Emerging market emissions rise, offsetting advanced economy improvements.

The global economy is falling far short of the decarbonization pace needed to reach net zero by 2050, Fitch Ratings warned in a report.

The rating agency said global carbon emissions rose by 1.8% in 2023, while GDP growth came in at 2.9%.

“The ratio of emissions-to-GDP fell by just over 1%, broadly in line with the average annual decline of the previous 25 years and massively short of the 8% annual decline needed in 2020-2030 to achieve net-zero by 2050,” Fitch said.

The net-zero goal is designed to limit global warming to the 1.5 C rise set out in the Paris Agreement.

The shortfall in global decarbonization in 2023 came despite significant improvements in the major advanced economies, the report said, as emerging markets failed to reduce the carbon intensity of their economies and their share of global energy consumption rose.

Fitch reported that the emissions-to-GDP ratio in the advanced economies fell by 6%, as carbon emissions by the 10 leading developed economies — including Canada, the U.S., Japan and Australia, along with six leading European economies — fell by 4.2% and GDP rose by 1.8%.

For the 10 developed economies, emissions fell to their lowest level since 1970, it noted.

“Most of this improvement was due to gains in the energy efficiency of GDP although steady progress was also made in reducing the carbon intensity of energy consumption,” the report said.

Meanwhile, in emerging markets, both carbon emissions and GDP rose by 4.7% last year, Fitch said.

“Neither energy efficiency nor the carbon intensity of energy showed any improvement, the worst performance in a decade,” it said, noting that the carbon intensity of economic growth remains much higher in the emerging markets.

“The lack of progress in decarbonization in emerging markets is particularly concerning, given their faster GDP growth and rising share of global energy consumption.”

One of the reasons for emerging markets’ poor performance, the report noted, is underinvestment in clean energy projects, especially in emerging markets excluding China.

“Most of the recent growth in global clean energy investment has been in advanced economies and in China.”