The fossil fuel era will peak this decade – so long as governments hold themselves to their stated policies. Looking ahead, the world is definitively moving toward electricity as the dominant form of energy consumption. That is the picture sketched out by the International Energy Agency’s latest annual World Energy Outlook. The report makes clear that, despite geopolitical fragmentation, the energy transition can now only be slowed, not stopped.
Even so, the push towards net zero has not been fast enough.
The Paris Agreement’s goal of limiting global warming to 1.5°C has slipped away. Temperature rises will overshoot this mark within the next decade across all scenarios. The report outlines a most likely case leading to warming of 2.5°C by 2100, up from last year’s 2.4°C projection. Steering back to safer levels is possible but demands much faster clean energy deployment alongside widespread use of carbon-removal technologies that remain unproven at scale. Renewable technology roll-outs have simply not kept pace with rising energy needs.
For the first time ever, emerging and developing economies excluding China will drive the future of energy demand. The fate of coal, for instance, will now be decided by India, Indonesia, and others in Southeast Asia, fundamentally altering the geopolitics of climate action.
Even with investment into renewables now twice that of fossil fuels, the world is not decarbonising fast enough.
The Outlook’s release was marred by unprecedented political interference from the Trump administration. The US has supplied 14% of the agency’s budget since 2021, and the Trump administration has used that leverage to resurrect a low-ambition scenario in the Outlook last used in 2019. In that scenario, the world heads towards 2.9°C of warming. Assumptions to get there included a slower deployment of clean energy technologies that runs counter to current trends, alongside the abandonment of current strategies and commitments not yet legislated. This makes the scenario highly unlikely in practice and underscores the extent to which Washington’s decisions are increasingly out of step with climate realities.
Trump’s sweeping climate policy retreat means that by 2035, the United States is now expected to build 30% less renewable energy capacity than projected last year. This is nothing short of a complete abrogation of US global leadership.
It also represents a major own goal, ceding green technological dominance to Beijing precisely when it matters most. China – the world’s largest emitter – is levelling off its greenhouse gas emissions thanks to a surge in clean energy power generation. Despite offering muted international pledges, Beijing has developed a reputation for underpromising and overdelivering. As Washington turns away, China is winning the climate narrative even while being responsible for one third of all greenhouse gas emissions and continuing to build coal-power plants.
But China’s real advantage lies in supply chains that are helping the rest of the world decarbonise. Since 2020, critical mineral refining has become increasingly concentrated as production costs are roughly 50% cheaper. China leads refining in 19 of 20 energy-related minerals. Nearly half of these now face some form of export control. Diversification efforts are underway globally, but it is expected to take until 2035 to bring production shares back to 2020 concentration levels.
This pattern repeats across renewable technology manufacturing. China accounts for over 80% of global production across the solar panel supply chain, 70–80% of major wind-turbine components, at least 85% across the battery supply chain, and roughly 70% of global electric vehicle production. Its installed manufacturing capacity also far exceeds its current output – double for solar and triple for batteries. It will therefore be difficult for other markets to compete effectively in these sectors. Trade tensions will surely persist as countries balance decarbonisation goals with protecting domestic producers in these industries.
Such dominance underpins the global shift of energy consumption towards electricity highlighted in the Outlook. This is why China’s rise as the world’s first “electro-state” and unmatched manufacturing powerhouse across technologies central to electrification is so disruptive. It also explains why energy security is becoming central to the transition. As the report notes, “energy [is]…economic and national security” and the future of energy lies in renewables and electrification.
This marks a structural change in the global system which all countries will have to grapple with. On present trends it means the United States is becoming an ever more insecure superpower – while China’s position continues to strengthen. Storms, floods, wildfires and other disasters exacerbated by climate change are also expected to inflict damage on critical energy infrastructure across all scenarios – especially electricity grids – alongside growing disruption risks from cyberattacks and other malicious actions.
Even with investment into renewables now twice that of fossil fuels, the world is not decarbonising fast enough as an insatiable thirst for more energy has offset deployment of clean energy systems. As countries face new insecurities, the energy transition is proving messier than ever.
