Energy executives less optimistic on 2050 energy transition progress

15 April 2024 3 min. read

Executives in the energy and natural resources industry are expecting a slowdown in the progress of the energy transition. That is according to a new report from Bain & Company.

In its report, Bain & Company showed that only 38% of energy executives expect the world to reach net-zero emissions by as soon as 2050, a smaller percentage than the 46% from last year’s survey. In other words, this year’s survey showed more executives (62%) now believe that net zero will only be achieved by 2060 or later.

With climate change topping the list of priorities for global leaders both public and private, the energy transition – which would see fossil fuels replaced by renewable sources of energy on a massive scale – is increasingly becoming the most pressing issue for the energy sector.

Energy executives less optimistic on 2050 energy transition progress

“This year’s survey found that energy and natural resource companies have not dampened ambitions for their transition-oriented growth businesses,” said Joe Scalise, head of Bain & Company’s Energy & Natural Resource practice. “However, customers’ willingness to pay is a growing issue, as is the ability to generate adequate return on investment (ROI) in energy transition-oriented projects. As a result, companies are focusing on projects with a viable ROI path.”

The survey shows that executives in the Middle East were dramatically more optimistic on growth in energy transition areas – much more so than in Europe or North America. But considering the strategic importance that fossil fuels play in the Middle East, this finding might just reflect a sort of ‘honesty gap’.

Energy executives less optimistic on 2050 energy transition progress

The survey showed that most business leaders now see North America as the most promising market for growth in green investment. That sentiment comes not just from North American executives themselves, but also a majority of those surveyed from Europe, Latin American, and Asia Pacific.

New regulations like the US Inflation Reduction Act (IRA) have incentivized renewables with a system of subsidies. Despite a generally welcoming attitude to incentives, 42% of US executives surveyed had major caveats, noting that subsidies under the IRA are not clear enough and the regulations are convoluted.

Europe was a somewhat close second in the perceived attractiveness for green investment. That should not be surprising as Europe – like North America – already has incentivizing regulations in place and has already made impressive strides in infrastructure for renewables.

Energy executives less optimistic on 2050 energy transition progress

It should also come as no surprise that executives in Middle East, an energy sector powerhouse, are mostly optimistic about their own market for new renewable investments. Green hydrogen is one of the renewables which is keenly anticipated by executives, although the technologies involved in green hydrogen and the infrastructure needed are still in their infancy.

The study echoes a previous report from Bain & Company, which found that executives are bullish on hydrogen and carbon capture.

“The Middle East stands out in the energy sector thanks to its access to capital, top-tier infrastructure, and decisive governance. These strengths position the region as a leader in adopting low-carbon energy solutions and the global energy trade,” according to Eric Beranger, partner and head of the Energy & Natural Resources practice for Bain & Company in the Middle East.