001002Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data Map Content Approval Number:GS 京（2025）1790 号All the data,information and images contained in this report may be cited in any form for educational or non-profit services,provided that acknowledgement of the source is made and no citations,deletions or modifications are contrary to the original intention.The International Research Center of Big Data for Sustainable Development Goals would appreciate any publication that uses this report as a source.No use of this report may be made for any commercial purpose whatsoever without prior permission in writing from the International Research Center of Big Data for Sustainable Development Goals.Suggested CitationCBAS.2025.Global-Scale Sustainable Development Scientific Monitoring Report(2025):A Decade of Progress through the Lens of Big Earth Data.Beijing,China.http:/doi.org/10.12237/casearth.CBAS2025P04IForeword 01Preface 02Message 04Acknowledgements 05Executive Summary 061.Introduction 082.Data and Methodology 082.1 Data Selection 102.2 Determining Indicator Status Scores 102.3 Calculation of Indicator Trend and Quantitative Calculation of Progress 112.4 Trend Significance Test and Composite Index Calculation of Indicators 132.5 Calculation of Indicator Contribution 143.Global and Regional Progress Status 163.1 Overall Global Progress 163.2 Regional Progress Analysis 17Australia and New Zealand 17Central and Southern Asia 18Eastern and South-Eastern Asia 19Europe 19Latin America and the Caribbean 20Northern Africa and Western Asia 21Northern America 21Oceania(excluding Australia and New Zealand)22Sub-Saharan Africa 234.Thematic Analysis 24Zero Hunger(SDG 2)24Crop Production(SDG 2.3.1)25Cropland Area(SDG 2.3.1)28Water Resources(SDG 6)30Cropland Water-Use Efficiency(SDG 6.4.1)31ContentsIIGlobal-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data Wetland Area(SDG 6.6.1)33Groundwater Storage(SDG 6.6.1)35Energy(SDG 7)37Building Electrification(SDG 7.1.1)38Industrial Heat Source Emissions(SDG 7.3)40Sustainable Cities and Communities(SDG 11)43Access to Public Transport in Typical Cities(SDG 11.2.1)44PM2.5 Population-Weighted Concentration(SDG 11.6.2)46Urban Greenness Index（SDG 11.7）48Climate Action(SDG 13)51Heatwave Frequency（SDG 13.1）52Drought Index（SDG 13.1）55Per Capita Anthropogenic CO2 Emissions(SDG 13.2.2)58Marine environment(SDG 14)60Dissolved Oxygen in the Ocean(SDG 14.1)61Ocean Acidification（SDG 14.3.1）64Marine Protected Areas(SDG 14.5.1)65Land Ecology(SDG 15)68Forest Cover(SDG 15.1.1)69Land Productivity Dynamics（SDG 15.3.1）705.Integrated Assessment of SDG Progress 735.1 SDG Trend Significance Analysis 735.2 Analysis of Countries Contribution to SDGs 746.Summary and Outlook 766.1 Main Conclusions 766.2 Uncertainty Analysis 776.3 Outlook 78Acronyms&Abbreviations 79Reference 81Appendix 83Appendix 1:Big Earth Data Used 83Appendix 2:Indicator Target Values and Status Score Classification Table 90Appendix 3:Country-Level SDG Single-Indicator Contributions and Rankings 93012025 marks a critical juncture in the global pursuit of the Sustainable Development Goals(SDGs).With just five years remaining until the 2030 deadline,the urgency to accelerate progress has never been greater.Amid growing concerns about environmental degradation,climate extremes,and widening inequalities,the global community requires more than commitmentswe need actionable intelligence.This Global-Scale Sustainable Development Scientific Monitoring Report(2025):A Decade of Progress through the Lens of Big Earth Data makes a vital contribution to this space.Developed by the International Research Center of Big Data for Sustainable Development Goals,this report offers a timely,rigorous and scientifically grounded assessment of planetary sustainability through the powerful lens of Big Earth Data.It demonstrates how new technologiesparticularly Earth observation,remote sensing,and integrated big data analyticscan overcome the limitations of incomplete and patchy data,a hallmark of traditional surveillance and monitoring systems-by providing timely,granular,relevant and globally comparable indicators that also have local relevance.Importantly,this report does more than just describe the current status of SDG progress.It offers a roadmap for corrective action.Through composite indicators that coherently link multiple SDGsfor example,linking rising food insecurity to declining crop yields and arable land,to the persistent challenges of clean water,climate resilience,and sustainable urban developmentthe analyses presented here serve as a sobering and urgent call to action.The report is also a testament to the potential of mutually respectful and trusted scientific collaborations in confronting shared planetary risks.The regional analysis highlights the diversity of challenges that face us at a regional level and while a one size fits all approach may not be appropriate there are certainly lessons to be learnt and shared between regions and countries within each region.An important facet of the regional analysis beyond performance against the global average is the highlighting of potential emerging threats and possible interventions to mitigate the impact of these threats through drawing on a combination of thematic and trend analyses.The limitations of approaches used are highlighted and its restricted use on select but centrally important SDGs further underscore the impact of novel technologies and approaches to accelerate progress through flexibility and innovation while not compromising rigor and robustness.By bridging scientific data and policy decision-making,this report reinforces the indispensable role of science in guiding sustainable development choices beyond 2030.As we move closer to the 2030 SDG timeline,this report empowers governments,researchers,multilateral organizations,and civil society with the data and tools needed to drive transformative change.Chapters are written succinctly and concisely further facilitating ease of use and accessibility to all sectors of society.This report is not just a record of progress and challengebut a beacon of possibility for a more sustainable,equitable,and data-driven future for everyone everywhere and leaves no-one behind.Quarraisha Abdool KarimPresident,The World Academy of SciencesForeword02Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data The year 2025 marks the tenth anniversary of the implementation of the United Nations 2030 Agenda for Sustainable Development and opens the final critical five-year window for realizing these Goals.Over the past decade,the world has made only modest progress toward sustainable development:the global building electrification rate increased from 88.1%in 2015 to 91.88%in 2023,bringing stable electricity for the first time to hundreds of millions of rural residents in Sub-Saharan Africa and South Asia;and East and Southeast Asia achieved a net wetland gain of 7,000 km2 through water conservancy development and ecological restoration,gradually reviving the“kidneys of the Earth.”Yet the overall outlook remains sobering.Under the compounded pressures of accelerating climate change(with global heatwave days increasing by 4.6tween 2015 and 2022),geopolitical conflicts disrupting energy and food security,and frequent economic shocks,progress toward sustainable development is far from sufficient.According to this report,among the Sustainable Development Goals(SDGs)characterized by high spatial heterogeneity and supported by 18 data products,only SDG 6.6.1(no net loss of wetlands)is close to the target.Eleven indicators face significant or major challenges,and eight key indicatorsincluding per-capita cropland area,groundwater storage,and ocean dissolved oxygen concentrationshow a clear regressive trend.The urgency to bring global sustainable development back on track has never been greater.Building on the success of preparing and publishing the series reports on Big Earth Data in Support of the Sustainable Development Goals report,and in response to the Global Development Initiative proposed by Chinese President Xi Jinping,our team conceived the idea of producing a global sustainable development report based on Big Earth Data analysis.The core approach is to acquire and process dynamic global monitoring data,conduct analytical studies oriented to specific SDG targets,and derive scientific insights into the evolution of the SDGs from first-hand data.In early 2025,UNESCO approved the Digital Sustainable Development Goals Programme(DSP)proposed by our team.DSP aims to build a new paradigm of sustainable development science through data-intensive research,further strengthening the foundation for compiling a global sustainable development report based on Big Earth Data.Meanwhile,there is a growing international consensus on advancing sustainable development through data.In 2024,the Global Digital Compact adopted at the United Nations Summit of the Future went into effect and the Medelln Framework for Action on Data for Sustainable Development adopted at the UN World Data Forum provided a practical roadmap for leveraging data to accelerate the SDGs.However,“data poverty”remains an invisible yet formidable barrier to SDG progress.Currently,68%of SDG indicators have data covering only half of countries,and 51%lack comparable data since 2015.Some African and Pacific island countries remain blind spots in global monitoring.The integrated“spaceairground”Big Earth Data systemcombining Earth observation,artificial intelligence,and the Internet of Thingsserves as a key enabler for breaking this barrier and transforming digital commitments into practical actions.The value of Big Earth Data lies in overcoming the long-standing limitations of traditional monitoring systemsdata latency,fragmentation,and insufficient coverage.The 18 high spatiotemporal-resolution data products underpinning this report follow unified standards of global coverage,long-term continuity,and quality validation.This technology empowers developing countries with weak digital infrastructures to access equitable monitoring tools for SDG evaluation.For example,Small Island Developing States can use gridded data on ocean dissolved oxygen and acidification to protect coral reef ecosystems,while Central Asian countries can use dynamic groundwater storage data to improve water resource managementPreface03translating the Global Digital Compacts principle of an equitable digital environment for all into action.At the International Research Center of Big Data for Sustainable Development Goals(CBAS),we remain committed to providing global public data products and scientific support.This report focuses on seven GoalsZero Hunger(SDG 2),Clean Water and Sanitation(SDG 6),Affordable and Clean Energy(SDG 7),Sustainable Cities and Communities(SDG 11),Climate Action(SDG 13),Life Below Water(SDG 14),and Life on Land(SDG 15)and conducts ten-year assessments across global,regional,national,and grid scales.It highlights achievementssuch as composite yield achievement rates exceeding 80%in Northern Europe,Japan,and Chinayet also lays bare the reality of yield declines in several regions.It underscores that merely 5.27%of global areas have reached the agricultural water-use efficiency target,while,by contrast,groundwater storage is rising in parts of Europe and Africa,offering signs of recovery.Together,these findings provide