World Energy Outlook

The energy sector is undergoing four significant transformations: the rapid expansion of clean energy, increased electrification, China’s transition to a low-carbon economy, and the continued resilience of U.S. shale oil and gas. These shifts blur the traditional lines between energy producers and consumers while elevating developing economies, particularly India, into key players.

Rising Energy Demand

Despite slower growth, global energy demand is projected to rise 30% by 2040, equivalent to adding another China and India. Key drivers include:

• A 3.4% annual economic growth rate
• Global population growth from 7.4 billion to over 9 billion
• Rapid urbanization, adding a city the size of Shanghai every four months

India will contribute nearly 30% of the increase, with Southeast Asia following closely, growing at twice China’s pace. Developing nations in Asia will account for two-thirds of the total demand surge, while Africa, the Middle East, and Latin America will also see significant expansion.

The Rise of Renewables and the Decline of Coal

The way energy needs are met is shifting. The New Policies Scenario highlights natural gas, renewables, and energy efficiency as the primary growth drivers. Without efficiency improvements, global energy demand would more than double.

• Renewables will meet 40% of the demand increase, signaling the decline of coal.
• Since 2000, coal-fired power has expanded by 900 GW, but future net additions will be limited to 400 GW, mostly from projects already under construction.
• India's coal share in power generation will fall from 75% in 2016 to less than 50% by 2040.
• Global coal consumption is expected to stagnate without carbon capture and storage (CCS).

Shifting Fossil Fuel Outlook

• Oil demand will continue rising but at a slower pace.
• Natural gas use will increase 45% by 2040, with industrial demand driving growth.
• Nuclear power is expected to rise gradually, with China surpassing the U.S. as the top nuclear power producer by 2030.

These energy shifts highlight a future where renewables and efficiency improvements shape global consumption patterns while fossil fuel reliance slowly declines.

A Promising Future for Renewables

Renewables are set to dominate global power investments, accounting for two-thirds of new capacity by 2040. Solar photovoltaics (PV), led by China and India, will become the largest source of low-carbon electricity. By 2040, renewables will generate 40% of global power.

In the European Union, renewables will make up 80% of new power capacity, with wind energy surpassing all other sources by 2030. Rather than subsidies, competitive auctions are now driving renewable expansion, allowing households and businesses to invest directly in distributed solar PV.

Beyond electricity, renewable energy use in heat and transport is expected to double, with Brazil leading the shift, increasing its renewable energy share from 39% to 45% by 2040.

The Electrification of Energy

Electricity demand is skyrocketing, accounting for 40% of global energy growth by 2040, mirroring oil's role over the past 25 years. Rising incomes and industrial expansion fuel this demand, especially in electric motor systems, household appliances, and innovative technology.

Electric vehicles (EVs) are also gaining momentum. By 2040, the global EV fleet is projected to reach 280 million, a sharp rise from just 2 million today. The growing need for electricity is shifting investment focus – by 2016, electricity investment had already surpassed that of oil and gas, placing energy security at the center of global policy discussions.

China's Energy Transition

China is undergoing an energy revolution, prioritizing electricity, natural gas, and clean technologies over coal. Energy demand growth has slowed from 8% per year (2000-2012) to under 2% annually and is expected to drop further to 1% by 2040. Without new efficiency measures, China’s energy use would be 40% higher by 2040.

China is driving the global low-carbon transition, accounting for:

• One-third of new solar PV and wind installations
• Over 40% of global EV investments
• 25% of global natural gas demand growth

Despite these changes, China will still overtake the U.S. as the largest oil consumer by 2030, with imports reaching 13 million barrels per day (mb/d) by 2040. However, fuel efficiency policies and EV adoption will slow its role in global oil demand, shifting that growth to India after 2025. Meanwhile, coal consumption in China peaked in 2013 and is projected to decline by 15% by 2040.

The U.S. Shale Boom and Energy Exports

The U.S. has revolutionized global energy markets by unlocking shale oil and gas, pushing production 50% higher than any country has ever achieved. By the late 2020s, the U.S. will become a net oil exporter.

Between 2010 and 2025, U.S. tight oil production will surge by 8 mb/d, marking the fastest growth period in history. Similarly, shale gas production will expand by 630 billion cubic meters (bcm), setting a new record. This boom has:

• Boosted North American petrochemicals and manufacturing
• Reshaped global trade flows
• Challenged traditional energy suppliers

By the mid-2020s, the U.S. will become the largest liquefied natural gas (LNG) exporter and, later, a significant oil exporter. It will focus on light crude and refined products while still importing heavier crude for refining.

