Five Lessons From the IEA’s 2025 World Energy Outlook for the Transition Away from Fossil Fuels

What does the future of energy look like? It depends who you ask. Some insist oil and gas will dominate for decades, while others see booming renewables sealing the end of the fossil fuel era. The latest World Energy Outlook (WEO) from the International Energy Agency (IEA) shows a wide range of possible futures, to inform governments and investors in making decisions consistent with their goals.

WEO sets out scenarios, not predictions or forecasts. All start from the same assessment of the current landscape, which is one of rapidly growing energy demand and geopolitical tensions. Then they make different assumptions about technological and policy development.

The report models three core scenarios:

• the net zero emissions (NZE) scenario, showing what is needed to limit global warming to 1.5°C by 2100;
• the stated policies (STEPS) scenario, a “dynamic reading of today’s policy settings”, which leads to around 2.5°C warming;
• and the current policies scenario (CPS), which despite the name is more pessimistic than business as usual, as it assumes technological progress stalls and governments do not deliver their policies, resulting in about 2.9°C warming.

Below are the top five takeaways from the WEO 2025.

1. Net zero is cheaper than fossil fuel dependence

The net zero scenario has the lowest overall energy system costs and fossil fuel-dependent CPS the highest. You read that right.

While net zero involves higher upfront investments in clean technologies, it saves trillions of dollars in avoided fuel costs and shields consumers from price volatility. Lower fuel prices and efficiency improvements reduce importers’ fuel bills by more than two-thirds by 2035 from today’s levels. Household energy costs decline in advanced economies in the net zero scenario, and stay near present levels in emerging economies, as higher efficiency and electrification offset growing consumption.

The CPS is the most expensive scenario due to higher operating costs and fossil fuel rents. A high reliance on fossil fuels exposes economies to price shocks and volatility. The average oil price rises from around USD 65 a barrel today to USD 87 a barrel in 2035 and to USD 104/bbl in 2050 in the CPS, as costly frontier projects are developed. STEPS shows oil at USD 80 in 2035 and USD 76/bbl in 2050, while in NZE the price falls to USD 33/bbl in 2035 and USD 25/bbl in 2050. Gas prices in major importing regions such as the EU and East Asia are 30% to 40% higher by 2035 in CPS than STEPS.

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2. No one country can stop the renewables revolution

In all scenarios, renewables are the fastest-growing energy source, led by solar. Most of the energy demand growth—80%—comes from regions with abundant sunshine.

Drastic policy shifts in the US are having an impact, with 30% less installed renewable energy capacity projected by 2035 in this year’s STEPS compared to last year’s, and 60% fewer electric vehicles (EVs) on the road. The Trump Administration has slashed support for clean energy in the US, notably by removing tax credits for wind and solar power.

Despite this national policy rollback, the world is almost on track for the global target to triple renewable capacity by 2030, with STEPs projecting 2.6 times its 2022 level. China dominates this boom; in STEPS, China accounts for 45% to 60% of global renewable capacity additions over the next decade. Emerging markets outside China are projected to have 20% more EVs by 2035 than in last year’s STEPS, compensating for the US slowdown.

3. Peak fossil fuel demand is coming

The momentum behind renewable energy and EVs make a peak in global fossil fuel demand highly likely over the coming years. Under STEPS, global demand for both coal and oil peaks around 2030, while demand for gas peaks by 2035. Historically, wind and solar have grown faster than previous iterations of this scenario, as technological progress outpaced policy.

The global EV fleet grows sixfold by 2035 in STEPS, preventing over 10 million barrels per day (mb/d) of oil demand. Notably China, which accounted for more than two-thirds of global oil demand growth over the past decade, is expected to see demand peak before 2030.

The IEA is clear that despite having the word “current” in its name, CPS is not business as usual. It assumes that governments do not enact their stated policies and clean technology deployment flatlines.

In the net zero scenario, no new coal, oil, and gas fields are needed, and some close early. While some countries are deprioritizing emissions goals, the WEO shows that renewables are not just the green choice but the safe, cheap choice, particularly for net importer countries.

4. Beware of gas lock-in

The biggest uncertainties in the report are around gas. In IEA’s central case, STEPS, a wave of LNG terminals and new production flood the market, resulting in a 65 billion cubic meter surplus in 2030. “Questions still linger about where all this gas will go,” the IEA notes. Exporters are looking to emerging Asian economies, but many are going straight from domestic coal to renewables, rather than build new gas infrastructure only to be at the mercy of volatile global markets.

The fossil fuel-led CPS projects further LNG expansion, reaching 880 bcm in 2035, with the United States remaining the world’s largest gas producer.

In the net zero scenario, no new gas-fired power stations are built and global demand drops sharply, leading to a massive redundancy of LNG projects. Aggregate LNG capacity utilization would fall to 75% in 2030 and drop further to 50% by 2035, leaving a trail of stranded assets.

5. Climate action and energy access go together

Around 730 million people still live without electricity, and nearly 2 billion rely on polluting cooking methods that harm their health. Expanding access to modern energy is critical to development. The WEO contains two pathways to universal energy access: NZE achieves it by 2030, in line with UN sustainable development goals; and the Accelerating Clean Cooking and Electricity Services Scenario (ACCESS) by 2035 for electricity and 2040 for clean cooking.

In ACCESS, Liquid Petroleum Gas (LPG), a fossil fuel, accounts for the majority of clean cooking access. While LPG may be part of the solution for rural areas, the net zero scenario shows there is no need to sacrifice climate goals for development; the two go hand in hand.

IISD research shows that LPG subsidies benefit wealthy households more than the poor, strain public budgets and expose governments to volatile markets. Electric cooking powered by renewables and biogas offers a more transformative solution. This is where governments and funders should focus their resources.

Conclusion

One scenario missing from this year’s WEO was the announced pledges scenario (APS). Since 2021, this has shown what will happen if countries’ national climate plans and net zero targets are met in full. Countries were due to submit national climate plans covering the period 2031-35 this year, but several major economies left it late or have yet to do so. The IEA said it would incorporate these pledges in future analysis. However, these may not substantially change the outlook: Climate Action Tracker has warned that submissions to date have not bent the temperature curve and stronger action is needed.

The good news from this year’s WEO is that renewables are booming, and speeding up the clean energy transition serves multiple policy objectives. Whether the national priority is to bring down the cost of living, expand energy access, reduce import dependence or prepare for the reshaping of energy markets, NZE shows the way.