precise reference points for countriesparticularly developing onesto implement the 2030 Agenda more effectively.As the latest outcome of DSP under UNESCOs International Decade of Sciences for Sustainable Development(IDSSD),this report brings together the expertise of over 40 research institutions and international organizations across 21 countries,and has undergone multiple rounds of international peer review.The methodological framework and data products are openly shared worldwide,providing foundational datasets for interdisciplinary SDG research and offering a solid scientific foundation for evidence-based policy-making.Looking ahead,CBAS will continue to advance the application of Big Earth Data in cross-scale integrated monitoring,multi-indicator correlation analysis,scenario simulation,and policy pathway optimizationfurther strengthening the datasciencepolicyaction interface for sustainable development.We are convinced that when action is informed by data and grounded in shared commitment,the world can reverse the current trajectory and use SDGs to underpin global progress and benefit every person and every corner of the Earth.GUO HuadongDirector General,International Research Center of Big Data for Sustainable Development GoalsChief Scientist,Digital Sustainable Development Goals ProgrammeFormer Member,the Group of 10 Experts on the Technology Facilitation Mechanism of the United NationsMember,International Science Council Global Commission on Science Missions for SustainabilitySeptember 202504Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data Allow me first to commend the International Research Center of Big Data for Sustainable Development Goals(CBAS)for its outstanding leadership in bringing together such a diverse and distinguished global team of experts.This report,“Global-Scale Sustainable Development Scientific Monitoring Report(2025):A Decade of Progress through the Lens of Big Earth Data,represents a landmark achievement in our collective effort to monitor and achieve the 2030 Agenda.Ten years into the implementation of the 2030 Agenda,the world urgently needs clear,science-based evidence on where we stand,where we are falling behind,and where immediate action is most needed.This reportbuilt on the power of Big Earth Dataanswers that call.It offers an unprecedented,data-driven perspective on the state of our planet,leveraging satellite observations,geospatial information,and advanced analytics to provide insights that are timely,objective,and crucial for effective policymaking.The findings are both insightful and sobering.On the one hand,they demonstrate encouraging progress in certain areas,such as the protection of water-related ecosystems.On the other,they reveal alarming reversals in critical indicators,including biodiversity loss,groundwater depletion,and the impacts of climate extremes.These are not just data pointsthey are warnings about risks to people,to the planet,and to prosperity.What makes this report truly significant is not only its scientific rigor but also its international and interdisciplinary collaboration.Experts from more than twenty countries have come together as contributing authors and peer reviewers,combining natural sciences with social and economic perspectives.This is exactly the kind of cooperation the SDGs demand:cooperation across borders,across sectors,and across disciplines.UNESCO Regional Office for East Asia is honoured to support this endeavour.As the UN agency entrusted with science,education,culture and communication,we hold that science is the most democratic language humanity possesses;once rendered into policy,it becomes the most powerfuland it must serve society.Big Earth Data,when mobilised responsibly and inclusively,equips us to decide with evidence,build capacity without borders,and forge global solidarity in real time.That conviction is now enshrined in the International Decade of Sciences for Sustainable Development(2024-2033),which UNESCO Regional Office for East Asia is proud to advance.The Decade will restore trust in science,cultivate critical and nuanced thinking,and weave ever-stronger networks of cooperation across every region.It is our promise to turn data into wisdomand wisdom into rights.Looking forward,I see this report as the beginning of a living series of knowledge productsa foundation that can be built upon year after year to inform policy,inspire innovation,and guide collective action.I invite all of us here today to engage with the findings,to share them widely,andmost importantlyto act on them.Together,we can turn scientific insights into solutions,and solutions into progress,so that by 2030 we can deliver on the promise of the Sustainable Development Goals for all humankind.Prof Shahbaz KhanDirector,UNESCO Regional Office for East AsiaMessage05AcknowledgementsChief Scientist:GUO Huadong(International Research Center of Big Data for Sustainable Development Goals,CBAS)Methodologlcal development:CHEN Yu,HUANG Lei,LI Xiaosong,LU Shanlong,SUN Zhongchang,ZUO Lijun(CBAS);WU Mingquan,WANG Futao(Aerospace Information Research Institute,Chinese Academy of Sciences,AIRCAS)Overall Coordination:LIU Jie,HE Shu(CBAS);WANG Meng,CHEN Zhanjun,XIA Lili,ZHU Yan(AIRCAS)Contributing Authors(Alphabetically arranged):BAI Kaixu,ZHENG Zhe(East China Normal University,ECNU);CHEN Fenggui(Zhejiang Gongshang University);CHEN Yu,HUANG Lei,HU Yonghong,JIA Gensuo,LI Xiaosong,LIU Liangyun,LU Shanlong,PAN Tianshi,PENG Dailiang,SHEN Tong,SUN Zhongchang,XUE Cunjin,ZHI Yubo,ZHANG Anzhi,ZHANG Xiao,ZHAO Licheng,ZUO Lijun(CBAS);DOU Xinyu,LIU Zhu(Tsinghua University);HUANG Xianmiao(Beijing Forestry University,BFU);JIA Li,JIANG Min,LIANG Haojian,MA Caihong,OU Shengya,QIN Xingli,WANG Futao,WANG Shaohua,WANG Zhenguo,WANG Zhenqing,WU Mingquan,WU Bingfang,ZHENG Chaolei(AIRCAS);JIA Gensuo,ZHAO Huichen,ZHANG Anzhi(Institute of Atmospheric Physics,Chinese Academy of Sciences,IAP CAS);LI Huixiang,PAN Yun(Capital Normal University,CNU);JIANG Yuhuan,WU Jianwei(Third Institute of Oceanography,Ministry of Natural Resources,MNR);LIU Yue,SUN Liqun(Shenzhen Institutes of Advanced Technology,Chinese Academy of Sciences,SIAT CAS);WANG Zhenbo(Institute of Geographic Sciences and Natural Resources Research,Chinese Academy of Sciences,IGSNRR CAS);XUE Liang,ZHAO Chang(First Institute of Oceanography,Ministry of Natural Resources,MNR);Shahbaz Khan(United Nations Educational,Scientific and Cultural Organization,UNESCO);Roshan Bhandari(Asian Institute of Technology,Thailand,AIT)Peer Reviewers(Alphabetically arranged):Abbas Rajabifard(The University of Melbourne,Australia);A.K.M.Saiful Islam,G.M.Tarekul Islam,Sara Nowreen(Bangladesh University of Engineering and Technology(BUET),Bangladesh);Amos Tiereyangn Kabo-Bah(University of Energy and Natural Resources,Ghana);CHEN Deliang(Tsinghua University);Gretchen Kalonji(CBAS);Johannes Cullmann(World Meteorological Organization,WMO);Jos Ramn Lpez-Portillo Romano(Permanent Mission of Mexico to the UN Agencies in Rome,FAO Council,Mexico);Massimo Menenti(Delft University of Technology,Netherlands);Marcelin Sanou(Pan-African Agency for the Great Green Wall,Afrique);Milan Konecny(Masaryk University,Czech Republic);Prajal Pradhan(University of Groningen,Netherlands);Quarraisha Abdool-Karim(The World Academy of Sciences,TWAS);Rajesh Bahadur Thapa(International Centre for Integrated Mountain Development(ICIMOD),Nepal);Rajib Shaw(Keio University,Japan);Rohan Bhandari(Washington University in St.Louis,United States);Rosa Lasaponara(National Research Council of Italy,Italy);Shahbaz Khan(United Nations Educational,Scientific and Cultural Organization,UNESCO);Shamsudduha Mohammad(University College London,United Kingdom);Therese El Gemayel(United Nations Environment Programme,UNEP)06Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data This report establishes a standardized,science-based monitoring and evaluation framework using Big Earth Data to assess global progress on the United Nations 2030 Agenda for Sustainable Development.It addresses limitations of traditional data(e.g.,incomplete coverage,low spatial resolution,poor timeliness)and provides insights on the Sustainable Development Goals(SDGs)from global,regional,and thematic perspectives.1.Big Earth Data Provides a New Paradigm for SDGs Scientific Monitoring2.Of the 18 monitoring indicators at the global scale,only one is on track,while eight are showing regression3.Regional performance varies in SDGs comprehensive score,reflecting divergent development stages and resource endowmentsThe report systematically integrates multi-source Earth data,including satellite remote sensing,ground-based sensor networks,and socio-statistical surveys,to establish an independent and standardized scientific monitoring framework for 18 SDG indicators with high spatial heterogeneity.Through a three-step methodology,the assessment ensures rigor:first,selecting globally covered,long-term,and quality-verified data products;second,calculating indicator status scores and trend changes using the TheilSen median method,with significance validated by the MannKendall test,while incorporating population impact analysis;finally,weighting national contributions based on resource endowments such as cropland area and population size,thereby presenting a comprehensive and multidimensional picture of global SDG progress.Globally,progress in advancing the SDGs has been limited.only one indicatorSDG 6.6.1(Wetland Area,judged as no net loss)was on track between 2015-2022.In contrast,11 indicators faced significant challenges or major challenges,with 8 showing a regressive trend.These regressing indicators include per capita cropland area,groundwater storage,heatwaves frequency,per capita anthropogenic CO2 emissions,dissolved oxygen in the ocean,ocean acidification,forest cover,and land degradation.Despite their high average scorse,such as Australia and New Zealand,and Europe,they also face regress in a number of indicators.For instance,Australia and New Zealand have high and increasing per capita anthropogenic CO2 emissions,and Europe continues to grapple with issues like ocean acidification,declining forest cover,and land degradation.To meet Figure 0.1 Average scores of 18 indicators in each SDG regionExecutive Summary07The methodological framework and outcome data of this report are openly shared with the public.This will provide fundamental data for interdisciplinary integrated research related to the SDGs,offer technical support for evidence-based actions toward SDGs,and help accelerate global sustainable development efforts in this final critical stage.Zero Hunger(SDG 2):In Northern Europe,Japan,China,and parts of the eastern United States,the comprehensive yield achievement rates exceed 80%,with remarkable results in food production.However,the rates are declining in regions such as Mongolia and Argentina,while the per capita cropland area in some populous Asian countries continues to decrease.Water Resources(SDG 6):The cropland water-use efficiency has increased slightly,but regional differences are significant.From 2015 to 2022,the total global wetland area showed a trend of first increasing and then decreasing(after 2020),with a slight overall increase.The groundwater storage is decreasing in Asia and North America,while increasing in Europe and Africa.Climate Action(SDG 13):Heatwave frequency increases globally(Asia/Americas