A new analysis by Wood Mackenzie has sounded an alarm about the potential consequences of a five-year delay in the global energy transition, projecting a significant increase in the global average temperature to 3°C above pre-industrial levels.
The study, conducted against a backdrop of political uncertainties, inflation, and upcoming elections worldwide, examines the potential impacts of delayed decarbonization efforts on a global scale.
According to Wood Mackenzie's findings, a delay in the energy transition could result in substantial economic costs, with total investment estimated to be as high as $48 trillion. This represents a stark contrast to the net zero scenario, which forecasts a total investment of $75 trillion.
The delayed transition poses challenges for renewables-led electrification, with solar and wind power dominating the long-term power markets but facing obstacles in the near term due to transmission bottlenecks. In this scenario, unabated thermal supply would play a significant role in balancing power grids.
The analysis also highlights how factors such as higher interest rates and supply chain disruptions have led to a 10% to 20% increase in renewables costs in recent years, further complicating the transition.
Prakash Sharma, Vice President of Scenarios and Technologies at Wood Mackenzie and author of the report, expressed concerns about the political landscape and climate skepticism in major emitting countries, which could undermine support for the transition. He stated, “With half of the global population heading to polls in 2024, political realities and climate skepticism in the major emitting countries, such as the US and Europe, could reduce the support for the transition as voters seek economic security and price stability.”
Sharma also noted the urgency for policy action and capital investment to accelerate the transition, citing the global stocktake at COP28 in December 2023, which highlighted the lack of progress by major countries in meeting Paris-aligned commitments.
