A radical energy transition is underway, driven by a combination of environmental, political and technological factors. We are seeing a global shift from the use of fossil fuels, like oil and coal, to low carbon energy sources, like wind, solar and lithium-ion batteries. Greenhouse gas (GHG) emissions produced in the extraction and combustion of hydro-carbon fuel sources are one of the primary causes of climate change. The effects of the shift will be far-reaching and transformational.
The Paris Agreement of 2015, with its ground-breaking commitment to limit GHG emissions to levels consistent with global warming of between 2 °C and 1.5 °C by mid-century, is a useful starting point for thinking about the features of the energy transition. With an increasing population and greater energy needs, the challenge to reduce emissions will be enormous.
So far, consumption of renewable energy has not increased fast enough, and the electrification of power is just getting started. It will take decades to shift away from fossil fuels to lower carbon energy sources and implies efforts on many fronts. A fair chance of achieving net zero goals requires continued policy and legislative changes, shifts in investor and consumer preferences and, importantly, technological advances across industries.
The following key themes are driving the energy transition towards the Paris Agreement goal of a 1.5 degree future.
Record commodity prices have highlighted the challenges in navigating the energy transition. Markets most exposed to global commodity markets double down on plans to decarbonise through electrification and other emerging, net zero-enabling technologies.
The Glasgow Climate Pact has set the stage for a global carbon market. As countries legislate net zero into law, Wood Mackenzie expects carbon prices to rise, reaching a global average of $175/t by 2050.
Battery pack prices will continue to fall as regulatory support grows and technologies advance. But an unprecedented growth in mine supply is required to deliver the raw materials to underpin electrification of the transport sector.
Low-carbon hydrogen and CCUS (carbon capture, utilisation and storage) deliver the last mile on emissions reductions and provide the solution for the difficult-to-abate end-use sectors and for reliable, flexible, dispatchable generation.
Though niche today, emerging technologies will become mainstream.
According to Wood Mackenzie’s accelerated energy transition scenario (AET-1.5), electrification and renewables underpin the reduction in CO2 emissions . The following graph shows the difference in CO2 emissions from Wood Mackenzie’s base case vs 1.5 degree aligned scenario:
Source: Wood Mackenzie. Forecasts are not an indicator of future performance and any investments are subject to risks and uncertainties.
Electric vehicles, battery technology, solar and wind generation, renewable fuels, and carbon capture are just some of the enablers of this energy transition.
At WisdomTree, we offer a range of thematic strategies, from equities to commodities, that provide comprehensive exposure and contribute to the energy transition megatrend.
Supporting the electrification of transportation and providing storage solutions for the energy generated by intermittent renewable energy sources.
Battery technologies are crucial to the electrification and energy storage required for a successful energy transition. Investing in equities exposed to the battery value chain allows investors to get a diversified exposure to this exciting theme.
Mobeen Tahir
In the latest episode of The Next Big Thing podcast, we hosted Ryan Corbett, Chief Financial Officer of MP Materials, one of the most strategically important companies in the rare earths space. We discussed why rare earths sit at the centre of the supply chain reset, why NdPr is the real bottleneck, and how demand is broadening well beyond electric vehicles (EVs) into robotics, drones, AI infrastructure and defence. Ryan also explained why scale, policy support and vertical integration matter so much in a market still dominated by China. This blog summarises the key messages Ryan delivered on the show.
Aneeka Gupta
The latest rebalance of WisdomTree's Strategic Metals and Rare Earths Miners Index widens its lens from 10 to 14 metal categories, adding vanadium, silicon metal, manganese and niobium. It trims copper and lithium, lifts rare earths and nickel, tilts toward upstream mining and larger names, and now offers above-market growth at a discounted forward earnings multiple.
Mobeen Tahir
Back in 1973, an oil shock changed the way the world thought about energy. More than fifty years later, geopolitical tensions, rising electricity demand from artificial intelligence (AI) and record renewable energy deployment are once again putting the sector in the spotlight. This blog explores why renewable energy is catching a second wind, how China is driving much of the growth, and why some emerging technologies may finally have found their moment. Investors, it seems, are keen to make hay while the sun is shining.
Mobeen Tahir
Lithium was once a laboratory curiosity. Today, it sits at the centre of the global shift towards electrification and digitalisation. As electric vehicles scale, battery storage expands, and industrial demand evolves, lithium demand is projected to rise meaningfully over the coming decades. Yet supply growth is expected to slow and remains concentrated in a handful of countries. In this blog, we break down the demand and supply outlook using International Energy Agency projections, with additional insight from our partners at Wood Mackenzie, and explore what this could mean for investors.