The Era of Oil Continues But Faces Challenges

Despite rising efficiency and electrification, the world is not yet ready to move away from oil. Oil demand is projected to grow until 2040, reaching 105 mb/d, with:

• Petrochemicals leading demand growth
• Freight, aviation, and shipping increasing oil consumption
• Passenger vehicle demand is falling despite a doubling of the global car fleet to 2 billion

After 2025, U.S. tight oil production is expected to plateau, shifting reliance back to the Middle East. Meeting demand will require developing 670 billion barrels of new resources to compensate for declining fields rather than new growth.

A Low Oil Price Scenario considers the possibility of doubling tight oil reserves to 200 billion barrels, combined with an accelerated EV transition. This could keep oil prices between $50-70 per barrel through 2040 but wouldn’t be enough to drive a significant drop in global oil use.

Even if passenger car electrification accelerates, other sectors must adopt stronger policies to reduce oil dependence. Meanwhile, underinvestment in conventional oil projects raises concerns about a supply shortfall in the 2020s, potentially disrupting the market balance.

A New Era for Global Gas Markets

By 2040, natural gas will account for one-quarter of global energy demand, making it the second-largest fuel after oil. While gas use expands steadily in resource-rich areas like the Middle East and the United States, the % of growth – 80% – will come from China, India, and developing Asia, where gas is needed for electricity, heat, and transport.

However, competition from coal and renewables challenges gas expansion, especially as renewables will become the cheaper option for power generation by mid-2020. Meanwhile, energy efficiency improvements slow the growth of gas demand, with electricity production from gas rising by 50% but actual gas consumption increasing by only one-third.

The Rise of LNG

A more flexible and liquid gas market is emerging, with U.S. liquefied natural gas (LNG) driving change. LNG will represent 90% of growth in long-distance gas trade by 2040, making it the preferred choice over new pipelines. Gas supply will also become more diverse, with liquefaction sites doubling by 2040, led by expansions in the U.S., Australia, Russia, Qatar, Mozambique, and Canada.

While a larger LNG market improves energy security, uncertainty in investment could lead to a supply crunch in the 2020s. However, by 2040, global gas importers could boost supply by 10% in just 10 days, improving flexibility compared to today's systems.

Energy Access and Emissions Challenges

Electricity and Clean Cooking

Despite progress, universal energy access remains a challenge. Since 2012, 100 million people per year have gained electricity, but by 2030, 675 million people – mainly in Sub-Saharan Africa—will still lack access. Clean cooking remains an even bigger issue, with 2.3 billion people still reliant on biomass, coal, or kerosene, leading to 2.8 million premature deaths yearly due to indoor air pollution.

Air Pollution and CO₂ Emissions

While policies to reduce air pollution have been effective, urbanization and aging populations increase exposure. As a result, premature deaths linked to outdoor air pollution could rise from 3 million today to 4 million in 2040.

Though slower than in previous years, energy-related CO₂ emissions will continue rising slightly until 2040. While emissions from power generation will only increase by 5%, those from oil-based transport and industry will grow significantly.

The Sustainable Development Scenario

This scenario envisions climate stabilization, cleaner air, and universal energy access while ensuring energy security. Achieving these goals requires:

• CO₂ emissions peaking soon, followed by a rapid decline
• Renewables doubling their share to 40%
• Immediate reductions in coal demand
• Oil consumption peaking soon after
• Near-total decarbonization of power generation by 2040
• Strict efficiency measures for road freight and heavy industry

Scaling Up Clean Energy

Meeting the 2030 goals for renewable energy and efficiency requires strong policy coordination. Expanding decentralized renewables and promoting energy-efficient appliances will be crucial, particularly in rural areas without access to modern electricity.

Natural Gas in the Energy Transition

As coal and oil decline, natural gas will become the world’s largest fuel source in the Sustainable Development Scenario. However, its climate benefits depend on reducing methane leaks – a potent greenhouse gas.

By 2030, global gas consumption will increase by 20%, but its role will vary. Gas will help transition to cleaner power and industrial processes in coal-heavy regions like China and India. However, gas will be a backup rather than a primary energy source in areas where renewables are advancing rapidly.

Cutting Methane Emissions

Reducing methane leaks along the oil and gas supply chain is essential for gas to maintain its environmental advantages. Studies show that 40-50% of methane emissions from oil and gas operations could be eliminated at no net cost, as the captured gas would offset the abatement cost.

Implementing methane reduction measures in the New Policies Scenario would have the same impact on global temperatures as shutting down all coal-fired power plants in China. Ensuring low emissions and investment stability will be critical for gas to remain a key player in a low-carbon world.