A new report by PwC brings with it a glimmer of hope, showing that the global growth in emissions was at 1.8% in 2013, the slowest rate of emissions growth since 2008-2009. However, for the sixth year running, the global economy has missed the decarbonisation target needed to limit global warming to 2 ̊C and the report urges that the talk of two degrees be turned into a concrete policy framework.

The 2014 Low Carbon Economy Index (LCEI) shows an unmistakeable trend. For the sixth year running, the global economy has missed the decarbonisation target needed to limit global warming to 2 ̊C. Confronted with the challenge in 2013 of decarbonising at 6% a year, we managed only 1.2%. To avoid two degrees of warming, the global economy now needs to decarbonise at 6.2% a year, more than five times faster than the current rate, every year from now till 2100. On our current burn rate we blow our carbon budget by 2034, sixty six years ahead of schedule. This trajectory, based on IPCC data, takes us to four degrees of warming by the end of the century.

This stark message, from PwC's report, 2 degrees of separation: ambition and reality, comes in the run up to a critical series of climate negotiations, kicking off in New York and Lima in late 2014, then moving to Paris by December 2015 for the COP21 Summit, widely thought of as the last chance to secure a global agreement on action on climate change. While the mood music for these climate negotiations is around two degrees – the threshold at which there is a substantial chance of avoiding climate feedback loops and runaway climate change – the sum of the pledges on the table limits warming only back to three degrees. We have got a gigatonne-gap, with global pledges falling more than 8 gigatonnes a year short of what is needed for two degrees.

But LCEI 2014 also brings two important grounds for optimism. First, the E7 group of emerging economies* appears to have woken up to the business logic of green growth, decarbonising faster than the G7 for the first recorded time, and substantially so. This, if continued, is a critical development. With ongoing manufacturing shifts to the E7, we are well past the frontier where unilateral G7 decarbonisation can get us back on track at the speed and scale required. Avoiding more than two degrees will depend on both G7 and E7 continuing to decouple growth from carbon. Second, underpinning these improvements is not just energy efficiency but the rapid growth of renewables across both the G7 and E7. The latest IEA data now shows that renewables represent 22% of global electricity supply. Looking forwards, as some renewables approach cost parity with fossil fuels, the stage is set for a policy framework that could further accelerate the renewables roll-out. These two emerging trends, E7 decarbonisation and the mainstreaming of renewables, run counter to the common rhetoric that climate action is just a cost for business and the economy– it can be complementary to growth.

Last year's Low Carbon Economy Index calculated that the global economy needed to reduce carbon intensity (the amount of carbon emissions per unit of GDP) by 6.0% a year to limit warming to two degrees. An unexpected champion surpassed this – Australia recorded a decarbonisation rate of 7.2% over 2013 putting it top of the table for the second year in a row. Three other countries – the UK, Italy and China – achieved a decarbonisation rate of between 4% and 5%. Five countries increased their carbon intensity over 2013. Overall, however, as a result of the failure to achieve a global decarbonisation rate of 6.0%, the challenge is now tougher still: the path to 2100 requires an annual global average of decarbonisation rate of 6.2%.

This year also sees a reversal of an emissions trend between the G7 and E7 economies. Since LCEI started, the G7 has consistently outpaced the E7 in reducing carbon intensity, but in 2013, for the first time, the E7 averaged a 1.7% reduction in carbon intensity, while the G7 only managed 0.2%. This is significant for the E7, showing that it is possible to maintain economic growth while slowing the rate of growth in emissions. Nevertheless, as the main manufacturing hubs of the world, the E7 economies continue to have total carbon emissions 1.5 times larger than that of the G7, so sustained decarbonisation by the E7 will be vital for a low carbon global economy.

On our current trajectory we are headed for four degrees, with policy pledges that currently steer us only towards three. A business logic is emerging for turning the talk of two degrees into a concrete policy framework based not just on minimising climate risk, but on maximising the upside of long term investment.

Please see here for the entire Low Carbon Economy Index 2014.

Please see here for the full report and associated media: Pathway to a low carbon economy

*The E7 group of emerging economies, a term coined by PwC, comprises: China, India, Brazil, Mexico, Russia, Indonesia, Turkey.

The G7 are: Canada, France, Germany, Italy, Japan, United Kingdom and United States of America.