Wood Mackenzie, in his analysis entitled “An energy transition delayed”, examines the consequences of a five-year delay in global decarbonization efforts. This scenario predicts a drastic drop in average annual spending, falling to $1.7 trillion, or 55% less than in Wood Mackenzie’s 2050 carbon neutrality scenario, which outlines the investments needed to meet the Paris Agreement targets.
Investment and economic impact
In the context of a delayed transition, the total investment required would reach up to $48 trillion, a significant reduction on the estimated $75 trillion needed to achieve carbon neutrality by 2050. This reduction in investment would have a marked impact on CCUS (the renewable energy sector and carbon capture and storage initiatives), where investment would fall to 2%, compared with 8% in the carbon neutral scenario.
Political and climate implications
Prakash Sharma, Vice-President of Scenarios and Technologies at Wood Mackenzie, points out that: “As half the world’s population heads to the polls in 2024, political realities and climate skepticism in major emitting countries, such as the US and Europe, could reduce support for the transition as voters seek economic security and price stability.” Adding that: “The global stocktaking carried out at COP28 in December 2023 also confirmed that no major country was on track to meet commitments aligned with the Paris Agreement, and that strong political action and capital investment were needed to accelerate the transition. Indeed, Europe and the UK have already pushed back climate targets for 2030 and other countries may follow.”
Consequences for energy markets
In this delayed scenario, oil demand would peak at 114 million barrels per day in 2033, almost 6 million barrels per day more than in the baseline scenario, due to the slower adoption of electric vehicles outside China. Demand for natural gas will not peak until 2045. At the same time, coal’s resilience would limit gas demand growth, keeping commodity markets tighter and more volatile for an extended period.
Urgency and action required
The delayed transition means that carbon capture and removal technologies will have to play a dominant role in restoring the carbon balance and meeting long-term climate targets. Emissions are expected to peak in 2032, and the remaining carbon budget for a 1.5°C world would be exhausted by 2027, further weakening countries’ ability to meet the Paris Agreement targets on time.
A delay in the energy transition has profound implications not only for the economy, but also for the ability to effectively combat climate change. Accelerating the transition to a low-carbon economy is not only an environmental necessity, but also an imperative global economic strategy.
