As we step into the year 2025, the global energy transition is accelerating, influenced by geopolitics, the quest for energy and supply chain security, and growing efforts to seize economic opportunities. We did well in 2024 – slowing further growth in emissions and attracting capital back towards ‘clean and green’. I expect four mega trends to define the new year:
Bigger and Broader Clean Energy Investment
Clean energy investments have been double those of fossil fuels for the last couple of years, and this trend will continue in 2025. I anticipate investments will expand beyond wind and solar to include other complementary renewable sources like hydro, storage and possibly bio-energy. Big Tech is sparking renewed interest in nuclear, with more announcements expected this year about restarting old plants and launching first commercial scale Small Modular Reactors based projects. In the transport sector, global electric car sales grew by over 20% in 2024, with similar growth expected in 2025. Green Hydrogen market may move to the next phase too, with more procurement tenders in Asia (following Europe’s leadership in 2024) and early set of projects entering construction stage.
Persistent Fossil Fuel Investments, with Opportunities for Subsidy Cuts
Global energy demand is growing by about 3% annually, with electricity demand increasing even faster at 4%. While the extraordinary profits seen in the fossil fuel industry in recent years are diminishing, strong localized incentives for new investments remain. The US and Norway are seeking to seize supply opportunities to meet Europe’s LNG demand as the EU reduces reliance on Russian supplies, while China and India continue to use coal to meet their rising electricity needs. RMI analysis shows that gas, with just 0.2% leakage, can be more harmful to the climate than coal. Despite this, I do not see gas plants being retired anytime soon; certainly not in 2025. However, with oil and gas prices under downward pressure due to economic slowdown and oversupply, and lower volatility from reduced ties to Middle East conflicts, there’s a unique opportunity to cut large fossil fuel subsidies in this year.
Fierce Jostling to Capture the $2 Trillion Clean Energy Technologies and Materials market
The clean energy technologies market is nearly as large as the current crude oil market, according to the IEA. If you include energy transition minerals, the market is four times bigger. While the US, China, and the EU have traditionally led in exporting advanced commodities, this time a wider set of countries are actively interested. India and Southeast Asia are developing solar supply chains, Brazil is expanding wind turbine manufacturing for exports, the UAE and Egypt are building electrolyser manufacturing, and countries like Indonesia, Mongolia, the Democratic Republic of Congo, and Chile are increasing investments in rare earth mineral mining and processing. In 2025, we are likely to witness more industrial and trade policies, new geopolitical partnerships, and significant corporate deals and investments.
New Commitments, Testing Our Global Resolve
With 94% of the global carbon budget already used, we need additional commitments to cut emissions by 22 gigatonnes of CO2 equivalent to stay within the remaining 6%. The UAE, UK, and Brazil have already made their pledges, setting the stage. The US has also committed, though its implementation remains uncertain under the new administration. New data from November 2024 shows China’s cumulative historical emissions have now surpassed the EU’s, increasing pressure for greater action despite a slowing economy. More NDCs are expected by the February 2025 deadline, and the Brazilian COP30 Presidency will be key in galvanizing everyone towards the necessary step-up in ambition. Early announcements from developed countries towards meeting the $300 billion per year climate finance commitment will send a strong positive signal.
In conclusion, 2025 will be a pivotal year in our energy transition. Most countries now have stable governments, elected last year, that will stay in power for at least three more years. While media often highlight risks from geopolitical developments —trade wars, inflation triggering global economic slowdown, and possible setbacks in climate action—I believe we’ve faced similar challenges before and emerged stronger. The US withdrew from the Kyoto Protocol in the early 2000s and the Paris Agreement in 2017, yet US states and countries like the EU, China, India, and those in the Middle East stepped up, exceeding expectations and slowing emissions. Collective action has proven powerful, and with strong economic conditions and momentum already building globally, 2025 holds great potential for greater ambition and progress.
