More Actions Needed To Achieve Net-Zero Targets: Wood Mackenzie

A string of global shocks has likely put 2030 emissions reduction targets out of reach. But with decisive action, there is still time to reach net zero emissions by 2050, according to Wood Mackenzie’s Energy Transition Outlook report, an assessment of the global journey towards a lower-carbon future.

The new report analyses four different pathways for the energy and natural resources sector – Wood Mackenzie’s base case (2.5-degrees), country pledges scenario (2-degrees), net zero 2050 scenario (1.5-degrees) and delayed transition scenario (3-degrees).*

KEY FINDINGS:

• US$78 trillion of cumulative investment is required across the power supply, grid infrastructure, critical minerals, and emerging technologies and upstream to meet Paris Agreement goals.
• Globally, energy demand is growing strongly due to rising incomes, population and the emergence of new sources of demand, including data centers and transport electrification.
• Strong renewables growth is a certainty and this will continue under all scenarios modeled in this update. Renewables capacity will grow two-fold by 2030 in the base case, short of the global pledge made at COP28 to triple renewables by 2030.
• Oil and gas are projected to continue playing a role in the global energy system to 2050.
• Innovation will improve the commerciality of carbon capture and low-carbon hydrogen and derivatives, driving uptake to 6 Btpa and 0.45 Btpa by 2050.
• Policy certainty crucial to helping unlock demand for new technologies and increases capital flow into all segments, including supply chains and critical minerals.

“A string of shocks to global markets threaten to derail the progress in a decade pivotal to the energy transition. From the unresolved war between Russia and Ukraine to an escalated conflict in the Middle East, as well as rising populism in Europe and global trade tensions with China, the energy transition is in a precarious place and 2030 emissions reduction targets are slipping out of hand,” said Prakash Sharma, vice president, head of scenarios and technologies for Wood Mackenzie. “However, there is still time for the world to reach net zero emissions by 2050 – provided decisive action is taken now. Failure to do so risks putting even a 2 ˚C goal out of reach, potentially increasing warming to 2.5 ˚C – 3 ˚C trajectory.

“We are under no illusion as to how challenging the net zero transition will be, given the fact that fossil fuels are widely available, cost-competitive and deeply embedded in today’s complex energy system,” added Sharma. “A price on carbon maybe the most effective way to drive emissions reduction but it’s hard to see it coming together in a polarised environment. We believe that these challenges are overcome with policy certainty and global cooperation to double annual investments in energy supply to US$3.5 trillion by 2050 in our net zero scenario.”

Electrification is the accelerated route to energy efficiency and peak emissions

The electrification of the energy system is the central plank of the energy transition. In Wood Mackenzie’s base case, displacing fossil fuels with more energy-efficient electricity leads to global emissions peaking in 2027 and subsequently falling by 35% through 2050.

Global final energy demand is projected to grow by up to 14% by 2050. For emerging economies with rising populations and prosperity, growth is 45%, whereas demand in developed economies peaks in the early 2030s and enters a decline. The reshoring of manufacturing (supply chains, cleantech, semi-conductor chips), green hydrogen and electric vehicles support demand growth, particularly in the US and Europe. Artificial intelligence and the build-out of data centres are new growth sectors, increasing electricity consumption from 500 TWh in 2023 to up to 4,500 TWh by 2050.

“While electrification is at the heart of energy security, the quick expansion of electricity supply is often constrained by transmission infrastructure which takes time to permit and build,” said Sharma. “Recognising these challenges, we modelled different electrification rates in our energy modelling. Electricity’s share of final energy demand steadily rises from 23% today to 35% by 2050 in our base case. And, in an accelerated transition such as our net zero scenario, the share of electricity increases to 55% by 2050.”