Net Zero Readiness Index 2021

1 Net Zero Readiness Index 2021. KPMG IMPACT. Contents Quick reader guide Foreword Quick reader guide 3 Singapore 64. Chile 66. Foreword 5. Australia 68 Net Zero Readiness Net Zero Readiness Index results 6 Index results Brazil 70. Results at a glance 7 Poland 72. Top six countries 8 China 74. Key observations and insights 10 Malaysia 76. Key observations Argentina 78 and insights NZRI key observations 11. Mexico 80. KPMG insights 16. Turkey 82. Global sector summaries 18. United Arab Emirates 84. Electricity and heat 19 Global sector NZRI countries to watch 86 summaries Transport 22. India 87. Buildings 25. Indonesia 89. Industry 28. Nigeria 91. Agriculture, land use and forestry 31. Russia 93 NZRI top 25 countries NZRI top 25 countries 34. Saudi Arabia 95. NZRI top 25 results 35 South Africa 97. Norway 36 Thailand 99. United Kingdom 38. Appendix 101 NZRI countries to watch Sweden 40. Methodology 102. Denmark 42. National preparedness 104. Germany 44. Electricity and heat 106.

2 France 46. Transport 107. Japan 48 Appendix Buildings 108. Canada 50. Industry 109. New Zealand 52. Agriculture, land use and forestry 110. Italy 54. South Korea 56 Sources 111. Sources Spain 58 About KPMG IMPACT 122. Hungary 60. KPMG contacts 123. United States of America 62. 2 | Net Zero Readiness Index 2021. KPMG contacts 2021 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. The Net Zero Readiness Index Quick reader guide (NZRI) is a tool that compares the progress of 32 countries in reducing the greenhouse gas emissions that Foreword cause climate change, and assesses their preparedness and ability to achieve Net Zero emissions of these Net Zero Readiness Index results gases by 2050. Key observations KPMG has selected the 32 countries to capture insights and insights from across developed and emerging economies and current energy exporters. They include members of the G20 intergovernmental forum, as well as G20 invitees, which are emerging or large economies; members of the Global sector Organization of the Petroleum Exporting Countries; and summaries Quick reader countries that had a Net Zero target in place at the time of framing the methodology.

3 The date 2050 was proposed by a 2018 report of the United Nation's (UN) Intergovernmental Panel on Climate NZRI top 25 countries guide Change, which said that cutting net emissions by about 45 percent from 2010 to 2030, then 100 percent by 2050. would limit temperature rises to degrees Celsius. The panel said that doing this would lessen the still- NZRI countries to watch substantial damage that global warming will cause over the coming In August 2021, a report by the panel approved by 195. governments said that humanity has already warmed Appendix the planet by approximately degrees Celsius, that degrees is likely to be reached or exceeded in the next 2 decades and that without immediate, rapid and large-scale reductions in emissions, limiting warming to or even 2 degrees will be beyond Sources 3 | Net Zero Readiness Index 2021. KPMG contacts 2021 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients.

4 All rights reserved. The NZRI uses the World Resources Institute definition Through this analysis, KPMG has identified key of Net Zero. Primarily, this involves reducing greenhouse observations and insights that we see as critical to Quick reader guide gas emissions caused by humans as close as possible to understanding and overcoming the challenges of zero. Remaining emissions are balanced by an equivalent the transition to Net Zero at a global level. The 32. amount of carbon removal from the atmosphere, participating countries have been grouped into two effectively neutralizing humanity's future impact on the categories: our view of the top-performing 25 countries world's in the race to Net Zero based on progress to-date and Foreword established initiatives; and seven countries to watch The main greenhouse gas is carbon dioxide, and work where KPMG is seeing significant opportunities to towards Net Zero is often called decarbonization' to advance their decarbonization efforts through large- reflect the focus on this gas, which is released when scale projects and emerging escalation initiatives.

5 Fossil fuels are burnt. However, emissions of methane Net Zero Readiness Index results and nitrous oxide also make significant contributions to As countries around the world race to implement climate change and are included in this Index . policies to reduce carbon emissions, it is likely there will be movement, perhaps significant, in the rankings. How the NZRI works KPMG intends to update the NZRI regularly and share insights on an ongoing basis. Key observations and insights For each of the 32 countries, the NZRI considers 103 indicators that KPMG considers as key drivers More information on the results, methodology and to achieving Net Zero. The indicators have been split sources used can be found in the Appendix. between national preparedness and sector Readiness . National preparedness considers a country's national The following abbreviations are used in the text: Global sector CO2 (carbon dioxide); ESG (environmental, social and summaries commitment to decarbonize, its past decarbonization performance and the national enabling environment for governance); GDP (gross domestic product); GW.