hardest hit);Per capita CO2 emissions has been rising since 2015,growing from 4.10 tons to 4.65 tons.Marine environment(SDG 14):Ocean ecosystems are deteriorating,with intensifying deoxygenation,especially in mid-water layers,accelerated acidification,and at a rate pf0.023 decrease in pH units every decade between 20152022),posing a serious threat to fishery resources and economic activities reliant on the oceans ecosystems.Land Ecology(SDG 15):Global forest cover declined annually at-0.07%/a,20152022);the global land productivity showed a slight downward trend,and the risk of biodiversity loss intensified.Sustainable Cities and Communities(SDG 11):In 2024,the population-weighted average proportion of people with convenient access to transport in major global cities exceeded 50%.PM2.5 concentration is significantly higher in Asian than elsewhere.The area of Chinese cities with a significant increase in green coverage accounts for nearly half of the global total,benefiting the largest number of people worldwide.Energy(SDG 7):From 2015 to 2023,the average annual growth rate of the proportion of global built-up areas with electricity access was 0.49%,lower than the 1.07%required by the 2030 target.Built-up areas without electricity access are mainly distributed in sub-Saharan Africa and rural regions,and the improvement of energy access urgently needs to be accelerated.4.Highlights in Various Thematic SDGs Over the Decade,Yet Greater Challenges Remainthe 2030 targets,accelerated efforts are needed to advance these indicators.In densely populated regions of most part of the world,the proportions of improved SDG indicators are relatively high.However,in some densely populated areas like northern India,Myanmar,Central Asia,and North Africa,the proportions of SDG degradation are high,warranting further attention.08Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data 1.IntroductionToday,the globalized world faces a multitude of challenges,such as poverty,hunger,climate change,and environmental degradation.To address these global issues and advance sustainable development,the United Nations adopted the 2030 Agenda for Sustainable Development in 2015,which sets out 17 Sustainable Development Goals(SDGs).These goals provide a common framework for global action to achieve economic,social,and environmental sustainability.The SDGs cover a wide range of areas,from poverty eradication and health to education,economic growth,and environmental sustainability.Achieving them requires collective action and cooperation among stakeholders in all countries,including governments,businesses,academia,and civil societythrough a global partnership for sustainable development.The SDGs are not only comprehensive and systemic in nature,but also embody a transformative vision for humanity,the planet,and prosperity.They underscore the deep and inseparable connections between peace,poverty eradication,and the Earths environment,thereby exerting far-reaching global influence.Environmental issues are prominently positioned in the SDGs,such as SDG 6(Clean Water and Sanitation),SDG 13(Climate Action),SDG 14(Life Below Water),and SDG 15(Life on Land).These issues are inseparable from sustainable development,as protecting and sustainably using natural resources and maintaining ecosystem stability are essential for long-term economic growth and social progress.Given the global nature of environmental challenges,collective action across nations is essential to achieving environmental sustainability.Big data plays a vital role in the monitoring and evaluation of environment-related SDGs.It can help address limitations of traditional data collection methods,such as data gaps,poor timeliness,and insufficient spatial resolution,thereby offering new opportunities for global-scale SDG monitoring and assessment.Big data supports environment-related SDG monitoring in several key ways:First,filling data gaps.Traditional approaches often rely on sampling surveys,field observations,and periodic statistics,which are time-consuming,labor-intensive,and costly.In contrast,big data harnesses vast volumes of digital informationfrom sensor data,satellite remote sensing,site monitoring,and social media datato enable extensive and rapid environmental monitoring.Big Earth Data,in particular,integrates and analyzes multi-source datasets to provide more comprehensive and accurate environmental information.These data underpin assessments of water resources,climate change,biodiversity,and more,offering a robust foundation for monitoring and evaluating environment-related SDGs.Second,enhancing timeliness.Traditional statistical data often has long publication and update cycles,making it difficult to access up-to-date environmental information.Big data,however,enables real-time data collection and analysis,greatly accelerating the pace of updates.For example,satellite remote sensing can track changes in forest cover or marine pollution in real time,and social media data can reflect public awareness of and responses to environmental issues.Such timely data improves our understanding of environmental trends and impacts,supporting timely actions and adjustments.Third,improving spatial resolution.Environmental issues are inherently spatial,varying across regions.Big datas spatial analysis capabilities allow for granular monitoring of environmental indicators across different geographic scales.This helps to uncover regional differences and inform science-based policy formulation and implementation.However,this paradigm shift toward big data is not without challenges.The digital divide may marginalize some regions due to insufficient data acquisition capabilities,preventing them from equally benefiting from technological progress.Algorithmic biases,if not properly addressed,can be mitigated,distort analysis and undermine the accuracy of environmental assessments.Weak data governance frameworks may also pose risks to data security,privacy protection,and data sharing.These challenges must be carefully managed to ensure that big data technologies truly contribute to fair and accurate environmental insights.09This report fully acknowledges these limitations and seeks to harness the unique strengths of Big Earth Dataparticularly its multi-source integration and precise spatiotemporal dynamic monitoringto overcome the persistent obstacles in traditional environmental monitoring,including limited coverage,delayed updates,and inadequate regional representation.Ultimately we seek to provide more reliable support for the efficient monitoring and scientific assessment of environment-related SDGs.This report is not intended to compete with or replace the UN Voluntary National Review(VNR)process.Rather,it is an invitation to engage SDG stakeholders in methodological discussions and contribute additional perspectives on SDG progress and status monitoring.10Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data To effectively monitor environment-related SDGsmany of which are complex and dynamic in naturewe go beyond static snapshots to embrace a multi-dimensional evolving perspective.This is the power of Big Earth Data.By integrating vast streams of informationfrom satellite imagery and ground-level sensors to socioeconomic statisticswe generate high-precision data products that capture the status and trends of sustainable development across spatial scales,from global and regional levels down to finer-grained grid resolutions.The selection of data for global-scale SDG monitoring and evaluation followed three criteria:1).The dataset must have global coverage and include time series data spanning at least eight years between 2015 and 20241;2).The data must enable the quantitative assessment of indicator progress toward specified targets;3).The data must be quality-assured,either officially released or peer-reviewed to ensure accuracy and precision.The detailed list of selected data sources,along with their production methodologies and accuracy assessments,is provided in Appendix 1 of this report.The indicator status score is calculated in three steps:“data value indicator value indicator status score.”First,the meaning of each data product is clarified.Second,indicator values are computed based on their definitions.Third,status scores are assigned by following the methodology of the UN Sustainable Development Solutions Network(UN-SDSN)1.For indicators with clearly defined 2030 targetseither set by UN agencies or specified in global policy documentsor for those whose targets can be logically inferred based on indicator meaningthe target value is standardized to 80(representing“achieved”),and the minimum value is set as 0.A linear relationship between the minimum and target values is then used to define the full scoring range,with a maximum score of 100.For indicators lacking clear or authoritative target definitions,the Top 2.5%Champion Method is applied:the top and bottom 2.5%of indicator values(based on area 2.12.2Data SelectionDetermining Indicator Status Scores1 Some data products utilize longer time series,but the indicator status and trend analysis are calculated only for data since the 2015 Sustainable Development Agenda was launched to provide a more consistent and comparable timeframe.Additionally,Certain data products(e.g.,urban transportation convenience)can reflect stable trends and current conditions without requiring annual data,relying instead on data from just two time periods(2015-2024).2.Data and Methodology11or count)are used as maximum and minimum reference points,respectively.The score for indicator i at a given spatial scale is calculated as:In Equation 2-1,where:Si is the status score for indicator i(ranging from 0 to 100),Ii is the indicator value,Imin and Imax are the minimum and maximum benchmark values for indicator i.Based on the score Si,the indicator status is classified into four categories:Achieved(80)Challenges remain(60 and 80)Significant challenges remain(40 and 60)Major challenges remain(40)The Theil-Sen median trend analysis is adopted to assess the trend of indicators from 2015 onward.This robust non-parametric method reduces the influence of outliers and is well-suited for analyzing spatiotemporal trends in time-series data.At the pixel level,the trend is estimated as follows:2.3Calculation of Indicator Trend and Quantitative Calculation of ProgressWhere denotes the median function,i.e.,the slope;and are the indicator values for year i and j,respectively.indicates the direction of change(positive for upward,negative for downward),while the magnitude reflects the strength of the trend.A of zero indicates a stable indicator over the assessed period.Building on this foundation,the report calculates the progress trends of regional SDGs with reference to the methodology developed by the UN-SDSN 2.Leveraging historical data,it assesses whether extrapolating future progress using the (trend slope)will be sufficient to achieve the SDGs by 2030.To estimate indicator-level trends,the report first computes the slope required to meet the target by 2030(denoted as)and then compares it with the observed.To mitigate the impact of outliers in individual years on trend assessment,all valid annual data and their corresponding average scores since 2015 are used as the baseline for trend calculation.The progress trends of indicators are ultimately categorized into four statuses:1)On track or maintaining SDG achievement:;2)SDG increases above 50%of the required growth but below the needed to achieve the SDG by 2030:;3)SDG remains stagnant or increases at a rate below 50%of the growth rate needed to achieve the SDG by 2030:;4)SDG decreasing:1 or n 1Using 2024 as the current year,the Indicator Progress Achievement Rate(P,%)is calculated as:For cases where progress trends deviate from the target value,is replaced with its negative equivalent(-)to calculate the progress rate toward the original goal.The result is then expressed as-P(%)to quantify the degree of deviation.Where:represents the 2015 indicator value fitted via (single-year actual values are excluded to avoid annual fluctuations):(and are defined in Equations 2-5 and 2-6,respectively.)Case 2:n=1This denotes a 2030 target of no decrease(for negative indicators)or no increase(for positive indicators)compared to 2015.Taking wetland area(a positive indicator)as an example:If (the trend of wetland area since 2015)0,P(%)is directly assigned 100%(using 2024 as the current year);If 0,the negative progress is calculated based on the standard that the reduction slope reaches the minimum value by 2030.