Decreasing carbon intensity and increasing sustainability reporting positive signs for sustainable economy

Over the last few decades, global economic growth has been accompanied by rising greenhouse gas emissions, disproportionately affecting the most vulnerable populations, see Resilience at risk. The Bridgetown Covenant -—
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—- emphasizes the need to decouple economic growth from environmental degradation and greenhouse gas emissions. It advocates for promoting sustainable energy and providing developing countries access to environmentally sound technologies, as key strategies for implementing the 2030 Agenda and achieving a sustainable economy.

Large regional differences in carbon intensity remain

While emissions continue to rise, reductions in carbon intensityCarbon intensity is the amount of emissions of carbon dioxide (CO₂) released per unit of another variable such as gross domestic product (GDP), output energy use or transport -—
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—-. are starting to offset increasing consumption and population growth. Despite significant regional differences in carbon dioxideCarbon dioxide (CO₂) is a colourless, odourless and non-poisonous gas formed by combustion of carbon and in the respiration of living organisms -—
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—-. emissions intensity, all regions have seen notable reductions since 1990 (figure 1). Developing Asia, while still the most carbon-intensive region, has achieved a significant 76 per cent reduction in CO₂Carbon dioxide (CO₂) is a colourless, odourless and non-poisonous gas formed by combustion of carbon and in the respiration of living organisms -—
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—-. intensity since 1990.

Figure 1. Regional differences in carbon dioxide emissionEmission is the discharge of pollutants into the atmosphere from stationary sources such as smokestacks, other vents, surface areas of commercial or industrial facilities and mobile sources, for example, motor vehicles, locomotives and aircraft -—
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—-. intensity are high

Carbon intensity (grams of CO₂ per unit of GDPGross domestic product (GDP) is an aggregate measure of production, income and expenditure of an economy. As a production measure, it represents the gross value added, i.e., the output net of intermediate consumption, achieved by all resident units engaged in production, plus any taxes less subsidies on products not included in the value of output. As an income measure, it represents the sum of primary incomes (gross wages and entrepreneurial income) distributed by resident producers, plus taxes less subsidies on production and imports. As an expenditure measure, it depicts the sum of expenditure on final consumption, gross capital formation (i.e., investment, changes in inventories, and acquisitions less disposals of valuables) and exports after deduction of imports -—
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—-. measured by United States dollars) (SDGSustainable Development Goal 9.4.1)

Source: UNCTAD calculations based on UNCTADstat -—
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—- and EDGAR Community database version 8.0 (2023) for CO₂ emissions -—
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Note: Emissions from fuels burned on ships and aircrafts in international transport are not included.

Global carbon intensity decreased by 63 per cent from 1990 (998 gGrams/$) to 2022 (371 g/$), indicating that CO₂ emissions have grown more slowly than GDP. Europe was the only region where total annual fossil CO₂ emissions were lower in 2022 than in 1990, by 27 per cent -—
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—-. In contrast, emissions in China and India were 5.3 and 4.5 times higher than their respective 1990 levels (map 1).

Map 1. High regional variation in fossil carbon dioxide emissions per unit of GDP

Carbon intensity (grams of CO₂ per unit of GDP measured by United States dollars)

Source: UNCTAD calculations based on UNCTADstat -—
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—- and EDGAR Community database version 8.0 (2023) for CO₂ emissions -—
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Notes: Emissions from fuels burned on ships and aircrafts in international transport are not included.

If all regions were able to reduce their carbon intensity of GDP to around 200 g/$, global annual emissions would be nearly halved. The high carbon intensity in some developing regions highlights the need to support them in building sustainable infrastructure and adopt lower-carbon technologies to enhance energy efficiency and phase out polluting energy generation methods -—
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—-. The higher carbon intensity in developing regions is partly driven by other regions’ demand for carbon-intensive final products. Developed economies generally have higher demand-based CO₂ emissions production-based emissions, making them net importers of CO₂ emissions, while most developing economies are net exporters (Wiebe and Yamano, 2016). As environmental policies vary by country, companies may relocate carbon intensive production processes globally, leading to "carbon leakage" -—
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—-. To prevent this, setting global environmental standards is crucial.

Positive, but diverging trends in the clean energy transition

In some areas, the clean energy economy is emerging fast. In 2023, global renewable power capacity grew by 13.9 per cent, accounting for 86 per cent of net capacity expansion. Electric car sales increased by 55 per cent in 2022, reaching over 10 million. Electric cars, including battery electric vehicles and plug-in hybrids, made up 18 per cent of global new car sales in 2023, a 35 per cent year-on-year increase, and their sales could increase to over 20 per cent in 2024 -—
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Despite positive developments in renewable energy investment, further efforts are needed. In 2022, investment in clean energy technologies reached a record high of $1.8 trillion (in 2022 dollars) -—
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—-. By 2030, this amount would grow to more than $2 trillion under the IEA’s Stated Policy Scenario. However, achieving the 1.5°C target requires an annual investment estimated at $4.3 trillion, leaving us with barely half of the required levels.

