• EIU forecasts that, despite the need to tackle climate change, the energy transition will proceed at a snail’s pace over the next decade. 

• By 2032, fossil fuels will still account for 78% of the global energy mix, down only slightly from 81% in 2022. 

• The electricity sector will account for most of this reduction, amid the adoption of renewables and a revival in nuclear power spurred by the war in Ukraine. 

• However, governments also need to focus on decarbonising the industrial and transport sectors, as well as promoting energy efficiency.

Countries are making slow progress towards decarbonising their energy sources for transportation, power generation, heating and other activities, which together account for the bulk of all greenhouse gas (GHG) emissions globally. The global energy mix remains heavily reliant on fossil fuels (oil, gas and coal), which account for an estimated 81% of total energy consumption in 2022. EIU forecasts suggest that this will drop only marginally, to 78% by 2032.

The average share of fossil fuels in the energy mix of the G7 countries, the leading industrialised economies, is estimated to be 75% in 2022. That is expected to fall to 71% by 2032. Moreover, this average includes France whose large nuclear fleet allows it to meet half of its energy requirements through non-fossil fuel sources. 

The 2022 share of fossil fuels for India, the world’s third largest GHG emitter, is similar to that of the G7 countries. However, given India’s development priorities, this share will decrease just by two percentage points in the next ten years. China, the world’s largest emitter, is more dependent on fossil fuels, which currently meet 86% of its energy requirements. But, as China’s transition to cleaner energy sources will move faster, the share of fossil fuels is expected to come down to 82% by 2032.

Globally, the meagre drop in the share of fossil fuels in the energy mix is further clouded by the expectation that consumption of fossil fuels, measured in tons of oil equivalent, will rise in absolute terms as more energy is required to fuel the growing global economy.  

How will countries make the shift?

Those countries that do make good progress in changing their energy mix, including Israel, Norway and France, will rely on the rapid deployment of solar and wind power capacity to replace fossil fuels. Japan will also reduce its dependence on fossil fuels substantially by restarting its idle nuclear plants amid a general softening in attitudes to nuclear power. South Korea is another country where a policy shift in favour of nuclear power will help accelerate its phase-down of fossil fuels. 

On the other hand, some countries are moving away from nuclear energy. Among them is Belgium: although the ongoing energy crisis in Europe has promoted the government to loosen its nuclear phase-out plan, Belgium’s nuclear capacity will shrink substantially by 2032. To compensate, Belgium will turn to higher use of natural gas for its electricity generation. This means that Belgium will be among the few developed countries that will increase the share of fossil fuels in their energy mix by 2032. Taiwan and Canada are two other rich countries where natural gas consumption will rise to fill the gap left by nuclear and coal phase-downs. 

In addition, some major developing countries such as the Philippines, Nigeria, and Pakistan will increase the share of fossil fuels to meet their growing energy requirements as their economies and populations expand. Fossil-fuel consumption will rise across the board in these countries, as demand for transportation fuel and electricity increases. 

A greener power generation sector

A different picture emerges when looking at the fuel composition of different countries’ electricity generation mix. It looks greener due to the wider availability of low-emissions sources for power generation, which currently are limited for transportation and industrial energy usage. According to the International Energy Agency, energy used for electricity and heat generation accounts for 40% of global CO2 emissions from fuel combustion, with coal plants supplying over 70% of this share. 

In G7 countries, the average share of fossil fuels in the electricity generation mix is estimated at 43% in 2022 and is expected to come down to 32% by 2032. The shares for China and India are much higher, at 66% and 76% respectively, which we expect to fall to 53% and 67% respectively by 2032.

The presence of traditional low-emissions sources of electricity generation, such as hydro and nuclear, since many decades presents a greener current state of affairs. Large scale adoption of solar and wind power in the last couple of decades has also acquired a prominent share in the global power sector. Favourable unit economics of solar and wind power projects in major markets has made it a commercially viable option, and their expansion is now largely led by the private sector rather than government initiatives.

More support is required for a transformation

Solar and wind power projects are highly capital intensive, however, which means that they still require public investment to support their deployment in many developing countries. The rapid addition of renewable electricity capacity in countries such as India and China also happened in a low interest-rate environment, before monetary policy tightened to tame high inflation. 

The higher cost of capital increases the risks of developing countries continuing to burn fossil fuels to meet their growing needs. These risks are also exacerbated by the increasing incidence of extreme climate-change events, such as droughts and heatwaves. These have an extremely adverse effect on hydro-power generation, currently the biggest source of clean energy globally. 

Efforts to decarbonise outside the electricity sector have been slower. For the industrial and transport sectors, governments and companies will need to accelerate the rollout of electric vehicles (EVs), and encourage the adoption of electric heat-pumps and alternatives for industrial uses. We currently expect only five of the 65 countries covered by our EV forecasts to end the sale of new fossil-fuel cars by 2032.

These existing and emerging risks highlight the need for stronger government commitment, for all decarbonising technologies, to significantly reduce the share of fossil fuels in the overall energy mix. Incentivising energy efficiency measures would also be required to tame the growth of overall energy consumption, if clean energy uptake proves to be difficult.  

The analysis and forecasts featured in this piece can be found in EIU’s Country Analysis service. This integrated solution provides unmatched global insights covering the political and economic outlook for nearly 200 countries, helping organisations identify prospective opportunities and potential risks.