The energy transition myth

For years, to the average person, climate change has felt like a problem that was, quite frankly, easy to ignore. After all, its effects would only be felt in the future, ice caps and glaciers are far away, and a few degrees couldn’t make that much of a difference… right?

Well, the historically hot summers currently sweeping across the world are a bucket of cold-water alerting people to the very real economic implications of the climate crisis.¹

This sweltering wake-up call has shown the world that ‘slightly hotter summers’ reads better on a holiday brochure than on the news, and thus the question of green-house gas emissions has never been more pressing. To avoid catastrophic outcomes, emissions must be cut in half by 2030 and zero by 2050, the UN warns.² Consequently, as the biggest contributor to global emissions, the energy sector’s pivot to renewables is of utmost importance.

Strong growth and an overcoming of many hurdles mean that, in 2026, renewables are set to overtake coal as the biggest contributor to the world’s electricity supply – making up roughly 35%³ – and are the cheapest form of new-build energy.⁴

A fresh set of hurdles, and a rejuvenated set of incentives, add new energy to both sides of the decades-long struggle between pollution and revolution.

So which way are the power scales tilting?

It makes economic sense

From a cost standpoint, renewables now fare surprisingly well against traditional energy sources. Following research by Lazard, “unsubsidised renewable energy remains the most cost-competitive form of new-build generation” as measured by their LCOE (Levelized Cost of Energy) metric, which measures the cost of power generation over the course of a plant’s life.⁴

This is largely attributable to the fact that, although building a new fossil-fuel plant – or even bringing one back online – may be cheaper than building a renewable plant, the near zero marginal cost of renewable energy production after the fact, beats out the high marginal costs of traditional means over time. On top of which, the latter is a marginal cost that can vary wildly due to geopolitical or macroeconomic conditions. This can be seen clearly with the increase in Liquid Natural Gas (LNG) prices stemming from the war in the Middle-East.

A question of national security and prosperity

This input-price sensitivity perfectly outlines another virtue of renewable electricity, and drawback of pollutant fuels, that governments worldwide have recently become acutely aware of. Renewable energy – as opposed to coal and LNG – provides insulation from fluctuations in fuel markets, be it in price or scarcity.

This step towards reduced interdependence and greater economic resilience has changed the rhetoric around renewables to something more appealing to those in power. Indeed, ‘national security risk’ probably lands somewhere higher on the agenda than ‘homeless polar bears’.

The UN also estimates that, by 2030, $4.2 trillion per year could be saved globally if we can reduce “pollution and climate impacts”. This footprint-reduction could also help combat millions of premature deaths caused by air-pollution.²

When considering tangible economic damage, cheaper energy, national security, downstream cost-avoidance and the prevention of unnecessary death, the rationale for investment into renewables becomes rather obvious.

For clean energy, we must play dirty

Rationale for investment on its own, however, is not enough; the necessary figure is somewhere around $4.5 trillion worth of investment into green-energy by 2030.² Indeed, in a recent article for the FT, Noah Gordon (fellow at the Carnegie Endowment for International Peace) argued that the notion that rationale alone will be able to avert the climate crisis “is a fantasy”.⁵

Chiefly, he outlines the idea that governments must actively continue “tilting the playing field” to further incentivise a green transition. He points to high nominal investment values and slow returns on those investments as forces that weaken “self-interest” motives, alongside coal’s merits as a provider of “economic resilience – in the absence of wind and sunlight – as some of the main reasons that a clean move to renewable energy is not so straightforward.

Gordon concedes that a purely free-market solution would be ideal. And, given enough time, the very real incentives could eventually push rational agents and markets towards net-zero naturally. However, the aforementioned obstacles combined with the speed with which the pivot must occur cast doubt on whether this outcome is possible; or better, likely.

Gordon’s stance, at least, is clear: Economic agents will only make sufficient ‘green choices’ with their money – from home solar panel installation to hundreds of millions worth of investment into fossil fuel avoidance – if governments “point them in the right direction”.

The demand problem

Despite the strides taken in renewable technology, the major financing packages provided by governments and large macroeconomic tailwinds, emissions are still set to rise in 2026.³ This is because of the unfortunate fact that the replacement of fossil fuels for renewable means is a war on two fronts, and, until now, we have only touched on the easier of the two battles: supply. The fundamental law of economics makes it simple to guess the other force.

