2025

EnergyPerspectives

Globalmacroeconomicandenergymarketoutlook

2|EnergyPerspectives2025

PAGE

3

|EnergyPerspectives2025

WelcometoEquinor’sEnergyPerspectives2025

Long-termforecastsofthedevelopmentinglobalenergymarketsarenormallyverydifficult.Asthisyear’sEnergyPerspectivesreportispublished,thetaskisevenmorecomplex,asglobalmarketsandgeopoliticsareundergoingmassiveshiftswithunpredictableconsequencesinboththeshorterandlongerterm.Politicalprioritiesaffectingglobalenergymarketsareshiftingfurtherawayfromdecarbonisationtowardsenergyaffordabilityandsecurityofenergysupply.Ontopofthis,itisnearlyimpossibletogaugetheshort-termimpactoftradeconflictsandnewrulesinthegeopoliticsgame.

AglobalenergytransitionroughlyinlinewiththeambitionsoftheParisAgreementhasbecomeseverelydelayedandmorefragmented,andglobalgreenhouseemissionscontinuedtoincreaselastyear.Despitenumerouspositivedevelopments,themacroeconomic,politicalandgeopoliticalrealitiesarecharacterisedbylackoftrust,cooperationandburdensharing,thatareslowingdownthepaceofchangeforeseenintheParisAgreement.Areversalofthisdevelopmentwilltaketime,anditssuccessisbynomeansguaranteed.Withshort-termismandlocalandregionalprioritiesdominatingpolicy-making,necessaryglobalchangesinthedirectionoftrulysustainabledevelopment,balancingthedifferentconcernsintheenergytrilemma,willbefurtherdelayed.

EnergyPerspectives2025presentsfourscenariosforthefutureworldeconomy,internationalenergymarketsandenergy-relatedgreenhousegasemissions.Thescenariosaredesignedtoillustratehowdivergentdriversintheenergytrilemma(energysecurity,affordabilityanddecarbonisation)affectlong-termdevelopments.Thescenariosarenotpredictions,butpossiblecontrastingpathways,providingaplatformfordebate,strategicplanninganddecisionmaking.

Thethreeforecastingscenarios,Walls,PlazasandSilos,aimtohighlightthelargegapbetweentherelativelyslow,incrementalchangesthatcharacterisetheenergytransitiontoday,andtheradicalandrapidchangesneededtomovetheworldontoapathalignedwiththe1.5°CambitionoftheParisAgreementasinthenormativeBridgesbackcastscenario.

TheinsightsandanalysisprovidedbyEnergyPerspectiveshelpusnavigateshort-termuncertaintieswithoutlosingsightoflong-termtrends

AndersOpedal

PresidentandCEO

ThegeopoliticallandscapeandtradeconflictsclearlyillustratethattheglobalcooperationneededforaParis-alignedenergytransitionisnotpresent

EirikW?rnessSeniorvicepresidentandChiefeconomist

KeyinsightsfromEnergyPerspectives2025

EnergyPerspectivespresentsfourscenariosforeconomicandenergymarketdevelopment

Wallsbuildsonhistoricalenergymarkettrendsandassumesclimateactionslowlyaccelerates.

Plazasexploresaworldwhereopentradeandcross-borderinvestmentenablehighereconomicgrowth,moreconsumption,andaffordableenergy.

Silosconsidersafragmentedworldwhererestrictedglobaltradeandalackofcollaborationhindergrowthandshapeconsumptionaroundenergysecurityconcerns.

BridgesEP23*isanormativebackcastscenariothatdemonstratestheimmensechangeneededtostaywithinthe1.5°Ccarbonbudget.

Competingprioritiesareinfluencingpolicymakers’approachtoeconomic,climateandenergypolicies

Geopoliticaltensions,warsandeconomicdevelopmentaredrawingfocusawayfromenergytransitiongoals.

Decarbonisationfacesincreasingscrutinyasapolicyconsiderationifviewedasachallengeforenergysecurityoraffordability.

*TheBridgesscenarioasoutlinedinthe2023outlook.