(2-3)(2-4)(2-5)(2-6)(2-7)(2-8)(2-9)(2-10)13Where represents the 2015 indicator value fitted via.(defined in Equation 2-9)the minimum value of the indicator change slope,which is generally determined based on Top 2.5.The Mann-Kendall(MK)trend test,originally developed as a technique for climate diagnostics and forecasting,is used to determine whether a climate time series contains abrupt changes.It is also widely applied in trend detection of time-series data.As a non-parametric method,it has the advantages of not requiring the data to follow a specific distribution,being robust to outliers,and being relatively simple to compute.The MK test evaluates whether to reject the null hypothesis(H0)in favor of the alternative hypothesis(H1):H0:No monotonic trend exists.H1:A monotonic trend exists.The initial assumption is that H0 is true.To reject H0 and accept H1,the test result must reach a specified confidence level,exceeding reasonable doubt.Under the null hypothesis H0,the time-series data X1,X2,Xn are assumed to be n independent and identically distributed random variables.The alternative hypothesis H1 corresponds to a two-sided test,where for all i,j n and i j,the distributions of Xi and Xj are not the same.The test statistic S is calculated as follows:Where Xi and Xj are the observed values at time points i and j in the time series,respectively,with i 0,this suggests an upward trend in the series.Finally,the results of the indicator trend analysis are classified numerically as follows:1 for improving,0 for no significant change,and1 for deteriorating.In this report,the Progress Significance Composite Index(PSCI)for each region is calculated as follows:First,at a 95%significance level,the change trends of all indicators to be evaluated within each region are determined,and corresponding values(1,0,-1)representing significant positive change,no significant change,and significant negative change are assigned respectively.Subsequently,the average value of these corresponding values for all 2.4Trend Significance Test and Composite Index Calculation of Indicators(2-11)(2-13)(2-12)14Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data indicators in the region is calculated(data missing or no such indicator will be ignored),and the final PSCI for that region is obtained.The PSCI ranges from-1 to 1.Specifically,an PSCI value less than 0 indicates that among all the evaluated indicators in the region,the proportion of indicators showing a significant deterioration trend is higher;an PSCI value greater than 0 indicates that the proportion of indicators showing a significant improvement trend in the region is higher;the larger the absolute value of the index,the more obvious the tendency difference in the overall changes of indicators within the region.Different countries/regions have different natural resource endowments,so when calculating the contribution of indicators,it is necessary to take into account the degree of spatial clustering of indicators in different countries/regions.Specifically,the broader the scope of an indicator in a country or the greater its impact,the higher the weight it should carry in that country.Progress on indicators in countries with greater weights will have a more substantial influence on global achievement.For instance,as defined by United Nations Economic and Social Commission for Asia and the Pacific(UN-ESCAP),the forest coverage indicator requires a 20%increase by 2030 compared to 2015.In this case,countries with large forest coverage(e.g.,Russia and Brazil)will have a notable influence on global progress,whereas countries with limited forest resources will contribute relatively little to the global outcome.It should be noted that this weighting approach does not contradict the sustainable development principle of Leave No One Behind.Rather,it aims to highlight the international responsibilities of populous and resource-rich countries from a global perspective.The determination of SDG indicator weights for individual countries is classified into the following three categories:Category I:Environmental status indicators based on actual land surface coverage.Spatial weights are determined by the proportion of coverage area in each country as of 2015.This category includes most indicator data,such as:-Forest coverage-Wetland area-Groundwater storage-Cropland water-use efficiency-Composite yield achievement rate-Industrial heat source emissionsCategory II:Coastal coverage distribution with no data coverage on land.Weights are based on the proportion of the indicator-relevant area within each countrys Exclusive Economic Zone(EEZ),defined as the 200-nautical-mile range coastal boundary.This method reflects the fact that marine environmental changes are closed related to coastal activities;therefore,the spatial influence of these indicators is assigned to adjacent coastal land areas.This category primarily includes:-Dissolved oxygen in the ocean-Ocean acidification-Marine KBAs protection ratioCategory III:Indicators related to human settlement activities.Spatial weights are determined by the proportion of population in each spatial unit,based on the assumption that larger populations imply greater influence on settlement-related indicators.Examples include:-Per capita cropland area-Building electrification-Accessibility to public transport in typical cities-PM2.5 population-weighted concentration-Urban greenness-Per capita anthropogenic carbon dioxide emissionsThe contribution of each country to a specific indicator is calculated as follows:1.Calculate the weighted average score of the indicator Where wi is the weight of the indicator for country i,and xi 2.5Calculation of Indicator Contribution(2-14)15is the score of the indicator for country i,2.Calculate the contribution of each country:3.Calculate the sum of the absolute values of the total contributions:(if,it means that there is no difference in the contribution of each country)4.Contribution percentage calculation:.Based on this calculation result,if,the countrys contribution is positive;if,the contribution is negative.The absolute sum of contributions across all countries satisfies:,while the algebraic sum satisfies:.16Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data At the global scale,among the SDGs monitored using 18 data products,only one indicatorSDG 6.6.1“Change in the extent of water-related ecosystems over time”has been achieved or is close,based on the criterion of no net loss in total wetland area.A total of eleven indicators,accounting for 61.11%,are currently facing significant challenges or major challenges.Regarding to the progress,eight indicators or sub-indicators show decreasing trends and warrant particular attention:per capita cropland area,groundwater storage,heatwaves frequency,per capita anthropogenic CO2 emissions,dissolved oxygen in the ocean,ocean acidification,forest cover and land degradation.These negative trends highlight the urgency for targeted and effective interventions to reverse environmental decline and accelerate progress toward the 2030 Agenda(Table 3.1).3.1Overall Global Progress3.Global and Regional Progress StatusSDG indicatorsVolume of production per labour unit by classesof farming/pastoral/forestry enterprise sizeIndicator/TargetData usedStatus/ProgressSDG.Composite yield achievement rate()Per capita cropland area()Change in water-use efficiency over timeChange in the extent of water-related ecosystems over timeSDG.SDG.Cropland water-use efficiency()Wetland area()Groundwater storage()Proportion of population with access to electricityAnnual mean levels of fine particulate matter(e.g.PM.and PM)in cities(population weighted)By,double the global rate of improvement in energy efficiencyProportion of population that has convenient access to public transport,by sex,age and persons with disabilitiesBy,provide universal access to safe,inclusive and accessible,green and public spaces,in particular for women and children,older persons and persons with disabilitiesStrengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countriesTotal greenhouse gas emissions per yearBy,prevent and significantly reduce marine pollution of all kinds,in particular from land-based activities,including marine debris and nutrient pollutionForest area as a proportion of total land areaProportion of land that is degraded over total land areaAverage marine acidity(pH)measured at agreed suite of representative sampling stationsCoverage of protected areas in relation to marine areasSDG.SDG.SDG.SDG.SDG.SDG.SDG.SDG.SDG.SDG.SDG.SDG.Building electrification()PM.population-weighted concentration()Industrial heat source emissions()Accessibility to public transport in typical cities()Urban greenness()Heatwaves frequency()Drought index()Per capita anthropogenic CO emissions()Dissolved oxygen in the ocean()Forest cover()Land degradation()Ocean acidification()Marine KBAs protection ratio()SDG achievementChallenges remainSignificant challenges remainMajor challenges remainOn trackModerately IncreasingStagnatingDecreasingTable 3.1.Overview of Global-Scale Indicator Status and Progress17This report divides the world into nine regions(Figure 3.1),based on the UN SDG grouping standard from the United Nations Department of Economic and Social Affairs(UNDESA),treating Europe and North America as separate regions.This approach is consistent with the methodology used in the United Nations Environment Programme(UNEP)Measuring Progress series.Australia and New Zealand achieved an average score of 65.82 across the 18 monitored indicators,exceeding the global average of 58.88.Seven indicators are showing regressive trends including composite yield achievement rate,wetland area,groundwater storage,heatwaves frequency,per capita anthropogenic co2 emissions,dissolved oxygen in the ocean and ocean acidification.Five indicators,are on trackper capita cropland area,building electrification,accessibility to public transport in typical cities,PM2.5 population-weighted concentration,and land degradation.Progress on the remaining indicators is slow,particularly in forest cover and marine KBAs protection ratio.3.2Regional Progress AnalysisFigure 3.1 Regional division in this