ExxonMobil’s Global Outlook is the company’s latest view of demand and supply dynamics through 2050. It forms the basis for the company’s business planning and is underpinned by a deep understanding of long-term market fundamentals. In addition to assessing trends in economic development, technology advances, and consumer behaviour, the Outlook seeks to identify potential impacts of climate-related government policies.

Every day, billions of people around the world benefit from the ability to heat and cool their homes, cook their food, access medical equipment and modern medicine, and travel for work and pleasure. Affordable and reliable energy is at the core of every key measure of human development – elevating living standards, life expectancy, education, and income per person. Yet for billions of more people, modern living conditions are still far out of reach. 

In developing countries, such as India, gross domestic product (GDP) per person is only about $2,000 per year, and many people earn far less and lack access to basic necessities, including clean drinking water, heat, and cooking fuel. This challenge will only grow as the world’s population increases from about 8 billion people today to nearly 10 billion in 2050 – a rate of about 1 million people every six days. And just as human progress has been fuelled by higher energy use, further expansion of economic prosperity will depend on increased access to abundant, affordable energy. 

Energy use and economic development are inseparable. Where there is energy poverty, there is poverty. And where energy availability rises, living standards rise as well.

China provides a great illustration. Over the past two decades, China’s GDP per capita surged from around $2,000 to more than $11,000 and drove the elevated living standards that accompany this growth. At the beginning of this period, the basic energy needs of China’s people weren’t being met – the definition of “energy poverty.” But 20 years later, China’s energy use per person had nearly tripled, fuelling massive economic expansion.

Between now and 2050, developing countries will see GDP per capita more than double, driving higher demand for energy. Meeting that demand with lower-emission energy options is vital to making progress toward society’s environmental goals. At the same time, failing to meet demand would prevent developing nations from achieving their economic goals and their citizens from living longer, more fulfilling lives.

The critical question is how that growing energy demand will be met. Renewable energy continues to hold great promise, and we see wind and solar providing 11% of the world’s energy supply in 2050, five times today’s contribution. Other lower-emission options, such as biofuels, carbon capture and storage, hydrogen, and nuclear, will also play important roles. And even with this unprecedented rise in lower-emission options, oil and natural gas are still projected to meet more than half (54%) of the world’s energy needs in 2050.

Three drivers will accelerate the energy transition

An energy transition is underway, but it is not yet happening at the scale or on the timetable required to achieve society’s net-zero ambitions. Three key drivers are available, all involving broad collaboration among governments, companies, universities, and others. 

First, continued public policy support. Incentives like those in the U.S. Inflation Reduction Act can provide the necessary catalyst to begin scaling up low-carbon solutions. Permitting reform is needed to accelerate the deployment of these solutions, a factor recognized in the European Union’s NetZero Industry Act. Other policy priorities include enhanced transparency so that market participants have sufficient time to adapt to changes, and a recognition of the importance of keeping supply matched with demand to help minimize economic hardships on consumers. 

Second, technology advances. Currently, only two of the 55 technologies needed to reach net-zero emissions by 2050 are “on track,” according to the International Energy Agency. An all-of-the-above approach to technology, where governments avoid picking winners and losers, will lead to the most cost-efficient solutions produced in a timely manner. 

And third, market-driven solutions. Governments across the world can't afford to pay in perpetuity to reduce the amount of emissions needed to be removed or avoided. Ultimately, to achieve global emission-reduction goals, the world will need to move to widespread adoption of markets where society as a whole incentivizes driving emissions down. 

The world has made meaningful progress. Even with ongoing economic development, the emissions intensity of the world’s energy supply has declined since the Paris Agreement was signed in 2016. On the policy front, incentives for wind and solar catalyzed rapid deployment and cost reductions. Technologically, breakthroughs in shale enabled natural gas to disrupt and displace coal. And new markets for solar were created for both residential and utility-scale. Given the need to do more and do it faster at a lower cost, progress will need to occur in parallel, supported by policies that are technology-agnostic and incentivize all approaches, equally. Multiple approaches, nurtured by public-private partnerships and cross-industry collaboration, will be needed.

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