Wood Mackenzie’s newly-published “Energy Transition Outlook 2025-2026” report finds that surging power demand and geopolitical tensions have made net zero by 2050 unattainable, projecting a base case warming of 2.6°C by 2060. Achieving a 2°C limit would require $4.3 trillion in annual investment from 2025-2060 and a rise in energy sector investment from 2.5% to 3.35% of global GDP within the next decade. The report models four pathways: base case (2.6°C), country pledges (2°C), net zero 2050 (1.5°C), and delayed transition (3.1°C).
Key findings highlight that no major G7 country is on track to meet 2030 emission targets, and a significant increase in investment could still limit warming to 2°C by 2060. Renewables are set to surge to 60% of power generation by 2050, with solar doubling by 2030 and surpassing gas by 2033 and coal by 2034. Battery storage and nuclear energy provide critical grid flexibility.
The report also stresses that the energy transition faces complex challenges including capital allocation, system integration, and geopolitical factors. China is emerging as a climate leader through dominance in EVs, solar, and renewables deployment, while the US lags behind and requires the steepest investment increases.
Critical minerals such as lithium, cobalt, nickel, and rare earths are becoming strategic battlegrounds due to supply concentration, mainly controlled by China. The AI revolution risks adding unprecedented power demand, threatening clean power goals but also potentially accelerating innovation.
Electricity will become the dominant energy carrier, growing from one-fifth to over half of final energy use by 2050. Fossil fuels remain necessary for backup and developing economies, with oil demand peak delayed to 2032. Advanced technologies like CCUS, hydrogen, and bioenergy are essential to close hard-to-abate sectors’ emission gaps.
Overall, energy ecosystems are increasingly interconnected, requiring integrated approaches across fuels and technologies to manage risks and enable decarbonisation effectively.