reportAustralia and New Zealand18Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data Central and Southern Asia recorded an average score of 54.78 across the 18 monitored indicators,below the global average of 58.88.Seven indicators(per capita cropland area,wetland area,groundwater storage,industrial heat source emissions,drought index,per capita anthropogenic co2 emissions and ocean acidification)are showing regressive trends,accounting for 38.89%and warrant close attention.Three indicators are on trackbuilding electrification,dissolved oxygen in the ocean,and land degradation.The remaining indicators fall into the“slow progress”category,with particularly slow progress observed in indicators such as marine KBAs protection ratio and cropland water-use efficiency.Central and Southern Asia19Eastern and South-Eastern Asia scored an average of 58.90,basically on par with the global average of 58.88.Six indicators are showing regressive trends(per capita cropland area,cropland water-use efficiency,groundwater storage,per capita anthropogenic CO2 emissions,dissolved oxygen in the ocean,and ocean acidification).Five indicators are on track,including composite yield achievement rate,wetland area,building electrification rate,accessibility to public transport in typical cities,and land degradation.Slow progress is seen for the remaining indicators,particularly in increasing the marine KBAs protection ratio,forest cover,and cropland water-use efficiency.Europe recorded an average score of 61.80 across the 18 monitored indicators,higher than the global average of 58.88.However,ten indicators are showing regressive trends(per capita cropland area,cropland water-use efficiency,heatwaves frequency,drought index,per capita anthropogenic CO2 emissions,dissolved oxygen in the ocean,ocean acidification,marine KBAs protection ratio,forest cover and land degradation),accounting for 55.56%.Five indicators,or 27.78%,are on track,including wetland area,groundwater storage,building electrification,accessibility to public transport in typical cities,and PM2.5 population-weighted concentration.The remaining indicators show slow progress.Eastern and South-Eastern AsiaEurope20Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data Latin America and the Caribbean scored an average of 61.24,above the global average of 58.88.Seven indicators are showing regression(per capita cropland area,PM2.5 population-weighted concentration,urban greenness index,heatwaves frequency,dissolved oxygen in the ocean,ocean acidification,and forest cover).Five indicators are on trackcomposite yield achievement rate,wetland area,groundwater storage,building electrification rate,and land degradationaccounting for 27.78%.The remaining indicators fall into the“slow progress”category,with particularly slow progress observed in marine KBAs protection ratio.Latin America and the Caribbean21Northern Africa and Western Asia scored an average of 53.00 across the 18 monitored indicators,below the global average of 58.88.Nine indicators are showing regressive trends(composite yield achievement rate,per capita cropland area,groundwater storage,urban greenness index,heatwaves frequency,drought index,per capita anthropogenic CO2 emissions,ocean acidification,and land degradation),representing 50%and warranting attention.Three indicatorswetland area,building electrification,and dissolved oxygen in the oceanare on track,accounting for 16.67%.The remaining indicators fall into the category of“slow progress”,with particularly slow progress observed in improvements in PM2.5 population-weighted concentration.Northern America recorded an average score of 58.92 across the 18 monitored indicators,slightly above the global average of 58.88.Eight indicators are showing regressive trends(per capita cropland area,cropland water-use efficiency,groundwater storage,urban greenness index,drought index,ocean acidification,forest cover,and land degradation),accounting for 44.44%.Five indicators are on track,including composite yield achievement rate,wetland area,building electrification,PM2.5 population-weighted concentration,and dissolved oxygen in the ocean,representing 27.78%.The remaining indicators show slow progress.Northern Africa and Western AsiaNorthern America22Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data In Oceania,excluding Australia and New Zealand,five of the 18 indicators lack sufficient data coverage and cannot be full evaluated.Among the remaining 13,the average score is 65.23,slightly above the global average of 58.88.While this regions PM2.5 population-weighted concentration(13.32g/m3)is significantly lower than the global average(31.83g/m3),it has shown a slight regressive trend from 2015 to 2022.Ocean acidification and declining forest cover have also dragged down the overall score.However,the other six indicators are on track and have all been achieved,accounting for 46.15%of the indicators that can be evaluated,including groundwater storage,industrial heat source emissions,heatwaves frequency,per capita anthropogenic CO2 emissions,dissolved oxygen in the ocean,and land degradation.The remaining indicators are progressing slowly,with cropland water-use efficiency showing particularly slow progress.Oceania(excluding Australia and New Zealand)23Sub-Saharan Africa achieved an average score of 55.60 across the 18 monitored indicators,lower than the global average of 58.88.Two indicatorsper capita cropland area and ocean acidificationare showing regressive trend,with the former primarily driven by rapid population growth.Of the 18 indicators monitored,Five are on track including wetland area,groundwater storage,per capita anthropogenic CO2 emissions,dissolved oxygen in the ocean and land degradation.However,slow progress is observed for 11 indicators,or 61.11%,where accelerated progress is needed to meet the 2030 targets.Sub-Saharan Africa24Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data The core aim of the global Zero Hunger is to eliminate all forms of hunger and malnutrition by 2030 and to ensure that everyoneespecially children and vulnerable groupshas access to sufficient,safe,and nutritious food.Monitoring changes in global cropland area and crop per unit yield(SDG 2.3.1)is critical to achieving this goal.Cropland forms the foundation of agricultural production.Its availability and quality directly affect the global food supply.However,population growth and accelerating urbanization are contributing to a steady decline in cropland area,posing a growing threat to food security.Meanwhile,some ecologically sensitive areas are being encroached upon.Therefore,studying the changes in global cropland and finding sustainable land management strategies to protect and restore cropland and reduce interference with fragile ecological spaces are crucial to achieving the Zero Hunger goal.To meet growing food demand driven by population increase requires enhancing per unit yield so that more food can be produced on limited land resources.Yet,global climate change is already havingand is expected to continue havinga profound impact on crop yields.For example,climate change increases the frequency and intensity of extreme weather events such as droughts and floods,which negatively impact crop yields.Hence,studying crop yield variations,as well as exploring how to boost the per unit yield of major crops by advancing agricultural technologies and optimizing management strategies,and how to adapt to and mitigate the impacts of climate change,is essential for attaining the Zero Hunger goal.Zero Hunger(SDG 2)4.Thematic Analysis25Crop Production(SDG 2.3.1)Figure 4.1.Status scores(a:grid level;b:country level)for composite yield achievement rate of four major crops,along with progress trends(c:grid level;d:country level)and 95%significance levels of changes(e:grid level;f:country level)from 2015 to 2022Eliminating hunger,achieving food security,improving nutrition,and promoting sustainable agriculture(SDG 2)are among the core priorities of the SDGs.Wheat,maize,rice,and soybeansthe worlds four most important staple food and oil cropscollectively account for approximately 64%of global dietary energy intake.These crops play a fundamental role in ensuring global food security and meeting the nutritional needs of the global population.Wheat is the most widely cultivated food crop and a dietary staple across many regions.Maize serves not only as a major food crop but is also extensively used in livestock feed and industrial applications.Rice is the staple for nearly half of the worlds population,especially in Asia.Soybeans are the most important oil crop and source for non-animal protein.Changes in the yields and geographic distribution of these crops directly impact the stability and sustainability of the global food supply and are therefore of great significance to the realization of Zero Hunger.Considering the differing natural resource endowments across regions,this report uses the achievable crop yield data from the Global Agro-Ecological Zones(GAEZ)database developed by the Food and Agriculture Organization(FAO)as the benchmark.It calculates the 26Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data Figure 4.2.Distribution of yield changes for the four major food and oil crops from 20152022(based on SDG standard regional divisions)Total production(million tonnes)YearYearTotal production(million tonnes)Distribution of changes in annual maize production()Distribution of changes in annual maize production()RegionLatin America and the CaribbeanNorthern Africa and Western AsiaSub-Saharan AfricaAustralia and New ZealandEuropeOceaniaEastern and South-Eastern AsiaCentral and Southern AsiaNorthern AmericaTotal production(million tonnes)Total production(million tonnes)YearDistribution of changes in annual maize production()YearDistribution of changes in annual maize production()composite yield achievement rate for the four major crops(weighted by the planting area of each)3,and sets 80%of the composite yield achievement rate as the target.The analysis examines the current status scores,progress trends,and 95%significance level of changes in the composite yield achievement rate for these four crops during the period 20152022(Figure 4.1).Using the achievement of 80%of the composite yield achievement rate by 2030 as the benchmark,significant disparities in performance are observed across countries(Figure 4.1).Regions including Northern Europe,Japan,China,Brazil,and parts of the eastern United States have attained relatively high composite yield achievement rates for the four crops,with the indicator either on track or having already achieved and sustained the targets.In most parts of India,Australia,and parts of Africa,the composite yield achievement rates remain insufficient,though they have already exceeded 50%of the growth required to meet the target.These areas thus face challenges in reaching 80%composite yield of the achievement rate by 2030.Notably,some parts of Mongolia,Argentina,Chile,Myanmar,and Thailandhave even seen declining trends in the composite yield achievement rate,putting them under immense pressure to meet the 2030 target.To achieve the 2030 target,these countries need to increase investment in agricultural science and technology innovation,improve resource use efficiency,and strengthen international cooperation to facilitate the transfer of agricultural technologies