How to Think about the Energy Transition
Energy Transition/Climate & Sustainability
The 2015 Paris Accord marked a new era in climate diplomacy: it replaced the vision of unified global climate policy with nationally determined contributions—with each country designing its own emissions reduction pathway considering national conditions, resources, and constraints. The shared ambition of keeping global warming “well below 2 degrees C” would, it was hoped, encourage individual countries to be ambitious, aligned, and cooperative. In advance of COP26, scheduled for November 2021 in Glasgow, Scotland, more than 100 countries, including the European Union, Japan, and South Korea, have pledged carbon neutrality by 2050. Most are developed economies where energy consumption is flat or growing very slowly. But what of the lower income countries with fast-growing energy needs, where economic growth requires increased supplies of low-cost, high-reliability energy and expanded transportation? How will the global energy transition play out for them? Will they be prepared to limit economic growth to reduce emissions? Will richer countries finance a faster transition for them? And, if so, what trade and tariff responses would we expect? And how will global companies respond?