Largest study of its kind shows almost all the world’s most influential power utility and automotive firms are still a long way from being on a ‘climate-safe’ decarbonisation pathway

Nearly all the world’s leading carmakers and electric utility companies are set to blow a hole in their individual carbon budgets for limiting global warming to 1.5C, with their continued overreliance on fossil fuels and sluggish rollout of green technologies putting both the climate and their businesses in danger.

That is the stark conclusion today from an assessment of the world’s most influential 50 electricity and 30 automotive firms carried out by CDP, the World Benchmarking Alliance (WBA), and ADEME, which underscores just how far even companies that are in sectors that are widely seen to be leading the net zero transition are lagging far behind where they need to be if the Paris Agreement’s 1.5C goal is to be met.

Dubbed “the largest study of its kind”, the research ranks the firms in these two critical sectors based on their climate commitments and progress towards achieving a low carbon transition in-line with achieving net zero emissions worldwide by the middle of the century. It finds almost all the world’s leading automotive and power brands are badly wanting, despite the recent wave of net zero targets adopted across the energy and transport industries.

As much as 98 per cent of the electricity firms and 93 per cent of automotive firms assessed in the study are set to exceed their emissions thresholds for 1.5C, with only one company – wind power giant Ørsted – projected to stay within its carbon budget between now and 2035, the research warns.

Both the automotive and the electric utility sectors remain heavily reliant on fossil fuels and many firms still lack robust decarbonisation strategies, according to the research.

Vicky Sins, decarbonisation and energy transformation lead at WBA, said transforming these two critical industries would have “a significant impact on the fight to drive down global emissions”.

“With companies in these sectors lagging behind on both transition planning and in reducing net emissions, we need investors, governments, civil society and other actors to engage with these keystone businesses and hold them accountable for the gaps between ambition and performance right now, and not in the future,” she argued. “Poor performance of the most influential automotive and electric utilities companies could undermine the legacy that COP26 sets out.”

Overall, the electricity utilities assesses are projected to exceed their total carbon budget by 57 per cent up to 2035, and only three firms – Ørsted, EDP, and AES Corporation – have emissions targets that align with the International Energy Agency’s 1.5C scenario, the research shows. Of those three, only Ørsted is currently on track to meet its climate goals.

In order to be fully aligned with a 1.5C pathway, the report estimates 78 per cent of power companies’ generation capacity must come from renewables by 2030, yet at present only eight firms are investing at a level that could put them on track to meet this goal. Meanwhile, coal power still accounts for more than 10 per cent of the generating capacity across 34 of the electricity utility firms assessed.

Similarly, the automotive sector is lagging far behind where it needs to be for a 1.5C world, despite the rapidly growing market for electric vehicles, the research suggests.  

Last year only seven per cent of the total vehicles sold across all 30 carmakers assessed were low carbon vehicles, according to the study. That marks a significant uptick from two per cent in 2015, but the study estimates automotive firms should be aiming for 64 per cent of their sales to be low carbon vehicles by 2030 if they are to be aligned with a 1.5C pathway.

To reach these levels, a 5.75 per cent increase in low carbon vehicle sales is needed every year until 2030, yet sales have only risen five per cent over the past five years, it estimates.

In 2020, seven of the 30 most influential automotive firms – Ford, Honda, Mahindra & Mahindra, Mazda, Subaru, Suzuki, and Toyota – drew less than one per cent of their total sales from low carbon vehicles, according to the study. Moreover, not even the five biggest firms that sell more than five million vehicles each year – Toyota, VW, GM, Stellantis and SAIC Motor – derive more than six per cent of their sales from low carbon vehicles.

Growing numbers of automotive firms are setting out more ambitious electric vehicles (EV) sales targets and climate strategies, with 23 of the 30 firms assesses ranked in the study as having improved their transition planning since last year.

However, the study warns far more ambition is still needed across the sector, with only 13 car firms having set out credible targets for their scope 3 value chain emissions, none of which are sufficiently ambitious to align with a 1.5C pathway.

CDP’s chief impact officer Nicolette Bartlett said the findings showed the global electricity utility and automotive sectors still need to make “massive strides” if they are to put their businesses on a more climate-safe pathway.

“At present, we’re simply not seeing change happen fast enough,” she said. “The automotive sector has only increased its low-carbon vehicle share by five per cent over the past five years – that kind of progress is not going to get us where we need to be by 2030. Likewise, the fact that only eight out of 50 companies are currently investing enough in low-carbon tech to align with a 1.5C warming scenario is a red flag for the entire industry. Companies must increase ambition and deliver against climate transition plans or it will prove disastrous for their businesses and for our overall climate efforts.”

The ‘red flag’ provided by the latest analysis should alarm business leaders and policymakers worldwide. There is a widespread assumption that the combination of plummeting renewables costs, the rapid improvement in EVs, and surging customer demand means the power and automotive industries are on track for deep decarbonisation and can blaze a trail for harder to abate industries to follow. But the report provides a reminder that the shift towards clean energy and transport technologies is not yet proceeding fast enough and urgent action is still required to translate long term net zero targets into short term actoin that can slash emissions this decade.

Many leading businesses within both industries are fully aware they are not yet on track to meet the goals of the Paris Agreement. Within days of the Glasgow Climate Pact being signed European energy giants RWE, SSE, and Enel all announced a ramping up of their multi-billion pound clean energy investment plans, while US auto powerhouse Ford revealed it has doubled its EV production target. The hope is that many more businesses will follow in the coming months and years so as to close the emissions gap and accelerate the net zero transition in those industries where there is a relatively clear path to deep decarbonisation. Because if they fail to do so the slim chance of keeping the 1.5C goal alive will quickly disappear altogether.

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