PwC: Energy Sector Falling Short on Emissions Targets

Despite having pulled high-impact emissions reductions levers, fewer energy companies are on track to reach near- and long-term goals, according to a new report by PwC.

They aren’t alone. But companies in other sectors appear to be faring better in efforts to shrink Scope 1 and Scope 2 emissions, with some raising climate ambitions as desire fragments among energy players.

PwC compiled its decarbonization report using generative artificial intelligence to analyze responses from more than 4,000 companies that participated in its Carbon Disclosure Project last year.

Downstream oil and gas companies' increasing ambitions are pivoting strategically, prioritizing energy security while investing in biofuels, sustainable aviation fuels (SAF), and carbon capture PwC said in the report.

“Two of the world’s largest upstream oil and gas producers have recently decreased climate ambition, which has resulted in shareholder resistance. It remains to be seen if this marks the beginning of a broader retreat on the sector’s climate goals or if regulatory reporting requirements and shareholder pressure lead to enduring commitments.”

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Emissions, which impact the carbon footprint of businesses, play a crucial role in regulatory compliance and environmental impact. Companies with lower emissions may have a competitive edge when it comes to efficiency, access to capital and talent for stakeholders focused on sustainability.

However, growing energy demand, energy security concerns and moves to boost profitability could impact emissions if fossil fuel production grows without more emissions reduction efforts such as carbon capture and storage, improved energy efficiency and renewable energy growth.

Slipping across all scopes

PwC reported that progress on climate targets is slipping across all scopes for the energy sector. Data show the share of energy companies on track for Scope 1 and Scope 2 targets fell to 52% in 2024 from 57% in 2023. Scope 3 saw an even bigger fall, dropping from 67% to 52%.

Companies in other sectors—which include IT and communications, automotive, chemicals, health care and mining—revealed 68% were on track to meet their Scope 1 and Scope 2 climate targets in 2024, up from 64%. Data showed 55% said they were on track to meet Scope 3 targets in 2024, compared to 50% in 2023.

Scope 1 greenhouse gas (GHG) emissions come directly from a company’s operations, while Scope 2 GHG emissions are indirect emissions from energy purchased or consumed by a company. Scope 3 emissions are indirect emission from a company’s value chain, excluding Scope 1 and Scope 2.

Still, evidence of progress is mounting as renewable energy usage, fuel switching, equipment upgrades and efficiency gains drive emissions reductions in the energy sector.

“Wind power delivered nearly 5 times more emissions reductions per project than solar PV, highlighting an underused lever for Scope 1 and 2, especially in markets with fewer land or grid constraints,” PwC said. “However, high-cost, regulatory barriers and uncertainty related to tariffs and federal incentive programs may hinder growth of wind projects in the near-term.”

When it comes to climate investments, the report showed the energy sector outspends others. The percentage of both capex and opex allocated to climate transition was higher for energy companies compared to others examined in the report. PwC forecast the energy sector’s share of climate-transition aligned capex will rise to 55% by 2030, compared to 50% in 2024. Investment is flowing to grid modernization, battery storage and smart grid tools along with carbon capture, utilization and sequestration (CCUS), hydrogen and renewable fuels.

But the firm warned the buildout of fossil fuels driven by electricity demand growth could alter the forecast as new natural gas-fired turbines and coal plants are called upon to help meet increasing demand.

Opex is expected to fall to 38% by 2030 compared to 44% in 2024 as efficiencies materialize and spending shifts to “more stable, mature asset portfolios, as early investments in renewables, efficiency, and process upgrades yield operational cost savings relative to fossil-based systems.”

Other sectors

Each sector is on a different decarbonization pathway and each faces unique structural and technological challenges, according to PwC.

Nearly 70% of automotive companies, for example, reported they are on track to meet Scope 1 and 2 targets, using renewable electricity such as solar PV onsite, sealing wind- and solar-powered virtual power purchase agreements and utilizing energy attribute certificates.

But only 28% of the automotive companies are on track for Scope 3 targets, which PwC said rely on electric vehicle demand and policy.

More than 60% of companies in the agriculture, food and beverage sector are on track to meet Scope 3 goals, targeting emissions with “certified lower-impact ingredients, investing in practices that restore soil health and carbon stocks, and optimizing packaging and distribution systems.”

Companies in various sectors could learn from others, according to PwC.

“Companies have multiple levers to pull, but the selection, sequencing and outcomes will likely depend on a company’s own operations and value chain. Our research offers a unique chance for companies to learn how their peers have overcome challenges while also exploring ideas for reducing emissions from other sectors,” PwC said. “By leveraging these aggregated insights from peer disclosures, companies can discern and account for key determinants of successful decarbonization.”