OvercomingtheEnergyTrilemma:SecureandInclusiveTransitionsIEAreporttoG7LeadersINTERNATIONALENERGYAGENCYTheIEAexaminestheIEAmemberIEAassociationfullspectrumcountries:countries:ofenergyissuesincludingoil,gasandAustraliaArgentinacoalsupplyandAustriaBrazildemand,renewableBelgiumChinaenergytechnologies,CanadaEgyptelectricitymarkets,CzechRepublicIndiaenergyefficiency,DenmarkIndonesiaaccesstoenergy,EstoniaKenyademandsideFinlandMoroccomanagementandFranceSenegalmuchmore.ThroughGermanySingaporeitswork,theIEAGreeceSouthAfricaadvocatespoliciesthatHungaryThailandwillenhancetheIrelandUkrainereliability,affordabilityItalyandsustainabilityofJapanenergyinitsKorea31membercountries,Lithuania13associationLuxembourgcountriesandbeyond.MexicoNetherlandsThispublicationandanyNewZealandmapincludedhereinareNorwaywithoutprejudicetothePolandstatusoforsovereigntyoverPortugalanyterritory,totheSlovakRepublicdelimitationofinternationalSpainfrontiersandboundariesandSwedentothenameofanyterritory,Switzerlandcityorarea.RepublicofTürkiyeUnitedKingdomUnitedStatesTheEuropeanCommissionalsoparticipatesintheworkoftheIEASource:IEA.InternationalEnergyAgencyWebsite:www.iea.orgOvercomingtheEnergyTrilemma:SecureandInclusiveTransitionsRationaleIEAreporttoG7leadersRationaleSince2022,inthecontextoftheglobalenergycrisis,theG7hasrespondedstronglyandmadeamassivepivottowardsbuildingthenewglobalcleanenergyeconomythroughcollectivecommitmentsandmajorcountry-levelpolicyshifts.TheInternationalEnergyAgency(IEA)hasbeenmandatedbyG7Leaderstodevelopadviceonhowtoaddressthetriplechallengesofenergysecurity,climatechangeandrisinggeopoliticalrisksthroughconcreteactionsthatlowerexposuretoimmediateriskswhilemovingtowardsamoreresilientandsustainableenergysystemforthefuture.Diversityisakeywatchword:diverseenergysourcesandsupplies,diversecleanenergysupplychains,includingmanufacturingandcriticalminerals.AsJapanishandingovertheG7PresidencytoItaly,theIEAispleasedtotracktheprogressofG7commitmentsonenergysecurityandclimateactionstowardsa1.5oC-alignedpathway,andtoproviderecommendationsonthefutureprioritiesfortheG7.TheseincludeguidanceontheimplementationofglobalcommitmentsandopportunitiestobuildbridgesbetweenadvancedandemergingeconomiesacrosstheG7,G20andtheConferenceofParties(COP)processes.ThisreportintendstorespondindetailtotheinvitationbytheG7LeadersMeetinginHiroshimainMay2023expressedinitsG7HiroshimaCommuniqué(paragraph25):“Whileacknowledgingvariouspathwaysaccordingtoeachcountry’senergysituation,industrialandsocialstructuresandgeographicalconditions,wehighlightthattheseshouldleadtoourcommongoalofnetzeroby2050atthelatestinordertokeepalimitof1.5°Cwithinreach.Inthisregard,weinvitetheIEAtomakerecommendationsbytheendofthisyearonoptionshowtodiversifythesuppliesofenergyandcriticalmineralsaswellascleanenergymanufacturing.Throughthis,togetherwithourpartners,weseektoholisticallyaddressenergysecurity,climatecrisis,andgeopoliticalriskincludingtheexpansionofglobaluseofrenewableenergyinordertoachievenet-zeroemissionsby2050atthelatestandkeepalimitof1.5°Ctemperaturerisewithinreach.”PAGE3IEA.CCBY4.0.OvercomingtheEnergyTrilemma:SecureandInclusiveTransitionsDefiningandtacklingthetrilemmaIEAreporttoG7leadersDefiningandtacklingthetrilemmaTheenergypolicytrilemmahastraditionallybeenthatofmeetingsustainability,securityandcompetitivenessgoals.ThemandatefromtheG7LeadersCommuniqueusestheconceptoftrilemmatodescriberiskstoenergysecurity,climateandgeopoliticalstability.Thisdefinitioniswell-justifiedbytoday’sheightenedsupplysecurity,climateandgeopoliticalconcerns.Newenergysecurity,geopoliticalandclimaterisksNewriskshaveemergedfortheenergysectorsincetheCovid-19pandemic,withtheRussianFederation’s(hereafterRussia)invasionofUkraine,theglobalenergycrisisof2022/23andtoday’sinstabilityintheMiddleEast.TheseeventshavereinforcedtheneedfortheG7toremainstronglycommittedtoacomprehensiveandmodernisedenergysecurityagendathataddressescurrentandfuturerisksastheenergysystemundergoesaprofoundtransformation.EnergysecurityconcernswereheightenedbytheglobalenergycrisistriggeredbyRussia’sinvasionofUkraine.Naturalgaspriceshitall-timehighsafterRussiacutgassuppliestoEurope,asdidcoalprices.TheIEAactivatedco-ordinatedemergencyoilstockreleases,representingonlythefourthandfifthcollectiveactionsundertakenbytheIEAsinceitscreation,witheachrepresentingthelargestinitshistory.Geopoliticaltensionscontinuetobeamajorriskfactorforenergymarkets.Inparticular,Russia’sinvolvementinactionstocontroloilsupplybytheOPEC+alliancehastightenedglobaloilmarketsandcreatedupwardpressureonoilprices.AsuddenescalationingeopoliticalriskintheMiddleEast,aregionaccountingformorethanone-thirdoftheworld’sseaborneoiltrade,hasputoilmarketsonedge.Inlinewithitsmissiontoupholdenergysecurity,theIEAwillcontinuetomonitorenergymarketscloselythroughwinter2023/24andbeyond.Asever,theAgencystandsreadytoactifnecessarytoensuremarketsremainadequatelysupplied.Drasticspikesinoil,gasandcoalpricesin2022ledtohigherelectricitycostsinmanypartsoftheworldduringthepasttwoyears.InEurope,electricitypricesin2022reachedlevelsfourorfivetimesabovehistoricallevels.Thesepricehikesturnedouttobeaveryheavyburdenforenergyconsumers,andG7governmentsputinplaceprotectivemeasurestoshieldthemostvulnerable.InmanyG7PAGE4IEA.CCBY4.0.OvercomingtheEnergyTrilemma:SecureandInclusiveTransitionsDefiningandtacklingthetrilemmaIEAreporttoG7leaderseconomies,energypricesremainakeydriverforinflationandcloudtheoutlookforfinancialmarketsandinvestmentasweturnto2024.Concernsovertheclimatecrisishavedeepened.2023issettobethehottestyearonrecord.Globalenergy-relatedcarbondioxide(CO2)emissionsdeclinedin2020asaresultoftheCovid-19pandemicbutreboundedsharplyin2021andgrewbyafurther1%in2022.Globaldemandforbothcoalandoil,thetwolargestsourcesofenergy-relatedCO2emissions,isexpectedtoreachanewall-timehighin2023.Extremeweathereventssuchasheatwaves,droughts,wildfires,tropicalstormsandfloodsweremorefrequentthanever.ThelatestUnitedNationsIntergovernmentalPanelonClimateChange(IPCC)reportshowsthatthishasledtowidespreadadverseimpactsandrelatedlossesanddamagestonatureandpeople.Vulnerablecommunitieswhohavehistoricallycontributedtheleasttocurrentclimatechangearedisproportionatelyaffected.Inthiscontext,theGlobalStocktakeagreedatCOP28inDecember2023setsoutimportant2030targets,whicharealignedwithIEAanalysis,notablythetriplingofglobalrenewableenergycapacity,doublingtherateofenergyefficiencyimprovements,reducingmethaneemissionsandtransitioningawayfromfossilfuels.AnewcleanenergyeconomyisemergingfastG7countriesareamongthegloballeadersinthedeploymentofcost-competitivecleanenergytechnologiesthatrepresentlastingsolutionstotoday’schallenges.Arapidpick-upincleanenergydeploymentiskeepingthedooropentoa1.5°Calignedpathway,althoughmuchmoreneedstobedonetogetontrack.Moreover,theemergingcleanenergyeconomyalsobringswithitsomepotentialvulnerabilitiesthatgovernmentsneedtoaddress.Cleanenergycanplayavitalroleinaddressingenergysecurityconcerns.TheIEA’sRenewableMarketUpdateinJune2023estimatedthatelectricityconsumersintheEuropeanUnionhavesavedEUR100billionbetween2021and2023duetoadditionalelectricitygenerationfromnewlyinstalledsolarPVandwindcapacity.NewwindandsolarPVinstallationshavedisplacedanestimated230terrawatthours(TWh)ofmoreexpensivefossilfuelgenerationintheperiod,leadingtoareductioninwholesaleelectricitypricesonallEuropeanmarkets.Withoutthisadditionalrenewablepowergeneration,theaveragewholesalepriceofelectricityintheEuropeanUnionin2022wouldhavebeen8%higher.PAGE5IEA.CCBY4.0.OvercomingtheEnergyTrilemma:SecureandInclusiveTransitionsDefiningandtacklingthetrilemmaIEAreporttoG7leadersFigure1SavingsinelectricitycoststhankstosolarPVandwindadditionsintheEuropeanUnion,2021-2023blnEUR100Scenario500EUR/MWh9045080400703506030050250402003015020100105001234567891011121234567891011121234567891011120202120222023GermanyFranceSpainNetherlandsPolandItalyRestofEUActualav.price(rightaxis)IEA.CCBY4.0.Note:CumulativecostsarecalculatedbasedonEUwholesalespotelectricityprices.Source:IEA(2023),RenewableEnergyMarketUpdate–June2023.Figure2GlobalenergysectorCO2emissionsinthepre-ParisAgreementBaselineScenarioandtheStatedPoliciesScenario,2015-203045GtCO₂Pre-ParisBaselineOther40ElectricvehiclesWindSolarPV35STEPS-202330201520222030IEA.CCBY4.0.Source:IEA(2023),WorldEnergyOutlook2023.Suchcontributionsfromlow-emissionstechnologiesarechangingtheenergyoutlook,eveniftheyarenotyetenoughtoalignwithglobalclimategoals.TheIEA’sWorldEnergyOutlook2023highlightsthattoday’senergyandclimatepolicysettingsarealreadysettoleadtoapeakindemandforeachofthefossilfuelsbefore2030andapeakinglobalenergy-relatedCO2emissionsby2025.Thischangeintheoutlookistheresultofeffortsbygovernmentstopromotecleanenergytechnologiessuchasrenewables,energyefficiencyandheatpumps,notonlyfortheclimatebutalsoforenergysecurityandaffordabilityobjectives.PAGE6IEA.CCBY4.0.OvercomingtheEnergyTrilemma:SecureandInclusiveTransitionsDefiningandtacklingthetrilemmaIEAreporttoG7leadersAnalysisintheIEA’sEnergyTechnologyPerspectives2023alsounderscoresthatmanycleanenergysupplychainsexhibitahighdegreeofgeographicalconcentration,bothfortheminingandprocessingofcriticalmineralsandultimatelyinthemanufacturingofcleantechnologies,manyofwhichrelyoncriticalminerals.Thisanalysishighlightsthecrucialimportanceofresilientanddiversesupplychains.Today,thePeople’sRepublicofChina(hereafterChina)leadsglobalcleanenergyinvestmentandhasadominantpositionintherefiningandprocessingofcriticalminerals,aswellasinthemanufacturingofrelevantcleanenergytechnologies.Figure3Shareoftopthreemanufacturingregionsforkeycleanenergytechnologiesin2023and2030basedonannouncedprojects100%80%60%40%20%0%ProjectCurrentProjectCurrentProjectCurrentProjectCurrentProjectCurrentpipelinepipelinepipelinepipelinepipelineSolarPVWindBatteriesElectrolysersHeatpumpsChinaVietNamIndiaEuropeanUnionUnitedStatesOtherIEA.CCBY4.0.Source:IEA(2023),WorldEnergyOutlook2023.Figure4