ENERGIZED TO DECARBONIZE
In the face of a challenging macroeconomic environment and geopolitical tensions reshaping the global landscape, energy suppliers and consumers alike have demonstrated remarkable resilience in their commitment to decarbonization goals.
Energy suppliers and investors
Fast-tracking decarbonization
Our survey results show that 60% of energy suppliers and investors have accelerated decarbonization plans in the past year, with 26% maintaining consistent goals. On a regional basis, we note significant acceleration in Latin America (42%) and the U.S. (41%). The Middle East shows the highest combined responses of "accelerated significantly" or "accelerated somewhat" at 81%.
How have your company's decarbonization goals changed in the last 12 months from a production and/or investment perspective? (energy suppliers and investors)
Globally, motivation appears equally split (32% each) between meeting stated net zero goals and increased focus on GHG reduction. In the U.K., for example, drivers of clean energy initiatives are evenly distributed among net zero goals and availability of government support. Despite substantial U.S. subsidies and incentives, only 16% of U.S. respondents cite these as a primary acceleration driver.
Firm conviction in net zero goals
Energy suppliers and their investors are ramping up efforts to reduce carbon emissions, driven by growing confidence in their internal net zero targets. This acceleration in decarbonization initiatives, makes these goals increasingly attainable, creating a positive feedback loop in the transition to cleaner energy. 72% of respondents have confidence in their ability to achieve internal targets.
What is your confidence level that your own company's net zero commitments can be met? (energy suppliers)
This positive sentiment was highest in the U.S. and the U.K. where 78% and 72%, respectively, expressed slightly-to-very high confidence in stated goals. Energy suppliers in the EU were more moderate; 66% were somewhat-to-very optimistic, while 19% were neutral and 7% were negative on net zero targets.
Regional: What is your confidence level that your own company's net zero commitments can be met? (Energy suppliers)
Decarbonization is a clear priority
An overwhelming 82% of commercial consumer respondents consider decarbonization either important or very important, citing environmental concerns as the primary driver. This sentiment is evidenced by concrete action, with 76% of surveyed companies having formulated and/or are in the process of implementing energy transition plans.
Moreover, 57% report an acceleration in their decarbonization initiatives, indicating a growing awareness, urgency, and commitment to reducing their own emissions first.
How and why is decarbonization important to your company? (commercial consumers) Click on the questions for data
There is still considerable effort needed to tackle Scope 3 emissions across the commercial consumers we surveyed with 56% of commercial consumer respondents having established alignment with energy suppliers, vendors, and partners on Scope 3 goals, and 57% having established a formal reporting system.
If your company has a plan to tackle scope 3 emissions, what is your company's status on each of the following as a part of that plan? (commercial consumers)
On track and on target
Commercial consumers also believe in their ability to achieve their goals. An overwhelming majority of 79% stated they are confident in their own decarbonization/net zero targets.
How confident are you that your company's decarbonization goals can be met? (commercial consumers)
All geographies show a similar level of general conviction (somewhat/very confident) in net zero goals. Optimism (very confident) is highest in the U.S. (62%), followed by Latin America (45%) and the Middle East (44%).
Regional: How confident are you that your company's decarbonization goals can be met? (commercial consumers)
Covering the costs: energy suppliers and investors vs. commercial consumers
Decarbonization initiatives are backed by diverse funding strategies across the “energy economy". Energy suppliers plan to finance their efforts through strategic investors (58%), operating income (55%), private capital (48%), corporate transactions (38%), and government support (38%).
The Middle East, Asia-Pacific, and Western Europe signaled the most intent to use ongoing operating income, while U.K. energy suppliers suggested they would be equally likely to seek support from strategic investors (52%) and government support and incentives (52%.) U.S. energy suppliers, consumers, and investors are looking to strategic alliances to bolster their efforts
Notably, only 17% of energy suppliers and investors view government support as pivotal in accelerating decarbonization plans, with higher emphasis on government support in the U.K. and Middle East (25% each). The U.S. shows slightly less interest at 16%, though it still has a significant portion of projects leveraging government support (40%). Globally, 38% of energy suppliers are inclined to use government financing, with the U.K. and Middle East leading this trend.
Contrastingly, commercial consumers are looking inward rather than to government support and subsidies to finance decarbonization plans, with 63% planning to fund decarbonization through operating income, despite 39% reporting increased operating costs and 53% stating that operating costs and economic impact is the greatest challenge to the energy transition. This trend is even more pronounced in the U.S., where 80% of consumers plan to fund decarbonization through operating income, with just 30% leveraging public support.
Energy suppliers plan to finance their efforts through a mix of sources, including:
strategic investors
operating income
private capital
corporate transactions
of energy suppliers and investors view government support as pivotal in accelerating decarbonization plans
Regional: How do you expect to fund decarbonization initiatives? (energy suppliers)
Commercial consumers certainly need the government as well. As noted above, 63% plan to finance their efforts using operating income, but 38% say they need the government to support such initiatives. Nearly half (49%) say that availability of additional incentives and grants would prompt more commitment to decarbonization.
No matter how cleaner energy is funded, these findings highlight the widespread push for decarbonization. The ramifications of this sustained focus on lowering carbon emissions on energy transition initiatives cannot be underestimated. Such focus drives a positive feedback loop as demand for cleaner energy solutions and emission-reduction technologies will further de-risk private investment, drive M&A and joint ventures, and foster innovation through R&D, licensing, and strategic alliances.
Decarbonization is not just a box-ticking exercise for corporations to show they are consistent with the industry, but a crucial element towards building a sustainable future.
Diverse funding strategies across the entire energy economy will allow us to get there in a way which fosters and encourages innovation and collaboration, all while de-risking the significant costs that businesses are using to decarbonize their operations.
Sarah Daun, U.K. Partner – Manufacturing
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