Walls Bridges

Plazas Silos

ThebalanceofprioritieswithintheenergytrilemmawillinfluenceglobalGDP,energydemand,energymixandultimately,emissions

InWalls,theworldlookstobalanceenergysecurityandaffordabilitywithoutdisregardingdecarbonisation.

InPlazas,economicgrowthissupportedbyunrestrictedglobaltrade,investmentandcollaboration,whichincreaseconsumptionattheexpenseofdecarbonisation.

InSilos,energysecuritydominatespolicymakingasglobaltradeandcollaborationfragmentintoregionalalliances.

Scenariooutcomesin2050comparedto2022levels

Walls

Plazas

Silos

+5%

+19%

-5%

-35%

-16%

-34%

2.1%

2.3%

1.7%

Totalprimaryenergydemand

Netemissions

GDPCAGR

Source:Equinor

Totalprimaryenergydemandisimpactedbybotheconomicgrowthandachangingenergymix

InWalls,despiteagrowingglobalpopulationandeconomy,primaryenergydemandplateausinthelate2030saselectrificationandashiftawayfromfossilfuelsincreaseend-to-endenergyefficiency.

By2050,theincreasedconsumptionandslowertransitioninPlazasdriveprimaryenergydemandhigherthaninWalls.InSilos,lowergrowthandrestrictedconsumptionreduceenergydemandin2050comparedto2022levels.

Totalprimaryenergydemand(Gtoe)

20 2022 2030 2050

18

16

14

12

10

8

6

4

2

0

Source:IEA(history),Equinor(projections)

Peakdemandforfossilfuelsarrivestowardstheendofthe2020sinWallsandSilos,butcomeslaterinPlazas

InWalls,totalfossilfueldemandstartstoleveloffinthemid-2020s,followedbyaslightdownwardtrajectory.

InPlazas,increasedeconomicactivitydrivesprolongedfossilfueldemand,whichpeaksin2033beforeaveryslowdecline.

InSilos,demandisimpactedbylowgrowthbutsupportedbyreducedglobaltradeincleantechnology.

InBridgesEP23,allfossilfuelsseerapiddecline.

Source:IEA(history),Equinor(projections)

Walls WallsPlazasSilosBridgesEP23

Fossilfuels Other Newrenewables

Globalfossilfueldemand(Gtoe)

14

12

10

8

6

4

2

0

2010 2020 2030 2040 2050

Walls Plazas

Silos BridgesEP23History

Sectoraldemandchangesreflecttheinterplaybetweengrowthandefficiencyimprovements

Energydemandbysector:changein2050vs.2022levels(Gtoe)

InWalls,demandinmostsectorsincreasesinlinewiththegrowingpopulationandeconomy,butefficiencygainsachievedthroughelectricvehicle(EV)uptakereduceroadtransportenergydemand.

InPlazas,theefficiencygainsfromEVuptakekeeproadtransportdemandin2050at2022levels.Inothersectors,efficiencyimprovementsarenotsufficienttooffsetgrowingdemandduetostrongeconomicgrowth.

4

3

2

1

0

-1

-2

-3

-4

InSilos,cost-focusedbehaviouralchangesandefficienciesleadtoareductioninbuildingsandroadtransportdemandoutto2050.

Walls

Plazas

Silos

BridgesEP23

Source:IEA(history),Equinor(projections)

Industryandnon-energy Buildings

Roadtransport Non-roadtransportNetchange

5|EnergyPerspectives2025

LiquidsdemandisweakenedbyEVsbutsupportedbypetrochemicalandnon-roadtransportsectors

InWalls,EVsincreasinglyreplaceinternalcombustionvehicles,causingdemandtosoften.However,petrochemicalsandnon-roadtransportseeincreasingdemand,drivenbyalackofalternatives.Asaresult,totalliquidsdemandpeaksat105mbdin2028beforesoftening.

InPlazas,higherdemandfortravelandconsumerproductsincreasesliquidsdemandandpushesthepeakover108mbdin2035,

SilosfollowsasimilartrajectorytoWalls,peakingat105mbdin2028,astheeffectsofaslowertransitiontoEVsareoffsetbyloweroveralldemand.

