Key Takeaways
- Governments globally are not abandoning energy transition targets, but political priorities are coming under pressure.
- Against the background of tighter fiscal constraints and a worsening geopolitical landscape, policymakers across the world increasingly focus on cost of living, energy security, economic competitiveness, and defense spending.
- Distributional questions are increasingly being raised in connection with the energy transition, amid concerns about voter backlash and cost-of-living pressures.
- The economics of the energy transition differ across geographies. While net energy exporters can afford a slower shift toward non-hydrocarbon resources, net importers in Europe and Asia can't.
Political priorities have been evolving, particularly since 2022. Due to the sharp increase in geopolitical risks and changing spending priorities, we have observed that many countries have gradually shifted their energy transition priorities. This, in turn, could alter the balance of the energy trilemma's of energy security, affordability, and sustainability priorities. For example, we have seen the U.K. and several EU countries backtrack on proposed environmental regulations regarding heat pump targets and the ban of petrol and diesel cars.
Public sentiment seems to be changing. European voters are now seemingly more focused on geopolitical risks and cost of living pressures than on climate change. This was reflected in the European Parliament elections this year, with frontrunner parties shifting away from recent years' focus on the climate agenda. This is also reflected in voter surveys on their most important issues and, unsurprisingly, the new European Commission's strategic agenda, which passed in June 2024 and features the green transition significantly less prominently than the previous one.
