The climate transition isn't easy — but by some measures, we’ve reached a tipping point

Every day, we get a clearer picture of the threat from a warming planet and the costs we incur amid the transition to clean energy and a low-carbon future.

It’s easy to be discouraged in the face of the largest-scale challenge humanity has ever collectively faced: tackling climate change and preventing warming above 1.5°C.

In recent months, we’ve heard fresh doubts about electric vehicle demand, seen fossil fuel production increases and private-sector oil investments that fly in the face of climate pledges. The market for shares of clean energy companies has been depressed, and there are signs of a backlash against emission-reduction policies.

Accenture’s analysis of the top 2,000 global companies shows that only 37% are committed to achieving net zero by 2050 — and just 18% are on track reach that goal. Businesses are struggling to afford decarbonization and CEOs are pessimistic about hitting the UN’s Sustainable Development Goals.

But hitting net zero by 2050 was never going to be easy — and it is apparent that there is a historic change happening. By some measures, it is now unstoppable.

The International Energy Agency (IEA) says that fossil fuel demand will peak by 2030. Renewables will overtake coal as the leading source of electricity by 2025. Solar and wind power, both now cheaper than ever, generate more than 10% of electricity and account for 75% of new power-generating capacity. We may have already passed a tipping point at which it is inevitable that solar energy will come to dominate electricity markets.

In road transport, electric vehicles have grown to 15% of new vehicle sales, and the range of the average EV has tripled over the past 10 years.

What’s more, a number of potential gamechangers are on the cusp of broad commercialization: renewable-energy technologies, electric mobility alternatives, heat pumps for zero-carbon home heating, carbon capture and storage, green hydrogen fuels and industrial electrification. In Europe alone, those technologies could address up to 45% of the greenhouse gas abatement required for net zero, McKinsey says.

The pace of the energy transition will largely be decided by China, the United States and the European Union — the world’s biggest greenhouse gas emitters. China’s emissions are set to peak by 2030. In the US, a rapid transition is underway.

There are hopeful indicators in other economies, as well. Brazil and Indonesia have taken steps to halt deforestation and some other countries have declared that they will leave their oil and gas reserves in the ground.

Of course, the energy transition demands constant and rapid innovation. Of late, we’re seeing the power of human creativity brought to bear on some of the climate transition’s toughest challenges: materials shortages, production bottlenecks, risk mitigation and financing.

The shift to electric vehicles has highlighted the difficulty in securing adequate supplies of lithium and rare earth minerals used in batteries. But it also has triggered a search for substitutes such as wood chips — a source of synthetic graphite for electric vehicles— and heightened the realization that the energy transition is a materials transition.

Similarly, hydrogen-powered heavy haul trucks are emerging as an alternative to battery-cell rigs. New alternatives in textiles and construction are being scaled. Innovations in recycling are making steel, plastics and cement cleaner, more versatile and more durable.

Adoption of green energy for road transport and ocean shipping is farther along than in commercial aviation, but in November, Virgin Atlantic completed the first transatlantic commercial flight fully powered by sustainable aviation fuel. Elsewhere, fertilizer producers are making strides in solving the production and storage problems associated with producing low-carbon ammonia for fuel.

Global investors have doubled their investment in transition technologies from $660 billion in 2015 to more than $1 trillion today. Climate-related venture capital investment increased 89% from 2021 to 2022. Advance market commitments — binding contracts by governments, development banks and others to guarantee a viable market for a product — are spurring innovation and bridging the gap needed to complete successful development of green products and services.

We shouldn’t require any reminders about the urgency of the climate challenge: 2023 was the hottest year on record and 2024 is forecast to be even warmer with the arrival of El Niño.

Historically, it’s usually been safe to bet on government and policy inertia. But climate policies and legislation are getting bolder, and there appears to be more fast-tracking than backtracking. A review of 215 policies across two dozen major economies since 2015 found 17 examples of backtracking and 41 of accelerated action with most others unchanged. The review predicted a public clamor for speedier climate action as extreme weather exacts a heavier toll and green tech shows increasing promise.

At the same time, there is growing determination to develop better green standards and to buffer developing economies and vulnerable populations from the effects of a costly and disruptive transition by offering technical and financial assistance.

At COP28, the agreement to cut down on greenhouse gas emissions from methane was a major victory. Less certain is the immediate impact of language about a “transition away” from fossil fuels. COP’s statement on oil, gas and coal was not strong enough for many environmental advocates, but it did mark a breakthrough.

As Jennifer Morgan, Germany’s climate envoy, said: “Every investor should now understand that future investments that are profitable and long-term are renewable energy — and investing in fossil fuels is a stranded asset.”