New Wood Mackenzie warns $118 trillion needed for climate goals as 2030 emissions targets slip out of reach

New analysis from global research firm Wood Mackenzie has found that $118 trillion in investment will be needed to meet Paris Agreement goals and has predicted that the 2030 emissions reduction targets are now out of reach.

WoodMac’s Energy Transition Outlook report has also, however, concluded that with decisive action there is still time to reach net-zero emissions by 2050.

All the while, global energy needs continue to increase due to rising incomes, population and the emergence of new sources of demand such as data centres and transport electrification.

Renewable energy growth

Wood Mackenzie’s base case forecasts that, while renewables growth will double by 2030, this is well short of the global pledge made at COP28 to triple renewables by the end of this decade.

Oil and gas will continue to play a role in the global energy system until 2050.

“A string of shocks to global markets threatens to derail progress in a decade pivotal to the energy transition,” Wood Mackenzie head of scenarios and technologies Prakash Sharma said.

“From the unresolved war between Russia and Ukraine to escalating conflict in the Middle East, as well as rising populism in Europe and global trade tensions with China, the energy transition is in a precarious place and 2030 emissions reduction targets are slipping out of reach.”

Mr Sharma said that – given the fact that fossil fuels are widely available, cost-competitive and deeply embedded in today’s complex energy system – there are no illusions as to how challenging the net-zero transition will be, suggesting that a carbon price may be the most effective way to drive emissions reduction.

Electrification the key

Wood Mackenzie has identified the acceleration of electrification as the central plank of the energy transition, with solar expected to be the biggest contributor of renewable electricity, followed by wind, nuclear (including large and small reactors) and hydro.

In its base case, displacing fossil fuels with more energy-efficient electricity leads to global emissions peaking in 2027 and subsequently falling by 35% through to 2050—by which point it forecasts that global final energy demand will have increaed by up to 14%.

“While electrification is at the heart of energy security, the quick expansion of electricity supply is often constrained by transmission infrastructure, which takes time to permit and build,” Mr Sharma said.

“Electricity’s share of final energy demand steadily rises from 23% today to 35% by 2050 in our base case [and] in an accelerated transition, such as our net-zero scenario, the share of electricity increases to 55% by 2050.”

Together, depending on the scenario, renewables’ share rises from 41% today to as much as 58% by 2030 and 90% by 2050.

“But any number of challenges – from the supply chain, critical minerals supply, permitting, and power grid expansion – could dampen aspirations for renewables capacity,” Mr Sharma warned.