To reduce climate impacts, it is not sufficient for renewable energy generation to progress. It must increase faster than demand for energy, to replace existing pollutant energy sources, to reduce fossil fuel consumption.

It is from this nasty caveat in the renewables story that the demand problem stems. Demand for electricity increased by 8.1 exajoules in 2025, with no signs of slowing. It is absorbing all progress in the clean energy supply – which increased by around 3.2 exajoules in 2025 – and is begging for more power still.⁶

Robert Rapier, a chemical engineer writing for Forbes, reflected on a recent publication covering data from 2025 and highlighted this unfortunate truth.⁶ “This is an important distinction in discussions about the energy transition”, he writes, “Solar can grow 30% in a year, wind can continue setting records, and renewables can capture an increasing share of the electricity market, while global fossil fuel consumption still rises.”

A future dominated by renewable energy may be well on its way, but the problem is how it is arriving. Rapier describes the systematic undermining of climate progress via renewable means like this: “The future [he] envisioned nearly two decades ago is arriving, but for now it is being layered on top of the existing energy system more than replacing it.”

Where is this demand coming from?

Over the coming years, as we move towards 2030, the leading contributors to electricity demand are projected to be industry, transport, air conditioning – or space cooling, as it is named in the report – and data-centres.⁷

A self-reinforcing loop of higher temperatures leading to AC installation, leading to higher energy demand which in turn leads to higher emissions, is a noteworthy source of demand. Alongside it, the sheer scale and speed of the datacentre buildout makes it unsurprising that AI is to some degree responsible for ever-increasing energy demand; following the IEA report, datacentre energy demand is set to double by 2030 as a “base case”.⁷

AI's hidden climate footprint

AI’s role in this story doesn’t end at demand. In a recent piece, Martha Muir at the FT warned that an impact of AI is flying under the radar and “will substantially increase global emissions”.⁸ Despite the attention being focused on AI’s energy consumption, AI-driven energy production may be an even more potent threat to the climate crisis.

AI is set to augment renewable energy production – with some estimates saying that wind and solar could see increases of up to 30%.⁸ A recent study finds, however, that all gains in clean energy are likely to be offset by AI’s application to the oil and gas sector: “Enabled emissions exceed avoided emissions whenever fossil-sector gains are nonzero; net emissions reductions require renewables gains 4–5× greater than fossil fuel gains”, the authors of the study say.⁹

Muir also warns that AI is likely to augment the pollutant energy sector more than the renewable sector as it cannot solve the structural barriers to renewable deployment: “interconnection queues, permitting delays and curtailment due to weak demand or transmission constraints”.

Considering not just AI demand-driven emissions, but also the more perilous AI supply-driven emissions is crucial to understanding the impact this revolutionary technology will have on the renewables industry, and it is fundamental to effective government intervention to avoid 1.8 gigatonnes of CO2 that could be released annually.⁹

A clean, clean energy narrative

Renewables seem to be narrowly winning on the supply side but are losing badly on the demand side. The latter outstrips the former, so the globe’s thermometer keeps rising. The “energy transition” is a myth; what we are seeing is “energy addition”.

If you are hoping AI will save us, the research says it will only make things worse… let’s hope governments can.

Footnotes

1. The London Review, Europe's Rising Temperatures Are Becoming a Macroeconomic Problem (opens in a new tab), 27th July 2026.

2. United Nations, Renewable energy – powering a safer and prosperous future (opens in a new tab). ^{2 3}

3. IEA, Electricity Mid-Year Update 2026 (opens in a new tab), 23rd July 2026. ²

4. Lazard, Lazard’s Levelized Cost of Energy+ (LCOE+) (opens in a new tab), July 2026. ²

5. Financial Times, The global green transition won’t be driven by self-interest alone (opens in a new tab), 5th August 2026.

6. Forbes, Renewables Are Booming. So Why Aren’t Fossil Fuels Declining? (opens in a new tab), 9th August 2026. ²

7. IEA, Increase in electricity demand by sector, Base Case, 2024-2030 (opens in a new tab), 10th April 2025. ²

8. Financial Times, AI will boost oil and gas production more than green energy, report finds (opens in a new tab), 10th August 2026. ²

9. Nature, AI-driven productivity gains enable more CO₂ emissions than they avoid in a global energy–economy model (opens in a new tab), 4th August 2026. ²