The global energy transition has reached a ‘fork in the road’, with nations that choose a pathway of electrification and energy security set to reap both financial and emissions-reduction benefits, a new report from Wood Mackenzie has suggested.
Wood Mackenzie’s Energy Transition Outlook 2026-27 examined five possible pathways for the global energy system to 2060, covering 105 energy markets.
“The energy transition has arrived at a genuine crossroads,” said Prakash Sharma, vice president, head of scenarios and technologies, Wood Mackenzie. “The world is no longer moving in one direction. Nations are making fundamentally different choices about how to power their economies, and those choices are producing outcomes that confound conventional wisdom.”
Five scenarios
The report’s Energy Security scenario, which anticipates a warming trajectory of 2.5°C by 2100, posits a world in which the 2026 Strait of Hormuz crisis, which halted 15% to 20% of global oil and LNG flows and pushed Brent crude above $100 per barrel, becomes a structural turning point.
Under this scenario, countries invest in domestic nuclear, geothermal and renewable energy to reduce exposure to supply disruptions and volatile fuel markets.
“The lower emissions are a structural consequence of which technologies a security-first strategy rewards, not which ones it intends to deploy,” said Sharma. “Countries would be mindful though that energy security comes at a cost because the race for resilience replaces efficiency and globally optimised supply chains.”
By contrast, the Growth First scenario, which prioritises economic expansion and rising electricity demand, including from artificial intelligence, produces warming above 3°C, with existing fossil fuel assets ‘extended’, thermal plant retirements delayed, and renewables failing to displace fossil fuels at scale.
Wood Mackenzie’s Base Case, which anticipates warming of 2.6°C by 2100, projects global liquids demand peaking at approximately 109 million barrels per day in 2031, remaining within 5% of that level until 2041. Gas demand peaks later, in 2042, while coal demand is projected to decline gradually following a peak in 2024.
Finally, the Country Pledges scenario, where announced net zero pledges are implemented, anticipates a 2°C trajectory; while the Net Zero scenario, where the most ambitious Paris Agreement goals are achieved, projects a 1.5°C trajectory.
‘Analytically essential’
“The more climate-ambitious pathways, Country Pledges and Net Zero, remain analytically essential as benchmarks,” said Sharma. “But the gap between where the world is heading and where these scenarios require it to go has widened again this year.
“The policy ambition, capital mobilisation and international cooperation they demand are more difficult to achieve today than at any point in the last decade. The fork in the road is real, and right now, most nations are not intentionally taking the faster transition path, resetting priorities towards economic resilience and security. Yet some of these decisions may in fact play a beneficial role in decarbonisation strategies if policies of self-interest unlock or accelerate new technologies.” Read more here.