Source:IEA(history),Equinor(projections)

120

100

80

60

40

20

0

Globalliquidsdemand(mbd)

2010 2020 2030 2040 2050

Walls Plazas

Silos BridgesEP23History

Globalgasdemandishighlysensitivetotraderestrictionsandenergyinterdependence

Wallsseespeakgasdemandin2038aselectrificationandrenewablesmoderatetheworld’srelianceongas.

InPlazas,unrestrictedgassupplyanddilutedclimatetargetspushpeakgasdemandbeyond2050.

InSilos,globalgasdemandpeaksin2029asgasimportersreducetheirdependenceonotherregionsandgrowthstalls.

Source:IEA(history),Equinor(projections)

Whilegasandliquidsarebothtradedglobally,gasdemandismoresensitiveasitisimpactedbyelectricitydemandandcanbemoreeasilysubstitutedwithotherenergysources

LiquidsdemandinSilosissimilartoWallsdespitelowereconomicgrowth,assloweruptakeofEVsandcleantransportfuelssupportliquidsdemand.

Incontrast,gasdemandis17%lowerinSilosthanWallsby2050duetoreducedtotalenergyuse,lowerelectricitydemand,andincreasefuelswitchingtoviablealternatives.

6000

5000

4000

3000

2000

1000

0

-1%

-17%

5

4

3

2

1

Globalgasdemand(bcm)

2010 2020 2030 2040 2050

Walls Plazas

Silos BridgesEP23History

Totalprimaryenergydemand2050(Gtoe)

Liquids Gas

Source:Equinor

6|EnergyPerspectives2025

0

PlazasWalls Silos PlazasWalls Silos

Electricitywillmeetahighershareoffinalenergydemand

Electricityshareoffinalenergydemand(%)

InWalls,electrificationseessteadyacceleration 60%

towards2050,increasingitssharebyhalf. 50%

Plazasfollowsasimilartrend,withincreasedeconomicactivitydrivingdemandforbothelectricityandotherenergycarriers.

40%

30%

20%

InSilos,restrictionsonthetradeofEVsandrenewabletechnologiesslowtheincreaseinelectricitydemandandtheavailabilityofcheapelectricity,leadingtoaslowerrateofelectrification.

10%

0%

2010

2020

2030

2040

2050

Source:IEA(history),Equinor(projections)

WallsSilosHistory

PlazasBridgesEP23

Thekeyenableroftheenergytransitionisgrowthindecarbonisedelectricity,stronglylinkedtoinvestmentandpolicy

Low-carbonelectricityproductionwillincreaseinallscenarios,buttovaryingdegree.

Solarandwindcanprovidecheapelectricity,buttheircostsandshareofgenerationwilldependontraderestrictions,climatepolicy,andthewiderinvestmentenvironment.

Source:IEA(history),Equinor(projections)

60

40

20

0

-20

Electricitygeneration:changein2050vs.

2022levels(ThousandTWh)

Walls Plazas Silos Bridges

EP23

Coal Gas Nuclear OtherWind SolarPV HydrogenNetchange

Electricvehiclesbecomeincreasinglyaffordableandavailable

EVshareofglobalLDVfleet(%)

InWalls,policiesincludingsubsidiesandemissionstandardsencouragetheadoptionofEVs,especiallyamongstlightdutyvehicles(LDVs).

InPlazas,policyincentivesarediluted,buthigherconsumerspendingandunrestrictedtradesupportEVuptake.

InSilos,EVuptakeisdelayedduetolowerconsumerspending,limitedpolicysupport,andrestrictedtrade.

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

2010

2020

2030

2040

2050

Source:IEA(history),Equinor(projections)

WallsSilosHistory

PlazasBridgesEP23

7|EnergyPerspectives2025

InPlazasandSilos,theenergytransitionprogresseswhereitalignswithaffordabilityorenergysecuritypriorities

InPlazasandSilos,incidentaldecarbonisationoccurs,asusingrenewableenergytodriveincreasedelectrificationcanprovidebothvalueformoneyandenergyindependenceforsomeenduses.

Climatepolicycanincreasethespeedoftransitionandencouragedecarbonisationacrossallsectors.

