The global energy transition has reached an inflection point. The prevailing narrative of an urgent shift away from fossil fuels at all costs has driven policies and investment decisions for more than a decade. But the return of Donald Trump to the White House and growing discontent with rising energy costs demand a more pragmatic approach—one that brings the energy and finance sectors to the centre of the transition.
Rather than pursuing an all-or-nothing pathway that seeks to replace fossil fuels with renewables, the emphasis must shift towards an affordable, technology-driven transition that decarbonises existing energy systems while ensuring energy security and economic stability.
This reset is not about slowing climate progress; it is about making it achievable. The near-term priority should be the large-scale displacement of coal-fired power with natural gas, which offers an immediate and significant reduction in emissions. Coal-to-gas switching in the US removed more CO₂ than all the wind and solar installed in the last 15 years. Simultaneously, we must accelerate investment in carbon management, methane reduction and low-cost solutions for hard-to-abate sectors such as heavy industry and shipping.
Financing the new energy reality
A fundamental challenge in the current energy transition framework is financing. For years, climate finance mechanisms have disproportionately focused on renewables, with limited capital flows directed towards decarbonising the oil and gas sector. Yet the scale of investment required to modernise and clean up existing energy systems is massive: more than a trillion dollars will be needed to develop and deploy advanced decarbonisation technologies.
To unlock these investments, financial institutions must recalibrate their approach. Private capital, including institutional investors and sovereign wealth funds, should be incentivised to fund large-scale carbon management projects. The role of public-private partnerships must expand, ensuring early-stage decarbonisation technologies receive the necessary support to scale. Governments, for their part, must move away from punitive regulatory approaches that discourage investment in oil and gas and instead create a predictable framework that rewards emissions reductions.
Energy companies are already moving in this direction. The Oil and Gas Decarbonization Charter, announced at COP28, represents a shift in industry commitment, with major producers pledging to cut emissions and invest in cleaner technologies. Similarly, the Carbon Management Challenge, launched by key stakeholders, is designed to accelerate the deployment of CCS. These initiatives signal an important transformation: rather than being sidelined in the transition, the oil and gas sector must be fully engaged as a driver of progress.
The risks of getting this wrong are clear. Europe’s experience over the past few years has shown what happens when energy policy prioritises aggressive decarbonisation targets over affordability and security. Costly policies that pushed an overreliance on intermittent renewables while discouraging gas infrastructure led to skyrocketing electricity prices, industrial decline and public backlash. The resulting economic strain contributed to political crises, with energy affordability becoming a major electoral issue. The lesson is clear: an energy transition that ignores cost realities is not sustainable—either politically or economically.
The Global South and the role of gas
A just and effective energy transition must also acknowledge the needs of the Global South. While advanced economies debate peak fossil fuel demand, billions of people still lack access to reliable and affordable energy. Over the next decade, the availability of affordable energy—particularly gas—could transform lives, driving industrialisation, economic growth, and poverty reduction in developing nations.
The push to rapidly phase out hydrocarbons often overlooks this reality. The alternative to gas is not an immediate leap to renewables but rather a continued reliance on coal and biomass—both of which have devastating environmental and health consequences. A transition that ignores the energy needs of the Global South risks entrenching inequalities and slowing global development.
By financing gas infrastructure alongside decarbonisation technologies, the world can achieve several objectives at once: cutting emissions by displacing coal, ensuring energy affordability, and enabling economic development in regions that need it most. The recent expansion of LNG projects highlights the role gas can play in a balanced transition, but these investments must be supported by policies that recognise their contribution to both energy security and emissions reductions.
A call for realignment
The current moment offers a unique opportunity to realign the energy transition and its principal players. Instead of an exclusionary approach that prioritises renewables at the expense of everything else, we need an inclusive strategy that leverages all available tools—gas, carbon management, methane reduction, and new technologies.
By shifting the emphasis from an unrealistic “transition-at-all-costs” model to an affordable and sustainable decarbonisation pathway, we can ensure that climate goals are met without sacrificing energy security or economic growth. The financial sector, energy industry and policymakers must now work together to make this vision a reality.
Joseph McMonigle is the former secretary-general of the International Energy Forum and president and CEO of the Global Center for Energy Analysis, based in Washington D.C.
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