KPMG on the Net-Zero Readiness of the United States

Originally published at info.kpmg.us. KPMG ranked No. 16 on The DiversityInc Top 50 Companies for Diversity list in 2021.

 

From board rooms to the halls of country capitals, leaders across the public and private sectors are increasingly deploying strategies to address climate change and drive towards a future net-zero society.  New research continues to highlight the importance of ambitious global climate action and the need for sustained efforts to reduce emissions and decarbonize the global economy. To help better understand the state of these efforts and compare work happening across the world, we have developed the Net Zero Readiness Index (NZRI).

 

Our Net Zero Readiness Index brings transparency to global progress to fight climate change

This new tool compares the progress of 32 countries (from both developed and emerging economies) in reducing the greenhouse gas emissions that cause climate change and assesses their preparedness and ability to achieve Net Zero emissions by 2050. By looking at 103 indicators we consider the key drivers to decarbonizing, we ranked the countries based on two categories: overall national preparedness and sector readiness. It is our hope that the NZRI will provide the needed transparency to help spur the collaboration required to decarbonize our global society.

 

The U.S. ranks 14th in the world in its Net Zero readiness. Norway tops the charts.

Our research finds that the U.S. is the 14th ranked country in its Net Zero readiness. Norway, the United Kingdom, and Sweden lead the index. In reviewing the full index, we note several findings:

  1. The 32 countries in the NRZI account for about three-quarters of global emissions. 9 have made binding Net Zero commitments. 10 have set Net Zero targets in policy documents. These countries represent 51 percent of global emissions.
  2. Delivery capability – such as green technology patents, clean technology companies, and innovation rates – is the key weak point in Net Zero commitments. Our colleague Richard Threlfall notes, “The current lack of delivery capability in 80 percent of the countries analyzed in our Index could be an Achilles’ heel for the global transition to Net Zero.”
  3. Net Zero readiness correlates with country prosperity, and national preparedness correlates with sector readiness. In particular, delivery capability scores for high-income countries are 7x higher on average than middle-income countries.

 

The U.S. Path Forward

The U.S. ranking reflects both large upsides and outstanding challenges. The U.S. boasts high levels of private sector finance and a very active cleantech market. Notably, investors are doing more than putting dollars toward sustainable finance — they are increasingly demanding tangible evidence from companies to prove they are cutting emissions. A challenge is aligning federal and state government efforts around Net Zero strategies. Still, the potential for increased federal and state renewable energy targets, along with shifting regulatory and tax environments, can help accelerate action promoted by investors and consumers.

For example, the U.S. ranked 11th in the electricity and heat sector – which accounts for more than one-third of all U.S. emissions – but the costs of wind, solar and battery-powered energy continue to fall. The development of tax incentives and policies that accelerate investment in carbon capture, utilization technologies, and direct air capture technologies will play an important role in decarbonizing parts of the energy sector.

 

What will be necessary for countries like the U.S. to move up in the rankings and continue to meet the Net Zero goals set out by businesses and governments?

Ultimately, success relies on achieving collaboration between the public, private, and financial sectors. Our report highlights some high-level recommendations including:

  1. Moving beyond Net Zero targets to establish clear strategies, milestones, and interim targets for decarbonization
  2. Harnessing the full power of financial markets by further incorporating climate risks into investment and lending decisions and escalating growth in climate-related financial products
  3. Expanding ESG and climate reporting for businesses to increase the data available for investors
  4. Aligning Net Zero policies across all levels of national and sub-national governments
  5. Expanding public support for climate action through increased communication and highlighting the benefits of action
  6. Ensuring climate action does not become the next global technology race that exacerbates inequality and generates risks and costs for companies and investors trying to navigate an unclear, inconsistent policy landscape

Uniting all our efforts to address climate change will be difficult, but this report helps illuminate the pathways to success and can be a meaningful reference point heading into the important UN Climate Conference (COP26) in November. To learn more, read the full report to see where all the reviewed countries stand and the strategies and efforts that are having the largest impact in driving down emissions.

For more on our KPMG IMPACT solutions, visit https://www.kpmg.us/services/kpmg-impact.html.

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