BCG: What’s Next for Global Energy Transitions?
The change in governments around the globe over the past year marks a key shift in the approach of energy transition, in light of jobs, growth and the cost of living.
Boston Consulting Group (BCG) has reviewed the recent transitions in politics and energy in India, Indonesia, Mexico, South Africa, the UK, the US and the EU.
“The consequences for the energy transition of recent elections are still playing out but there has been a clear shift in emphasis,” says Edmond Rhys Jones, Partner & Associate Director at BCG and co-author of BCG’s Blueprint for the Energy Transition.
“The 2024 elections have redrawn the global energy map,” explains Aparna Bharadwaj, Global Leader, Global Advantage practice at BCG and co-author of the report.
Governments prioritise security, affordability and economic growth as much as climate goals.
Starting the energy transition
“We have the tools to get to net zero, but we do not have the policies, proven business cases, and capabilities in place everywhere to massively accelerate the pace of action,” BCG’s Blueprint for the Energy Transition says.
BCG emphasises that governments will devote more attention to energy affordability and energy security.
“The net zero path is no longer linear,” Aparna says.
“Every country is making trade-offs to balance sustainability with economic and political realities.
“The challenge ahead? Keeping momentum while navigating an increasingly fragmented landscape.”
Recent concerns about supply disruptions, exaggerated due to ongoing conflicts in Ukraine and the Middle East, have had an unsettling effect on many voters and government leaders – especially in economies like the EU, the UK, India and South Africa that rely on energy imports.
Changes in demand and the limitations of many energy grids are prompting politicians to explicitly link energy policy to macroeconomics and national security, ensuring that energy remains accessible and affordable.
BCG is expecting governments with climate ambitions to place greater emphasis on the role that low-carbon energy sources can play in delivering on those objectives, whilst managing the risk of the transition.
Ultimately, funding for the transition will have to come from one or both of two sources: taxpayers and consumers.
Funding from taxpayers means making large public investments in infrastructure that typically lasts for decades and can create long-term growth.
Taxpayer funding is essentially a progressive tax – higher earners will pay a larger share because of their higher marginal tax rates.
However, taxpayers resist approving higher taxes and most governments are financially constrained from relying on public debt to defer the bill.
On the other hand, shifting the costs to energy users will translate into higher energy bills, disproportionally impacting low-income families and energy-intensive industries – who often pay the same as higher earners.
As people seek economic growth and employment, governments are likely to prioritise investment in technologies and industries, driving economic competitiveness.
Transitioning to green energy
The transition to green energy creates opportunities for renewable energy producers offering low-carbon energy at competitive prices and for fossil fuel producers working to stay relevant in the energy transition.
Increasingly, governments are recognising that green tech will be a trillion-dollar industry in the 2030s.
At the same time, government leaders need to address public concerns over industries and workers whose futures are at risk from the energy transition.
Eventually, the energy transition may lead to a more fragmented approach to global energy policy development, with each country prioritising its own dominant industry players.
Investors may focus on a more limited set of technologies driven by national priorities beyond the energy transition whilst governments may relax regulations aimed at accelerating shifts toward low-carbon energy sources.
Alternative energy sources such as biofuels and hydrogen are predicted to see slower growth than investments in nuclear and renewable energy.
According to BCG, countries such as the UK are moving towards the political left which may see a push in low-carbon energy deployment.
“Between £700bn–£900bn (US$906bn-US$1.165tn) could be invested in capital projects in the UK over the next five years – a 2.1x-2.7x increase on the previous five-year period.” explains Raoul Ruparel, Director of BCG’s Centre for Growth.
“The push for growth, preparation for the energy transition and historic underinvestment all contribute to this increase in investment that has not been seen in the UK for 75 years.”
However, countries such as Indonesia and South Africa, where the energy transition is still building momentum, may progress more slowly.
Energy transitions across the world
The EU
Despite gains by far-right parties, the 2024 European Parliament elections upheld the EU’s climate commitments.
Building on the 2019 Green Deal, the EU is set to launch a European Clean Industrial Deal, aiming to balance sustainability with economic growth.
However, geopolitical tensions, including Middle East conflicts and the Russia-Ukraine war, have forced a partial energy shift.
Coal use has risen in Germany, and liquified natural gas reliance persists, slowing the transition to carbon neutrality by 2050.
The new European Commission (EC) agenda includes four priorities:
- Updating the EU Climate Law to cut emissions by 40% by 2040
- Transforming energy-intensive industries
- Reforming energy markets to curb costs
- Accelerating low-carbon technologies like hydrogen and carbon capture.
