New research identifies remaining global carbon budget for twelve main industries

2 November 2021

For the first-time sector allocations of the global carbon budget have been provided for both hard to abate and all other sectors – 12 main macro industry sectors in total reporting scope 1, 2 and 3 breakdown.

Scientists from the University of Technology Sydney (UTS) have developed energy-related carbon budgets for industries including the aluminum, steel, and chemical industries and the car and aviation industries.The research shows that it is still possible to limit global warming to 1.5˚C and implement the Paris Climate Agreement. This, however, requires timely climate action by the energy-intensive industries supported by the finance sector, backed by reliable and long-term policies from governments.

The global carbon budget to limit global warming to +1.5°C with 67% certainty is 400 GtCO2 until 2050. The steel industry would have a share of 19 Gt CO2 remaining (5.0%), the cement industry 9 Gt CO2 (2.4%), and the aluminum industry 6 Gt CO2 (1.6%). The largest carbon budgets are calculated for buildings (climatization and electricity) with 88 Gt CO2 (22.6%) and road transport with 82 GtCO2(21.1%).

This research has been supported and financed in parts by the UN-convened Net-Zero Asset Owner Alliance, the Rockefeller Foundation, and the European Climate Foundation (ECF).

Associate Professor Sven Teske, who led the research at UTS said: “It is crucial to have a science-based carbon budget for specific industries to implement climate targets for all parts of these industries. We found that power utilities have by far the greatest responsibility: They have to provide enough renewable electricity for the energy-intensive chemical, steel, cement, and aluminum industries and for electric vehicles that no longer need oil.”

Those specific industry emission budgets were further subdivided into so-called Scope 1, 2, and 3 emissions, which define the responsibility for those emissions. So far, this system has only been applied to companies, but not to an entire branch of industry or a region in a very granular way. For investment portfolio steering in line with a net-zero emission pledge, the finance industry needs one holistic model for a 1.5°C low/now overshoot path. The UTS scientists developed a model – the OneEarth Climate Model (OECM) – to fill the gap for industry sector-specific decarbonization pathways.

Emission targets for a specific branch e.g. the steel industry sector and emissions by ‘Scope’ can be used as a benchmark and guidance for investment portfolio decision making.  It is possible now to develop emission paths for industry classifications, which are then captured in one consistent model in line with the net-zero ambition level. Members of the UN-convened Net Zero Asset Owner Alliance (the Alliance) have already started using the model.

The twelve analyzed main industry and service sectors are: Aluminium, chemical, cement, steel and textile & leather industry, power& gas utilities, agriculture, forestry, the aviation and shipping industry, road transport, and the real estate & buildings.

Günther Thallinger, Chair of the UN convened Net-Zero Asset Owner Alliance said: The OneEarth Climate Model’s sector pathway work is important to inform the financial industry for portfolio decision making as the model is based on a holistic integrated approach. It also shows the granularity that is needed to feed into investors’ analysis.  The information details on sector budgets and scope, on interconnections and responsibilities, are exceptional.

As a first major use case sending a strong signal to the UNFCCC COP negotiations, the UN-convened Net-Zero Asset Owner Alliance is supporting the further development of the OECM and applying the latest UTS findings and data for informing the investor group’s net-zero target setting protocol and reporting framework. The Alliance is an international group of 60 institutional investors committed to transitioning their investment portfolios of about USD  10tr Assets under Management (AuM) to net-zero emissions by 2050 on a low/no overshoot path

The following recommendations derive from this new UTS research:

  1. Setting and implementing investment, lending, and underwriting portfolio decarbonizations targets in line with 1.5˚C no/low overshoot
  2. Stop investing in new oil, coal, and gas projects
  3. Ensure coal phase-out by 2030 in OECD countries, between 2030 and 2040 all regions should phase out coal
  4. Manufacturing stop for passenger cars with oil-fuelled internal combustion engines by 2030
  5. Governments to provide detailed transitions plans to net-zero
  6. Companies to disclosure climate mitigation strategy, mid-term target setting, target achievements, and investments in renewable energies and climate solutions

An executive summary is available here.

Research Background

The UTS ‘One Earth Climate Model’ (OECM) is an integrated energy assessment model to develop net-zero targets based on science for all major industries in granularity and with the key performance indicators (KPI) needed to make short-, mid-and long-term investment decisions. The 1.5˚C emission pathways developed by UTS are no/low overshoot scenarios (SSP 1) as defined by the IPCC: this means that a carbon budget overshoot is avoided and that already released CO2 is not assumed to be ‘removed’ by unproven technologies still under development such as carbon capture and storage (CCS). The OECM does take negative emissions into account, but only ‘natural carbon sinks’ such as forest, mangroves, or seaweed to compensate for process emissions that are currently un-avoidable such as from cement production.

The OECM remains within an energy-related carbon budget of 400 Gt CO2 while the recently released Net Zero scenario of the International Energy Agency (IEA NZ) leads to “(…) cumulative energy‐related and industrial process CO2 emissions between 2020 and 2050 of 460 Gt CO2.” In August 2021, the Intergovernmental Panel on Climate Change (IPCC), the United Nations body for assessing the science related to climate change, identified the global carbon budget to achieve 1.5˚C with 67% likelihood as 400 GtCO2 and 50% likelihood at 500 GtCO2 between 2020 and 2050.

The One Earth Climate Model (OECM) has been developed under the leadership of the Institute for Sustainable Futures (ISF) at the University of Technology (UTS) in order to develop 1.5˚C compatible climate and energy pathways for countries, regions or globally. The OECM-derived net-zero pathways have been invited to peer-review by a number of climate modeling organizations including the Energy Transition Commission, Potsdam Institute for Climate Impact Research, Science-Based Targets Initiative, Rocky Mountain Institute (RMI), CRREM (Carbon Risk Real Estate Monitor) and WWF. Initial work by the University of Technology Sydney and the University of Melbourne, Australia, as well as the German Aerospace Centre (DLR) has led to published the first joint One Earth Climate Modell (OECM) in February 2019 as an open access book with Springer Nature.

The first phase of the research from 2017 to 2019 has been financed by the Leonardo DiCaprio Foundation. Since 2019, the OECM has been further developed toward no/low overshoot sectorial pathways for 12 industry sectors. This research has been supported and financed in parts by the UN-convened Net-Zero Asset Owner Alliance, the Rockefeller Foundation, and the European Climate Foundation (ECF).

The latest OECM research methodology, assumptions and data are scheduled to be published in the scientific literature in late 2021 / early 2022. The full datasets will be made available as open-source usage to the public, esp. for academics and researchers, civil society organizations, financial industry, companies, and policymakers.