Article by Daniel Yergin, Peter Orszag, and atul Arya, courtesy of Foreign Affairs
25.02.2025
2024 was a record year in another regard, as well: the amount of energy derived from oil and coal also hit all-time highs. Over a longer period, the share of hydrocarbons in the global primary energy mix has hardly budged, from 85 percent in 1990 to about 80 percent today.
As a result, the world is far from on track to achieve the often stated target of reaching, by 2050, “net-zero emissions” — a balance in which any residual emissions are offset by removals of emissions from the atmosphere.
And there is no clear plan for getting on track or for delivering the magnitude of investment that would be required to do so. The International Energy Agency projected in 2021 that, for the world to meet 2050 targets, greenhouse gas emissions would need to decline from 33.9 gigatons in 2020 to 21.2 gigatons in 2030; thus far, emissions have gone in the other direction, reaching 37.4 gigatons in 2023 (and there’s no reason to think that a 40 percent decline in just seven years will be remotely feasible).
Other facts similarly reflect the challenges of transition. The Biden administration set a goal of electric vehicles accounting for 50 percent of new cars sold in the United States by 2030;
Yet that number remains just ten percent, with automakers slashing investment in electric vehicles as they face multibillion-dollar losses. Offshore wind production in the United States was supposed to reach 30 gigawatts by 2030 but will struggle to reach just 13 gigawatts by that date. And Trump administration policy changes will make these gaps even larger.
Part of the problem is sheer cost: many trillions of dollars, with great uncertainty as to who is to pay it. Part of the problem is the failure to appreciate that climate goals do not exist in a vacuum. They coexist with other objectives—from GDP growth and economic development to energy security and reducing local pollution—and are complicated by rising global tensions, both East-West and North-South. And part of the problem is how policymakers, business leaders, analysts, and activists expected the transition to go, and how plans were shaped accordingly.
The first energy transition began in 1709, when a metalworker named Abraham Darby figured out that coal provided “a more effective means of iron production” than wood. And the ensuing “transition” took place over at least a century
Oil, discovered in western Pennsylvania in 1859, would overtake coal as the world’s top energy source in the 1960s. Yet that did not mean that the absolute amount of coal used globally was falling—in 2024, it was three times what it had been in the 1960s.
The same pattern is playing out today. About 30 percent of the world’s population still depends on traditional biomass for cooking, and demand for hydrocarbons has yet to peak or even plateau. The portion of total energy usage represented by hydrocarbons has changed little since 1990, even with the massive growth in renewables. (In the same period, overall energy use has increased by 70 percent.)
In Africa—a demographically young continent whose population has been projected to increase from 18 percent of the global population today to 25 percent by 2050—almost 600 million people live without electricity, and roughly one billion lack access to clean cooking fuel. Traditional biomass energy still fuels almost half the continent’s total energy consumption. As Africa’s population grows, more people will require food, water, shelter, heat, light, transportation, and jobs, creating further demand for secure and affordable energy. Without that economic development, migration will become an even greater problem.
The scale of the transition means that it will also be very costly. Technological, policy, and geopolitical uncertainty makes it challenging to estimate the costs associated with achieving net zero by 2050. But one thing is certain: the costs will be substantial.
The most recent estimate comes from the Independent High-Level Expert Group on Climate Finance, whose numbers provided a framework for the COP29 meeting—the UN’s annual forum on climate change—in Azerbaijan. It projected that the investment requirement globally for climate action will be $6.3 to $6.7 trillion per year by 2030, rising to as much as $8 trillion by 2035.
Based on such estimates, the magnitude of energy-transition costs would average about five percent a year of global GDP between now and 2050. If global South countries are largely exempted from these financial burdens, global North countries would have to spend roughly ten percent of annual GDP—for the United States, over three times the share of GDP represented by defense spending and roughly equal to what the U.S. government spends on Medicare, Medicaid, and Social Security combined.
