Does the EU really lead the US on climate ambition?

Assessing countries' relative level of ambition or effort will be a critical political issue this year. So how does the US target of a 26-28 per cent reduction on 2005 levels compare with the EU's target of a 40 per cent reduction on 1990 levels? I looked at the numbers with my colleague and Rob Milnes and we were surprised to find that the US appears to be as ambitious as the EU.

Although carbon intensity in the US is significantly higher than in the EU, it has fallen faster since 2000: by 2.3 per cent each year on average. The EU's carbon intensity has fallen by two per cent annualy on average over that period. The US economy is expected to grow by close to three per cent over the next five years and then at 2.2 per cent each year in the 2020's according to our latest 'World in 2050' report. So the US's GDP will be 84 per cent higher in 2030 compared to 2000 (the EU's will grow by 62 per cent).

This rate of GDP growth means that if the US continues on its current decarbonisation path, emissions will be only eight per cent below 2005 levels by 2025. The US will need to nearly double its current rate of decarbonisation to achieve the 26 to 28 per cent reduction target announced by President Obama in November last year. This is compared with our business as usual emissions scenario for the US, which combines our GDP growth projections with its historical average decarbonisation rate.

Both the EU and US will have to decarbonise at approximately four per cent each year (assuming their economies grow as expected) to hit their Paris targets. In other words, the US target appears to be as ambitious as the EU one. And both will need a step change to the levels of incentives and penalties to shift businesses and consumers down the low carbon pathway.

It is striking that both the EU and US fall far short of their own long term targets which are more closely aligned with a 2 degrees pathway. Decarbonisation of seven per cent and six per cent respectively is required by the EU and US to achieve their 2050 goals.

While goalless draws are acceptable in the Premier League, they are less popular across the pond. Carbon intensity in the US is 326 tCO2/$ million GDP compared with 209 in the EU which also has a stronger track record of greenhouse gas legislation. We suspect that there are more lower cost reduction opportunities in the US, so perhaps the EU 2030 target is slightly more ambitious as it may have to work harder to achieve it.

Jonathan Grant is director of sustainability and climate change at PwC.

This article is part of BusinessGreen's Road to Paris hub, hosted in association with PwC.