World leaders gathered in Belém, Brazil this week for the annual United Nations climate summit to confront a sobering reality: Global emissions from fossil fuels are set to reach a new high in 2025, the goal of limiting temperature rise to 1.5 degrees Celsius above preindustrial levels is out of reach, and the United States did not even bother to show up. Against this backdrop, the International Energy Agency (IEA) released its flagship World Energy Outlook, making headlines for including a scenario in which oil demand continues to climb through 2050.
The report contains multiple, diverging scenarios, with ambiguity around the assumptions behind each one. As a result, advocates on all sides are predictably declaring the report either a welcome reality check on overconfidence in the clean energy transition or proof that the transition is unstoppable. The truth, as usual, lies somewhere in between. Perpetually rising oil and gas demand should not be seen as the status quo, but neither should a faster transition be seen as inevitable. Much will depend on how countries view the national security implications of clean energy.
World leaders gathered in Belém, Brazil this week for the annual United Nations climate summit to confront a sobering reality: Global emissions from fossil fuels are set to reach a new high in 2025, the goal of limiting temperature rise to 1.5 degrees Celsius above preindustrial levels is out of reach, and the United States did not even bother to show up. Against this backdrop, the International Energy Agency (IEA) released its flagship World Energy Outlook, making headlines for including a scenario in which oil demand continues to climb through 2050.
The report contains multiple, diverging scenarios, with ambiguity around the assumptions behind each one. As a result, advocates on all sides are predictably declaring the report either a welcome reality check on overconfidence in the clean energy transition or proof that the transition is unstoppable. The truth, as usual, lies somewhere in between. Perpetually rising oil and gas demand should not be seen as the status quo, but neither should a faster transition be seen as inevitable. Much will depend on how countries view the national security implications of clean energy.
Reporting on the new World Energy Outlook has been understandably muddled because it is difficult to parse the assumptions in the IEA’s two main scenarios—one based on countries’ current policies and another that also incorporates their stated, in other words proposed, policies. As a result, headlines have resorted to saying oil demand “could” rise through 2050—not a particularly helpful insight for anyone assessing probabilities.
Under current policies, oil demand climbs from 100 million barrels per day to 113 million barrels per day by 2050; under stated policies, it peaks near 102 million by 2030 before gradually declining. Another scenario outlines what would be required to reach net-zero emissions by 2050, a goal for which the world remains far off track.
So where is the world most likely headed? The current policies scenario (CPS) offers a static view of policy and technology, that assuming no changes to laws already on the books and slower adoption of new technologies—not just relative to the stated policies scenario (STEPS) but to recent experience. STEPS, by contrast, assumes a more dynamic outlook: that governments implement announced intentions but not achieve every aspiration or target.
The differences can be subtle. In the IEA’s 2025 CPS scenario, for example, improvements in fuel economy in Japan stop once a 2030 target in regulation is achieved, while STEPS assumes Japan will gradually strengthen the policy beyond 2030.
Judgment calls are unavoidable. The IEA assumes, for example, that the European Union will implement its 100 million euro ($117 million) plan for industrial decarbonization, but not achieve its implausible goal of producing 10 million metric tons of green hydrogen by 2030. It places far greater confidence in China’s ability to carry out its national energy plan—a judgment supported by recent history.
The IEA warns that labeling current policy as “business as usual” is “misleading.” Past CPS projections have repeatedly underestimated the dynamism of both policy and technology. For example, the IEA’s last CPS, produced in 2019, significantly underestimated how fast renewable energy would grow—and coal growth as well.
Which scenario is more plausible depends on which assumptions one finds most credible. Believing the IEA’s projection of rising oil demand through 2050 would require assuming that electric vehicle deployment barely expands outside China and the EU, that alternative technologies stagnate despite plummeting costs and surging investment, or that the world remains complacent about worsening climate impacts.
American economist Herb Stein’s maxim—“If something cannot go on forever, it will stop”—is worth remembering when considering how the sense of urgency around climate change may evolve. Given growing concerns about energy affordability, it is also notable that the IEA finds household energy spending and oil prices are both lower in STEPS than in CPS because in the former scenario, fossil fuel use declines, and the system shifts toward more efficient electricity.
At the same time, the IEA reminds readers that nearly 2 billion people around the world lack access to clean cooking, and 730 million remain without electricity. Billions more consume a tiny fraction of the energy consumption that so many in advanced economies take for granted. Achieving aspirations not just for access to electricity, but also for mechanized agriculture, industrialization, and comforts such as air conditioning, refrigeration, and cars will require vast amounts of energy beyond what IEA projects.
The new CPS aligns with a growing refrain: As U.S. Interior Secretary Doug Burgum recently put it, “There is no energy transition; there is only energy addition.” To date, that has been true. The global energy system is so vast that clean energy growth has largely met new demand from population and economic expansion, but it has not yet risen fast enough to replace hydrocarbons.
Yet as BP’s Energy Outlook 2025 states, the distinction is not between addition and transition, but between addition and substitution as two distinct phases of transition. Energy addition is necessarily the first; substitution follows. Roughly 40 percent of global energy demand already comes from regions that have entered the substitution phase, a share that BP projects will rise to 60 percent by 2050.
Energy demand will continue to grow, but that need not mean that all forms of energy will grow indefinitely. The pace at which addition gives way to substitution will depend on how quickly clean energy costs fall—driven not only by policy, but also by technological advances that are now being buffeted now by the artificial intelligence boom, as I recently wrote in Foreign Policy.
The largest driver of falling clean energy costs, however, has been China—a reality that calls into sharp relief the IEA’s warnings about geopolitical risk. China’s staggering build-out of industrial capacity in renewables, batteries, electric vehicles, and related technologies has reshaped global markets. China can now produce more than twice as many solar modules as the world installs each year, pushing module prices to below 10 cents per watt—down from nearly 80 cents in 2014.
The speed at which cheaper clean technologies can reshape a nation’s energy policy is evident in Pakistan, where plummeting costs of Chinese solar panels led households and businesses to install vast amounts of rooftop photovoltaic panels. This has curbed demand for debt-financed coal power from the grid that the government had planned and budgeted for.
Whether governments elsewhere follow Pakistan’s lead and embrace cheap Chinese clean energy will depend on how they perceive and respond to the World Energy Outlook’s central message: that geopolitical tensions, national security risks, and economic fears once again dominate energy policy priorities.
As Meghan O’Sullivan and I recently argued, growing energy security fears increase incentives to curb imports and diversify supply by electrifying energy use and generating electricity from domestic sources such as solar, wind, nuclear, and geothermal—and, for some countries, coal too.
The imperative to bolster energy security could thus give greater momentum to efforts to curb oil and gas use: for example, Ethiopia’s bid to replace costly fuel imports with domestic electricity from a controversial new dam project by banning the import of new gasoline and diesel cars.
Yet whether national security fears hasten or hinder clean energy deployment depends on whether countries view dependence on Chinese supply chains for clean energy technology as posing the same energy security risks as dependence on imported oil and gas. If they do, and insist on producing everything domestically, then costs will rise and adoption will slow.
The differences between the IEA’s two main scenarios are smaller than implied by headlines about whether oil demand plateaus after this decade or rises another 10 percent by mid-century. Both foresee rising energy use, accelerating electrification, faster expansion of renewable energy than any other sources, and more than $600 billion invested annually in oil and gas—even as the world drifts further from its climate goals.
None of these pathways will unfold exactly as written. Yet given the pace of technological innovation, the possibility of social and political tipping points, and the shifting geopolitics of energy, the greater mistake would be to assume that tomorrow will look much like today.
