The global energy transformation is happening, driven by the dual imperatives of limiting climate change and fostering sustainable growth. An unprecedented decline in renewable energy costs, new opportunities in energy efficiency, digitalisation, smart technologies and electrification solutions are some of the key enablers behind this trend.
At the same time, the energy transformation must happen much faster. To meet global climate objectives, the deployment of renewables must increase at least six-fold compared to current government plans. This would require the impressive progress that we are already witnessing in the power sector to accelerate even further, while efforts to decarbonise transport and heating would need to be stepped-up significantly.
Electrification is emerging as a key solution for reducing emissions but only if paired with clean electricity, which increasingly can be sourced at the lowest cost from renewable energy. The share of electricity in total energy use must increase to almost 50% by 2050, up from 20% today. Renewables would then make up two-thirds of energy consumption and 86% of power generation. Renewable electricity paired with deep electrification could reduce CO2 emissions by 60%, representing the largest share of the reductions necessary in the energy sector.
Fortunately, this shift is also a path of opportunity. It would enable faster economic growth, create more jobs, and improve overall social welfare. Reducing human healthcare costs, environmental damages and subsidies would bring annual savings by 2050 of between three and seven times the additional annual costs of the transition. By 2050, the energy transformation would provide a 2.5% improvement in GDP and a 0.2% increase in global employment, compared to business as usual.
However, climate damages will lead to significant socioeconomic losses. Putting in place policies that ensure a just and fair transition will maximise the benefits for different countries, regions and communities as well as address inequalities. Transforming the global energy system will also enhance affordable and universal energy access and improve energy security. While timely action would strand assets of over USD 7.7 trillion worth of energy infrastructure that is tied to today’s polluting energy technologies, further delays would risk to significantly increase this amount.