Meanwhile, business leaders, backed by the Draghi report, push for lower energy costs to stay competitive with China.
This could drive new incentives and streamlined regulations, reinforcing the EU’s commitment to climate action while addressing economic and security concerns.
Labour’s landslide victory in July 2024 set the stage for its plan to make the UK a “clean energy superpower.”
However, Prime Minister Keir Starmer must navigate economic constraints, political opposition and regulatory hurdles to deliver on these promises.
The government aims to decarbonise the electricity system by 2030, backed by the state-owned Great British Energy to drive private investment in offshore wind, hydrogen and decarbonisation technologies.
It has reinstated the 2030 ban on new petrol and diesel car sales and launched the Warm Homes Plan for insulation, solar and low-carbon heating.
Plans also include tripling solar capacity, doubling onshore wind and quadrupling offshore wind.
Despite its strong mandate, Labour must balance clean energy investment with affordability to avoid burdening households.
In November 2024, the UK raised its emissions reduction target to 81% by 2035, up from 68% by 2030 – a significant acceleration of climate ambition.
Mexico
In October 2024, Claudia Sheinbaum made history as Mexico’s first female president, securing a Morena supermajority.
She aims to boost renewables to 45% of the energy mix by 2030 but faces infrastructure challenges and a struggling Pemex.
Her National Energy Plan commits US$12.3bn to electricity generation, US$11.1bn to grid upgrades and US$9bn to expand renewable capacity to 13.7 GW.
Whilst private firms can own up to 46% of renewable generation, her focus on state-owned energy and refinery expansion may limit foreign investment.
“We need to be more environmentally aware, which means not thinking about ourselves so much,” President Sheinbaum explains.
“Consumerism cannot be a central part of our lives anymore. We need to think of the collective.”
President Sheinbaum’s scientific expertise positions her to drive Mexico’s energy transition; however, her policies will determine the pace of progress.
South Africa
Following the African National Congress’ historic loss of its majority in May 2024, South Africa’s coalition government must tackle poverty, unemployment (32%) and infrastructure shortages whilst advancing its energy transition.
In August 2024, the Electricity Regulation Act introduced a competitive power market, attracting private investment and accelerating grid expansion.
By 2030, South Africa aims to triple renewable capacity, adding 15 GW, with 14,000 km of new grid infrastructure by 2035.
The government is also expanding nuclear and gas power, despite funding hurdles.
New incentives, such as a 150% tax break for EV and hydrogen vehicle production, aim to draw US$27bn in investment.
Financial uncertainty and coal dependence pose risks to South Africa’s green future.
Indonesia
President Prabowo Subianto’s 2024 election marked a shift toward economic growth and energy security, slowing Indonesia’s climate ambitions.
His plans to boost natural gas, restart idle oil wells and extend coal plant lifespans aim to cut reliance on costly imports – risking delaying the 23% renewables target set for 2025.
While President Subianto pledges to phase out coal, his push for nickel processing (powered by coal) and a 50% palm oil biodiesel mandate could accelerate deforestation.
Though Indonesia remains committed to the Paris Agreement, its coal dependence suggests a slower energy transition, with gradual decarbonisation efforts such as public transport electrification.
The US
With a Republican sweep of the Presidency and Congress, US President Donald Trump has moved quickly to implement an “energy dominance” agenda.
His administration prioritises fossil fuel and critical mineral production, fast-tracks infrastructure permits and has issued executive orders rolling back climate policies – including withdrawing from the Paris Agreement.
The White House aims to restrict US$369bn in clean energy funding from the Inflation Reduction Act and Infrastructure Investment Jobs Act while revising regulations on vehicle emissions, environmental reviews and power generation.
Despite favouring fossil fuels, the administration may still support carbon capture, battery storage and nuclear power – if it aligns with job creation and economic growth.
Faster permitting for large projects suggests a more pragmatic approach than campaign rhetoric initially implied.
A lot of attention in the policy space right now is on the US, and energy is no exception,” explains Maurice Berns, Chair, Centre for Energy Impact at BCG and co-author. “The outcome of the election will shape which sources and technologies receive support, particularly at the federal level.
As the global effort to combat climate change continues, voters have made clear that they want policymakers to strike a better balance between sustainability, security and affordability.
For many governments, balancing sustainability with security and affordability is the new mandate – one that requires a nuanced understanding of the complex tradeoffs involved.
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