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Introduction
Since the inception of our scenarios work in 2022, one fact has become ever clearer: the energy story is not one of a clean handover from fossil fuels to green power.
In our latest scenario, we extrapolate the current trends to 2050: techno-optimism on the electro-revolution and the stubborn pragmatism and political realities of the embedded high carbon economy.
The scenario – as summarised below – explores the consequences of an energy ‘addition’ as opposed to the energy ‘transition’ narrative.
Energy addition and the road to abundance
Renewables, especially solar, are at a transformational inflection point in scale and cost. With energy becoming a technology platform, not a pure commodity flow, solar continues to break the forecasting gravity.
By 2050, annual installs may reach 3 terawatts per year – that’s 30 times faster than China’s explosive coal build out in the 2000s. One consequence would be that electrification rises from 35 to 60 per cent of final energy demand, further boosting usable energy (known as ‘useful energy’) in the process.
With demand unrestrained by effective carbon policies, this energy potential finds keen users across the world be that for advanced AI and digitisation or the essentials of infrastructure and basic economic development.
Though fossil looks set to lose ground, it will do so slower than anticipated. Instead of replacing the old with the new, we’ll build on top of what is already there. Coal continues to confound forecasts of its imminent demise. Oil use shows only a slow fade as countries such as China electrify. And gas use will grow modestly where it is competitive.
Living in a more fragmented world, countries will invest in local, reliable power sources. The ‘green premium’ (paying more for clean energy) will have been replaced by a ‘security premium’ (paying for reliability).
Different regions will prioritise different technology mixes to meet their energy demands, depending on what’s cheapest and most reliable. That’s electric vehicles (EVs) and heat pumps where clean power is competitive, and hybrid vehicles and gas turbines where hydrocarbons dominate.
With all this new capacity, the amount of useful energy may grow by about 3 per cent a year, triple the consensus growth rate. Despite the growth, solar deflation helps keep the share of GDP spend on energy flat.
Abundance collides with a hotter climate
Here’s the catch. Without a full phase-out of fossil fuel use, global emissions will still exceed 30 gigatonnes (Gt) in 2050, down from about 42Gt today. By the half-century, that will have kept the world on a path to 2C of warming over pre-industrial levels.The flipside of the climate ledger is clear: what you don’t mitigate, you must adapt to.
The impact will be more frequent and wider-ranging hazards. Extreme heat will be life-threatening for 40 per cent of the global population at least one year in every five. About half a billion more people will face severe water shortages. And there will be more intense hurricanes and more prolonged droughts.
To prosper in this world, we must be extremely optimistic about our ability to deploy adaptation solutions at scale. Will governments be prepared and nimble enough to keep pace with the change?
The abundant energy we have amassed may initially provide a lifeline. Adapting to this reality will require more energy for cooling and air conditioning, desalination, new farming inputs and defensive infrastructure. By 2050, adaptation alone could consume approximately one-tenth of the total energy supply.
The energy system will not be immune to climate changes. Thawing permafrost could disrupt Russian production. Stronger hurricanes will raise risks in the US Gulf. Hydro will face an increasingly volatile water supply. And wildfires and heat will complicate grid and solar expansion. Another tenth of the supply could be lost or diverted to handle these stresses, pushing system costs higher.
Last-resort solutions and geo-engineering
As warming heads towards 3C in this late-stage adaptation-led world, the pressure will grow to consider deploying geoengineering tools.
Stratospheric aerosol injection, which involves spraying particles into the upper atmosphere to reflect sunlight, will be one option. It’s a relatively inexpensive but risky method that would need to continue indefinitely. Will the countries most threatened by more than 2C unilaterally bite the bullet?
Direct air capture (DAC) of carbon – pulling CO2 from the air – is a safer but more expensive alternative that could be unlocked by energy abundance. Removing the remaining 30Gt per year of emissions in 2050 could consume another 15 per cent of useful energy.
What this means for investors
The bottom line is that much of the headline growth in energy is redirected from economic development to climate defence. Whether you mitigate early or adapt late, the cost must be borne.
Optimists see continued innovation and opportunities driven by adaptation; pessimists note the escalating costs and residual risks. The global adaptation bill could exceed $4tn per year. That’s approximately 3.5 per cent of the entire world’s current economic activity and more than current estimates for accelerated decarbonisation.
We suggest the following questions to stress-test your investment portfolios:
- Are companies aligned with the dominant technology stacks in their regions or stranded on the wrong side of cost and policy as energy systems diverge?
- How might weather-driven volatility cluster across assets, supply chains and geographies?
- Does the coming build-out of power generation, grids and resilience signal a shift back to more capital-intensive businesses? Or can knowledge- and data-driven models still command a premium in a more complex system?
Climate scenarios report 2025
Read more about why low-carbon electrification is the main growth story; how gas producers might find higher value markets; and why complexity and volatility are here to stay in our full climate scenario report.
Read the full PDF
Risk Factors
The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.
This communication was produced and approved in January 2026 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.
Potential for Profit and Loss
All investment strategies have the potential for profit and loss, your or your clients’ capital may be at risk. Past performance is not a guide to future returns.
This communication contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research, but is classified as advertising under Art 68 of the Financial Services Act (‘FinSA’) and Baillie Gifford and its staff may have dealt in the investments concerned.
All information is sourced from Baillie Gifford & Co and is current unless otherwise stated.
The images used in this communication are for illustrative purposes only.
