Introduction

Economic development and growth

According to the World Energy Outlook 2018, published by the Organisation for Economic Co‑operation and Development and the International Energy Agency, global energy demand increased by 2.1% in 2017 and is expected to increase by another 25% by 2040. That most of the increase in demand comes from emerging economies underscores the close relationship between energy consumption and economic growth. The continued demand for coal to generate thermal power comes primarily from fast‑growing Asian economies. While the demand for oil for passenger vehicles is expected to plateau in the short term due to improved fuel efficiency and electrification of transport, strong demand from sectors such as petrochemicals, freight transport and aviation suggest peak oil demand is further away than expected. 

Energy transition also has wider societal implications, driven by signals of unequal distribution of its costs and benefits. This is particularly important for communities that depend on legacy energy infrastructure for their livelihoods. Rising fuel prices have driven protests in countries as diverse as Zimbabwe¹⁰, France, India¹¹ and Brazil.¹² Public discourse, such as over the Green New Deal in the United States, is reflecting the socio‑economic ramifications of energy transition. Inclusiveness and affordability are critical for a just transition.

Energy security and access

Geopolitical shifts, such as the political crisis in Venezuela, trade sanctions against Iran and oil production cuts across OPEC countries, drove commodity price volatility in 2018 and resulted in rising fuel import bills for many countries. Thanks to continued technological advances and efficiency gains, the United States became the largest producer of crude oil,¹³ with consequences that will reshape the international energy geopolitical order for years to come. The geopolitics of renewable energy is gradually growing in importance, according to “The Geopolitics of Renewable Energy”, a 2017 paper of the Belfer Center for Science and International Affairs, Harvard Kennedy School, USA, as countries look to gain competitive advantage in technologies and materials required to develop renewable energy infrastructure. 

Regarding energy access, the number of people without access to electricity fell below 1 billion due to substantial gains made in South and South‑East Asia. The year 2018 was also a strong reminder about the need for resilience across the energy infrastructure. Blackouts from successive waves of tropical storms, as well as large‑scale infrastructure disruptions from wildfires in the United States, argue strongly for redesigning resilience strategies for security of supply. Moreover, given increasing digitalization and interconnections in the power system, companies are integrating cyber‑resilience as a core business issue, according to the World Economic Forum 2019 report, Cyber Resilience in the Electricity Ecosystem: Principles and Guidance for Boards.

Environmental sustainability

Global carbon emissions from fuel combustion grew at an accelerated rate in 2017, while investment in clean energy declined by 8% in 2018. Lower capital costs in solar photovoltaics partly explain this (lower costs caused by sharp price decreases due to oversupply); the other explanation is the tariffs imposed on solar panels imported to the United States.¹⁴ Despite these headwinds and the financial pressure that lower solar prices have put on solar manufacturers, particularly in China,¹⁵ 2018 was a record year for solar installations. 

The increasing frequency and intensity of extreme weather events call for a quicker transition to a low‑carbon world. In late 2018, scientists from around the world and on behalf of the Intergovernmental Panel on Climate Change reiterated the urgency of reducing emissions and limiting global warming to 1.5°C. Although feasible, the scale and pace of the economic, social and technological transformation required is unprecedented. Only 16 countries have laid out emission reduction targets consistent with their nationally determined contribution in the Paris Agreement.

The World Health Organization, in its COP24 Special Report: Health and Climate Change of 2018, estimated that meeting global carbon reduction targets would save the equivalent of 1 million lives per year through related reductions in air pollution. Achieving these targets would also mitigate the negative economic and health impacts from increased sea levels, droughts and heat waves. In that light, accelerating the transition to a low‑carbon energy system in a just and equitable manner, without limiting economic growth, is arguably the most important energy transition challenge today, underpinning the need for speed.