A new report by McKinsey has suggested that fossil fuels are projected to retain a ‘large share’ of the global energy mix beyond the mid part of the century, however demand is likely to plateau between 2030 and 2035.
According to McKinsey’s Global Energy Perspective 2025 report, ‘geopolitical uncertainty, shifting policies, and increasing demand for power are reshaping the energy landscape’, with cost competitiveness and energy affordability essential to drive a successful energy transition.
In addition, McKinsey noted that the decarbonisation of the energy sector has no ‘silver bullet’ solution, with different countries and regions following distinct trajectories based on local economic conditions, resources, and business realities.
‘Yet every year also brings unforeseen developments, whether breakthroughs in energy technology that allow accelerated scale-up of solar and wind power, or innovations like AI that drive rapid growth in power demand,’ McKinsey noted.
Energy demand
On the continued demand for fossil fuels beyond 2050, McKinsey noted that natural gas is likely to see the strongest increase in demand, displacing many higher-emission fuels in the process, however coal use may also persist at higher levels than previously anticipated.
Elsewhere, McKinsey noted that alternative fuels are unlikely to achieve broad adoption before 2040, unless they are mandated.
‘The current emphasis on affordability means that some alternative sources, such as green hydrogen and some other sustainable fuels, may not be competitive with traditional fuels in the near term,’ McKinsey observed.
Regional dynamics are also likely to play a key role in the energy transition – with China expected to lead in the move to electrification – while global power demand is set to surge, partly due to a rise in data centres in the US, Europe and China. McKinsey does anticipate, however, significant growth in clean energy sources such as nuclear, geothermal, and hydropower, supported by expanded battery and pumped-hydro storage.
Greenhouse gas emissions
According to McKinsey, under various scenarios, global greenhouse gas emissions are set to remain above the levels required to limit warming to 1.5°C. The expected temperature increase by 2100 is 1.9°C under McKinsey’s Sustainable Transformation pathway, 2.3°C under the Continued Momentum pathway, and 2.7°C under the Slow Evolution pathway. Each of these are about 0.1°C higher than in last year’s outlook.
‘While the urgency remains, the pathways to meet the Paris Agreement targets are now more complex and must be grounded in economic and geopolitical realities,’ it noted.
‘Global greenhouse gas emissions are still rising, and the journey toward decarbonisation remains long. But with resilience and agility, energy sector leaders can prepare for and navigate the challenges.’ Read more here.
