The world is facing its biggest challenge yet in its journey towards net-zero emissions and needs to double-down on plans to achieve the goal of limiting the rise in global temperatures to within 1.5 °C above preindustrial levels by 2050, natural resources market research company Wood Mackenzie (WoodMac) notes in its 'Accelerated Energy Transition 1.5-Degree scenario' report.

“Record commodity prices and recent geopolitical changes have highlighted the challenges in navigating the energy transition. To remain on course, those most exposed to global commodity markets need to double-down on plans to decarbonise through electrification and other emerging, net-zero enabling technologies.

"Policy must be geared towards renewables growth and investment in grid infrastructure,” WoodMac Americas head of markets and transitions David Brown says.

Electrification is expected to dominate, providing 48% of the world’s energy consumption, supported by the rapid deployment of wind and solar which will account for 61% of a significantly larger power market globally by 2050, the company states.

Meanwhile, hydrocarbons’ share of energy demand will decrease to 43% in 2050, compared with 89% today. Coal and oil demand decline nearly two-thirds during this period.

Natural gas is expected to be resilient, falling by about 26%, supported by blue hydrogen production and carbon capture and storage adoption in the power sector.

“Central to the electrification of global economies is road transportation. Global electric vehicle stock is expected to rise to around 1.7-billion vehicles by 2050 . . . and will require substantial investment in charging infrastructure. Battery pack prices will continue to fall as regulatory supports grow and technologies advance.”

However, unprecedented growth in mine supply is required to deliver the raw materials needed to underpin electrification of the transport sector.

Metals costs will endure vast price cycles as demand booms and higher carbon costs are embedded into production. End-users will need to be cautious about near-term price volatility for battery raw materials caused by a supply-demand disconnect or other disruptions, WoodMac highlights.

“Further, advanced nuclear small modular reactors, bioenergy, geothermal and battery storage also play important roles, as the world approaches an accelerated energy transition towards 2050. This low-carbon, dispatchable generation becomes critical due to higher wind and solar penetration.”

As mid-century approaches, emerging technologies including carbon capture, utilisation and storage (CCUS) and hydrogen at industrial scale will become critical for decarbonising hard-to-abate sectors. Hydrocarbon resource holders could also monetise remaining reserves through blue hydrogen, and these support CCUS deployment, establishing hubs for power and industry.

“Low-carbon hydrogen and CCUS deliver the last mile on emissions reductions, the solution for difficult-to-abate end-use sectors and for providing reliable, flexible dispatchable generation,” says WoodMac Asia Pacific head of markets and transitions Prakash Sharma.

“Under [the accelerated energy transition scenario], we expect the power sector to account for a sizable chunk of low-carbon hydrogen demand. China, the US, India and the European Union-27 are expected to make up 70% of global hydrogen demand by 2050. This means a globally traded hydrogen market of $475-billion emerges.”

To incentivise technology development and adoption, global carbon prices need to increase. The prospects of a global carbon market improved significantly after resolution of Article 6 at the COP26 meeting in 2021. The momentum is expected to continue, with a global carbon price to take shape by 2030, says WoodMac.

“We have expanded our assessment of a global carbon price to deliver global net zero by 2050. The accelerated energy transition scenario price represents an average global price required to facilitate and incentivise low-emissions technology development and adoption. The price implementation will be closely linked to government economic priorities and the pace of the transition in different markets,” notes WoodMac research director Murray Douglas.

The company expects the global carbon price to rise seven-fold from an average of $25/t of carbon dioxide-equivalent (CO₂e) today to $175/t of CO₂e by 2050 in developed economies and $127/t of CO₂e in emerging economies. Some countries will likely choose to integrate international or domestic offsets, nature-based or technological solutions, in compliance mechanisms to increase flexibility.

“While the journey to net zero might seem insurmountable at present, there are boundless opportunities for those willing to take a shot. Around $60-trillion of capital expenditure investment is needed to get to net zero by 2050 in low-carbon technologies and infrastructure, mining commodities and abated fossil fuels,” WoodMac estimates.