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Economy

Asia learns to run while exhaling less CO2

Growth appears to be 'decoupling' from greenhouse gas emissions

A plant in Yokaichi, Mie Prefecture Japan. The world has managed to reduce the amount of CO2 emissions needed to boost economic growth.

TOKYO -- Slowly but surely, the world is learning to grow its economy while emitting less.

Over the 15 years to 2015, the amount of global carbon dioxide emissions per unit of gross domestic product dropped by about 20%.

Not so long ago, economic growth was seen as going hand in hand with rising emissions, but recent statistics show a "decoupling" of the two. And the fast growing economies of Asia are chugging along. Carbon dioxide emissions per unit of gross domestic product, calculated in purchasing power parity, have dropped by 26% in China from the year 2000, 23% in South Korea and 18% in India.

Looking across Asia (excluding China), average CO2 emission per unit of GDP was 0.23 kg in 2015, down 18% from 2000. The trajectory was similar to the global average, which dropped 18% during the same period to 0.31 kg.

According to the International Energy Agency, global CO2 emissions have stayed flat for the three years leading to 2016 while the economy grew by roughly 3% in each of those years. In 2015, the amount of CO2 emitted to produce $10,000 of global GDP was 3.1 tons. In 2000 it took 3.8 tons. The amount of CO2 emissions from burnt fuel totaled 32.1 billion tons in 2016, down 0.6% from a year earlier.

A year after the Paris climate agreement took effect in November 2016, pressure has been building on companies and nations to cut emissions that cause global warming, raising of the question how this will affect the global economy. So far, the signs have been positive.

Behind the decoupling are three trends. Companies actively switching to more renewable energy, those renewable energies spreading to developing nations and the world's largest emitters, namely China and the U.S., turning away from greenhouse gas emitting sources of power.

Cheaper renewables

The first reason for the decoupling is the increase in renewable energy. Apple, Microsoft and General Motors have joined RE100, an initiative of over 110 companies around the world, that aims for an eventual transition to 100% renewable energy.

In Asia, China's Broad Group and Elion, India's Dalmia Cement and Tata Motors, as well as Japan's Ricoh and Sekisui House have joined the RE100.

In a tailwind for those efforts, the cost of renewable energy is declining. According to research by Bloomberg New Energy Finance, in the U.S., Germany, Italy, Spain and Australia, the cost of generating solar power is now on a par with that of coal-fired power plants.

Companies including Apple and Microsoft are aiming to eventually transition to 100% renewable energies.

Growing investments in energy-saving technology are also helping. According to the IEA, global investments in such technology grew 9% to $231 billion in 2016 from a year earlier. The number of heat pumps and electric vehicles increased 28% and 38%, respectively.

Furthermore, energy conserving equipment developed in advanced economies are now spreading to emerging countries.

More must be done to contain CO2 emissions.   © Reuters

The heavyweights

Over two-thirds of global emissions for 2015 originated from just ten countries, with the shares of China (28%) and the United States (15%) far surpassing those of all others, according to the IEA.

While China, the world's biggest CO2 emitter, is projected to see greenhouse gas emissions jumping 3.5% in 2017, according to the Global Carbon Project, the long term trend of moving away from coal remains unchanged.

The country is turning from coal power to solar, and considering closing hundreds of coal thermal generators.

The proportion of coal in China's energy mix will decrease from 73% in 2014 to 51% in 2030 and to 43% in 2040.

In the U.S., the world's second-largest CO2 emitter, the shale revolution is prompting a shift away from coal power plants.

Although President Donald Trump has said he wants to take the U.S. out of the Paris climate accord, U.S. businesses continue their shift to this lower-emission energy source.

In India, on track to be the world's most populous country and tasked to provide electricity to those who remain without it, solar power is considered to be the energy source of the future. Installed capacity of solar power generation is projected to rise to 29 gigawatts in 2020 and 188 gigawatts in 2040, making it the second largest solar power country in the world after China.

Japan's cost dilemma

Japan was not among the 21 countries listed by the World Resources Institute as having achieved GDP growth while reducing CO2 emissions in 2016. The country's CO2 emissions per $10,000 of GDP were 2.6 tons in 2015, a smaller percentage drop than comparable figures for the U.S. and China.

Japan needs to cut costs of local renewable energy sources. Only two Japanese companies are participating in RE100. Many companies view the target as unrealistic, considering the high cost of renewable energy in Japan. In particular, the cost of solar power has remained high due to a feed-in tariff system, under which providers relied on subsidized purchases at high prices, and failed to improve efficiency.

The IEA estimates that while maintaining an average annual global GDP growth of 3.4%, the current pace of efforts to cut emissions would result in 38.6 billion tons of total emissions in 2030, a 20% rise over the 2015 level.

To hold the increase in the global average temperature to below 2 C above preindustrial levels -- as the Paris accord calls for -- an estimated 35% greater reductions will be necessary.

Nikkei staff writers Takuro Kusashio and Ken Sakakibara in Tokyo contributed to this report.

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