Accelerating the Energy Transition 2025

In areas such as clean hydrogen, sustainable aviation fuels (SAF) and carbon management, especially in hard-to-abate sectors, the business case for investment remains too weak to support commercial-scale adoption. Understanding and articulating the systemic value of investment beyond molecules and electrons can help inform policies on pricing, subsidies and mandates, making the business case more viable. A key challenge of the energy transition is that while economic benefits are broadly shared over time, the costs and investments are borne upfront by a limited set of stakeholders. The business and economic cases for the energy transition FIGURE 1 Planned economies pathway Business case for the energy transition “Mechanism for market economies” Conditions for businesses to invest Key enablers: pricing, confidence in demand, cost of capital, policy credibilityPrivate sector objectivesEconomic case for the energy transition “The need for transition” Broader socio-economic benefits Key enablers: public support, technology readinessGovernment actionsIn state-directed economies, the economic case itself can drive government-led action, with resources mobilized to achieve broader societal benefits and competitive advantage, regardless of individual company profitability through a business case. Effective government policies and regulations in these economies guide markets towards associated clean energy infrastructure investments and objectives. For example, in China, centralized policies such as five-year plans allow the government to strategically directly and mobilize resources towards large- scale renewable deployment. This approach has driven down technology costs domestically and internationally, giving China a competitive edge in global energy technology markets. At the same time, the business case matters for private sector companies making investment decisions. The approaches differ across economies. The US and Europe depend on a strong business case to actualize the economic case. The US relies on subsidies, tax breaks and incentives (“carrots”) while Europe’s more regulation-orientated approach (“sticks”) creates different market dynamics and, at times, greater fragmentation. Additional factors such as higher interest rates, capital costs, lengthy permitting and administrative processes, supply chain and trade constraints, and a growing skills gap further impact a business’s ability to profitably deploy new projects, underscoring the complexity in aligning the business and economic cases in these regions. A key challenge of the energy transition is that while economic benefits are broadly shared over time, the costs and investments are borne upfront by a limited set of stakeholders. To bridge this gap, mechanisms are needed to translate societal benefits into financial incentives that attract investors – a complex but important task.Unlocking more private capital requires offering attractive, risk- adjusted return opportunities tailored to diverse investor profiles. Source: World Economic Forum. Accelerating the Energy Transition: Unpacking the Business and Economic Cases 6