2024 was the hottest year on record and the first to breach the 1.5C global warming target. Rising temperatures, along with increasing natural disasters and disruptions to the food chain, are just some of the horrifying realities of climate change. To avoid the most dramatic impacts of climate change, greenhouse gas emissions must be reduced via electrification and divestment away from fossil fuels. Yet the energy sector, responsible for 75% of emissions, remains largely unchanged. Back in 2021, Fatih Birol, Executive Director of the International Energy Agency (IEA) said: “If governments are serious about the climate crisis, there can be no new investments in oil, gas and coal, from now – from this year.”
Four years later, emitting CO₂ has never been more profitable. In 2023, the combined profits of ExxonMobil, Shell, BP, Chevron and TotalEnergies were $123 billion. Add Saudi Aramco’s earnings and that amount doubles to $242 billion for just these six companies. For comparison, wind turbine manufacturers have suffered billions in losses. In 2023, wind energy developer Ørsted wrote off $4 billion on offshore wind projects in the U.S. In 2024, BP put its $2 billion wind business up for sale to offload underperforming assets, after writing down the value of its offshore wind business by $1.1 billion the previous year.
Figure 1: Distribution of average daily surface air temperatures compared with pre-industrial average, by year, degrees Celsius. Source: Financial Times, ERA5, C3S/ECMWF.
To achieve net zero by 2050, we must rapidly scale renewable energy and fully divest from fossil fuels. Oil and gas companies should do both, yet in 2023, only 4% of their capital spending went toward clean energy. Last summer, Glencore reversed its plan to exit coal, highlighting a broader trend of prioritising fossil fuels due to profitability. Companies will stick with fossil fuels if they remain the more profitable option.
Currently, markets favour fossil fuels over renewables. Profit drives value and emitting CO2 is far more lucrative than developing zero-emission technologies. Oil and gas companies will only shift their investments if legally compelled or if greater profits can be found in renewables. Fifteen years ago, Europe’s power sector was transformed by this carrot-and-stick approach. From 2008 to 2013, the fossil fuel sector lost €500 billion in market value as wind and solar grew by 20% annually. Their business cases were undermined by the emergence of low-cost wind and solar, and by an emerging price on emitting CO2 for power production. Renewable developers must be profitable to attract investment and deliver the renewable energy projects we need to replace fossil fuels.
Instead of promoting what we value, we do the opposite. Fossil fuel subsidies totalled $7 trillion in 2023, according to the IMF. While intended to keep energy affordable, these subsidies distort markets and favour incumbent fuels, making the transition to cleaner alternatives harder and more expensive than necessary.
Figure 2: Comparison of Fossil Fuel Subsidies to Renewable Subsidies. Source: O’Connor (2023) Supergrid – Super Solution.
Infrastructure challenges also present a major hurdle for the shift to carbon-free electricity. While solar and wind are cheap energy sources, their growth outpaces grid capacity. Without significant upgrades, European electricity grids will be overwhelmed by 2030. Fossil fuels still dominate energy delivery channels, with up to half of shipping cargo and many high-profile pipelines.
We need similar infrastructure for electricity and renewable energy, in the form of larger continental scale electricity grids supported by adequate storage. Coordinated economic signals and significant infrastructure development, requiring planning and innovation, are prerequisites to deliver the energy transition. Without them, national targets for renewables are unrealistic and should be acknowledged as such.
Figure 3: Ember’s forecasts for European grid connection capacity versus demand, in 2030 and 2040. Source: Ember
EU energy ministers in May 2024 underlined the need for a “holistic, long-term, coordinated, and integrated electricity grid infrastructure planning” aligned with decarbonisation targets. Technology companies focusing on grid tech will play a vital role in this transition and should be considered as strategic to Europe’s industrial development. Innovations in energy storage, grid management, and high-capacity transmission are essential for efficient renewable energy delivery.
The EU’s Competitiveness Compass, launched in January 2025, outlines plans to improve Europe’s competitiveness through lower energy costs, innovative clean technology and cross-border electricity transmission. Meanwhile, the British government has committed to delivering clean power by 2030. The focus must be on making renewables financially attractive, investing in infrastructure, fostering innovation in clean technology and dissuading companies from continuing carbon-intensive energy production.
Decarbonisation presents a significant economic opportunity for Europe, but it will require coordinated action from policymakers, investors, and businesses. If we can make renewables as appealing to investors as fossil fuels are, the energy transition will not only be possible—but inevitable.