McKinsey: Reaching 1.5C a ‘daunting’ and unparalleled transition for all sectors

The report states that the global transition would impact every economy

A new in-depth report from global analysis firm McKinsey outlines “rigorous, data-driven snapshots” at how the world can reach the 1.5C ambition of the Paris Agreement, through three different pathways.

A rapid scenario would require all sectors to have abated at least 30% of their 2016-level CO2 emissions by 2030. This rises to 76% for the power sector. Slower decarbonisation transitions are also possible but would require some sectors to go beyond net-emissions and for mass-scale reforestation and carbon capture to offset emissions from hard-to-abate areas.

Keeping to 1.5C would require limiting future net-emissions from 2018 levels onwards to 570 gigatonnes (Gt), and reaching net-zero emissions by 2050, the report notes. However, the world is currently on a trajectory to exceed that target in 2031.

The report outlines that five necessary shifts are required across reforming food and forestry, large-scale electrification, industrial adaptation, clean power generation, and managing carbon markets. These would deliver major business, economic and societal disruptions that would enable the world to meet the 1.5C target. Doing so, the report states, would help overcome “the risk of physical hazards and nonlinear, socioeconomic jolts”, as is currently being experienced during the coronavirus pandemic.

The report is one of the first to observe the net-zero transition beyond just reductions in carbon emissions, with around a quarter of global warming levels attributable to other greenhouse gas emissions such as methane and nitrous oxide. This poses significant disruptions to areas like agriculture and food, which would have to pivot to new business models and production to reduce other greenhouse gas emissions.

McKinsey estimated that carbon emissions would need to be reduced by 50% by 2030 compared to 2010 levels, with other greenhouse gases reduced by 40% in the same timeframe. Analysis from the UN Environment Programme estimates that global emissions would need to fall by 7.6% every year this decade, in order to put the planet on the 1.5C trajectory.

“Getting to 1.5C would require significant economic incentives for companies to invest rapidly and at-scale in decarbonisation efforts. It also would require individuals to make changes in areas as fundamental as the food they eat and their modes of transport. A markedly different regulatory environment would likely be necessary to support the required capital formation.

“Our analysis, therefore, presents a picture of a world that could be, a clear-eyed reality check on how far we are from achieving it, and a road map to help business leaders and policymakers better understand, and navigate, the challenges and choices ahead.”

Power and fuel

McKinsey now estimates that electrification would at least triple demand for power by 2050, compared to its 2019 estimates of a 50% increase. While renewables are already market-ready, the report notes the importance of growing the hydrogen and bioenergy markets. The report also predicts a peak in global demand for oil in 2033.

By 2030, yearly buildouts of solar and wind capacity would need to be eight and five times larger, respectively, than today’s levels and coal-powered electricity generation would have to fall dramatically by 80% by 2030. Slower transitions are possible in this area, but even then, coal output would need to drop by more than 60%. The amount of electricity produced by natural gas would also need to reduce by between 20% to 35%.

Offsetting and carbon capture

“Currently, it is impossible to chart a 1.5-degree pathway that does not remove CO2 to offset ongoing emissions. The math simply does not work,” the report notes.

The report additionally states that carbon capture, use and storage (CCUS), would be a critical aspect of any net-zero transition. In the rapid decarbonisation scenario, annual capture levels from CCUS would have to multiple by more than 125 times from 2016 levels.

The rollout of these technologies would have to be supported by mass reforestation, to compensate for emissions from hard-to-abate sectors.

“By 2050, on top of nearly avoiding deforestation and replacing any forested areas lost to fire, the world would need to have reforested more than 300 million hectares (741 million acres)—an area nearly one-third the size of the contiguous US,” the report added.

Food and forestry

For food and forestry, the report states that agricultural emissions are poised to increase by about 15 to 20% by 2050. Diets would have to change to reach 1.5C, reducing the share of ruminant animal protein in the global protein-consumption from 9% by 2050 on current projections to 4% by 2050. Food waste would also need to be curbed to reduce emissions, with the levels of food wasted globally not exceeding 20%, down from today’s estimates of 30% according to the FAO.

New cultivation methods would also need to be championed in order to deliver a required 53% reduction in the intensity of methane emissions from cultivation by 2050.

In a scenario where all sectors decarbonise at pace, levels of deforestation, which currently account for around 15% of global carbon emissions, would need to fall by 75%. Across scenarios where reduced deforestation and improved reforestation are used to offset slower progress elsewhere, deforestation would need to be eliminated by 2030.

Industrial electrification

The report notes that improvement in efficiencies can reduce energy demand, which will need to be electrified regardless. Insulation and home-energy management could reduce demand for space heating and cooling, lowering CO2 emissions 30% by 2050, while improving the efficiency of aviation technologies by 2% per year could reduce emissions 15% by 2050. By 2050, reducing demand through improved efficiencies could bypass 15% of today’s carbon emissions.

Under the best-case scenario, electric vehicles (EVs) would still account for less than half of global food sales by 2030 and be fully phased-out by 2050. sales of EV passenger vehicles, for example, would need to grow nearly 25% a year between 2016 and 2030. If EVs are unable to penetrate the market at such an aggressive pace, the report warns that “unprecedented levels of reforestation” would be covered to describe the difference.

Electrification of heating could reduce emissions by 20% against 2016 levels, while integrating district heating, hydrogen and biogas, the levels of decarbonisation could reach 40% by 2050.

Adapting industrial operations

The report notes that most businesses in low-to-medium-carbon sectors, such as food, textiles and manufacturing will be able to electrify more than twice their current level by 2050 – a jump from 28% to 76% by 2050.

For sectors like iron and steel, or cement, the report states that low-carbon innovation and the used of recycled materials will need to be integrated at scale. The plastics market could consist of 60% recycled content in a net-zero world by 2050, while scrap steel reuse will climb from today’s levels of one-third of production.

The report arrives on the same day that the IEA revealed that the Covid-19 pandemic is set to deliver the biggest disruption to the energy system since the 1930s, with global electricity demand to fall by 5% while the level of emissions for 2020 are set to fall by 8% – the largest annual decrease in emissions ever recorded.

Based on an analysis of more than 100 days of real data so far this year and the assumption that lockdowns will ease gradually and economic productivity improving over time, the report claims the global electricity demand is set to fall by 5% in 2020, the largest decline since the Great Depression of the 1930s.

However, many nations are going to ramp-up production once lockdown measures are eased, meaning that emissions could increase in 2021 as nations race to spur the economy. This has raised calls that governments should only approve rescue packages for industries if they are linked to improved environmental performances.

Matt Mace