CLIMATE CHANGE & EQUITIES
● GLOBAL
January 2019
Why transport is the second frontier
All countries signed up to the 2015 Paris Agreement aim to limit
global warming in 2100 to well below 2⁰C higher than in pre-
industrial times, and ideally 1.5ºC. Now comes the hard work –
bringing down greenhouse gas emissions (GHGs) to achieve this.
The power generation sector has, until now, been the focus of
efforts to decarbonise economies – it’s the first frontier. But even
dramatic success there won’t be enough to meet climate targets
alone. So we think the next global focus will be on reducing
emissions in the transport sector.
In this report, we have created a Clean-Power-and-Transport-2040 scenario, which we
abbreviate to CPT-2040. This scenario sees power generation fully decarbonised over the 2020
to 2040 period – as renewable technologies such solar and wind replace fossil fuels in
generation mixes – the first major step down in closing the ‘emissions gap’, which exists
between business-as-usual GHG emissions and emissions consistent with 2ºC of warming at
century end. This is a substantial first step, given power generation is responsible for around
27% of manmade GHGs. Next, our scenario incorporates a transport sector in which emissions
fall overall by 76%, a number built up subsector-by-subsector, as illustrated in Figure 1 (on the
right hand side, and with a fuller data set in Appendix 1).
Transport emissions reduction in our
proprietary CPT-2040 scenario
Supportive policy, technological advances and cost improvements mean that electricity,
hydrogen and biofuels can all replace oil as fuel feedstocks for different transport modes.
Decarbonisation of transport is a crucial second step, given that the sector is responsible for
over 15% of GHGs. Nevertheless, it is more challenging to achieve a low-carbon transition for
certain means of moving people and goods – in particular, for trucks, aviation and shipping.
This is a collaborative note between HSBC Global Research’s equity sector teams and the
HSBC Climate Change Centre of Excellence. Analysts from across our autos, capital goods,
transport & logistics teams have described how technology and regulation catalysts can drive
change in their areas of transport and we have built these thoughts into the emissions
computations for our CPT-2040 scenario. Essentially, CPT-2040 combines zero-carbon
electricity with low-carbon transport to demonstrate how the emissions gap can be
substantially reduced. Overall, the gap for 2ºC is closed by 72% of maximum warming at
the median case, as shown on the left-hand side of Figure 1. The larger emissions gap,
for the more ambitious target of 1.5ºC of warming, is closed by 48% by CPT-2040 – a
more detailed version of this emissions gap chart can be found on page 13.
Closing the emissions gap
