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.
The following key themes are driving the energy transition towards the Paris Agreement goal of a 1.5 degree future.
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.
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:
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
En 1973, un choc pétrolier a modifié la perception mondiale de l'énergie. Un demi-siècle plus tard, les projecteurs se braquent de nouveau sur le secteur, des tensions géopolitiques persistantes, une envolée de la demande d’électricité portée par l’intelligence artificielle (IA) et un déploiement inédit des énergies renouvelables sont venus rebattre les cartes. Ce blog explore les raisons du nouvel essor des énergies renouvelables, le rôle central joué par la Chine dans cette dynamique, ainsi que la percée de certaines technologies émergentes qui semblent, cette fois, arriver à maturité. Les investisseurs paraissent déterminés à profiter des conditions avantageuses du moment.
Mobeen Tahir
Le lithium a longtemps été considéré comme une curiosité de laboratoire. Aujourd’hui, il se trouve au cœur de la transition mondiale vers l’électrification et la numérisation. Avec la montée en puissance des véhicules électriques, l’essor du stockage sur batteries et l’évolution des besoins industriels, la demande de lithium devrait progresser de manière significative au cours des prochaines décennies. Pourtant, la croissance de l’offre devrait ralentir et demeure concentrée dans un nombre limité de pays. Dans ce blog, nous analysons les perspectives de l’offre et de la demande à partir des projections de l’Agence internationale de l’énergie, complétées par les analyses de nos partenaires de Wood Mackenzie, et examinons les implications potentielles pour les investisseurs.
