What will 2025 bring for energy and climate action?

Growing geopolitical risk and economic fragmentation were a common theme in 2024, with some of the greatest uncertainty lying with economically developed Western democracies.

The year closed with the governments in Germany and France in disarray, which may well cause greater instability in the EU just as it needs to face up to the trade measures of Trump 2.0.

At the same time, the Russia’s war in Ukraine and armed conflict between Israel and Hezbollah and Hamas show no signs of a lasting resolution. Even though the current ceasefire in Gaza is a positive move, as is the collapse of the Assad regime in Syria, there is still huge uncertainty about what happens next.

While Ukraine and Russian might be forced by hard military or economic realities to the negotiating table under the tutelage of the incoming President Trump, concerns will remain of a wider conflict in the Middle East. Much depends here on Washington’s attitude towards Tehran.

In short, when it comes to geopolitics the only certainty is continuing uncertainty.

So, what does all this mean for global energy security? The biggest surprise is that so much geopolitical uncertainty has not resulted in higher oil prices. For the most part the price has hovered between $70 and $80 a barrel.

The Organization of the Petroleum Exporting Countries plus other major oil exporters (OPEC+) is losing influence in an increasingly over-supplied market and will have to maintain production cuts to support prices.

Falling oil demand in China is the major cause – the result of a sluggish economy and increasing electric vehicle penetration in the mobility sector. But surging non-OPEC+ production is also part of the underlying trend.

Natural gas prices have also been relatively stable, but trending up in the face of winter and uncertainty over the consequences of an end to the transit agreement between Russian and Ukraine at the end of 2024. The industry has absorbed problems with the Panama Canal and the closing of the Suez Canal due to the Houthis’ actions in the Red Sea.

Going forward into 2025, things are likely to be much the same: short-term volatility around medium-term stability. However, the global liquefied natural gas (LNG) market is very tight, and any disruption could result in price spikes. All bets are off if Iran takes actions that impact on the Straits of Hormuz, but the key issue here will be the willingness of the US to protect everyone else’s oil and LNG exports. Even an energy dominant US is exposed to global oil and gas prices.

Ironically, the greatest beneficiary of higher oil and gas prices would likely be US producers who need a price of $90 to incentivise investment in new production. The new message from the White House might be ‘drill-baby-drill’, but the answer from the US industry is ‘only if the price is right’.

How will the 'greenlash' affect climate change?

Meanwhile, the past year has been a very sobering one for climate action. All the indicators are going in the wrong direction. It is likely that 2024 will be the warmest on record, with an alarming number of extreme climate events around the world. Thus, the physical risks of climate change are a clear and present danger, despite the fact that President-elect Trump considers it to be a ‘hoax.’

The COP29 meeting in Azerbaijan was underwhelming at best and a disaster at worst. Many world leaders stayed away and the emerging and developing world was very disappointed with the promise of $300 billion a year in climate finance up to 2035.

Everywhere you look there seems to be evidence that short-term energy security is a far greater worry than climate change, with a lot of public concern focusing on the costs of the energy transition.

The Financial Times has used the term ‘greenlash’ to describe how the ‘unrelenting rise of populism’ is driving a retreat from environmental targets. Meanwhile, the fossil fuel industry and its supporters are calling for greater realism and pragmatism. That is short-hand for a business-as-usual or do-nothing world, something that is impossible in the face of climate change.

According to the Intergovernmental Panel on Climate Change (IPCC), global carbon emissions need to peak in 2025 and then fall dramatically to get on a Paris-compatible track to limit global warming to as near 1.5C as possible.

But for many, including the climate science community, 1.5C is out of sight at the moment and the fear is that by 2030 limiting warming to 2C will be the best we can hope for.

According to the UN Development Programme, we are currently on track for as much as 3.1C of warming this century (but, if you are looking for positives, that is a much lower warming trajectory than projected prior to the Paris Agreement).

The US is a key locus of uncertainty here, but whether or not it remains part of the 2015 Paris Agreement there is the hope that there is now sufficient momentum to sustain climate action. The problem is that global energy demand is growing at a rate that means both fossil fuels and renewables are growing, and we are not substituting one with the other. Maybe 2025 will be the turning point and global greenhouse gas emissions will peak along with oil demand.

When it comes down to it, if you had wanted 2025 to herald in a new era of sustainable prosperity you would not have wanted to start with the state of the world in 2024.

We can only hope that things will get better, peace will come in Ukraine and the Middle East, the worst threats of Trump 2.0 turn out to be bluster and COP30 Brazil – a decade on from the Paris Agreement – marks a real turning point in the world’s determination to address climate change. 

We can but hope.

Further reading:

Predictions for 2025: a bleak outlook but with glimmers of light and hope

Why phasing out gas will be harder than transitioning from coal

How can the world reach net zero?

Cutting demand for gas: The key to preventing UK energy crisis

Mike Bradshaw is Professor of Global Energy and a Fellow of the Royal Geographical Society and the UK Energy Research Centre. He teaches Managing Sustainable Energy Transitions and Managing Sustainable Energy Transitions (Outside the UK) on the Full-time MBA and Executive MBA, and on the Global Online MBA and Global Online MBA (London).

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