and the sharing of best practices.From 2015 to 2022,global production of the four major food and oil crops exhibited clear regional concentrations along with varying degrees of yield fluctuation(Figure 4.2).Maize production was mainly concentrated in North America and East and Southeast Asia.While annual maize production in North America declined after peaking in 2016,Latin America experienced a general upward trend despite fluctuations.Wheat was primarily produced in Europe,Central and South Asia,and East and Southeast Asia.Europe saw fluctuating increases with a peak in 2022;Central and South Asia experienced 27steady growth,while North America saw a gradual decline.Rice production remained highly stable and was concentrated in East and Southeast Asia and Central and South Asia.East and Southeast Asia showed minor fluctuations,whereas Central and South Asia maintained continuous growth.Soybean productions,concentrated in Latin America and North America,exhibited the greatest year-to-year variability among the four crops.Annual soybean production in Latin America peaked in 2021 before declining significantly,while North America rebounded after a trough in 2019 but continued to show notable volatility.Overall,during the period 20152022,the total output growth of the major crops was modest,though their fluctuation patterns differed markedly.The rice output curve was the smoothest,while soybeans and wheat exhibited relatively large inter-annual fluctuations.These volatilities are mainly related to climate change,extreme weather events and market factors etc.Global food production is showing signs of increasing regional differentiation and geographical concentration(Figure 4.3),with emerging economies making significant contributions and highlighting the need to strengthen international cooperation.Traditional agricultural powerhousesEurope(wheat),Latin America(soybeans),and Asia(rice)are consolidating their dominance.In contrast,fragile regions like Sub-Saharan Africa are facing mounting challenges due to insufficient infrastructure,limited technological capabilities,and high vulnerability to climate change.These constraints hinder their ability to boost food production in response to growing population needs,thereby exacerbating food insecurity and hindering progress toward SDG 2.Data from 20152022 reveal a marked emergence of key production centers for four major crops:maize output growth was led by Argentina(22.6%)and Brazil(21.6%);wheat growth was dominated by Russia(41.5%)and Figure 4.3.Contribution to output growth of four major crops,2015202228Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data India(20.8%);rice production gains were highly concentrated in Asia,particularly India(61.5%);soybean output growth came mainly from Brazil(35.0%)and Argentina(26.5%).Emerging economies and developing countries are becoming the main drivers of global food output growth.India performed strongly in both rice and wheat production;Brazil and Argentina played leading roles in maize and soybean production;China also made significant contributions to yield increases in maize(11.0%)and soybeans(12.8%).Although the rise of emerging economies adds new resilience to global food security,the increasing geographic concentration of crop yields also introduces vulnerabilities in the global supply chain.This highlights the urgent need to enhance international cooperation and technology sharing and to cultivate new centers of agricultural growth.Cropland Area(SDG 2.3.1)Cropland serves as the foundation for grain production and the cornerstone for achieving food security.Accurately monitoring changes in global cropland area is therefore essential for assessing global food security,particularly by leveraging the advantages of remote sensing technologiessuch as long time series data and global coverage.However,existing global cropland datasets are largely based on single-time-point ones,which suffer from limitations such as short monitoring timespans,inconsistent data quality,and poor cross-product compatibility.These deficiencies hinder long-term,high-resolution monitoring of cropland dynamics.To overcome these challenges,a monitoring framework was developed using long-term Landsat satellite data at a spatial resolution of 30 m.By integrating continuous change detection with dynamic updates,a global 30 m dynamic cropland dataset was produced.Using a benchmark of 12,000 m2 of per capita cropland area(determined by the Top 2.5 champion method),the global average score in 2022 was 38.80,showing a slight decline from 2015.The global spatial distribution of the per capita cropland area scores reveals pronounced disparities(Figure 4.4).Most African countries scored very low,reflecting limited per capita cropland area pressing food security challenges.India and China,both with large populations,had low average scores of 8.79 and 8.09,respectively.In contrast,Argentina,Australia,and Canada scored over 80,indicating relatively abundant per 29capita cropland area.Current projections suggest that approximately 29.50%of the global area has reached or is expected to reach the 12,000 m2 per capita target by 2030.These areas are mainly located in northern Asia,Australia,central and northern North America,and southeastern South America.However,39.21%of the global area shows a downward trend in per capita cropland area,including parts of India,Africa,and Europe,posing substantial challenges to regional food security.From 2015 to 2022,the total cropland area increased across most SDG regions.However,per capita cropland area declined in many regions(Figure 4.5).Latin America and the Caribbean showed a clear upward trend in total cropland area,helping meet the rising food demand driven by population growth.Central and South Asia,along with North America,also recorded notable increases.With the exception of Europe,East Asia,and Southeast Asiawhich remained relatively stableother SDG regions experienced declines in per capita cropland area.During the study period,Australia and New Zealand had the highest per capita cropland area,ranging from 8.21 to 8.66 ha per capita.By contrast,Sub-Saharan Africa and Latin America&the Caribbean had relatively low per capita cropland areas among all SDG regionsat just 1.63 and 1.72 ha per capita,respectively.Figure 4.4.Status scores(a:grid level;b:country level)for per capita cropland area in 2022,along with progress trends(c:grid level;d:country level)and 95%significance levels of changes(e:grid level;f:country level)from 2015 to 2022-.-.-.-.-.Change in cropland area(km)Change in per capita cropland area(m)Australia and New ZealandCentral and Southern AsiaLatin America and the CaribbeanEuropeNorthern AmericaOceania(excluding Australia and New Zealand)Eastern and South-Eastern AsiaNorthern Africa and Western AsiaSub-Saharan AfricaYearYear(a)(b)Figure 4.5.Changes in total and per capita cropland area by SDG region,2015202230Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data The core objective of SDG 6 is to ensure availability and sustainable management of water and sanitation for all by 2030.This is not only a cornerstone for safeguarding humanitys fundamental right to survival,but also a key pillar in maintaining global ecological balance and promoting sustainable social and economic development.The equitable distribution and rational use of water are directly tied to global issues such as food security,public health,and ecosystem resilience.However,global water distribution and utilization show marked spatial disparities.Some regions face acute water scarcity,while others struggle with severe water pollution.This imbalance is constantly intensifying with climate change and population growth.Traditional statistical approaches to water resources suffer from poor timeliness,insufficient spatial coverage,and infrequent updates,making it difficult to accurately capture the status of water use and ecosystem health across regions.Consequently,the formulation of targeted governance strategies often lacks a solid scientific basis,which seriously hinders progress toward SDG 6.To address this challenge,this study utilizes multi-source satellite remote sensing and Earth big data to conduct global-scale monitoring and assessment of two SDG indicators:improving water-use efficiency(SDG 6.4.1)and protecting and restoring water-related ecosystems(SDG 6.6.1).By overcoming the spatial and temporal limitations of traditional statistical data,the study achieves high-temporal and high-resolution monitoring of global water resources and aquatic ecosystems.It quantitatively characterizes the spatiotemporal variations in global agricultural water-use efficiency,wetland area,and groundwater storage since 2015.Water Resources(SDG 6)31Cropland Water-Use Efficiency(SDG 6.4.1)Cropland water-use efficiency refers to the biomass yield or economic value produced per unit of water consumed.It is commonly expressed as Gross Primary Productivity(GPP)/Evapotranspiration(ET)or Net Primary Productivity(NPP)/ET 4-5.Previous assessments mostly relied on site-level data or statistical data,which suffer from limited spatial coverage,low timeliness,and infrequent updates,making them inadequate for capturing large-scale spatial and temporal changes in efficiency 6.Remote sensing technology,by contrast,offers a powerful tool for timely,broad-scale estimation of agricultural output and water consumption.Compared to traditional methods,remote sensing approaches are superior in terms of spatial coverage,update frequency,and timeliness.Figure 4.6 presents the status scores,progress trends,and 95%significance levels of global cropland water-use efficiency increase since 2015,at both grid and country levels.Between 2015 and 2023,the average growth score of global cropland water-use efficiency was 42.80,with significant spatial disparities in its distribution.Based on the current trend,it will be highly challenging to meet Figure 4.6.Status scores(a:grid level;b:country level)for cropland water-use efficiency growth rate,along with progress trends(c:grid level;d:country level)and 95%significance levels of changes(e:grid level;f:country level)from 2015 to 202332Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data the 2030 target of increasing water-use efficiency to 1.51 times the 2015 levelglobally,only approximately 5.27%of cropland areas are projected to achieve this goal(Figure 4.6c).Overall,global cropland water-use efficiency showed a slight increase(with a growth rate of 1.16%),but the significance level of this growth is low due to interannual fluctuations.At the national scale,only a handful of countriesincluding China,Mongolia,Saudi Arabia,South Africa,and Indiahave seen their growth in water-use efficiency pass the 95%significance test.Furthermore,48.04%of global cropland areas still exhibit a declining trend in water-use efficiency,which is mainly concentrated in the Americas(particularly southern South America),Central Asia,and parts of Africa.Regarding to different climate zones,between 2015 and 2023,cropland water-use efficiency in tropical regions recorded the largest increase,reaching 5.31%.Arid and semi-arid regions followed with a growth rate of 2.05%.In contrast,temperate zones and frigid zones saw slight decreases,with declines of-1.12%and-2.26%respectively(Figure 4.7).When comparing irrigated and rainfed cropland,the improvement