Governments simply cannot tolerate disruptions to, shortages of, or sharp price increases in energy supplies. Energy security and affordability are thus essential if governments want to make the transition acceptable to their constituencies. Otherwise, a political backlash against energy and climate policies will occur—what in Europe is known as “greenlash”—the impact of which is showing up in elections. Assuring that citizens have access to timely supplies of energy and electricity is essential for the well-being of populations. That means recognizing that oil and gas will play a larger role in the energy mix for a longer time than was anticipated a few years ago, which will require continuing new investment in both hydrocarbon supplies and infrastructure.
At the moment, almost half the population of the developing world—three billion people—annually uses less electricity per capita than the average American refrigerator does.
Natural gas consumption is expected to continue to increase well into the 2040s. Production of liquefied natural gas is on track to increase by 65 percent by 2040, meeting energy security needs in Europe, replacing coal in Asia, and driving economic growth in the global South.
The preference for economic growth is evident.
Policy asymmetries are apparent in emissions targets: China, India, Saudi Arabia, and Nigeria account for almost 45 percent of energy-related greenhouse gas emissions. None of them has a 2050 target for net-zero emissions; their targets are 2060 or 2070. Similarly, while investment in new coal-fired power plants continues to decline globally, nearly all of the 75 gigawatts of new coal capacity construction that began in 2023 was in China. India has ambitiously set out to develop 500 gigawatts of renewable energy capacity by 2030, up from the 190 gigawatts installed capacity to date (and requiring a massive increase from the 18 gigawatts installed in 2023), but it is also committing $67 billion to expand its domestic natural gas network between 2024 and 2030, and it plans to increase coal capacity by at least 54 gigawatts by 2032
The International Energy Agency has projected that global demand for the minerals needed for “clean energy technologies” will quadruple by 2040. At the top of the list are such critical minerals as lithium, cobalt, nickel, and graphite, as well as copper. Between 2017 and 2023 alone, demand for lithium increased by 266 percent; demand for cobalt rose by 83 percent; and demand for nickel jumped by 46 percent. Between 2023 and 2035, S&P expects the demand for lithium to increase by another 286 percent; cobalt, by 96 percent; and nickel, by 91 percent. Electric vehicles require two and a half to three times more copper than an internal combustion engine car; battery storage, offshore and onshore wind systems, solar panels, and data centers all require significant amounts of copper. S&P’s analysis of future copper demand found that global copper supply will have to double by the middle of the 2030s to meet current policy ambitions for net-zero emissions by 2050. This is extremely unlikely, considering that, based on S&P data that tracked 127 mines that have come online globally since 2002, it takes more than 20 years to develop a major new mine; in the United States, it takes an average of 29 years.
China already has a dominant position in mining and a predominant position in the processing of minerals into metals essential for renewable energy infrastructure. It accounts for over 60 percent of the world’s rare-earth mining production (compared with nine percent for the United States) and more than 90 percent of the processing and refining of rare earths. It produces 77 percent of the world’s graphite, processes 98 percent of it, and processes over 70 percent of the world’s lithium and cobalt and almost half the copper. ( IK Note: Opportunities in crotical minerals processing plants in USA.)
Over the last year, a new challenge for the energy transition has emerged: assuring adequate electricity supplies in the face of dramatically increased worldwide demand.
Electrification trends suggest that power demand in the United States will double between now and 2050. Electricity consumption is already outpacing recent demand forecasts.
Indeed, it has become apparent that, in addition to batteries, natural gas will play a larger role in electricity generation than was forecast even two or three years ago. Utility-scale electricity generation from natural gas emits about 60 percent less carbon dioxide than coal per kilowatt hour of electricity produced. And reliance on natural gas has grown rapidly. In 2008, coal represented 49 percent of U.S. electricity generation and natural gas 21 percent. Today, those figures have been reversed, with coal at 16 percent and natural gas at almost 45 percent.
Today’s lengthy permitting and regulatory approval processes threaten the supply of minerals necessary for the energy transition.
The importance of also addressing economic growth, energy security, and energy access underscores the need to pursue a more pragmatic path.
