Chairman’s Message

My institute, IEEJ, has participated in the production of a report by S&P Global, “Multidimensional Global Energy Pathways.” I believe the report presents a realistic, credible outlook for the future of energy, based on realities rather than driven by predetermined outcomes, which can provide an actionable basis for decisions by policymakers and investors. This is the reason why I intend to introduce the essence of the report in this month’s Chairman’s Message.

<Main Points>

Emerging markets and developing economies (EMDEs) will be the main driver of energy demand growth.

The strong energy demand growth will lead to a future energy system defined by the coexistence of multiple energy sources, including fossil fuels.

Electrification and renewable energy will drive emission reductions but will face limits.

The pathways for countries are multiple, as each country faces different constraints and objectives.

The advanced economies and China may achieve net zero, or come close, by 2060, but achieving net zero globally in this century will be very difficult.

The 1.5℃ pathway is no longer achievable, while the 2℃ pathway is feasible but challenging.

We need to start looking at reality and take necessary actions, including ensuring sufficient investment in fossil fuels, support for EMDEs, investment in carbon dioxide removal, and adaptation.

1. EMDEs will be the main driver of energy demand growth.

Energy demand in EMDEs could grow by over 60% by 2060. This is equivalent to adding another China to the energy system. The strong energy demand in EMDEs is the principal energy challenge of the coming decades, which may not have been fully reflected in other past outlooks.
　Media attention tends to highlight power demand for AI data centers. While this load is significant for advanced economies, it is modest compared with the very strong energy demand growth in EMDEs to support their economic growth and rising living standards, including the broader use of air conditioners. EMDEs will have to greatly expand their energy systems to accommodate the strong energy demand growth, while advanced economies can focus on transforming existing systems, as their demand will be flat or declining.

2. The strong energy demand growth will lead to a future energy system defined by the coexistence of multiple energy sources, including fossil fuels.

Renewable energy becomes the dominant source of incremental supply. But rapid growth in renewables does not translate into an immediate decline in fossil fuel use. Low-carbon energy must first meet the growing demand in EMDEs. In addition, fossil fuels perform functions that are difficult or expensive to replace. They provide dispatchable capacity in power systems, high-temperature heat and feedstocks in industry, and liquid fuels for long-distance transportation. The fossil-fuel-based energy system is sticky, too. Existing infrastructure has long lifetimes, often several decades. Capital stock turnover is gradual, particularly in industry and power generation.
　In many cases, renewable energy and fossil fuels increase simultaneously. Multiple energy sources will be coexisting. The current fossil fuel share of total energy demand, which is about 80%, will decline over time. But the share of fossil fuels will remain significant even in 2060, between 39% and 60%, depending on the pathways. The absolute volume of fossil fuels will show an even more significant role for them. The absolute volume of oil demand declines gradually from 101 million barrels per day in 2025, but still remains between 59 million and 93 million barrels per day in 2060, depending on the pathways. Considering the need to replace the production decline from existing fields, substantial investment in upstream oil and gas supply is required through 2060, between US$11 trillion and $14 trillion, depending on the pathways.

3. Electrification and renewable energy will drive emission reductions but will face limits.

Electrification, coupled with renewable energy, is the most important decarbonization lever. Electricity demand grows faster than total energy demand. The share of electricity in final energy demand increases from 22% today to between 38% and 47% in 2060, depending on the pathways. While this increase is significant, the limits to electrification become apparent. Heavy industry, air and marine transport, heavy-duty land transport, and some building uses remain difficult to electrify.
　Decarbonization of electricity is principally achieved through intermittent solar and wind generation. Massive deployment of solar and wind power generation, coupled with broad deployment of batteries, is envisioned. This combination provides the cost-competitive path when the penetration of renewables is modest. But as the penetration of intermittent renewables rises beyond 50-60%, integration costs rise rapidly. Transmission, storage, demand response, curtailment management, and thermal backup capacity will be required. Thus, there is a limit to electrification and the use of renewable energy.

