The global energy transition is facing major challenges, which are unfolding differently in different parts of the world.
S&P Global has launched “Look Forward: Energy at the Crossroads,” the latest edition of its Look Forward research series, reports that take a deep dive into the most important topics that are transforming the global economy.
The research draws together insights from across S&P Global to explore the direction of global energy markets and climate change, the progress being made by the oil and gas industry to measure and mitigate methane emissions, the reasons for a global resurgence in nuclear power, how to assess climate risks, and the potential impact of AI on optimization and innovation across energy value chains.
Key findings include:
- Governments are reevaluating their energy strategies and climate policies, focusing on affordable energy over sustainability. The transition will be multidimensional, rather than linear.
- Slower energy demand growth is anticipated, with electricity becoming central to future energy systems. Achieving net-zero emissions by 2050 is now deemed unlikely.
- Western economies face challenges in reducing dependence on China for clean technology, requiring significant investment and planning to develop local manufacturing.
- New observation technologies are providing more accurate, actionable data on methane emissions, revealing higher emissions levels than previously reported.
- There is a growing interest in nuclear energy as a solution for decarbonization, driven by the need for firm power and the increasing demand for electricity from AI-related technologies.
- Indexes can help market participants navigate the energy transition, with companies in the S&P 500 having decarbonised by 62% over the past 20 years.
- Despite the potential financial implications of climate change, estimated to reach $25-trillion by 2050, only 35% of major companies have established climate adaptation plans.
- Integrating AI into operational efficiency, decision-making and innovation could transform how energy is produced and distributed.
Atul Arya, chief energy strategist at S&P Global Commodity Insights, says: “Today’s energy transition is fundamentally distinct from its predecessors, as it is meant to be transformative rather than an energy addition. Its scale and associated challenges mean it will not proceed as many expect; it will be multidimensional, proceeding at different rates with different technologies in regions with different priorities.
“This reflects the complexities of the energy system that is the foundation of today’s global economy and the ubiquity of fossil fuels as the building blocks of modern society.
“The importance of balancing economic growth, energy security, energy access and sustainability underscores the need to rethink the transition and redefine a pragmatic path forward.”