Trucost Blog

In its latest Five-Year Plan, the Chinese Government has set a reduction target on carbon emissions per unit of output of 17% by 2015, putting carbon efficiency at the centre of industrial policy.

Trucost data shows a 10 decrease in emissions per US$ million revenue for the 40 largest Chinese companies over the last two years, which suggests that the target set by the People's Republic might seem achievable.

On the other hand, developed countries with reduction targets based on absolute emissions might be disappointed to find that lower outputs linked with shrinking economies has not always led to lower emissions levels.

Unfortunately, a reduction in companies' revenues has not been matched by an equal reduction in emissions, as estimates by the International Energy Agency show. An analysis of Trucost data on the largest 40 companies in the FTSE 350 confirms this view, showing a 10% decrease in carbon efficiency, measured as tonnes of carbon dioxide equivalent (CO₂e) emissions per US$ million.

This seems to display a structural inability of the economy to adjust production processes to lower demand at  the same speed that it adjusts to cope with greater demand. Economic growth seems to improve carbon efficiency, while a recession seems to be linked with greater carbon intensity.

Chart 1: Carbon Efficiency (per $million revenue) FTSE v CSI

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