Renewable energy investments are highly unequally distributed across regions (figure 2). Of the 473 GWA gigawatt (GW) is a unit of measurement of electrical power. It is equal to one billion watts. of global additional net renewable capacity installed in 2023, only 2.7 GW was installed in Africa, less than one per cent of world total capacity added. Investments are strongly concentrated in China, Europe, and the United States of America -—
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—-, accounting for two thirds of installed renewable capacity in 2023, a share which has grown every year since 2014. Annual growth in renewable energy capacity in these three markets reached 18 per cent in 2023, up from 10 per cent on average between 2014 and 2020. In contrast, in Africa growth peaked in 2017 before falling to 5 per cent in 2023. This highlights challenges in Africa, such as immature financial markets, high capital costs, and lack of pricing benchmarks which impede investment in renewable energy and a just energy transition.

Figure 2. After a boost in 2017 and 2018, growth in renewable energy capacity in Africa has remained slower than in China, Europe and the United States of America

Year-on-year percentage increase in MWMegawatt of renewable energy capacity

Source: UNCTAD calculations based on -—
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While developing countries are progressing in renewable energy capacity, LDCsLeast developed country and LLDCsLandlocked developing country lag far behind. From 2011 to 2021, developing countries increased their renewable energy capacity from 109.7W per capita to 268W. From 2015 to 2020, the compound annual growth rate of renewable energy capacity was 9.5 per cent in developing countries, compared to just 5.2 per cent in LDCs and 2.4 per cent in LLDCs -—
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Global standardization encourages growth in sustainability reporting, but lack of interoperability in national reporting remains a challenge

Target 12.6 is the only SDG target focused on the contribution of businesses to sustainable development, while innovation and technological change driven by companies can be crucial for progress. UNCTAD and UN Environment are the custodians of SDG indicator 12.6.1 on the number of companies publishing sustainability reports developing reporting standards, supporting companies and collecting data. Sustainability reportingSustainability report is a document published by an entity describing the economic, social, environmental impacts caused by its activities; it is composed of a certain number of disclosures along the main pillars of sustainable development -—
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—-. is a tool for businesses to communicate their contribution and allow investors and customers to recognize and reward firms that protect people and the planet -—
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—-. A current trend in sustainability reporting is the development of ESG-related disclosure regulation to encourage and support enterprise sustainability reporting -—
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—- ¹.

The European Commission -—
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—- adopted new standards and several developing economies are introducing measures requiring financial institutions and companies to report on sustainability, including carbon emissions. However, inconsistencies in national sustainability reporting requirements remain a challenge -—
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UNCTAD² and partners assist member States in improving the quality and international comparability of corporate financial and sustainability reporting -—
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—-. A preliminary analysis of over 10 000 companies finds that 73 per cent of companies in the sample published sustainability reports in 2022, more than doubling their number since 2016 -—
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—-, with growth observed in all regions (figure 3). Latin America, Africa, and Oceania showed continuous progress, while Europe, Asia, and North America maintained the largest share of companies reporting on sustainability, supported by established national and regional regulations.

Figure 3. Enterprise sustainability reporting increasing in all regions, but growth slowest in Africa

Growth in number of company reports (SDG 12.6.1)

Source: UNCTAD and UNEPUnited Nations Environment Programme calculations based on -—
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Note: Preliminary data from a sample of 10 310 companies included in the above-mentioned database.

According to -—
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—-, globally, 96 per cent of the 250 largest businesses reported some sustainability information, and among 100 largest businesses in 58 countries 71 per cent did the same. As governments extend requirements to SMEsSmall- and medium-sized enterprise, they will need technical assistance particularly in developing countries. International support and capacity-building based on UNCTAD Guidance can assist companies, including SMEs, in establishing reporting practices -—
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In 2022, the manufacturing and finance and insurance sectors had the highest number of companies publishing sustainability reports, while the agricultural sector saw the biggest increase from 2016 to 2022. Environmental and governance dimensions are more commonly reported than social dimensions. Commonly disclosed environmental indicators included water, emissions, and energy efficiency, while governance disclosures often cover board gender diversity, board meetings, bribery and corruption. Over 80 per cent of reports in the social dimension refer to human rights, diversity and opportunity, and health and safety.

