The Energy Transition Index (ETI) has benchmarked the progress of countries’ energy transition for a decade on the three dimensions of the energy triangle – economic development and growth, energy security and access, and environmental sustainability – and on the enabling environment for transition. In view of the current volatile macroeconomic and geopolitical environment, however, a trend analysis from historical energy data can currently provide only limited insights. Hence, instead of the annual country energy transition benchmarking report, this special 2022 edition builds on the ETI trends observed in recent years to provide a perspective on the current challenges affecting the transition, and highlights priorities to supercharge it.

The urgency for transformative measures to mitigate climate change has intensified. The latest assessments by the Intergovernmental Panel on Climate Change (IPCC) emphasize the need for global greenhouse gas (GHG) emissions to peak by 2025 and for emissions to decline rapidly thereafter. However, a series of systemic shocks over the past three years and their implications on the energy system highlight the challenges in pursuing long-term targets while responding to short-term emergencies. The ETI framework underscores the need to help. advance energy affordability, security and access, and sustainability. The current environment poses simultaneous constraints on these three fronts.

Many countries have demonstrated resilience to the pandemic and exceptional economic recovery. However, the faster-than-expected rebound coupled with low investments in parts of the energy system have put stress on the energy supply, leading to very high energy prices and severely impacting households and businesses. Supply-demand imbalances can recur through the transition as energy systems reconfigure, yet the transition cannot progress at pace if it leads to expensive energy or exacerbates inequalities.

The war in Ukraine has led many countries to rethink their energy security paradigm and what it means for their energy transition. A review of the best-performing countries in terms of energy security in the past ETI editions reveals the benefits of dual diversification: energy mix diversification and fuel import diversification. The war has forced several countries to consider the trade-offs between energy security and sustainability to secure energy supply in the short term. However, in the long term, we expect the energy transition will offer win-win opportunities, aligning security and sustainability imperatives through investments in renewables and other clean energy sources, as well as demand-side measures like energy efficiency.

We believe this is the time for governments, companies and consumers to intensify efforts to reduce their dependence on fossil fuels. Governments can invest in domestic decarbonized energy systems that will secure affordable and reliable energy, and companies have opportunities to adopt low-carbon technologies and energy-efficient processes. The decrease in GHG emissions observed during the pandemic due to the reduction in energy demand demonstrates the opportunities offered by demand management. Considering the critical role of energy-intensive industries in achieving demand-side emission reductions, this report includes a focus on the energy transition within the industrial sector. As the largest contributor of anthropogenic emissions, industries are regarded as the last frontier of decarbonization. We examine the multiple choke points that industrial firms encounter on their journey to net zero, and show how a new generation of collaboration models, coupled with new levels of ambition at the industry, country and global levels can help these companies break through their bottlenecks and accelerate the transition.

There are glimmers of hope, but also caveats. A few countries, for example, are linking COVID-19 recovery packages with enhanced sustainability solutions to “build back better”. But many are not. And several large investment agendas are not yet fully approved. Also, we welcome the additional commitments made at COP26 at the end of 2021. However, action has fallen short in several key areas that will need to be addressed in the future. Overall, we remain cautiously optimistic. But success will depend on countries carefully striking the balance between energy affordability, availability and sustainability, and further strengthening their commitment to climate action.

Roberto Bocca
Head of Shaping the Future of Energy, Materials, and Infrastructure
World Economic Forum

Muqsit Ashraf
Senior Managing Director, Lead - Energy Industry Sector
Accenture