The energy transition has been an imperative for many multilateral organisations and countries—mainly in the OECD—since the COP21 meeting in Paris in 2015.
It makes sense to try keeping global warming to 1.5C to keep the world inhabitable. We all believe in leaving behind a world to our children and grandchildren with air worth breathing and temperatures kept at bay.
It is helpful to put into historical context long-term monumental goals such as abating climate change, in order to understand the extent of what is achievable.
This is not the first energy transition in recent history. After the first oil shock of 1974, many countries tried to steer their economies away from oil and petrochemical products. However, the numbers behind what was achieved speak volumes.
In 1974, fossil energy (oil, gas and coal) constituted 81% of global primary energy demand, while by 2024 this figure was reduced to 76.3%. While the share of oil slid from 42.2% to 29.6%, gas increased commensurately and coal decreased in terms of percentage points—notwithstanding that, according to the UN, coal consumption doubled in absolute terms over the last 20 years.
These numbers were driven by the growth in energy demand owing to an increasing world population, which has doubled over the last 50 years. By 2050, the world’s population is estimated to grow by another 1.5b and reach 9.66b. These additional 1.5b people will predominantly hail from Africa and South Asia, which are geographies as of yet undersupplied with energy. The majority of today’s more than 1b people inflicted with energy poverty live precisely in these regions. According to the World Bank, 85% of the people in energy poverty reside in sub-Saharan Africa.
These numbers tell us three things: Firstly, that energy transition is a long process and not without its difficulties; secondly, that while energy transition is a worthwhile goal, it clashes with other priorities such as energy security and affordability; and, thirdly, that energy poverty remains a global issue. It will not be easy to find a balance between climate goals and access to energy for all. (Let us not forget that energy poverty limits livelihoods, threatens the health of afflicted populations and leads to environmentally counterproductive behaviours such as chopping down forests to obtain firewood.)
These historic and current perspectives show how difficult it will be to achieve energy transition in the best of times, but what about the costs, policy requirements and other obstacles associated with the process?
Decade of ambition
The 2010s were the decade of ambitious climate and energy transition goals in OECD countries and multilateral development institutions. Business joined the cause through alliances such as the Glasgow Financial Alliance for Net Zero. The business buy-in to stringent environmental goals was the result of a shift of investor priorities to ethical (ESG) funding structures. It became increasingly difficult for industries associated with fossil fuels to meet their financing needs. Such was the heyday, where climate goals superseded other considerations such as energy security and affordability.
Then came COVID and the Ukraine war, which put renewed emphasis on energy security and affordability. So where are we now and what is the estimated price tag of energy transition going forward?
The IEA estimated that the total investment requirement in energy and energy infrastructure to reach its ambitious net-zero goals by 2050 stands at $4.5t/yr from 2030 to 2050. This is extremely ambitious given constrained budgets and increased military spending requirements in most OECD and G20 economies.
Furthermore, the IEA had to make a significant U-turn from its fossil fuel aspirations in 2021, when it had stipulated ceasing investment in oil and gas was the only way to achieve the net-zero goals. By autumn 2025, the institution acknowledges that, unless the hydrocarbons sector invests $540m/yr until 2050, there will not be sufficient oil and gas available to keep the wheels of the global economy churning.
So, what do the history and the numbers tell us? As the world population will reach nearly 10b people by 2050, we need to invest trillions into the energy infrastructure both in fossil fuel and transition fuels, or we risk endangering the global economy and the standard of living—especially in the developing world.
It will be important to keep on working on energy transition goals, but not at the expense of a good dose of realism. We need appropriate energy transition policies in place over a continued period—avoiding customary chopping and changing of goals after every election cycle. We especially need to be open to all technologies, including CCUS, hydrogen, etc.
There is no silver bullet in terms of energy source or technology. We need every molecule, every sun ray and every burst of wind. Fossil fuels will remain an important part of the global energy mix for the foreseeable future, which renders CO₂ abatement technologies such as CCUS particularly important. We also need access to the necessary minerals enabling the energy transition infrastructure—be they copper, lithium or rare earths. Overall, we need to be aware that energy transition—while a very worthwhile goal—is hard to achieve. Policies need to be consistent, and expectations need to be managed. We also should not lose sight that the large CO₂ emitters—namely China, the US and India—need to be on board for any policy to be successful on a global scale.
A good dose of realism in aspirations and what it takes to achieve them might be helpful for 2026 and onwards.
Cornelia Meyer is Chair & CEO at MRL Corporation and and Chair & Chief Economist at LBV Asset Management. This article is taken from our Outlook 2026 report. To read Outlook in full, click here.
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