Direction set, but moving too slow

Current situation and challenges

During the COP28 (28th Conference of the Parties) summit in Dubai in December 2023, world leaders and experts convened to address climate change. Amongst competing international priorities, the conclusions drawn during COP28 maintain a sense of urgency in the fight against global warming and have far-reaching implications for the energy transition.

The energy-intensive sectors (i.e. electricity and power, industry, transport and building) play a central role in global warming. Fossil fuels, coal, oil, and natural gas, have powered our economies for centuries, especially with the global economic expansion in the last 50 years. Examples are the use of coal as a reduction agent in steel production, or the significant CO2 emissions from cement manufacturing. These energy-intensive sectors are responsible for a significant share of negative emissions, that trap heat and lead to rising temperatures, extreme weather events, and melting ice caps. Whilst stopping short of many participants’ aspirations, COP28 nevertheless strengthened commitments to transitioning away from fossil fuels.

Some key targets and deadlines include:

• Renewable energy expansion

  The parties committed to tripling renewable energy capacity by 2030 compared to current levels. This shift towards cleaner sources is critical for mitigating climate change.

• Energy efficiency

  Governments agreed to double the global average annual rate of energy efficiency improvements by 2030, including using energy more wisely and reducing waste. According to the IEA’s Net Zero Emissions by 2050 scenario, annual progress needs to double from a baseline of 2% energy efficiency improvements per year to an average of more than 4% per year between now and 2030.

• Transition away from fossil fuels

  COP28 marked the first time that nearly 200 countries agreed on the need to transition away from fossil fuels, which is seen as critical to achieving net-zero emissions by 2050. This can be achieved through a variety of measures, such as phasing out coal-fired power plants and accelerating the utilisation of zero- and low-carbon fuels or technologies.

Indicative total anthropogenic greenhouse gas emissions by origin vs. climate change scenarios (mtCO2eq)

Despite these commitments, the latest data show that emissions are still increasing today. This trend will need to reverse in the immediate near term if we are to meet net-zero targets. Whilst net zero needs to be a global effort, with China and the USA often being at the focus of attention, Europe also has a key role to play, and effort will be required across many sectors, supported by a broad transition in energy production and consumption.

In 2024, the world faces many competing challenges. Alongside decarbonisation, affordability and energy security have become more pressing amid global economic turmoil and major regional conflicts, with many countries in Europe having to shield consumers from the resulting very volatile energy prices. Cooperation on energy issues has weakened as regions and countries look first to secure their own positions. For example, in Europe there was a rush to add liquefied natural gas (LNG) regasification capacity to support the move away from supplies through Russian gas pipelines.

Transitioning away from fossil fuels is urgent, and achieving the decarbonisation of our energy systems is essential to limiting global warming. However, the general theme coming out of COP28 was that this transition must be carefully managed by balancing sustainability with affordability, energy security and social acceptance. Clean energy alternatives should be accessible to all, and ensuring a secure energy supply is paramount as we shift towards low- and zero-carbon solutions.

Share of global emissions by region (2022) | Share of European emissions by sector (2022)

Looking ahead

Irrespective of the pathway to net zero followed, clear trends emerge. A major part of the sustainability transition will be growth in renewable and other low-carbon electricity generation while phasing out fossil fuels. This will take place alongside the electrification of demand in sectors that have traditionally relied on fossil fuels, such as heating and transport. Energy efficiency will be a key enabler of this shift, reducing the overall need for new generation capacity and the expansion of electricity, gas and heat network infrastructure. Storage and demand flexibility will also play a role in ensuring stable operation of the electricity system and providing the seasonality of demand that many regions still require.

Final energy consumption¹ in EU27+3² (PWh)

For those industries and processes that are difficult to switch to electricity, hydrogen (as well as ammonia and other low-carbon energy carriers) will be required to enable the transition. Carbon Capture, Utilisation and Storage (CCUS) will help to abate residual fossil emissions. And carbon removals, both technological and nature-based, have a role to play in reaching net-zero goals, whilst ensuring they are not used for ‘greenwashing’.

The transition away from fossil fuels will also have an impact on the materials used in manufacturing and other industries, with shifts towards non-fossil based raw materials and maximisation of circular manufacturing techniques.

All factors combined — trends and technological advancements primarily driven by the gradual phase-out of fossil fuels; extensive electrification across sectors, reaching more than 50% of total energy consumption globally by 2050; and efficiency enhancements — lead to significant reductions in emissions and energy consumption. On a European level, final energy consumption is projected to decline by more than 40% by 2050 compared to 2020.

AFRY scenarios

The future of the energy transition is uncertain, and it is not clear to what extent it will be driven by central (governmental and inter-governmental) action rather than by technological change or societal pressure.

We understand the pace of change required to meet the Paris Agreement targets, but there are uncertainties regarding how the necessary reductions will be achieved. To help companies and governments think through the potential range of outcomes, we at AFRY have been through the exercise of imagining what the world could look like in 2050 and detailed scenarios of the future, encompassing action led by governments (scenario 1), technological change (scenario 2), and society (scenario 3), as well as a world in which net zero is not achieved and more extreme climate adaptation is inevitable (scenario 4).

Because these are extreme scenarios, they challenge us and other companies to think about what decisions need to be made today by policymakers, energy companies and industrial players to be able to navigate each context. By preparing for these extremes, it becomes easier to consider what needs to be done and be ready for all possible outcomes, including the more probable combinations between.