Source:IEA(history),Equinor(projections)

Energy-relatednetemissionsarereducedinallscenariosby2050comparedto2022

Regardlessofclimatepolicyambitions,demandforcoalisprojectedtofallineveryscenario,drivenbytheaffordabilityofrenewableenergysources,whichcanprovideadditionaladvantagesovercoalsuchasdecreasedimportrelianceandimprovedairquality.

Thecost-driventransitiontoEVsreducesemissionsfromoilinallscenarios.Plazashashigheroildemandoverall,butagreatersharecomesfromthepetrochemicalsector,whichhasaloweremissionsintensitythantheroadsector.

In2050,gasdemandanditscorrespondingemissionsarehigherinPlazasandlowerinSilosversusWalls,inlinewiththelevelofdemandandtradeopenness.

*Excludingcarbonremovalfromnature-basedsolutions,directaircapture,andbioenergywithcarboncaptureandstorage.

Source:IEA(history),Equinor(projections)

4

2

0

-2

-4

-6

5

0

-5

-10

-15

-20

-25

-30

-35

Energydemandbyenergycarrier:changein2050vs.2022levels(Gtoe)

Walls Plazas Silos Bridges

EP23

Coal Oil Gas Electricity

HydrogenOther Netchange

Energy-relatednetemissions:changein2050vs.2022levels(GtCO?eq.)

Walls Plazas Silos Bridges

EP23*

Coal Oil Gas Netchange

Carboncaptureandstorage(CCS)deploymentstagnatesinPlazasandSilos

CCSenablesdecarbonisationbutincreasescosts,onlyprovidingacompetitiveadvantagewhenemissionreductionsareinherentlyvalued.

Accordingly,CCSisnotprioritisedinPlazasandSilos,wheredecarbonisationisnotamainpolicyfocus.InWalls,CCSaccountsfor644milliontonnesofCO2in2050,comparedto1,965milliontonnesinBridgesEP23*.

*Excludingnature-basedsolutions,directaircaptureandbioenergywithCCS.TotalcarboncaptureandremovalinBridgesEP23is6,264milliontonnes.

Source:IEA(history),Equinor(projections)

8|EnergyPerspectives2025

2000

1500

1000

500

0

Annualcarboncaptureandstorageofenergy-relatedemissions(MtCO?)

2022 2030 2050

WallsWalls WallsPlazasSilosBridges

EP23

EnergydemandinemergingregionsexcludingChinaovertakesuseinindustrialisedregionsinthisdecade

EnergydemandinWalls(Gtoe)

6

5

EmergingregionsexcludingChinawillbethebiggest

contributorstoglobalenergydemandoutto2050, 4

overtakingthecombineddemandofindustrialised

regions. 3

Thischangeisdrivenbyincreasingpopulationandhigheconomicgrowthinemergingregions,whileindustrialisedregionswillexperienceapopulationplateau,continueddeindustrialisation,andafastertransitiontomoreefficientenergytechnology.

2

1

0

1990 2000 2010 2020 2030 2040 2050

Source:IEA(history),Equinor(projections)

Emergingexcl.ChinaIndustrialised

ChinaHistory

EnergydemandpercapitainemergingregionsexcludingChinaremainsmuchlowerthaninindustrialisedregions

TheincreasedenergyuseinemergingregionsexcludingChinaisspreadoveranincreasingpopulation,whichlimitsenergypercapitagrowtheventhoughthetotalfinaldemandexceedstheuseinindustrialisedregions.Thisreflectsthecontinueddisparityinlivingstandardsbetweenindustrialisedandemergingeconomies.

AsChina’spopulationstartstodecreaseoutto2050,itsenergyusepercapitastartstoapproachthatofindustrialisedregions.

Source:IEA(history),Equinor(projections),UN(population)

EnergydemandpercapitainWalls(toepercapita)

4

3

2

1

0

1990 2000 2010 2020 2030 2040 2050

Emergingexcl.China China

Industrialised History

Chinaisexpectedtoleadtheworldinelectrification.Fossilfueldemandremainssignificantacrossregions

Energydemandin2050inWalls(%)

China’sdominanceinproducingcost-effectivecleanenergytechnologyallowsittoproducecheapelectricity,reducedependenceonfossilfuelimports,andconsequentlydecarboniseitsenergysupply.

