºC. Moreover, delaying the warming trajectory is crucial to give communities more time to adapt.
Striving toward net zero and the 1.5º Pathway would limit the extent of physical climate risks and reduce the odds of triggering the most catastrophic impacts of climate change. The transition itself is not without risks, including that of energy-supply volatility and supply-demand imbalances. Yet, the transition is also rich in opportunity with meaningful growth prospects, as shifting energy systems and accelerating decarbonization trends can bring new markets for low-emissions products and services. In parallel, while acting quickly will be key to achieving a low-carbon future and reaping the rewards, preparing for a world with climate-change impacts is already relevant—and becoming ever more important.