Geographicconcentrationofrefinedkeymineralsupplyin2022andin2030basedonannouncedprojects100%80%LithiumchemicalRefinednickelRefinedcobalt60%40%Restofworld20%CanadaFinlandRussiaArgentinaChileChinaIndonesia202220302022203020222030IEA.CCBY4.0.Source:IEA(2023),WorldEnergyOutlook2023.Japan’sG7PresidencyhasstrengthenedtheG7’scleantechnologymanufacturingagenda.TheimplementationoftheG7CleanEnergyEconomyPAGE7IEA.CCBY4.0.OvercomingtheEnergyTrilemma:SecureandInclusiveTansitionsDefiningandtacklingthetrilemmaIEAreporttoG7leadersActionPlanremainsaprioritytomaintainhighinvestmentandeffortstodiversifyandstrengthenglobalcleanenergysupplychains.TheimplementationoftheG7CleanEnergyEconomyActionPlanisanimportantleverforthenextwaveofmanufacturinginvestment.G7partnershipstosupporttransitionsinemergingmarketanddevelopingeconomiesDeliveringtheemissionsreductionstoachievenetzeroby2050willrequirehighlevelsofco-operationandco-ordinationacrossallgeographies,jurisdictionsandindustries,aswellasunprecedentedlevelsoffinanceandtechnologysharing.Theupdated2023IEANetZeroRoadmapshowsthatleadershipbyadvancedeconomies,notablytheG7,cancreatemorefavourableconditionsforEMDEstomakeprogressintheirenergytransitions.Intheupdatednetzeropathway,advancedeconomiesreachnetzeroemissionssoonerthanemerginganddevelopingeconomies(EMDEs).TheG7needstoworkcloselywithEMDEs,includingtheG20andotherfora–demonstratinganewcommitmenttointernationalco-operationinsupportofenergyfordevelopment,acknowledgingthatpathwaysforenergytransitionswillvarybycountryduetosuchfactorsasdifferentresourceendowmentsandstagesofdevelopment.Behindthesingleglobalgoaltoachieveasecure,affordableenergytransitionliesamultitudeofdifferentnationalapproaches.EMDEsneedmuchstrongersupportinplanningandachievingcleanenergytransitionsandeconomicdevelopmentinawaysuitedtotheircircumstances.Advancedeconomiesandmultilateralinstitutionsshouldplayamajorrole–particularlywhenitcomestomobilisingasignificantincreaseininvestmentinEMDEs.IntheIEA’snetzeropathway,globalcleanenergyspendingrisesfromUSD1.8trillionin2023toUSD4.5trillionannuallybytheearly2030s,withthelargestincreasesseeninmanyEMDEsoutsideChina.Thisdrivesmultiplebenefitsforsustainablegrowth,includingcleanerair,industrialopportunitiesandcleanenergyemployment.ThiscanbefacilitatedbyG7leadershipanddialoguewithmajorenergyconsumersandproducersinstandard-settingfortradeinzeroandnear-zeroemissionscommoditiesandgreaterco-operationontechnologytransferandintellectualpropertyissues.Inaddition,theG7needstoredoubleitssupportfortheenergy-relatedSustainableDevelopmentGoals,sothatallpeopleandcommunitieswhocurrentlydonothaveaccesstoelectricityorcleancookingachievethisby2030.AtCOP28,theIEAhascalledforactiononcleancooking,basedonavisionoutlinedjointlywiththeAfricanDevelopmentBankin2023andwillhostamajorSummiton14May2024inParistoleverageahistoriccommitmenttomostconsequentialinvestmentsinAfrica'sandtheworld'sfuture.PAGE8IEA.CCBY4.0.OvercomingtheEnergyTilemma:SecureandInclusiveTransitionsDefiningandtacklingthetrilemmaIEAreporttoG7leadersCleanenergyinvestmentsinemergingmarketanddevelopingeconomiesToday,cleanenergyinvestmentisconcentratedinafewmarketsandhasmajorshortfallsinmostEMDEs.OftheUSD770billioninvestedeachyearincleanenergyinEMDEs,mostofitisconcentratedinafewcountries.Two-thirdsofthetotalisinChina,andmorethanthree-quartersisinthreecountries:China,IndiaandBrazil.Investmentbarriersvarybycountrybutincludehigherinterestrates;weakpolicyframeworksandmarketdesigns;insufficientgridinfrastructure;financiallystrainedutilities;andthehighcostofcapital.Muchmoreneedstobedonebytheinternationalcommunitytodriveinvestmentinlower-incomeeconomiesandmobiliseprivatesectorinvestment.Figure5Averageannualcleanenergyinvestmentneedsbyregion/countryinthenetzeroemissionsscenario,2022-20502.0TrillionUSDOtherEMDEChinaAdvancedeconomies1.5CleanenergysupplyGridandstorage1.0Low-emissionspower0.5Energyefficiencyandend-use20222026-302046-5020222026-302046-5020222026-302046-50IEA.CCBY4.0.Source:IEA(2023),WorldEnergyOutlook2023.ThenewglobalenergyeconomyrepresentsahugeopportunityforgrowthandemploymentinEMDEs,accordingtothespecialreportonScalingUpPrivateFinanceforCleanEnergyinEmergingandDevelopingEconomies,publishedbytheIEAandtheInternationalFinanceCorporation(IFC)in2023.PublicandprivatespendingincleanenergyinEMDEsneedstomorethantriplefromUSD770billionperyearin2022toUSD2.2-2.8trillionperyearbytheearly2030s.Themosturgentinvestmentneedswillbeincleanelectrification,gridinfrastructureandenergyefficiency.Africaaccountsforaround20%oftheworld’spopulationbutattractslessthan2%ofitsspendingoncleanenergy.EnergyinvestmentinAfricahasbeenfallinginrecentyears.AchievingAfricancountries’energydevelopmentandclimategoalswillrequireenergyinvestmenttomorethandoublefromtoday’slevelsby2030,atwhichpointcleanenergywouldaccountforovertwo-thirdsofenergyinvestmentPAGE9IEA.CCBY4.0.OvercomingtheEnergyTrilemma:SecureandInclusiveTransitionsDefiningandtacklingthetrilemmaIEAreporttoG7leadersacrosstheregion.ThecostofcapitalinAfricancountriesforcleanenergyprojectsisoftenmorethantwotothreetimeshigherthaninNorthAmericaorEurope.Concessionalfundscanplayavitalroleinscalingupinvestmentsandmobilisingprivatecapital.InarecentreportonFinancingCleanEnergyinAfrica,theIEAestimatedthatUSD28billioninconcessionalcapitalisrequiredtomobiliseprivateinvestmentinAfrica’scleanenergysectorsby2030,morethanatenfoldincreasefromtoday.Concessionalfinanceprovidersareabletodrawonarangeofevolvingcreditenhancementsandde-riskingmechanisms,suchasguaranteesandinsurance,risksharingandpoolingproducts,liquiditysupport,andcurrencyhedging.Diversificationoffossil-fueldependentpowersystemsandeconomiesSecureandorderlyenergytransitionswillonlyunfoldwithcountriesworkingtogetherco-operativelyandinawaythatrecognisestheirsharedinterests.Thisincludescountriesthatarehighlydependentonfossilfuels,includingpowersystemsthatrelyheavilyoncoalandthosewithmajoroilandgassupplychains.Comprehensive,integratedpoliciesaddressingemissionsfromallsourcesareessentialforclimateaction,butreducingemissionsfromcoalneedstobeafirst‐orderpriority.Everypathwaythatavoidssevereimpactsfromclimatechangeinvolvesearlyandsignificantreductionsincoal‐relatedemissions.Internationalco‐operation,publicfinancialsupportandwell‐designedintegratedapproachesthatincorporatetheneedforfairandinclusivetransitionswillbeessential.CoaltransitionsarecomplicatedbytherelativelyyoungageofcoalplantsacrossmuchoftheAsiaPacificregion.PlantsinEMDEsinAsiaareonaveragelessthan15yearsoldcomparedwithmorethan40yearsinNorthAmerica.Industrialfacilitiesusingcoalaresimilarlylonglived.Forcoal‐dependentheavyindustriessuchassteelandcement,theyear2050isjustoneinvestmentcycleaway.Governmentsandinternationalinstitutionsneedtoremoveroadblocksthatcanpreventmorecost‐effectiveandcleaneroptionsfromenteringtheenergysystem.Animportantconditionistheeffortsmadetowardsendingtheconstructionofnewunabatedcoal‐firedpowerplantswhilesupportingcoaltransitions.Packagingtogetherdifferentelementsofcoaltransitionsinwaysthatincludesocialelementsaswellasarapidscale-upincleanenergy,aswiththeJustEnergyTransitionPartnershipsinSouthAfrica,IndonesiaandVietNam,arepromisingwaystobuildmomentum,mobiliseinternationalsupportandensureoverallpolicycoherence.Inaworldwheredemandforenergyservicesisincreasing,resource-richcountrieswillcontinuetoseekvaluefromtheirendowments,hydrocarbonorotherwise,andimporterswillvaluesecure,affordableenergysupplies.ThetaskaheadistomakePAGE10IEA.CCBY4.0.OvercomingtheEnergyTrilemma:SecureandInclusiveTransitionsDefiningandtacklingthetrilemmaIEAreporttoG7leadersthesequestscompatiblewithnetzerotransitionsandthegatheringpaceofchangeinglobalenergy.Therearefourmainroutestopromoteeffectiveinternationalco-operationinthisarea:ensuringtherightmarketsignals;co-operatingtounlockinvestmentinlow-emissionsfueltrade;collaborationontechnology;andbilateralandmultilateralengagement.Thereareseveralexistingpolicyeffortslookingtopromoteactionintheseareas.Forproducereconomies,effectivemulti-yearprogrammesandpartnershipscouldbedesignedwiththecloseinvolvementofinternationalfinance,includingmultilateraldevelopmentbanks.Increasingtheresilienceofmajorproducereconomies,particularlyasenergytransitionsgatherpace,isamatterofimportancebeyondtheproducersthemselves.Thecapitalgeneratedbyenergytradecanmakeamajorcontributiontowardsthelarge-scalechangesrequiredinproducereconomies,whilehelpingtoensurethatconsumershaveastablesupplyofenergyastheymaketheshifttoanetzeroemissionsfuture.Onekeyareainwhichimportingandexportingcountriescanworktogetheristacklingmethaneemissions.Ifconsumereconomiessendsupportorsignalstoproducereconomies–whichcouldtaketheformoffinancialandtechnicalassistance,financialpenaltiessuchasCO2bordertaxes,orimportrestrictions–producereconomieswouldhaveaclearincentivetoreducetheseemissions.Theoilandgasindustrycouldplayanimportantroleinenergytransitions.NewIEAanalysisonthesector’sroleinnetzerotransitionshighlightsthatsome30%oftheenergyconsumedin2050inadecarbonisedenergysystemcomesfromtechnologiesthatcouldbenefitfromtheindustry’sskillsandresources–includinghydrogen,carboncapture,offshorewindandliquidbiofuels.However,thiswouldrequireastep-changeinhowthesectorallocatesitsfinancialresources.TheoilandgasindustryinvestedaroundUSD20billionincleanenergyin2022,orroughly2.5%ofitstotalcapitalspending.PAGE11IEA.CCBY4.0.OvercomingtheEnergyTrilemma:SecureandInclusiveTransitionsEnergysecurityinenergytransitionsIEAreporttoG7leadersEnergysecurityinenergytransitionsAchievingnetzeroemissionsgoalsultimatelyboostsglobalenergysecurity,butthepathwaystogetthereareunlikelytobelinearorsmooth.EnergytransitionsrequireaddingnewcleanenergyinfrastructurewhilereducingrelianceonexistingCO2-emittinginfrastructure,andmanagingtheco‐existenceofthesesystemsischallenging,especiallyduringatimeofelevatedgeopoliticalrisks.TheneedtolookatabroadrangeofenergysecurityissuesduringenergytransitionswasacorepillarofnewmandatesgiventotheIEAatitsMinisterialmeetinginMarch2022.TheMinisterialCommuniquérecognisedtheneedfortheIEAtoremainvigilantinanincreasinglycomplexenergysecurityenvironment.Buildingoncoreprinciples–notablythebenefitsofdiversifiedenergysources,supplies,routesandmeansoftransport–thecommuniquéreflectsonevolvingsecurityissuesforoil,gasandelectricitymarketsandinfrastructureaswellasnewareassuchasclimateresilience,cleanenergysupplychainsandcriticalminerals.Somecoreelementsofanewapproachtoenergysecurityareoutlinedbelow,withparticularattentiontotheimportanceofdiversifiedandresilientcleanenergysupplychains.