Economies need to cut carbon emissions by 7 percent annually to hit Paris target

In the lead-up to the UN’s COP28 climate conference, the world’s largest CEO-led community committed to accelerating the net-zero transition is calling on businesses and governments to further slash global carbon emissions to meet the Paris Climate Agreement goals. According to a report by the Alliance of CEO Climate Leaders, in collaboration with the Boston Consulting Group (BCG), emissions must be cut back by 7 percent each year from now until 2030 to limit global warming to 1.5°C, as agreed in Paris in 2015.

The report, The State of Climate Action, says that “dramatic action” is needed to close the gap. This includes shorter-term net-zero national and corporate commitments, faster deployment and funding of green technologies, and stronger global collaboration to ensure a just transition. The report follows an open letter from more than 100 CEOs and senior executives from the Alliance to world leaders ahead of COP28 urging for a phase-out of fossil fuels and a massive scale-up of renewable energy and carbon removal.

“The findings in this report are a wake-up call to the world, reaffirming that the status quo is no longer an option,” said Rich Lesser, Global Chair of Boston Consulting Group and Chief Advisor to the World Economic Forum’s Alliance of CEO Climate Leaders. “Governments, companies and other stakeholders must act in lock step to meet our ambitious climate goals. It is our collective responsibility to build a more resilient and greener future for generations to come, and we are unwavering in our mission to make that a reality.

The Alliance of CEO Climate Leaders, facilitated by the World Economic Forum, consists of more than 120 top companies from diverse industry sectors and regions, representing more than $4 trillion in total revenues and 12 million employees.

Tackling insufficient national and corporate commitments

According to the report, as of mid-2023, the share of global emissions covered by national net-zero targets exceeded 80% – up from virtually zero only a few years ago. However, only a third of global emissions are covered by net-zero targets for 2050, the estimated timeframe required to maintain a 1.5°C limit, with most national net-zero targets set for longer timelines. The shorter-term gap is even more significant, with only 20% of emissions also covered by Nationally Determined Contributions (NDCs) aligned to a 1.5°C ceiling.

Stronger commitments and actions are most critically needed from the 10 largest national emitters, which account for half of the gap

On the corporate side, progress in recent years has been substantial. The total number of companies with commitments to 1.5°C science-based targets has increased more than six-fold between the end of 2020 and August 2023. However, fewer than 20% of the world’s 1,000 largest companies have set this type of target, and almost 40% have no net-zero commitment at all.

Addressing the technology and funding gap

Most green technologies required to achieve net zero exist already, but those that are or soon will be cost competitive would only cover around 55% of global emissions. Others, including “deep decarbonization” technologies – such as hydrogen, carbon capture, usage and storage (CCUS), and direct air capture – are still in early stages of development and scaling too slowly. To catch up, innovation and industrial scaling need to accelerate at nearly unprecedented levels.

Among key root causes, an over $2 trillion gap in yearly climate funding remained in 2022, with critical gaps in early technologies and infrastructure: bioenergy, hydrogen, sustainable aviation fuel, CCUS and battery storage collectively received only around 2% of 2022 global mitigation funds. The gap is also twice as large in lower-income countries as in higher-income ones, with the former subject to lower capital availability and higher perceived risks.

Major course corrections needed

Several near-term priorities are put forward in the report to keep the 1.5°C limit within reach. These actions include the need to:

• Unlock bolder, more rapid national commitments and actions
• Deploy carbon pricing and border taxes, and support actions in nature, agriculture and food
• Remove obstacles to the transition, such as permitting times, supply chain risks and skill gaps
• Shift corporate focus to bolder targets and transparency for themselves and their supply chains
• Strengthen incentives to massively scale up high-impact technologies and necessary infrastructure
• Raise climate financing for the Global South, conditional on ambitious mitigation action