6 Decarbonization. (gigawatt); MtCO2e (megatonnes of CO2 equivalent, used to measure greenhouse gas emissions). US. Sector Readiness covers the five highest emitting sectors: dollar equivalents for local currencies are correct as of NZRI top 25 countries electricity and heat; transport; buildings; industry; and August 2021. agriculture, land use, land use change and forestry (in the report referred to as agriculture, land use and forestry). The intended audience for the NZRI is governments and the public sector, multilateral organizations, The Index looks at the indicators for sector Readiness investors and financial institutions, the private sector, NZRI countries to watch through three lenses: decarbonization status, and the general public. It is likely to be of particular government action and delivery capability. The indicators interest to any entity, department, business or person are aligned to the fifth assessment report of the UN's with an interest or responsibility in advancing the Net Intergovernmental Panel on Climate Change published Zero agenda.

7 In 20144 and insights from KPMG professionals. For Appendix each of the 32 countries, our local experts provide a qualitative overlay sharing local context and their views on challenges, successes and imminent initiatives. Sources 4 | Net Zero Readiness Index 2021. KPMG contacts 2021 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. Foreword Quick reader guide Foreword Climate change is the existential challenge facing humanity. law and 10 more having stated a target. The majority of the It is now, at last, well accepted that if we do not urgently countries in this research have reduced emissions between limit the rate of global warming, the future for our children 2005 and 2018, many by significant amounts. and grandchildren is very bleak, indeed. Unfortunately, notwithstanding this progress, the world Net Zero Readiness Since the Industrial Revolution, concentrations of as a whole has not only failed in the last 5 years to reduce Index results greenhouse gases in the atmosphere have surged to now emissions, they have actually increased.

8 The scale of the their highest levels in 3 million years. The UN says this challenge can therefore seem daunting, but as Christiana has driven a global temperature increase of degrees Figueres, former Executive Secretary of the UN Framework Celsius between 1880 to 2012, and a rise in average sea Convention on Climate Change, argues, we have a collective Key observations and insights levels of NASA has seen the minimum average responsibility to focus optimistically on how society will solve area covered by Arctic sea ice each year almost halve this problem rather than be overwhelmed by since Most of the results of climate change will KPMG has ranked countries on their preparedness and continue for centuries, even if we stopped emissions ability to reach Net Zero by 2050, and provided insights into Richard Threlfall Global sector tomorrow. Resulting stresses on natural resources will have the strategies being adopted that are working well. The summaries consequences far beyond the environment, likely giving rise hope from this is that other countries can learn, copy and Partner, to broader social instability and conflict concerns.

9 Global Head of KPMG IMPACT. adapt their own roadmaps to Net Zero. Over the last year more and more governments have Progress is rapid, with new technology solutions, market and Global Head of Infrastructure, committed to Net Zero' which means stopping most KPMG International NZRI top 25 countries and policy mechanisms and consumer behaviors emerging greenhouse gas emissions completely, with mitigation every day. KPMG expects many new commitments and measures to cancel the effects of those remaining. It initiatives in advance of COP26, in Glasgow in November. is the world's greatest common challenge, requiring an The faster this report is out of date, the happier we will be. unprecedented alignment of human effort from individuals, businesses and governments. Ultimately, the climate challenge can only be met if society NZRI countries to watch as a whole changes behaviors. Although not all countries Agreements to cut emissions and reach Net Zero are made are equally responsible for the problem, and consequences at a national level and all countries have a role to play.

10 This will vary, as with COVID-19, no one and no country is is recognized by the 2015 Paris Agreement, ratified by safe until the world is safe. It is vital that every country 186 countries and territories, which aims to keep global does everything it can to contribute. It demands that Appendix temperature rises this century well below 2 degrees individuals, organizations and countries collaborate to an Celsius and try to limit them to degrees. unprecedented degree, and act transparently and honestly. KPMG has produced this first Net Zero Readiness Index in KPMG hopes that the NZRI can help provide some of the order to assess 32 countries' progress towards reaching transparency and honesty needed, and spur the collaboration Sources Net Zero. While we cannot underplay the phenomenal required to take the world all the way to Net Zero. effort that lies before us, there are grounds for optimism, with nine of these countries having set a Net Zero target in 5 | Net Zero Readiness Index 2021.