Stock exchanges are pivotal in navigating ESGEnvironmental, social and governance disclosure standards. The number of stock exchanges with written guidance on ESG reporting grew from fewer than ten a decade ago to 69 – more than half of the world’s stock exchanges – in 2022. Those providing training on ESG topics increased from 61 in 2021 to 81 in 2022. The number of markets with mandatory ESG disclosure rules rose to 34 in 2022, up from 30 the year before. These trends support SDG 12.6, which aims to integrate sustainability reporting into the annual corporate reporting cycle -—
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Innovation, recycling and circular economy to change the paradigm

The extraction and processing of materials, fuels, and food contribute to half of total global greenhouse gas emissions and over 90 per cent of biodiversityBiodiversity refers to the diversity within species, between species and of ecosystems -—
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—-. This necessitates alternative economic models to use natural resources innovatively in production processes to reduce greenhouse gas emissions, pollution, and waste. The UNECE and OECDOrganization for Economic Cooperation and Development guidelines -—
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—- define one such model: circular economyA circular economy is an economy where: (i) the value of materials in the economy is maximised and maintained for as long as possible; (ii) the input of materials and their consumption is minimised; and (iii) the generation of waste is prevented and negative environmental impacts reduced throughout the life-cycle of materials -—
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—-.. They propose core indicators, including material consumption, waste generation, circular material use rateThe circular material use rate is defined as the ratio of the circular use of materials to the overall material use., recycling rate, greenhouse gas emissions from production activities, pollutant discharges, and investment in waste management, and research and developmentResearch and development (R&D) comprise creative and systematic work undertaken in order to increase the stock of knowledge – including knowledge of humankind, culture and society – and to devise new applications of available knowledge -—
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—-. on circular economy.

Recycling is a key strategy within the circular economy, focusing on recovering and reusing materials from products that have reached the end of their lifecycle. SDG indicator 12.5.1 on national recycling rate is a key measure in this regard, however, it is not yet available for all countries. A preliminary analysis of 43 reporting countries shows significant progress on municipal waste recycling rate over time (figure 4). Over 40 per cent of these countries more than doubled their recycling rate between 2006 and 2021. In Eastern Europe, recycling rates were over four times higher on average in 2021 than 2006, while Southern European economies saw a 64 per cent increase. In Western Europe, the increase was slower, but rates reached an average of 56 per cent, while Northern European countries reached 37.3 per cent. Outside Europe, recycling rates were only reported by some economies, such as Algeria, Argentina, Ghana, Malaysia, Nepal, Peru, Thailand, Türkiye, and Uzbekistan.

Figure 4. Recycling rates increasing in reporting European countries

Percentage of municipal waste recycled (SDG 12.5.1)

Source: UNCTAD calculations based on UNEP, UNSDUnited Nations Statistics Division and UNITARUnited Nations Institute for Training and Research data as published in the SDG Global Database -—
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Note: For some years the reported data are national estimates or provisional values, especially for 2020 and 2021.

The use of circular materials, namely materials recycled and reintroduced into the economy, is increasing, particularly among developed economies. For example, in the European Union, the circular material use rate increased from 8.2 per cent in 2004 to 11.5 per cent in 2022 -—
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—-. Countries like the Netherlands, Belgium, France and Italy lead, recycling and reusing more than one sixth of all materials in their economies. Conversely, nearly one third of EUEuropean Union countries still have a circular material use rate below 5 per cent.

-—
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—- has identified 124 low carbon technology productsLow carbon technology products produce less pollution than their traditional energy counterparts, and will play a vital role in the transition to a low carbon economy -—
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—-., manufactured using technologies that result in low CO₂ emissions and renewable energy technologies, such as solar, wind, hydro and sustainable biofuel, as well as energy storage and transformation. Leading exporters of these low carbon technology products include China, Denmark, the United States of America, Japan, and the United Kingdom. Some of the most exported low carbon products, in value terms, include electric vehicles, optical and measurement devices, solar cells and panels, low carbon manufacturing machinery, lithium batteries, and electrical circuit boards.

An UNCTAD report -—
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—- highlights both barriers to trade of low carbon technology products, based on an analysis of tariff data, and opportunities to enhance such trade. Reducing and eliminating tariffsTariffs “are customs duties on merchandise imports, levied either on an ad valorem basis (percentage of value) or on a specific basis (e.g. $7 per 100 kg). Tariffs can be used to create a price advantage for similar locally produced goods and for raising government revenues. Trade remedy measures and taxes are not considered to be tariffs.” -—
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—-, as well as simplifying and harmonizing non-tariff measuresNon-tariff measures (NTMs) are policy measures other than ordinary customs tariffs that can potentially have an economic effect on international trade in goods, changing quantities traded, or prices or both such as technical barriers to trade, price-control measures, etc. -—
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Notes

1. In January 2024, the ISSB issued IFRS S1 and IFRS S2 standards, requiring organizations to disclose information about governance and strategy, and metrics and targets for material sustainability and climate-related risks and opportunities. The ISSB aims to become the global standard for sustainability reporting, if securities regulators adopt it in disclosure regulations. Multiple jurisdictions have already announced their decisions to adopt the ISSB Standards -—
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   —-. This year IESBA launched a public consultation on new ethical benchmarks for sustainability reporting and assurance to combat greenwashing and enhance the quality of sustainability information -—
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   —-. In July 2023, the European Commission adopted the ESRS for use by all companies subject to the CSRD -—
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2. UNCTAD assists member States with partners through its Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting.

References

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