InWalls,industrialisedregionsmaintainclimateambitions,experienceastrongercoalphase-downandahighershareofelectricityandcleantransportfuelsthanemergingregionsexcludingChina.

EmergingregionsexcludingChinaprioritisegrowthanddevelopment,andremainwithalowershareofelectrificationbeyond2050.

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Industrialised

China

Emergingexcl.

China

Source:Equinor

Coal Oil Gas Electricity Hydrogen Other

9|EnergyPerspectives2025

10|EnergyPerspectives2025

TableofContents

WelcometoEquinor’sEnergyPerspectives2025

3

KeyinsightsfromEnergyPerspectives2025

4

SHORT-TERMOUTLOOK

12

Geopoliticsisshapingtradeandenergymarkets

13

Theglobaleconomy

14

Highercostoffinancingchallengestheenergytransition

15

Commodities

17

THESCENARIOS

18

Thescenarios

19

Walls

21

Bridges

21

Plazas

22

Silos

23

LONG-TERMOUTLOOK

24

Theenergyworldin2030and2050

25

Globaleconomy:Declininglong-termgrowthprospects

27

Thegloballiquidsmarket

28

Theglobalgasmarket

30

GasremainsatransitionfuelinEurope

32

Theglobalelectricitymarket

34

Datacentres:Localeffects,globalconsequences

36

Theglobalhydrogenmarket

37

Keyfigures

38

Units

40

Definitions

40

References

40

Photocredits

40

Acknowledgementsanddisclaimer

41

11|EnergyPerspectives2025

SHORT-TERMOUTLOOK

12|EnergyPerspectives2025

PAGE

13

|EnergyPerspectives2025

Geopoliticsisshapingtradeandenergymarkets

In2025,energymarketswillbeimpactedbyintensegeopoliticalcompetitionandshiftsinglobalpowerdynamics.Theerosionofeconomiccollaborationwillfurtheraddtomarketvolatility.Also,thepoliciesofthenewUSadministrationwillplayasignificantroleinfuellingtheuncertaintythesemarketswillexperience.

Geopoliticalriskswilldominatetheshort-termoutlook,reinforcingasensethattheglobalorderisexperiencingafragileanduncertaintransition.

PresidentTrump’sdisruptiveinstinctsandwillingnesstochallengelong-standingUSforeignpolicynormswillfeedthisuncertainty,furtherincreasingtherangeofpossibleoutcomes.Inthiscontext,protectionismandnationalsecuritywilldominatepolicymakers'priorities,alongsideurgentincreasesindefencespendinginthisneweraofhardpower.Thisfocuswillfurtherlimitthespaceforglobalcooperation.

TheEUwillprioritiseimprovingitseconomiccompetitivenessanddefenceintegration.Whileclimatetargetswillremain,therewillbelessemphasisondecarbonisation,particularlywherestatesubsidiesareneededtoprogressenergytransitionprojects.EUmanufacturingisalreadyunderseverepressurefromhighenergyprices,exacerbatedbytheongoingconflictinUkraineandrisingglobaltradebarriers.

Thebloc’scompetitivenesswilllikelybefurtherunderminedbythenewUSadministration’stradeandsecuritypoliciesandpotentialreactionsfromChina.

FacedwithUStariffs,theEUwillinitiallyseektonegotiatewiththeUSbutisalsopreparedtoretaliateiftalksfail.Asglobaltariffsescalate,theEUwillaimtodiversifyitsgeopoliticalpartnershipsthroughstrengthenedrelationswithmulti-alignedpowerslikeIndia.AnyweakeningoftheUS’securitycommitmenttoEuropewillpushEuropeancountriestoincreasedefencespending,likelyattheexpenseofdecarbonisationinvestmentandwelfare.ThereisariskthatEuropeanpopulistparties,whicharehostiletomoredefencespending,willgainpopularityifpolicymakersfailtostriketherightbalance.TheEU’sgrowingcompetitivenessconcernswillpushtheEuropeanCommissiontoembarkonaderegulatoryagenda,includingonsomeclimateregulations.