(1)RemainvigilantontraditionalriskstoenergysecurityTraditionalriskstoenergysecurityevolvebutdonotdisappearinenergytransitions,soconstantvigilancealongwithwell-designedsecuritypoliciesandsafetynetsremainessential.Today’svolatilesituationintheMiddleEastcomesagainstabackdropofdelicatelybalancedglobaloilmarkets.Itshouldalsobenotedthatinthelongterm,asoilconsumptiondeclinesduetotheprogressincleanenergytransitions,theshareofproducersintheMiddleEastregionwillincreaseinglobaloilsupply.PAGE12IEA.CCBY4.0.OvercomingtheEnergyTrilemma:SecureandInclusiveTransitionsEnergysecurityinenergytransitionsIEAreporttoG7leadersFigure6WorldoilproductionandOPECsharein2010and2022andscenariosfor2030and2050mb/d10053%60%Worldoil90production8043%45%50%7040%35%35%OPECshare6036%37%40%5020224030%302020%10010%2010203020502030205020302050STEPSAPSNZEIEA.CCBY4.0.Note:STEPS=statedenergypolicyscenario,APS=announcedpledgesscenario,NZE=netzeroemissionsscenario.Source:IEA(2023),WorldEnergyOutlook2023.Naturalgasisexpectedtoplayaroleinimportantaspectsofenergytransitions,includingasasourceofflexibilitytoensuretheintegrationofvariablerenewablesintoenergysystemsandtomeetgrowingenergydemandandindustrialisationneedsinEMDEs.ThecontextforthesecurityofnaturalgassupplyhasalsoshifteddramaticallyinrecentyearsasaresultofRussia’scutstopipelinedeliveriestoEurope,highlightingtheimportanceofwell-functioningliquefiednaturalgas(LNG)markets.Enhanceddialoguebetweenproducersandconsumers,transparentinformationsharing,andreliableshort-andmedium-termanalysis,takingintoaccountriskfactors,remainsimportantforthestabilityofoilandgasmarkets.GasreservemechanismsandpolicymeasuresincludingjointprocurementandflexibleuseofLNGstoragetanks,tailoredtoeachcountry'scircumstances,couldalsocontributetoglobalmarketstabilisation.(2)Ensurewell-sequencedandco-ordinatedactionsacrossenergydemandandsupplyTheglobalenergycrisiswasnotacleanenergycrisis,butithasfocusedattentionontheimportanceofensuringrapidandorderlytransitions.Orderlytransitionsrequireawell-balancedsetofactionsacrossenergydemandandsupply.Economicdriversincreasinglysupporttheadoptionofmaturecleanenergytechnologies,butco-ordinatedactionsarestillessentialtoensureasmoothtransition.Consumptionpatternswillnotshiftatscaleunlessaffordableandreliablelow-emissionsoptionsandmoreefficienttechnologiesarereadilyavailableinthemarket.Supplierswillnotcommittolarge-scaleinvestmentsunlesstheyhavereliableexpectationsofrisingdemandforlow-emissionsPAGE13IEA.CCBY4.0.OvercomingtheEnergyTrilemma:SecureandInclusiveTransitionsEnergysecurityinenergytransitionsIEAreporttoG7leadersproductsandservices.Allmarketparticipantsrelyonadequate,modernandsmartinfrastructure,notablyelectricitygrids,tobringthemtogether.Thefasteranewcleanenergyeconomycanemergetomeetrisingglobaldemandforenergyservices,thesoonerfossilfueldemandandemissionswillstarttodecline.Trulystructuralandsustainablesolutionsforensuringmarketstabilityandmeetingclimatetargetsincludeimprovingenergyefficiency,broaderandfasterelectrificationofend-usesectorsincludingtransportandindustry,andthedevelopmentanddeploymentoflow-emissionsfuels.TheIEA’supdatedNetZeroRoadmapseesthistechnologyuptakeresultingina25%declineintheuseoffossilfuelsin2030inapathwayalignedwithlimitingglobalwarmingto1.5°C.G7effortstophaseoutinefficientfossilfuelsubsidiesthatencouragewastefulconsumptioninlinewiththeG7pledgesneedtocontinueevenmoreconsistently.Greaterenergyefficiencyprogressisakeysolutionforthis.(3)Prioritiseenergyefficiencyacrossend-usesectorsEnergyefficiencyisanindispensabletooltoaccomplishmultiplepolicyaims,easingpressuresonconsumersandreducingtheirvulnerabilitytohighandvolatilefuelprices,cuttingrelianceonfuelimports,anddrivingprogresstowardsclimategoalswhilesupportingjobsandeconomicgrowth.However,therateofimprovementinglobalenergyefficiencyhasslowedoverthepastdecadeandneweffortsareneededtoward2030todoublethecurrentpaceofprogress.TheIEA’sGlobalEnergyEfficiencyConference2023andtherelatedVersaillesStatementhighlightedapathforwardforgovernments,whichshouldimplementeffectivepolicypackagesthatmayincludemeasuresrelatedtobehaviourchange,sufficiencymeasures,andtechnologicalimprovementssuchasdigitalisationanddecarbonisedheating.Withthepublicsectorleadingbyexample,othersectorsincludingindustry,services,buildings,transportandagriculturewillallhaveanimportantroletoplayinimprovingenergyefficiencyanddrivinginvestment.Lessonsfromtheglobalenergycrisisconfirmthatmanagingdemandcanbeapowerfultooltocutenergybills,emissionsandenergyconsumption.Manycountrieshavesustainedthesebehaviouralchangesandenjoystillalowerenergyconsumptionthanbeforethecrisis.Demand-sideresponsesaremoreimportantthaneverduringenergytransitionsashighfuelpricesmaynotreadilytriggernewsupplyinvestments.PAGE14IEA.CCBY4.0.OvercomingtheEnergyTrilemma:SecureandInclusiveTransitionsEnergysecurityinenergytransitionsIEAreporttoG7leaders(4)ScaleupcleanenergyinvestmentinordertoreducefossilfueluseThelatestIEAestimatessuggestthatsomeUSD2.8trillionhasbeeninvestedinenergyin2023,withUSD1.8trilliononcleanenergyandUSD1trilliononunabatedfossilfuelsupplyandpower.Fiveyearsago,cleanenergyandfossilfuelsattractedthesamelevelofinvestmentofaroundUSD1trillion.Theriseincleanenergyinvestmentisaverypositivesignbutcomeswithsomecaveats.First,today’scleanenergyinvestmentsremainwellshortoftheamountsneededtoalignwiththenetzeroemissionsby2050pathway,whichrequiresspendingofwelloverUSD4trillionannuallyby2030.Second,thereareprofoundgeographicalimbalancesinthisinvestment,withalmostalloftheincreasesinrecentyearscominginadvancedeconomiesandChina.Third,therearewidevariationsacrosssectors.SometechnologiessuchassolarPVandelectricvehiclesaremovingatapacethatisalignedwitha1.5°Cpathway,butmanyothersarenot.TheIEAhashighlightedgridinvestmentsasanareaofparticularconcern.Figure7HistoricalinvestmentinenergybenchmarkedagainstneedsinIEAscenariosin203054TrillionUSD(2022)NZENaturalgas3APSOil2IEA.CCBY4.0.STEPSCoal1STEPSNZEAPS2030203020302023e20222021202020192030203020302023e2022202120202019CleanenergyFossilfuelsSource:IEA(2023),WorldEnergyInvestment2023.IEA.CCBY4.0.Rapidincreasesincleanenergyspendingwillreducetheinvestmentrequiredinthefossilfuelsector.Asthingsstand,oilandgasinvestmentisexpectedtomorethandoublethelevelsneededin2030intheIEA’sNetZeroEmissionsby2050(NZE)Scenario,andcoalinvestmentsaresixtimeshigher.Changestodemandareimportant,assimplycuttinginvestmentsinfossilfuelswillnotgettheworldontrackforthisscenariobutleadtohigherpricesandvolatility.Withoutdemand-sideaction,thereisalsoseriousriskoffossilfueluselock-inwhichwouldmakethenetzeropathhardertoachieve.GovernmentsshouldimplementPAGE15OvercomingtheEnergyTrilemma:SecureandInclusiveTransitionsEnergysecurityinenergytransitionsIEAreporttoG7leadersmuchstrongerandeffectivemeasurestoacceleratelow-emissionsdeployments,reducefossilfueldemandandsendmuchclearersignalstomarkettoguideinvestors.(5)PutelectricitysecurityattheheartoftransitionsInthecaseofelectricitymarkets,ensuringtheavailabilityofsufficientdispatchableresourceshasbecomethemajortestforensuringthereliabilityofpowersystemsthathaveincreasingvariablerenewablesources.Thevastmajorityofdispatchableresourcescurrentlyarefossilfuelthermalpowerplants.Theseflexibilityresourcesshouldalsobedecarbonisedwithbatteries,demand-sideresponseandtheuseoflow-emissionsfuels.Beforesuchoptionsbecomeavailableonalargecommercialscale,existingthermalcapacitiescanplayaroleinprovidingflexibilityandadequatecapacityinpowersystems.Governmentsshouldcarefullydesignpowermarketsystemstoavoidtheprematurephase-outofexistingthermalpowerplantsbeforealternativeresourcesbecomeavailableatsufficientscale,especiallywheretherearelargeseasonalswingsinelectricitydemand.TheManagingSeasonalVariabilityofRenewablesreportbytheIEA,whichwasproducedfortheG7,highlightsthatamixofflexibilityresourcesisneededtomanagevariabilityacrossalltimescalesandseasons.Inparticular,systemswithveryhighlevelofwindandsolarPVrequireseasonalflexibilityservices,whichcanbeprovidedfromexistingthermalpowercapacitiesandfromhydropowerplants.Eventually,asenergysystemstransitiontowardsnetzeroemissions,allflexibilityserviceswillneedtobefullydecarbonised.Acceleratinginvestmentsinpowergridsiscrucialforfastercleanenergytransitionsandelectricitysecurity,asidentifiedintheElectricityGridsandSecureEnergyTransitionsreportbytheIEA.Figure8LengthofgridexpansionandreplacementsandgridinvestmentneededfortheannouncedpledgesscenarioGridlengthsGridinvestment80800MillionkmBillionUSD70IEA.CCBY4.0.6060050GaptoAPS40400RenewablesAtrecent30growthrate2020020301002022-204002001-20212022ExpansionReplacementsIEA.CCBY4.0.Source:IEA(2023),ElectricityGridsandSecureEnergyTransitions.PAGE16OvercomingtheEnergyTrilemma:SecureandInclusiveTransitionsEnergysecurityinenergytransitionsIEAreporttoG7leaders(6)Deployabroadrangeoflow-emissionstechnologiesThereisnosingleorsimpletechnologysolutionforsecureenergytransitions,andarangeofinterlockingandcomplementaryoptionsarerequiredacrossacomplexenergysystem.Alargesuiteoftechnologiesneedstobemobilisedtoloweremissions.Inthepowersector,forexample,nuclearpowerisaprovendispatchablelow-emissionspowergenerationsource,alongsiderenewables.TheIEA’sNZEScenarioshowsadoublingofglobalnuclearpowercapacitytoachieveacost-optimaltransitiontonetzero