Inarguable truths: Searching for predetermined elements of the energy transition

For decades, global population growth has been one of the principal drivers of energy demand. The relationship between the two is highly correlated and has rarely deviated since 1990, most notably during the 2008–09 global financial crisis and the 2020 COVID-19 pandemic. Thus, at the macro level, demographic trends should be a reliable guide to energy demand growth — and demographics are pointing to a deceleration of demand growth, rather than acceleration.

Between 2000 and 2024, the global population increased by almost 2 billion people, split among Africa (680 million people), India (380 million people), China (160 million people) and other Asia-Pacific markets (360 million people), with the rest of the world accounting for the remainder. But over the next quarter-century, population growth will slow at the global level, with consolidation of that growth in emerging economies and populations in decline in industrialized nations.

By 2050, the population of Europe is expected to decline by approximately 12 million people, Japan by almost 19 million and South Korea by almost 6 million. But these changes are meager compared with the expected population decline in China: over 110 million people between 2024 and 2050. Where populations are rising, this growth rate is expected to be slower than the previous quarter-century: From 2024 to 2050, India is forecast to add 230 million people, while other Asia-Pacific markets are estimated to add 270 million people. Only Africa’s growth is expected to accelerate, adding almost 1 billion people to the population by 2050, nearly two-thirds of the global change over the same period.

The world’s population will be larger in 2050 than today, but the overall rate of growth is slowing. Given the long-standing relationship between demographics and energy, energy demand will inevitably increase, but demand growth will slow in the coming decades. As energy efficiency improves, risks point to a further deceleration rather than an upside deviation from the long-term trend.

While the relationship between population and energy demand is well established, deeper analysis of the structure of this demand indicates a stark underlying trend — one that positions electricity at the center of the world’s energy system for the foreseeable future.

Since 1990, end-use energy demand — energy used for purposes such as transportation, industry, heating, cooling, lighting and cooking — has grown steadily on a per capita basis, but the entirety of that growth has been captured by increasing electricity consumption. End-use demand for non-power energy sources, such as gasoline, diesel and natural gas, has flatlined.

This bias toward electricity demand growth is a global phenomenon. In absolute terms, end-use electricity demand in countries of the Organisation for Economic Co-operation and Development has grown since the early 2000s, as nonelectricity demand has stagnated. In these markets, substitution is a key driver as electricity takes market share from oil and gas in industrial sectors, buildings and, more recently, transportation. In the non-OECD world, the underlying demand for all kinds of energy has grown rapidly since 1990, but over this period, electricity consumption has increased fivefold, while demand for non-power energy types has only doubled. In emerging economies, substitution is a theme, but a more powerful driver is the choice of electricity as the first and best option to quickly and efficiently satisfy latent demand and accelerate access to energy. In both OECD and non-OECD markets, the growth of datacenters is a powerful new locus of electricity demand.

Analysis of developed and emerging economies indicates that electricity demand growth is not only irreversible but will continue to be positive, even amid weak or negative underlying demand growth. Moreover, electricity’s ever-greater share of end-use demand reinforces the trend for slower growth in primary energy due to its far higher efficiency versus other fuels and renewable energy’s expanding window of opportunity thanks to increased demand for power.

China's emergence as a highly industrialized nation has driven energy and commodity demand over the past three decades. But as China’s growth slows and the country embraces clean energy technology, there are compelling reasons to believe that the “China miracle” will not be repeated by any country or group of countries for the foreseeable future. The global energy demand trends of the early 21st century were an aberration, not a model for growth to 2050 and beyond.

China's rise was due to its large, centrally planned government capitalizing on liberalized global trade rules to become the world’s preeminent manufacturing center. Industry sector growth was the principal driver of China’s, and by extension the world’s, vast increase in energy demand through the 2000s and 2010s. During this period, industrial demand for energy tripled on a per capita basis, fell approximately 25% in OECD countries and remained flat in non-OECD countries excluding China. China therefore industrialized its economy, effectively deindustrialized the West and precluded additional industrialization elsewhere in non-OECD countries.

Now, international trade is rapidly retreating from globalization, and no other large economy or group of economies is governed in the same centrally planned fashion as China. The conditions enabling the rise of China have disappeared. But demographics and macroeconomics also present a barrier to another China miracle: China’s population is expected to fall, along with those of Europe, Japan and South Korea. Population growth elsewhere will slow, as noted above. Populations are still growing in emerging economies, but wealth — as measured by GDP per capita, the key driver of demand — will be growing from a low base and remains much lower than the world’s industrialized economies. Wealth is still increasing in the industrialized world, but this is as much a function of flat to negative population growth as it is of economic activity.

The problem is further compounded by industrial overcapacity in China. Under pressure to maintain growth through exports, China’s vast industry and manufacturing sector present a formidable barrier to development elsewhere in non-OECD economies. Effective reindustrialization of the West to 1990s levels is considered impossible due to cost. It is therefore unclear where the demand for a “new China” would emerge, or that any country apart from China could satisfy that demand if it did.

A fundamental implication of China’s slowing demand growth and pivot to clean technology is a slowdown in global GHG emissions growth. Our base case forecast indicates that global GHG emissions are close to, if not at, peak levels and will soon fall into a permanent and sustained decline. While this decline is welcome and necessary, it is not fast enough to reach the much-heralded goals of the Paris Agreement on climate change. Time has essentially run out on the most ambitious climate goal of all: achieving global net-zero GHG emissions by 2050.

In 2024, global GHG emissions totaled approximately 50 billion metric tons of CO₂ equivalent, the vast majority of which was derived from energy combustion. While GHG emissions growth has slowed in recent years, there has not been a sustained decline in annual output for many decades — likely since the start of the industrial revolution. Any annual declines in emissions have coincided with sharp reversals in economic activity, most recently during the 2008–09 global financial crisis and COVID-19 pandemic. Reengineering the global energy system to reach net-zero emissions in 2050 has always been an enormous challenge, but since the target was set, the challenge has only grown.

From the 2024 level, global GHG emissions must fall by an annual average rate of 16.2% per year to meet the net-zero target by 2050. Beginning in 2025, as forecast by our base case outlook, “Inflections,” the rate of decline would have to increase to 16.8% per year. From 2026, the rate of decline increases to 17.5%, and so on. With each year of delay, the net-zero goal moves further out of reach and is now, for all intents and purposes, impossible to meet.

The net-zero GHG emissions by 2050 target was originally derived as the best chance for limiting global warming to no more than 1.5 degrees C above preindustrial levels by 2100. That goal too is now out of reach. It remains to be seen when this temperature threshold will be irreversibly breached, but with 2024 recorded as the warmest year on record — and already above 1.5 degrees C — signs suggest that it could be far sooner than expected.

The global energy system is vast and complex. A nascent energy transition offers, from the vantage point of 2025, diverse yet equally compelling visions of the coming decades. But the inarguable truths of the energy transition allow for firm inferences about the future.

Slowing demand growth, China’s evolving role and the bias toward electricity consumption within this overall trend means an increasingly competitive landscape for legacy energy at the point of end use. Peak demand for coal, oil and gas by 2050 is likely now guaranteed, though all will play a material and invaluable role in the energy system for many decades to come. Missed GHG emission reduction targets guarantee some level of global warming, but the impacts of that warming are uncertain. The reaction from policymakers, industry and the public, once it is evident these targets have been missed, is also unclear. Although we can make some definitive statements about the future, a broad range of potential global energy scenarios remains.