TheUS“energydominance”strategymarksasignificantshiftawayfromdecarbonisationefforts,impactingenergymarketsandgeopoliticsin2025.GiventhegrowthpotentialofglobalLNGmarkets,USexports,alreadyapowerhouse,aresettoplayagreaterroleasabargainingchipduringtradenegotiations.USalliesarefacinggrowingpressuretoincreaseUSLNGimportstooffsetthreatsoftariffs.

TheUSdiplomaticbehaviour–outreachtoRussiaandclosertiestoSaudiArabia–underscoresashifttoamoreresource-drivenmindsetwhereenergymarketprimacyandbilateralnegotiationsareleveragedtoovercomeperceivedconstraintsofamultilateralorder.

CompetitionbetweentheUSandChinawillremainanenduringgeopoliticaldynamic,andariskfactorforbusinesses.Intheimmediateterm,tradeissueswilldominaterelations,butfundamentaldifferencesentailthattherelationshipwillfacelonger-terminstability.BothChinaandtheUSwillusetheireconomicpolicytofurthertheirstrategicinterests.

Thistrendwillbeechoedinpoliciesworldwide,riskingdeepertradefragmentationandgreatersupplychaincomplexityanddisruptions.

TheUSadministration’sstaunchlyunilateralistapproachtoforeignpolicyislikelytodrivefurthermultilateralengagementamongemergingeconomies.Whilemultilateralforums,suchasBRICS+1,havebeensteadilyexpanding,starklydivergentgoalsamongmemberswillcontinuetolimitcohesionandeffectivedecisionmaking.Nevertheless,thenumberofmulti-alignedpowersadeptatleveragingstrategicresourcesisgrowing.

CountriesacrossLatinAmerica,AfricaandSoutheastAsiahaveprovedabletonavigatebetweengreatpowers,therebysecuringadiverserangeofinvestmentsources.EffortsbytheEUandotherstode-risksupplychainsanddiversifyimportandexportmarketswillofferemergingeconomiesfurtheropportunitiesforcase-by-caseinternationalalignment.Yet,theUS’“AmericaFirst”agendawillplacesomeofthesemulti-alignedstrategiesundercloserscrutiny,potentiallyexposingthemtoeconomicbacklash.

Greatpowercompetitionalsocreatesopportunitiesforrisingmiddlepowerstoadoptamoreassertive,andattimes,moredestabilisingforeignandsecuritypolicy.InAfrica,thisdynamicmaterialisesinfiercecompetitionforcontrolovervitalcommoditiesandkeyinfrastructure.Inaddition,non-stateactorsmaycapitaliseontheresultinginstabilitytostrengthentheirterritorialcontrolandchallengefailedorfailingstates.

1AnexpandingintergovernmentalorganisationincludingBrazil,Russia,India,China,SouthAfricaandothers.

Theglobaleconomy

Globalgrowthisexpectedtocontinuetostabilise,althoughatasubduedlevel,withdivergentpathsandnear-termrisksbiasedtothedownsideduetopolicyuncertainty2.

Afterasequenceofshocks,theglobaleconomystabilisedin2024andclockedaGDPgrowthof2.7%y/y.Aroundtwo-thirdsofthegrowthcontributioncamefromemergingmarkets.TheUSgrewbrisklyat2.8%y/ywhileEuropedeliveredsubparexpansionat0.8%.Followingthesharpincreaseinfoodandenergypricesobservedin2022,globalinflationhasgraduallyfallentowards4%in2024,andmovedclosertocentralbanks’targetsinthedevelopedworld.Inresponse,severalkeycentralbankshaveloweredtheirpolicyinterestrates.Unemploymenthasremainedlowinmosteconomies,weatheringthequickestratehikecycleindecades.

Whileglobaleconomicmomentumpersistedatthebeginningof2025,theriseinprotectionistmeasures—triggeredbytheTrumpadministration'sshiftintradepolicy—hasthepotentialtosignificantlyaffecteconomicgrowth.Theeffectsarelikelytodifferacrosscountries,dependingontradeandfinanciallinkages,aswellaspolicyresponsestotrademeasures.OpeneconomiesliketheEUcountriesandNorwayarevulnerabletotariffsandothertraderestrictions.Protectionistpolicieshavebeenimplementeddespiteagreementonthepartofmostmainstreameconomiststhattheworldeconomybenefitsfromfreetrade.Itisoftenarguedthatfreetrademaximisestradingpartners’comparativeadvantage,increaseseconomicefficiency,andreducesconsumerprices.

IntheUS,economicgrowthisforecasttomoderatetoanaverageof2.0%overthenextfouryearsasconsumptioneases.Solidlabourproductivity

isexpected,onthebackofbusinessinvestmentwithinsoftwareandcomputerservices.TheEUlookstobeagrowthlaggardat1.4%annuallyfor2025-2028.

Europeansgrapplewithfinancialconstraintsduetodebtandcompetingspendingneeds,althoughthereisroomforsomeadditionalpublicspendinginselectedareas.Inaddition,theyfaceproblemsincludingstagnatingproductivity,insufficientinnovation,highenergycosts,andpoordemographics.Privateconsumptionshouldbeadriverforeconomicactivityduetoincreasedpurchasingpower.TheongoingslowdownoftheChineseeconomyislikelytocontinueandleadtoanestimated4%averagegrowthfrom2025to2028.Theeconomiclandscapeishamperedbyhighinvestment-drivenmanufacturingovercapacity,aweakpropertymarket,subduedconsumptionandahighdebtburden.Nevertheless,Chinawillpresumablycontributearoundone-thirdofoverallglobalgrowth.RobustperformanceisanticipatedinIndia,aidedbyconsumptionandinvestmentgrowth.

Theglobaleconomyisexpectedtoexpandatanaverageof2.6%peryearfrom2025-2028,whichwillbesomewhatweakerthanthe3.0%averagegrowthoverthelast15years.Inthenearterm,thebalanceofriskstotheoutlookisskewedtothedownside.Themainworryisthepotentialwidespreadimpactoftariffsanddisruptionstotradeandinvestment.Otherconcernsarepotentialescalationofgeopoliticaltensionsandfinancialmarketsvulnerabilityrelatedtothepaceofmonetarypolicyeasing.Upsiderisksaremorerelaxedfiscalpolicy,morepublicinvestment,andbusinessderegulation.

GDPgrowth(%changey/y)

10

8

6

4

2

0

2021 2022 2023 2024

India China World US EU

2TextfinalisedendofMarch2025

Source:OxfordEconomicsLimited2025

Highercostoffinancingchallengestheenergytransition

Theeraofcheapmoneyseeninthelastdecadehasended.Higherinterestratesshiftthedirectionofcapitalflowsandstrainstatefinances,challengingthedeploymentoftechnologiesandinfrastructurecrucialtolong-termclimategoals.

Theglobalshiftinmacroeconomicandfinancialconditionsoverrecentyearsthreatensthenecessarydeploymentofcapitaltoreachlong-termclimateobjectives.Financialmarketsforwardpricingandeconomicforecasters,suchastheIMF(2024),conveyexpectationsthatrealinterestrateswillstaymateriallyhigherthanthelowratesseenaftertheGlobalFinancialCrisisin2008-2009.Higherinterestratesandcostinflation,togetherwiththeEuropeanenergycrisis,havesignificantlycontributedto:

Integratedoilandgascompaniesscalingdowntheirdecarbonisationambitions..

100

75

50

25

0

Interestratesimpactonthelevelisedcostofelectricity(LCOE,USD)

4%

15%

14%

15%

Alargershareofgreenenergyandlowcarbonprojectsannouncedinpreviousyearsnotyetpassingfinalinvestmentdecision.

UK

Onshorewind

UK

Offshorewind

GermanySolarPV

USGasCCGT*

IEA(2024)reportinggrowthinenergytransitioninvestmentatathree-yearlowin2024.

Theenergytransitionimpliesmovingtowardsanenergysystemthatislessdependentonfossilfuelstooperate.However,low-emissiontechnologiestypicallyrequiregreaterandlongercapitalcommitmentsthantechnologiesreliantonfossilfuels.

Withgreatercapitalintensitycomeshighersensitivitytochangesinthecostofcapital.Asfinanci