The Paris-based energy watchdog also predicts that the world will probably overshoot its goal to hold temperatures to 1.5°C above pre-industrial levels to avoid serious climate change, and approach 2.7°C.

Presenting the report, IEA Executive Director Fatih Birol said: ‘This year the policies of all governments diverge substantially, and in order to give the policy makers in governments a framework, new scenarios have been added.’  

There are three main scenarios – the Current Policies Scenario (CPS) is a snapshot of policies and regulations already in place; the Stated Policies Scenario (STEPS) considers policies put forward but not yet adopted; and the Net Zero Emissions Scenario (NZE) describes a pathway to zero emissions by 2050, while recognising each country will have its own route. In addition, there is a scenario which focuses on Accelerating Clean Cooking and Electricity Services (ACCESS) in emerging and developing countries.

Generally, Birol admits: ‘There is less momentum than before behind national and international efforts to reduce emissions, yet climate risks are rising. While at the same time, the world remains thirsty for energy, and new technologies are entering the system at speed, with renewables setting new records for deployment.’  

However, oil, natural gas and coal consumption all reached record highs and nuclear is making a comeback, driven mainly by China.

What’s in common?

The different pathways also have commonalities, led by the need for global energy security ‘which today faces an unprecedented range of security threats for multiple fuels and technologies’, Birol remarked. With the supply of critical minerals as an ‘acute vulnerability’, given the arrival of what the IEA calls ‘The Age of Electricity’.

Indeed, there has been a shift of gravity in the energy system beyond China, towards India, South-East Asia, Latin America and other emerging economies. However, there is concern about the high level of market concentration of critical minerals, underscored by China’s new export controls on rare earth elements and battery components. China is the dominant refiner for 19 out of 20 energy-related strategic minerals, with an average share of about 70% for vital areas like power grids, artificial intelligence (AI) chips, jet engines and defence systems.  

‘Fostering more diverse and resilient supply chains for critical minerals will take concerted policy effort,’ notes the report. The CPS scenario shows supply concentration would likely remain higher risk than in the STEPS scenario. Given that 91% of rare earth elements refining is currently in China and is still likely to be 75% in a decade.

Electricity demand climbs

Electricity demand growth is likely to be spectacular, rising from 21% of total consumption today to about 40% in 2035 in both the CPS and STEPS scenarios, and by more than 50% in the NZE scenario – due to rising demand for air conditioners, advanced manufacturing, data centres and AI, and electrified heating. ‘This underscores the importance of secure and affordable electricity supply,’ noted Birol.

However, there is a serious lag in the speed at which new grids, storage and other sources of power system flexibility are being put in place. While investment in electricity generation has grown by almost 70% since 2015 to reach $1tn/y, grid spending has risen at less than half the pace to $400bn/y, increasing delays and congestion. Cooling is a rising source of electricity demand in all scenarios. Investment in data centres is expected to reach $80bn in 2025, with tripling of electricity consumption by data centres by 2035 – 85% concentrated in the US, China and Europe.  

Solar will play a pivotal role in renewables, with 80% of energy consumption growth by 2035 occurring in areas with high-quality solar radiation. This is in contrast with the past decade, when medium-and low-solar regions drove half of the growth. In the CPS, renewables will still meet the largest share of energy growth, followed by natural gas and oil, although annual PV additions are likely to stall at around today’s levels of 540 GW to 2035.  

In STEPS, recent policy changes mean the US will have 30% less renewables capacity installed in 2035 than in last year’s World Energy Outlook – but at the global level, renewables continue expansion, with robust growth across wind, hydropower, bioenergy, geothermal and the nuclear comeback.

China continues to be the largest market for renewables, accounting for 45–60% of global deployment over the next 10 years across the scenarios.

Oil, natural gas and coal

Nevertheless, the scenarios diverge with differing outlooks for oil, natural gas and coal. In the CPS, demand for oil and natural gas continue to grow to 2050 – in contrast to previous IEA forecasts, although coal starts to fall back before the end of the current decade. In STEPS, the peak in oil demand is accompanied by flattening in oil demand around 2030, due mainly to changes in US policies and lower gas prices. In the NZE, there is much faster deployment of low-emission technologies, with declines in demand for all fossil fuels.

But the IEA admits: ‘Underlying demand for energy services is similar across all scenarios, though the amount of energy required varies significantly.’ In the CPS, world energy demand is estimated to rise by 90 EJ to 2035 (15% increase from today). In STEPS it rises by about 50 EJ (8% above today), and in NZE it declines. These variations reflect differences in the energy mix and efficiency.

‘The oil markets look well supplied in the near term,’ says the IEA, with significant oil finds in the US, Canada, Guyana, Brazil and Argentina, but facing ‘muted demand growth’. However, today’s downward pressures on prices don’t last long in the CPS. And some 25mn b/d of new oil supply projects are needed to 2035 to keep markets in balance. In STEPS, oil demand is expected to level off around 2030 at 102mn b/d before starting a slow decline. In STEPS, electric vehicle (EV) sales are projected to rise above 50% by 2035, although EV forecasts in the US have been reduced.  

There is strong natural gas growth in both the CPS and STEPS, but there are questions about where all the new LNG will go, says the report. Though Europe and China were the main destinations for new LNG supply over the last decade, ‘the upside potential is limited in the STEPS scenario’, due to the continued momentum behind the deployment of renewables, nuclear in some countries, and efficiency policies – as well as issues around affordability in other parts of the world.

Around half of global coal demand is determined by a handful of economies, led by China, India, Indonesia and others. The outlook for coal depends on their needs for electricity, whether renewables’ momentum is sustained, and whether gas can be priced competitively enough to make inroads. In STEPS, renewables capacity additions in these economies average over 600 GW/y to 2035, sufficient to put global coal demand into steady decline – which is even more pronounced for the NZE scenario. In CPS, coal demand is higher and falls more slowly.

Access to electricity and clean cooking   
Last but not least, access to modern energy remains a core challenge. Around 730 million people lack electricity access, and nearly two billion rely on cooking with wood or animal waste. There is a need for significant progress in sub-Saharan Africa, for example. ‘As things stand, the world is not on track to close this huge gap in the provision of modern energy,’ the IEA cautions. The new IEA ACCESS report presented at COP30 outlines a country-by-country pathway to universal access, aiming to meet this milestone in 2035 for electricity and 2040 for clean cooking.