in water-use efficiency of irrigated croplands was substantially greater than that of rainfed croplands between 2015 and 2023,with the former Figure 4.7.Annual variation of cropland water-use efficiency globally and by climate zone,20152023Figure 4.8.Changes in cropland water-use efficiency for irrigated and rainfed farmland globally,20152023Cropland water-use efficiency(g C/kg HO)GlobalTropical zoneTemperate zoneArid and semi-arid zoneCold zone.YearCropland water-use efficiency(g C/kg HO)Rainfed croplandIrrigated croplandYear.increasing by 4.68%,while the latter experiencing a mere slight rise of 0.12%(Figure 4.8).Notably,the increase in evapotranspiration from irrigated croplands was higher than that from rain-fed croplands.However,the growth rate of NPP in irrigated croplands exceeded the growth rate of their evapotranspirationthis is the key factor driving the greater improvement in water-use efficiency of irrigated croplands compared to rain-fed ones.The rise in NPP for irrigated farmland outpaced the increase in ET,resulting in greater efficiency gains than rainfed areas.Irrigated farmland water-use efficiency improved by 18.5%while Rainfed farmland improved by 11.6%(Figure 4.8).Improvements in global cropland water-use efficiency were mainly driven by advances in agricultural technology,significant upgrades in agricultural infrastructure,and improved water-saving irrigation and water management practices.It is recommended that countries and regions with low water-use efficiency and slow growth rate(such as central and northern Argentina and northwestern Africa)increase investments in agricultural technologies and infrastructure to promote sustainable use of water resources.Furthermore,under the broader context of climate change,different regions respond differently to its impacts.For areas where climate change has led to reduced water-use efficiency,local strategies should be adopted to minimize the negative effects.33Wetland Area(SDG 6.6.1)Wetlands,often described as the kidneys of the Earth,wetlands are critical ecosystems that purify water,mitigate floods and droughts,sequester vast amounts of carbon,and support immense biodiversity.Yet,these vital areas are disappearing at an alarming pace.According to the 2024 Global Resources Outlook of the UNEP,wetlands are being lost 3 times faster than forestsa crisis driven by the combined pressures of agricultural expansion,urbanization,and climate change 7.The accurate and timely monitoring required is not just a scientific task,but a global imperative.Conventional ground-based methods cannot provide the consistent,large-scale data needed to address the crisis effectively.To meet this challenge,our study provides a breakthrough solution:the development of a global 30 m high-resolution wetland dynamics monitoring dataset(GWL_FCS30D),which enables dynamic mapping of wetland changes over time.By integrating multi-source remote sensing data with ecological knowledge,this dataset moves beyond simple mapping to produce high-resolution time-series.This enables policymakers to pinpoint the drivers of wetland loss,target restoration efforts with precision,and hold stakeholders accountable,turning the goals of SDG 6.6.1 into measurable,on-the-ground action.The global average score for wetland area change was 80.11,with notable spatial differences.Based on current trends,approximately 60.08%of regions are projected to achieve the 2030 goal of“no net loss of wetlands”(Figure 4.9).East and Southeast Asia had the highest average score(80.53),followed by North America(80.21),while Oceania(79.25)and Central and South Asia(78.54)lagged behind.From 2015 to 2022,global wetland area showed a slight overall increase,rising initially before declining after 2020(Figure 4.10).Excluding permanent water bodies,however,wetlands experienced a net decline of about 23,700 km2.Global wetland gains have been driven by glacier melt,wetland protection policies,and water conservancy infrastructure development.However,wetland loss due to agricultural irrigation and other human activities remains a pressing concern.Climate-driven glacier melt contributed to rapid expansion of high-altitude wetlandsfor example,on Chinas Qinghai-Tibet Plateau,where wetland area increased by approximately 8,800 km2,with an average annual growth of 1,300 km2.In China and other East Asian countries,the construction of water conservancy facilities for agricultural irrigation and ecological protection partially offset human-drivebn wetland loss,leading to a net gain of 34Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data Figure 4.9:Status scores(a:grid level;b:country level)for wetland area change rate,along with progress trends(c:grid level;d:country level)and 95%significance levels of changes(e:grid level;f:country level)from 2015 to 2022Figure 4.10.Change trends of different types of wetlands relative to 2015-Net change in wetland area（km）MudflatSalt marshMangroveSaline-alkali landRiverbank,lakeshoreWoody swampHerbaceous swampPermanent water bodyYeararound 7,000 km2 in East and Southeast Asia.In contrast,Central Asia,West Africa,and Argentina experienced declines of about 3,600 km2,largely due to agricultural expansion and other human activities.Meanwhile,regional patterns are complex.In high-latitude and high-altitude regions like the Qinghai-Tibet Plateau,glacier melt has led to a marked increase in the number of wetland patches,but the ecological structure and functions of these new wetlands are not yet stable.In tropical and subtropical basins,large-scale agricultural expansion has caused the continued shrinkage of crucial carbon sink wetlands such as mangroves and peat swamps.Therefore,to achieve the SDG 6.6.1,it is critical to develop wetland protection policies tailored to regional characteristics and levels of economic development.35Groundwater Storage(SDG 6.6.1)Groundwater,a strategic resource vital to global water security and public health,supplies daily drinking water and sanitation services for approximately 2.5 billion people worldwide.It is also a critical pillar for achieving the goal of universal access to safe and affordable drinking water by 2030.Sustainable management and protection of groundwater are thus directly tied to the quality of progress toward SDG 6(Clean Water and Sanitation).In particular,accurately tracking changes in groundwater volume is a pivotal link in evaluating progress on SDG 6.6.1.However,global monitoring of groundwater storage is confronted with systemic challenges such as insufficient observation networks and uneven spatial distribution.The GRACE(Gravity Recovery and Climate Experiment)satellite technology has provided an innovative means for monitoring large-scale terrestrial water storage change,but it still struggles with low spatial resolution and signal leakage when detecting small-scale changes in groundwater storage.To address these limitations,this study integrates GRACE satellite data with high-resolution model data to estimate global groundwater storage changes.Figure 4.11.Status scores(a:grid level;b:country level)for groundwater storage change,along with progress trends(c:grid level;d:country level)and 95%significance levels of changes(e:grid level;f:country level)from 2015 to 202336Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data Figure 4.12.Spatial distribution of global groundwater storage change rates,20152023The global average score for groundwater storage change was 76.93.Based on current trends,approximately 58.72%of regions are projected to meet the 2030 target.Since 2015,sub-Saharan Africa,Australia and New Zealand,Europe,and Oceania have generally stayed on track or already met the target.East and Southeast Asia have achieved more than half the growth rate needed but still fall short of the target.North Africa,West Asia,Central and South Asia,and North America have stagnated,facing significant challenges in meeting the 2030 target(Figure 4.11).From 2015 to 2023,the global groundwater storage change rate was-20 km3/a.While this average rate appears relatively moderate,regional differences are substantial(Figure 4.12).Areas with statistically significant(p 5%).In contrast,although Proportion of electrified built-up area(%)Existing buildingsIncluding new buildingsUrban areasCitiesTownsRural areasElectrification rate(as%of total population)Urban electrification rate(as%of urban population)Yearcountries such as Afghanistan and Liberia have achieved a growth rate of 2.1%,they are still in the catch-up zone due to weak foundations.Pakistan,Venezuela,and much of sub-Saharan Africa remain stagnant,and Estonia and Western Sahara have regressed.COVID-19,extreme weather events,and armed conflicts have severely hindered global electrification progress.During the pandemic,urban unelectrified areas rose by 0.36%,while rural unelectrified areas saw a 4.15 Figure 4.14.Changes in the proportion of electrified building areas from 2015 to 2023Figure 4.15.Changes in the proportion of electrified building areas worldwide from 2018 to 202040Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data Industrial Heat Source Emissions(SDG 7.3)Industrial heat sources refer to concentrated areas of thermal radiation generated during industrial production activities that consume primary or secondary energy and release waste heat and pollutants 12.The spatial structure of these heat sources reflects the underlying industrial structure,which in turn determines the energy structure.This study uses global thermal anomaly remote sensing data from 20122022 and employs a method combining spatiotemporal density segmentation with machine learning to identify industrial heat sources based on their“fixed location and temporal continuity”13.Validation using high-resolution imagery and ground surveys achieved an accuracy of 93.24%,successfully identifying 24,092 global industrial heat sources from 2012 to 2022(Figure 4.16).The results reveal spatial and temporal patterns and trends of industrial heat sources,providing essential data to support global industrial restructuring and improvements in energy efficiency.The global distribution of land industrial heat sources shows significant spatial clustering.In 2022,the top five countries accounted for 55.77%of the global total.Concentrations are highest in Asia,Europe,and North Americaparticularly central and eastern China,Russias Khanty-Mansi and Yamal-Nenets regions,the Persian Gulf,and the central and eastern U.S.