,ledbycountrieswhichsupportitsuse.Achievingnetzerowithalowernuclearcontributionistechnicallypossiblebutcomeswithahigherburdenforelectricitytariffpayers,andwithfurtherstrainsoncleanenergytechnologysupplychainsandcriticalminerals.Butreachingnetzeroemissionsrequiresmorethandecarbonisingthepowersectoralone.IntheNZEScenario,electrificationofenergyend-useshappensatmassivescalethroughthemajordeploymentofbatteries,heatpumpsandnumerousothertechnologies,increasingtheshareofelectricityinenergyend-useto50%from20%currently.Theotherhalfiscoveredbylow-emissionsfuelsinsolid,liquidorgaseousforms,requiringtheuseofsustainablebioenergy,ammoniaandsustainableaviationfuels,amongothers.Ensuringfastprogressinlow-emissionsfuelsisnecessarytoachievenetzeroby2050andtoguardagainstriskstothesecurityofsupplyofcriticalmineralsandothermaterialsneededforrapidelectrification.Achievingnetzeroemissionswouldrequirenewtechnologiesthatarenotyetcommerciallyviable,includingadvancedbatterydesigns,hydrogen-basedsteelmaking,ammonia-poweredships,CO2captureatcementplants,negativeemissiontechnologieslikedirectaircapture(DAC)andbioenergywithcarboncaptureandstorage(BECCS),innovativenucleartechnologiessuchassmallmodularreactors(SMRs),andothers.Figure9Keymilestonesfortheelectricitysectorinthenetzeroemissionsscenario,2022-2050RenewablesGridsinvestmentFossilfuelsunabatedNuclear(thousandGW)(BillionUSD2022)(thousandTWh)(GW)30120018900x220800Oilx2Naturalgas600x31040012300-95%6Coal2022202220222030203020302040204020402050205020502022203020402050IEA.CCBY4.0.Source:IEA(2023),WorldEnergyOutlook2023.PAGE17IEA.CCBY4.0.OvercomingtheEnergyTrilemma:SecureandInclusiveTransitionsEnergysecurityinenergytransitionsIEAreporttoG7leaders(7)EnsurediverseandresilientcleanenergysupplychainsThedevelopmentofcleanenergytechnologysupplychainshasmadeimpressivestridessince2015.Progresshasbeenparticularlyfastinthemanufacturingsegment,notablyforsolarpanelsandbatteries,wherenewfacilitiesarebenefitingfromstandardisationandshortleadtimes.Thepipelineofannouncedmanufacturingprojectsisexpandingrapidly.IfallannouncedsolarPVmodulemanufacturingprojectscometofruition,theircombinedoutputglobally,togetherwiththatfromtheincreasedutilisationofexistingcapacity,wouldexceedthedeploymentneedsseenintheIEA’sNZEScenarioin2030;EVandgridstoragebatteryneedsfor2030wouldalmostbemetonthesamebasis.Theexpectedpaceofgrowthincriticalmineralsuppliesdoesnotmatchthatofcleanenergytechnologymanufacturingcapacityadditions,althoughannouncementsofnewprojectsaregatheringpace.Theoverallspeedofthetransitionisusuallydeterminedbytheslowest-movingcomponent,andthatmakesitimportanttostrengtheneffortstoscaleupinvestmentincriticalmineralsupplies.Ahighdegreeofsupplychainconcentrationremainsamajorconcernforbothcleanenergytechnologymanufacturingandcriticalminerals,asitcanmaketheentiresupplychainvulnerabletoindividualcountrypolicychoices,companydecisions,naturaldisastersortechnicalfailures.Forcriticalminerals,recentIEAanalysisrevealedthatlimitedprogresshasbeenmadeintermsofdiversifyingsupplysources;thesituationhasevenworsenedinsomecases,especiallyforcobaltandnickel.Forbothcleanenergytechnologiesandcriticalminerals,abroadandboldstrategyisneededthatbringstogetherinvestment,innovation,recyclingandrigoroussustainabilitystandardstobuildmoreresilientanddiversecleanenergysupplychains.Greaterinternationalco-operationwillbeessential.On28September,theIEACriticalMineralsandCleanEnergySummitbroughtaround90countries,businessleaders,investorsandheadsofinternationalorganisationsandcivilsocietyorganisations.Thediscussionsyieldedsixkeyactionareastohelpturnrisksintoopportunitiesthroughgreaterinternationalcollaboration:Accelerateprogresstowardsdiversifiedmineralssupplies.Ahighlevelofsupplyconcentrationmustbereducedbybringingnewprojectsonlineacrossadiverserangeofgeographicalregions,facilitatingcross-investmentopportunitiesbetweenproducerandconsumercountries,strengtheningco-operationthroughmultilateralinitiativesandintroducingfinancialtoolstode-riskinvestment.Supportingdiversityinthemidstreamprocessingandrefiningsectorsisneededurgently.PAGE18IEA.CCBY4.0.OvercomingtheEnergyTrilemma:SecureandInclusiveTransitionsEnergysecurityinenergytransitionsIEAreporttoG7leadersUnlockthepoweroftechnologyandrecycling.Throughexpandingresearch,developmentanddeployment,fullpotentialoftechnologyandrecyclingneedtobetappedtoalleviatepotentialstrainsonsupplybyreducingthevolumeofcriticalmineralsrequiredinproducts,aswellastheenergyandwaterrequirementsforextractionandprocessing.Robustmaterialtracingandtracking,aswellasnewmethodstoimprovecircularity,mineralre-useandend-of-lifepractices,shouldbeexploredthroughaprogressivefocusoncollectionofe-waste,end-of-lifebatteries,permanentmagnets,solarpanelsandwindturbines,alongwithincentivesforrecyclingactivities.Promotetransparencyinthemarkets.Somecriticalmineralmarketshavelimitedpricetransparency,whichintroducesvolatilityandhindersnewinvestments.Thereisaneedtodeveloptransparentmarketsandenablingenvironmentsthatfacilitatenewinvestments,whilestrengtheningduediligenceandtraceabilitypractices.Transparencyinmarketsandpoliciesonaccesstorawmaterialsareneeded.Enhancetheavailabilityofreliableinformation.Accurate,accessibleandtimelydataisvital.However,informationoninvestmentlevels,tradeflowsandenvironmental,socialandgovernance(ESG)performanceislimited.TheIEAshouldconductregularmarketassessmentstodelivertherequiredtransparencyandsupportinformeddecisionmaking.CountriesshouldalsoconsiderinternationalmechanismsfordatasharingwhileenhancingtheavailabilityofIEAdatathatwillenablestakeholderstogaugerisksandidentifybottlenecks.Createincentivesforsustainableandresponsibleproduction.AllstakeholdersshouldcommittoadoptingsustainableandresponsiblepracticesthatprotectworkersandcommunitiesandmitigatevariousESGrisks.ThereisaneedtoencouragemechanismsthatrewardgoodESGperformancebyembeddingESGconsiderationsintopolicyandinvestmentdecisionsandbyexpeditingapprovalsofnewfacilitieswithoutlooseninglegalandregulatoryprotections.SystematictrackingofESGperformanceandstrengthenedeffortstoimprovepublicreportingofdataonESGindicatorsshouldalsobeencouraged.Fostereffortsoninternationalcollaboration.Allstakeholdersshouldexplorenewopportunitiestocoordinateefforts,especiallyondatasharing,securityofsupply,competitivenessinrefiningandprocessing,sustainableandresponsiblepractices,andlong-termstrategicplanning.Onespecificareaiseffortstoenhancethesecurityofsupplybyexploringmechanismsthatincludevoluntarystockpilingthatdonotadverselyimpactmarkets,alongsideothermeasurestohelpenhancetheresilienceofsupplychains.Thereisalsoaneedtoensurecomplementarityandinteroperabilityofinitiatives,standardsandnorms.BuildingontheoutcomeoftheSummit,theIEAwillcontinuetoworkwithitsmembercountriesthroughtheWorkingPartyonCriticalMineralsonthespecificdesignoftheIEAVoluntaryCriticalMineralSecurityProgramme,aswellassystematicmarketmonitoringthroughcomprehensivedemandandsupplyoutlookandothertopicalanalyses.PAGE19IEA.CCBY4.0.OvercomingtheEnergyTrilemma:SecureandInclusiveTransitionsEnergysecurityinenergytransitionsIEAreporttoG7leadersAddressingthehighdegreeofgeographicalconcentrationofcleanenergytechnologymanufacturingwillrequireadditionalpolicyeffortstobesuccessful.Whiletheminingofcriticalmineralsislinkedtoresourceendowment,theabilityofcountriestoreapthepotentialeconomicbenefitsfromthemanufacturingofcleanenergytechnologieswilldependonavarietyofcircumstances.Therearefourcrucialconsiderations:Itisimportanttorecognisethatcleanenergytechnologysupplychainsareatthenexusofclimate,energyandindustrialpolicy.Thismeansthattappingintotheindustrialopportunitiesthatcomewithcleantechnologymanufacturingrequiresanall-of-governmentapproachthatincludesdifferentministriesandpolicymakers.Highgeographicalconcentrationscanthreatensupplysecurityacrossallstepsofcleantechnologysupplychains.Therearedifferentpoliciesfordifferentsupplychainsteps.Forexample,whileupstreamrisksinminingcanbeaddressedthroughstockpilingorrecycling,othersupportivepoliciesareneededfurtheralongthesupplychain.Industrialstrategiesthatbuildonamappingofdomesticcompetitivestrengthsandidentifystrategicpartnershipsarecriticaltoeffectivelybenefitfrom,andparticipatein,thenewenergyeconomy.Formostcountries,itisnotrealistictoeffectivelycompeteinallsupplychainsteps,norinallsupplychains.Understandingrelativestrengthsandcompetitiveness,whichcanbeboostedbybuildingcomplementarystrategicpartnerships,isakeyconsiderationforindustrialstrategies.Timeisoftheessenceforcleanenergytechnologysupplychains.Itisnottoolatetocapitaliseontheopportunitiesofthenewenergyeconomy.Successherebuildsonreducingpermittingtimes,includingforlargeinfrastructureprojects;onmobilisinginvestmentandfinancingforkeysupplychainelements;ondevelopingskills;andonacceleratinginnovationinearly-stagetechnologies.TosupportdecisionmakersintheG7andbeyondwiththedesignofstrategiesfordiversifyingcleantechnologymanufacturing,theIEAwillreleaseareportduringthefirsthalfof2024inresponsetoarequestofG7Leaders.PAGE20IEA.CCBY4.0.InternationalEnergyAgency(IEA)ThisworkreflectstheviewsoftheIEASecretariatbutdoesnotnecessarilyreflectthoseoftheIEA’sindividualmembercountriesorofanyparticularfunderorcollaborator.Theworkdoesnotconstituteprofessionaladviceonanyspecificissueorsituation.TheIEAmakesnorepresentationorwarranty,expressorimplied,inrespectofthework’scontents(includingitscompletenessoraccuracy)andshallnotberesponsibleforanyuseof,orrelianceon,thework.SubjecttotheIEA’sNoticeforCC-licencedContent,thisworkislicencedunderaCreativeCommonsAttribution4.0InternationalLicence.Thisdocumentandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Unlessotherwiseindicated,allmaterialpresentedinfiguresandtablesisderivedfromIEAdataandanalysis.IEAPublicationsInternationalEnergyAgencyWebsite:www.iea.orgContactinformation:www.iea.org/contactTypesetinFrancebyIEA-December2023Coverdesign:IEAPhotocredits:©GettyImages