Full report
Published: 11 May 2022

Fostering Effective Energy Transition 2022

Executive Summary

1. The effects of macroeconomic turbulence and recent geopolitical developments on the energy system highlight the complexities and trade-offs inherent in the energy transition, calling for a balanced approach that delivers on the imperatives of sustainability, energy affordability, and energy security and access – in essence driving a resilient energy transition. The pandemic, the steep economic rebound, and the war in Ukraine have successively disrupted energy markets, causing significant consequences for people, companies and economies around the world. The conjunction of diverse adverse events has created a perfect storm, creating headwinds on all three imperatives of the energy triangle: economic development and growth, energy security and access, and environmental sustainability. This situation demonstrates that the energy transition is not immune to the impacts of major environmental, economic and geopolitical events and that the trade-offs between energy affordability, security and sustainability exist and need to be carefully considered. Such an approach is required to establish a resilient energy transition capable of achieving long-term climate ambitions, regardless of the challenges that might impact the journey.

2. Progress on the economic development and growth dimension of the energy transition has been slow over the past decade. Ensuring affordable access to energy for households and businesses is essential for economic growth and a just transition. As the energy system reconfigures to a low- carbon future, temporary supply-demand imbalances can be a recurring phenomenon, with consequences for households and businesses, not only in terms of energy prices but also of the cost of living (e.g. food, housing, transportation) and commodities. The effects of energy price volatilities tend to be more severe for vulnerable consumers and small businesses. Measures to address these concerns will rest on a robust framework of data transparency to determine the magnitude and prevalence of the challenge at the national and local levels, define mechanisms to effectively target vulnerable consumers for financial transfers, and design support measures in a manner that does not reduce incentives for efficient consumption.

3. The diversification of the energy mix with a range of low-carbon energy sources can help strengthen energy security. Countries can engage in dual diversification: diversifying their fuel import partners in the short term and their energy mix in the long term. A look at over 10 years of energy security analyses through the Energy Transition Index shows that the dual diversification of fuel import partners and of the domestic energy mix generates important benefits. Renewable sources are mature and available for accelerated deployment, allowing countries to build more diversified, reliable and sustainable energy systems. Other low- emission solutions, such as clean hydrogen and nuclear energy in those countries that accept such programmes, may appear as pathways to increase energy independence. Low-carbon energy systems can raise new energy security concerns, for example from disruptions in the supply of transition materials or less flexibility in the power system, which must be mitigated in advance.

4. Current energy market volatility and security constraints provide an opportunity to supercharge the transition by increasing clean energy investments at record pace and transforming consumers’ energy consumption habits. Renewable energy capacity installations set a record in 2021 with 290 gigawatts (GW)1 of new wind and solar capacity added worldwide, yet this remains well below the 960 GW needed annually by 2030 to meet the 2050 net-zero target,2 and the International Energy Agency (IEA) warns clean energy investments would have to triple by 2030.3 Today, as the risks of high fossil fuel prices and uncertainties about the global energy supply outlook increase, countries can seize the opportunity to strengthen their commitments to clean energy investments.

Additionally, the demand-side changes will be as critical as the supply-side transformation to achieve the energy transition objectives in the required time frame. The IEA indicates that “energy efficiency improvement will drive more than 40% of the reduction of energy-related GHG emissions over the next 20 years”.4

5. Addressing emissions from energy-intensive industries is essential to improve energy efficiency. Industrial activity generates more than 30% of anthropogenic emissions,5 yet many industries face considerable challenges to decarbonize. Going forward, “clean demand” signals could be a turning point to accelerate “clean supply”. With global demand for industrial products projected to grow significantly by 2050, the decarbonization of industries is fundamental to the global energy transition. Just five industries (cement and concrete, iron and steel, oil and gas, chemicals, and coal mining) together are responsible for 80% of industrial emissions.6 However, industrial firms face complex challenges that act as choke points.

Today, technology, financing and policies are at the forefront of companies’ and governments’ net-zero strategies to decarbonize the supply side. But demand-side initiatives, such as the First Movers Coalition,7 designed to create a strong “clean demand” pull (e.g. visibility on offtake volumes, acceptance of green premiums, etc.) are still isolated. They must be rapidly replicated to incentivize investments in low-emission technologies and production assets.

6. The “next generation” of ambitious multistakeholder collaborations between suppliers and customers, between industry and cross-industry peers, and between the wider industrial ecosystem of stakeholders can overcome decarbonization choke points and accelerate the industrial transformation towards net zero. The remedies to industry choke points are seldom found within a single firm or even industry. New forms of collaboration at the sector, country and global levels are needed. Such multistakeholder partnerships reflect a heightened level of ambition, a clear focus on emission reduction and fresh areas of joint action. Three archetypal partnerships have emerged:

  • Collaboration between customers and suppliers (e.g. low-emission product offtake agreements, circular supply networks, value chain decarbonization projects, etc.)
  • Collaboration between industry and cross-industry peers (e.g. CO2 infrastructure, low-carbon manufacturing plants, knowledge sharing for decarbonization, etc.)
  • Collaboration between the wider ecosystem of stakeholders, such as governments, policy-makers, financiers, researchers and non-governmental organizations (e.g. emission measurement standards, integrated research for low-carbon technologies, public-private partnerships, etc.).

Moving the industrial energy transition forward at the required pace will entail replicating, scaling, and improving these models of collaboration.

7. The window of opportunity to prevent the worst consequences of climate change is closing fast. It is essential to make the energy transition robust by building the necessary enablers that will keep the transition going if the economic and energy security context deteriorates. With the world in the most severe energy crisis since the 1970s, it is critically important to speed up action to put mankind on the path to net-zero emissions while addressing energy security needs. Four key actions can help give impetus and steady long-term momentum to the energy transition and make it more likely to withstand economic disruptions:

  • Anchoring climate commitments in legally binding frameworks that can endure political cycles and enforce the long-term implementation of national transition objectives
  • Taking and holding long-term decisions with regard to the decarbonization of the national energy system structure (energy mix, power generation mix, energy efficiency, fossil fuel dependency)
  • Building an attractive investment landscape for private capital, both foreign and domestic, to finance energy transition projects (policy and legal frameworks, currency and stability, infrastructure quality, technology availability)
  • Promoting consumer participation (awareness of climate change and carbon footprints, individual responsibility for action, incentives for consumer behavioural change) and building the local workforce required for the transition, paying particular attention to the livelihoods of vulnerable populations

The current energy crisis presents a good opportunity to increase the speed of the transition and strengthen its resilience to future challenges. Only by everyone working together will it be possible to advance the collective transition journey to 2050 and achieve the relentless progress the world requires and deserves. The time for action is now.

About Us



Partners & Members

  • Sign in
  • Join Us

Language Editions

Privacy Policy & Terms of Service

© 2024 World Economic Forum