Energy Transition Delay Could Cost Trillions and Raise Temperatures by 3°C, Says Report

A five-year delay in the global energy transition could lead to a 3°C rise in global average temperatures above pre-industrial levels, according to Wood Mackenzie’s latest analysis. The report, “A Delayed Energy Transition,” outlines the potential impacts of such a delay on global decarbonization efforts.

The delayed scenario predicts annual average spending will drop to $1.7 trillion, 55% lower than what is required to meet the Paris Agreement targets by 2050. Total investment could fall to $48 trillion, significantly less than the $75 trillion needed under a net zero scenario. The oil and gas sector’s capital expenditure would rise to 31%, while power sector spending remains at 60%. Investment in hydrogen and carbon capture, utilization, and storage (CCUS) would drop to 2%, compared to 8% in the net zero scenario.

Prakash Sharma, Vice President of Scenarios and Technologies at Wood Mackenzie, noted that political realities and climate skepticism in major emitting countries could reduce support for the transition as voters prioritize economic security. The global stocktake at COP28 confirmed no major country is on track to meet Paris Agreement commitments, with Europe and the UK already delaying their 2030 climate goals.

The delayed scenario expects emissions to peak in 2032, exhausting the remaining carbon budget for a 1.5°C world by 2027. Renewables-led electrification faces challenges due to transmission bottlenecks and higher costs, delaying low-carbon hydrogen cost declines and reducing demand by nearly 50% by 2050.

CCUS technologies would need to play a significant role, with uptake reaching 225 million tonnes by 2030. Oil demand could peak at 114 million barrels per day in 2033, and gas demand at 4,536 billion cubic meters in 2045. Meanwhile, coal demand would remain resilient, maintaining a higher trajectory this decade.

Sharma emphasized the need for increased investment in supply to avoid prolonged volatility in commodity markets.