Recent developments and emerging trends

#1Carbon emissions have continued to increase, growing at an average rate of 0.8% per year over the past four years (2019-23). If CO₂ emissions were maintained at close to recent levels, the carbon budget estimated by the Intergovernmental Panel on Climate Change (IPCC) to be consistent with a high probability of limiting average global temperature increases to 2°C would be exhausted by the early 2040s.

#2The war in Ukraine increased the attention on ensuring energy security and affordability as well as achieving the Paris climate goals. The recent disruptions in the Middle East have reinforced the importance of energy security.

#3 The increased focus on energy security could support greater emphasis on improving energy efficiency and growing domestic energy production. It may also prompt greater government involvement in the design and operation of energy markets, as illustrated by the growing role of green industrial policies, increasing attention on the security of energy supply chains and, where relevant, on the utilization of local fossil fuel resources.

#4Global energy demand has continued to grow, averaging around 1% per year between 2019 and 2023, weaker than its average rate of a little below 2% over the 10 years to 2019, driven by increasing prosperity and growth in emerging economies.

#5Progress on improving energy efficiency has been disappointing. The amount of energy used per unit of economic activity has fallen by a little over 1% per year over the past four years on average. That is slower than the previous 10 years and much weaker than the 4% annual rate targeted in the energy efficiency pledge at COP28.

#6Investment in low carbon energy is estimated to have grown very rapidly in recent years, up around 50% since 2019 at approximately $1.9 trillion in 2023. This investment is heavily concentrated in developed economies and China, with far lower investment levels in emerging economies where costs of capital are typically higher.

#7Much of this investment has been deployed in renewable power, with wind and solar power generation almost doubling between 2019 and 2023. This growth has been driven in particular by solar, supported by continuing falls in cost – the costs of solar modules have fallen by around 60% over the past four years.

#8The energy additions from low carbon sources have not, however, been sufficient to meet the growth in total global energy demand, meaning the use of fossil fuels has continued to increase. Fossil fuel consumption reached a new high in 2023, driven primarily by rising oil consumption.

#9Oil and gas upstream investment totalled $550 billion in 2023. Although upstream investment remains below its peak in the early 2010s, production has continued to grow steadily, supported by improving productivity of investment.

#10Growth in oil demand since 2019 – which has averaged around 0.5 Mb/d per year – has been largely driven by increasing consumption in emerging economies and increased demand for petrochemical feedstocks. Oil consumption in developed economies continued to fall over much of the past two decades. In 2022 oil demand in developed economies was around 2 Mb/d lower than it was before the Covid-19 pandemic, and 5.5 Mb/d (around 10%) below its historic peak in 2005.

#11Strong growth in natural gas demand in emerging Asian economies,  combined with disruptions to Russian pipeline exports to Europe, has increased the importance of liquified natural gas (LNG) within global gas markets. LNG demand has grown around eight times the rate of overall natural gas consumption over the past five years.

#12Growth in electricity has continued to outpace total energy demand growth in recent years as the energy system has increasingly electrified. This has been driven by continued rapid growth in electricity use in emerging economies, spurred by improved accessibility and affordability. Nascent but growing demand from data centres to support the increasing adoption of generative AI applications looks set to increase electricity demand materially in some markets in the coming years.

#13The rapid growth in low carbon generation is putting increased pressure on the infrastructure and governance process supporting power markets, including planning and permitting and grids. For example, in the US the average time between a request for grid connection and commercial operation increased from less than two years for projects built in 2000-07 to nearly five years for projects built in 2023.

#14The number of electric vehicles has risen rapidly, with sales increasing from two million vehicles in 2019 to around 14 million in 2023. This growth has been underpinned by vehicle emissions regulations, especially in China, the EU and the US.

#15Sales of heat pumps also grew steadily, particularly in the EU and North America. Annual sales increased by around 75% in the EU between 2019 and 2023 to reach 2.6 million units per year.

#16Growth in less mature, higher cost, low carbon energy vectors and technologies – including low carbon hydrogen, synthetic biofuels, and carbon capture and storage – remains at a very early stage. As an example, at the beginning of 2024 less than 5 Mtpa low carbon hydrogen projects were operational or under construction – a small fraction of the existing use of unabated fossil-fuel-based hydrogen.

#17Investment in critical minerals mining and exploration has increased in recent years in response to prospective increases in demand as the energy system transitions, but would need to accelerate further to meet the needs of a rapid energy transition.

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