4. The pathways for countries are multiple, as each country faces different constraints and objectives.

The report provides a unique tool to demonstrate the trade-offs facing each country. The Energy Prosperity Indicator (EPI) highlights the trade-offs by analyzing multiple components, including energy security, affordability, system resiliency, and national benefits. The country-by-country analyses of the 12 major EMDEs demonstrate that the trade-offs are very different among countries due to their respective geography, infrastructure, and resource endowments. There is no “one-size-fits-all” pathway. The pathway of each country will be decided based on the relative importance of objectives, the constraints faced, and the judgment made about the trade-offs involved.

5. The advanced economies and China may achieve net zero, or come close, by 2060, but achieving net zero globally in this century will be very difficult.

With the most ambitious emission reduction pathway, the advanced economies and China may be able to achieve net zero, or come close, by 2060. But EMDEs, with a few exceptions, will not achieve net zero until the end of this century. As a result, global GHG emissions will not reach net zero by 2060. GHG emissions will decline by 22% to 68% from 2025 to 2060, depending on the pathway. The deepest reduction is produced by the pathway that assumes both advanced economies and EMDEs engage in ambitious emissions reduction. Even with this most ambitious pathway, global net zero by 2060 is beyond reach. While emission reduction can be achieved relatively quickly in the early stages, it becomes progressively more difficult to realize deeper emission reductions as the focus shifts to the hard-to-abate sectors. These results should give a reality check to many government policies, corporate strategies, and investment assessments that may be based on the assumption of achieving global net zero by 2050. While net zero by 2050 has significance as an aspiration or a normative goal, it will be hard to use as a basis for realistic decisions.  

6. The 1.5℃ pathway is no longer achievable, while the 2℃ pathway is feasible but challenging.

The report concludes that limiting warming to 1.5℃ is not achievable under currently plausible assumptions. Limiting warming to 2℃ by the end of the century is achievable but increasingly challenging. This will be based on the pathway that requires both advanced economies and EMDEs to engage in ambitious emission reduction efforts. It also assumes substantial carbon dioxide removal activities. The more we diverge from this pathway, the greater the challenge of achieving the 2℃ target becomes, as the remaining carbon budget gets smaller.

7. What shall we do then?

With the results of this report, what shall we be doing? First, I believe that we should start looking at reality. We should not stop investing in fossil fuels, which will continue to play an important role in supporting the strong energy demand growth, particularly for EMDEs. Treating fossil-fuel-related projects as “stranded assets” is premature.
　At the same time, we should try harder to reduce GHG emissions globally. We should make more serious and sincere efforts to ensure that EMDEs get on board with emission reduction. EMDEs will be the key to realizing the 2℃ target. Technology transfer and financial investment/support will be essential. Energy efficiency will be extremely important to address the very strong energy demand growth in EMDEs. We should stop forcing a “one-size-fits-all” model on EMDEs, which have different circumstances and objectives.
　As the remaining carbon budget, even for the 2℃ trajectory, continues to shrink, we should start deploying carbon dioxide removal measures. We should also be better prepared for the unavoidable temperature rise by investing more in adaptation measures, not just in mitigation.

The report can be accessed through the following URL.https://www.spglobal.com/en/research-insights/special-reports/multidimensional-global-energy-pathways
Multidimensional Global Energy Pathways | S&P Global

＜Notice＞
The 53rd IEEJ Global Energy Webinar
“Multidimensional Global Energy Pathways”

Date & Time: Wednesday, October 28, 2026, 2:00-3:15 p.m. (JST)
(4:00-5:15 p.m. AEDT | 1:00-2:15 p.m. SGT | 8:00-9:15 a.m. AST)

　The webinar will feature a presentation by the report's lead author, highlighting key findings and perspectives on the future of the global energy system amid growing geopolitical, technological, and economic uncertainty. The presentation will be followed by a panel discussion featuring experts from S&P Global, Woodside Energy, and IEEJ, exploring the implications for energy security, energy transition, and global energy markets.