The Role of Energy in Mitigating Climate Change: Looking Back and Looking Forward

Modern economies need a lot of energy. Although in advanced economies energy demand peaked several decades ago and has declined even as their economies grew, in other parts of the world there is still a need to increase energy consumption. Energy powers industrialisation, provides comfort and convenience to households, and is indispensable to modern digital services and artificial intelligence. Today, however, more than 700 million people have no access to electricity and nearly 2 billion still cook with polluting fuels. This negatively impacts education, health, women’s welfare, and economic growth.

At the same time, the energy sector is the largest contributor to global greenhouse gas emissions. In 2024, energy-related emissions were around 42 billion tonnes of CO2-equivalent. This is around 75% of total greenhouse gas emissions. Far from peaking, energy-related emissions have continued to grow. To understand the prospect for a stronger contribution from the energy sector to climate mitigation, this article looks back at the last decade of trends and forward to the decade to come.  

Energy transition accelerates, but remains too slow and too uneven

Over the last decade, global energy demand has continued to grow but at a slower pace than global GDP. Since 2015, global energy demand has grown by 15%, adding the equivalent to nearly the total energy consumption of the United States. All of this demand growth has come from emerging market and developing economies, as energy demand in advanced economies fell even as their GDP grew. The world has seen important progress on improving energy access, with 400 million people gaining access to electricity and 770 million to clean cooking. Nonetheless, too many remain cut off from the modern energy system, as noted above. Energy affordability and access were negatively impacted by the surge in global energy prices during the global energy crisis triggered by Russia’s invasion of Ukraine. In 2022, energy bills paid by consumers increased by USD 1.6 trillion, despite the roughly USD 1 trillion in additional energy subsidies paid by governments.    

In 2014, one year before the negotiation of the landmark Paris Agreement, clean energy technologies were an expensive niche. Since then, a true revolution has occurred. Costs for critical technologies like solar PV and lithium-ion batteries have collapsed to the point where they compete strongly with fossil fuel incumbents without subsidies. Global capacity additions of renewables have raced far ahead of expectations. Wind and solar PV have gone from 5% to 15% of global electricity generation. Electric vehicles have gone from 0.7% to 20% of the global car market from 2015 to 2024. Investment in clean energy has reached USD 2 trillion, and for every dollar invested in fossil fuels two are invested in clean energy. The growth of clean energy technologies has also brought important co-benefits, notably providing another tool in the toolkit to ensure energy security.

But, so far, change has been too piecemeal to drive a peak and decline in global emissions. Global energy related emissions increased 1% in 2024 and were 10% above the 2015 level. All of this increase came from emerging market and developing economies. Emissions fell in advanced economies by around 10%, despite continued economic growth of 20%. China accounted for the largest increase in emissions (more than all other emerging market and developing economies combined) and its per capita emissions are now nearly two times the world average. 

Not all technologies have shown the same momentum as solar PV and electric vehicles. Wind power capacity additions have grown, but high commodity prices, interest rates, and permitting barriers have curbed the pace of growth in recent years. Nuclear power is now seeing renewed policy interest and technological innovation. But the fact remains that nuclear power generation has only grown 10% at the global level in the last decade. Phaseouts in some advanced economies have counteracted the effect of new capacity additions in emerging market and developing economies and the progressive restart of Japan’s reactors after the Fukushima accident. 

Energy efficiency is another area that has lagged, improving at only 1.5% per year in the last 10 years. Worryingly, the pace of efficiency improvements appears to be slowing in the post-Covid period. Global improvements in energy efficiency were 1.2% in the years from 2019 to 2024. 

The deployment of clean energy technologies has also been too concentrated geographically. Since 2015, advanced economies and China have accounted for 80% of clean energy investment. There are some signs of this changing, with recent strong growth of EVs in emerging market and developing economies other than China, for example.

Emerging lessons

The Paris Agreement has been critical to driving collective action and mainstreaming climate change across countries, sectors, and institutions. Projections for global temperature increases under ‘business as usual’ from before the Paris Agreement saw increases of around 3.5 C by 2100. In the IEA’s analysis, this has come down to around 2.5 C under today’s policy settings. This is still above the Agreement’s goal of limiting warming to 2 C and pursuing efforts to limit to 1.5 C. But it is an important marker of the progress that has been made.

In the energy sector, policies to promote transitions have been motivated by a combination of factors, including energy security, local pollution reduction, and industrial policy. However, in many instances, there is still a divergence in terms of the actions that countries are pledging to take internationally and the direction of their own policies. This is why it is important to look both at what countries are committing to internationally, but also what they are doing at home. 

Energy security remains a critical consideration, but its nature is changing as energy transitions advance. Recent geopolitical tension in key fuel producing regions highlight the continuing importance of energy security in oil and natural gas markets. But the rather muted reaction of energy markets in the last few months also demonstrates the value of the buffers that have been built up in recent years in energy markets. At the same time, new security concerns are emerging. Electricity is increasingly indispensable to modern economies, powering high value added manufacturing and digital services. But electricity security is facing a set of interlinked, complex challenges, including lagging investment in grids, growing variability and decentralisation of demand and supply, digitalisation and cybersecurity, and growing threats of climate impacts.

Another area of emerging risks relates to critical mineral and energy technology supply chains. These are taking even more salience in today’s context of geopolitical fragmentation. For a set of 20 strategic, energy-related minerals with multisectoral applications in tech, aerospace and advanced manufacturing, China is the dominant refiner for 19 of the 20 minerals analysed, holding an average market share of around 70%. China also has similarly high shares in the manufacturing of clean energy technologies such as solar PV and lithium-ion batteries. Such high degrees of concentration in any market lead to concerns around the risk of supply disruptions. On the other hand, falling costs and growing exports of low-emissions technologies from China to other developing countries have accelerated their uptake in recent years. Navigating the trade-offs around energy security, trade, supply chain security and energy transitions stands out as one of the most important challenges going forward.

A second key challenge relates to raising investment for capital intensive energy assets. Energy investments in Africa are one-third lower in 2025 than they were in 2015, as a decline in oil and gas spending has been only partially offset by higher investments in clean energy. Africa accounts for only 2% of clean energy investment despite having 20% of the world population. Reversing this situation is a challenge. Fiscal situations are stretched in many economies, interest rates have risen, and the private sector has pulled back somewhat from recent enthusiasm for sustainable finance. Mobilising international finance for clean energy investment in emerging market and developing economies will need to be combined with the development of domestic capital markets.

Looking forward

The world has the tools and technologies to make big differences to emissions in the near-term. Key actions include ramping up the use of renewable energy, accelerating nuclear power in countries that want to use it, improving energy efficiency, electrifying energy consumption, and cutting emissions of methane from the energy sector. These are also actions that are well understood, based on widely available commercial technologies, and, in many cases, cost-effective. The energy goals adopted at COP28 provide a good guide to what is needed to get back on track. But they require policy support to correct market failures, deploy enabling infrastructure, and scale up diverse and secure supply chains. Multilateral cooperation remains crucial but also needs to adapt as the context changes and new issues emerge during the transition.