(Figure 4.17).China,Russia,the U.S.,India,and Iran contributed 20.53%,13.68%,11.94%,5.25%,and 4.36%of the global total,respectively.In contrast,172 countries had fewer than 10 land industrial heat sources,including 108 with noneunderscoring marked disparities in global industrialization.Between 2015 and 2022,the global number of land industrial heat sources declined(Figure 4.18).Using the benchmark of halving 2015 levels by 2030,regional disparities are clear.Globally,the number of heat sources peaked in 2017 before declining.Between 2015 and 2017,the total rose by 1.46%,mainly in Asia,North America,and Europe;from 2017 to 2022,it fell by 14.90%,especially in Asia and Europe,though increases occurred in South and North America.China,Russia,Mongolia,Canada,and many African countries are on track or have times greater increase.Sub-Saharan Africa,Melanesia,Micronesia,Northern Europe,South Asia,and Southeast Asia experienced respective increases of 12.28%,5.74%,3.59%,1.09%,1.03%,and 0.48%.For LDCs,LLDCs,and SIDS,the respective increases were 12.99%,8.05%,and 2.90%(Figure 4.15).Extreme weather events caused by the super El Nio caused a spike in New Zealands unelectrified ratefrom 28.73%in 2014 to 47.60%in 2015.Armed conflicts have also severely damaged energy infrastructurefor example,Yemens unelectrified building rate exceeded 30%from 2015 to 2017,peaking at 46.34%in 2016,while southern Ethiopia conflict increased unelectrified building rate in this region from 17.95%in 2021 to 23.53%in 2022.Power station construction has played a key role in improving electrification in some parts of the world.China has made outstanding contributions in this process.By 2020,China had invested in 109 hydropower plants and 124 other power plants across 70 countries,reducing the global unelectrified rate in these countries from 21.03%in 2012 to 11.85%in 2023.To achieve global universal electricity access by 2030,it is necessary to accelerate investment and construction in regional grid integration and renewable energy projects in energy-vulnerable developing countries to enhance system resilience,support energy transition,and lay a foundation for sustainable development.41Figure 4.16.Status scores(a:grid level;b:country level)for change rate in the number of global land industrial heat sources,along with progress trends(c:grid level;d:country level)and 95%significance levels of changes(e:grid level;f:country level)from 2015 to 2023RegionNumber of Operational Industrial Heat Sources in 2015Regional Share in 2015(%)Number in 2012Regional Share in 2012(%)Change from 2015 to 2022(%)Africa12637.7112108.85-4.20Americas370822.65320523.43-13.57Asia723544.19635846.49-12.12Europe368622.51273720.01-25.75Oceania2671.631150.84-56.93Others2141.31520.38-75.70Total1637310013677100.00-16.47Table 4.1.Changes in the number of operational land industrial heat sources by regionalready met the target,while countries like India,the U.S.and Iran must accelerate reductions.Oceania,Europe,the Americas,and Asia each saw reductions above 10%,whereas Africa showed little change(Table 4.1).COVID-19 pandemic and the RussiaUkraine conflict significantly contributed to the decline.In 2020,pandemic-related shutdowns drove a 7.53%dropthe steepest in recent years.The 2022 RussiaUkraine conflict further disrupted energy markets,with energy price volatility and supply chain disruptions reducing industrial output,resulting in a 7.5%drop in industrial heat source count.Russia alone accounted for 34.53%(highest globally)of the global heat source reduction between 2015 and 2022.The global number of land industrial heat sources decreased with the largest year-on-year declines of 15.55%in 2020 and 14.50%in 2022.42Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data Figure 4.17.Global distribution of land industrial heat sources in 2022,Number of industrial heat sourcesYearNumber of Industrial Heat Source EmissionsChanging trendsFigure 4.18.Changes in the number of global land industrial heat sources from 2015 to 2022The energy efficiency improvement and sustainable development of global industries require global collaboration.First,developing performance-based energy efficiency policies is critical,involving harmonized standards,cross-border technology sharing and coordinated environmental governance.Second,the significant impact of sudden public health emergencies on industrial activities highlights the fragility of the global economic system,and measures such as strengthening global infrastructure construction and connectivity,establishing global rules and coordination mechanisms are needed to enhance global industrial resilience.Third,developing countries with weak technology and scarce funds urgently need international support for their industrial green and low-carbon transformation.Establishing mechanisms for NorthSouth technology transfersuch as clean production funds and green creditcan align developed countries technological strengths with developing countries resource potential,thus forging a global network for low-carbon industrial transformation.43As one of the core goals of the United Nations 2030 Agenda,SDG 11 aims to build inclusive,safe,and resilient urban systems.The world is experiencing an unprecedented wave of urbanization,with 68%of the global population projected to live in cities by 2050.This trend,however,also poses severe challenges such as resource misallocation and environmental pollution.Traditional monitoring of urban sustainability primarily relies on administrative statistics,which suffer from delays,low spatial resolution,and limited coverage,making them insufficient for dynamic governance and fine-grained management.To address this bottleneck,we developed an integrated monitoring system that combines multi-source remote sensing data with socioeconomic information,focusing on three core indicators:accessibility to public transport in typical cities(SDG 11.2.1),PM2.5 concentration(SDG 11.6.2),and urban greenness index(SDG 11.7.1).This high spatiotemporal resolution monitoring framework provides solid data support and spatial decision-making foundations for sustainable urban development policies.Sustainable Cities and Communities(SDG 11)44Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data Access to Public Transport in Typical Cities(SDG 11.2.1)Efficient and reliable urban public transport systems help advance sustainable transportation,reduce congestion and environmental pressures,and support socioeconomic development.Access to public transport reflects both the quality and effective coverage of services in cities.Since residents typically reach stops by walking or cycling,the effective service coverage of public transport is defined by the walking distance within a certain time threshold.Achieving sustainable public transport is a key indicator.This study assessed the share of Proportion of Population that has Convenient Access to Public Transport(PCAPT)in 330 major cities worldwide(population over 1 million)using multi-modal spatiotemporal big data collected before 2024.The results aim to support policy-making to improve connectivity,ease congestion,and enhance service quality,thereby promoting scientific urban planning and sustainable development.In 2024,the population-weighted average for SDG 11.2.1 in major global cities exceeded 50%.Cities in Europe and East Asia scored relatively high(60%),while those Figure 4.19.Status scores(a:grid level;b:country level)for accessibility to public transport in typical Cities in 2024,along with progress trends(c:grid level;d:country level)and above 5%change range(e:grid level;f:country level)from 2015 to 202445in Americas showed more dispersed values.African and South Asian cities scored lower(Africa(36 g/m3)North America(18 g/m3)Europe(17 g/m3)South America(16 g/m3)Oceania(9 g/m3).These results indicate that air pollution in Asia remains severe,followed by Africa,whereas Europe and North America have achieved relatively successful outcomes in managing urban air pollution.Changes in premature mortality due to PM2.5 exposure in urban areas carry major implications for public health.Using urban population data,PM2.5 exposure levels,and related disease statistics from 2015 to 2023 across all continents(excluding Antarctica),this study estimated premature deaths attributable to PM2.5 exposure in cities.Asia had significantly higher numbers of premature deaths than other continents,with a consistent upward trend from 2015 to 2023.In 2021 alone,premature deaths in Asia exceeded one million.Rapid urbanization and industrialization have led to increased traffic density,industrial emissions,and energy consumption,resulting in a sharp rise in PM2.5 emissions.High population density has further intensified the health burden.In contrast,other continents showed relatively stable mortality trends.Figure 4.22.Global land-based average PM2.5 concentration distribution,2015202348Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data YearUrban populationweighted PM.(g/m)AfricaAsiaEuropeNorth AmericaOceaniaSouth AmericaUrban Premature Deaths Caused by PM.(in,s)YearAfricaAsiaEuropeNorth AmericaOceaniaSouth AmericaFigure 4.23.Changes in population-weighted PM2.5 concentrations in cities across all continents(excluding Antarctica),20152023Figure 4.24.Changes in premature deaths from PM2.5 exposure in cities across all continents(excluding Antarctica),20152023 Urban Greenness(SDG 11.7)Urban green spaces are an integral part of urban ecosystems,vital for regulating rainwater,purifying air,and mitigating the urban heat island effect.In developed countries,municipal green infrastructure is generally well established,providing residents with good access to green space public service.In contrast,many developing countries still lack basic infrastructuresuch as safe drinking water,reliable energy supply,and adequate health and education servicesmaking green public spaces even scarcer.Globally,continuous spatiotemporal monitoring of urban green space is essential to achieving the SDGs.In 2004,Chinas National Forestry and Grassland Administration launched the National Forest City initiative,marking the beginning of forest city development in China.By 2024,a total of 219 National Forest Cities had been established nationwide.However,quantitative and international comparative research on urban greennessan essential component of urban ecological civilizationremain limited.To address this gap,the present case study uses remote sensing and Big Earth Data technologies to examine disparities in urban environmental change during global urbanization from 2015 to 2024.It evaluates the direct benefits of increased urban greenness to populations,providing data support for advancing Chinas urban ecological civilization and offering a low-cost Europe and North America experienced only modest increases,thanks to strict air pollution control policies and technological advances,such as industrial emissions regulations and clean energy adoption.Meanwhile,in Africa,South America,and Oceania,frequent dust pollution,industrial emissions,and wildfires led to a steady,linear increase in urban premature deaths.49Figure 4.25.Status scores(a:grid level;b:country level)for urban greenness index in 2024,along with progress trends(c:grid level;d:country level)and 95%significance levels of changes(e:grid level;f:country level)from 2015 to 2024Figure 4.26.(a)Comparison of urban greenness ratio and average maximum greenness across income levels;(b)Global share of beneficiary population by continent;solution for monitoring sustainable urban development globally,particularly in developing countries.The urban greenness index is defined as the annual maximum Enhanced Vegetation Index(EVl)value within the built-up area(Sun et al.2020).Urban greening correlates strongly with income level,with low-income countries achieving the most significant improvement.Based on the World Banks income classification,the average proportion of cities experiencing significant greening ranked as follows:low-income countries(14.18%),upper-middle-income countries(8.84%),lower-middle-income countries(6.52%),and high-income countries(5.09%)(Figure 4.26a,bar chart).The spatial average of maximum greenness in 2024 was used to represent the current environmental status of cities(Figure 4.26b,line chart).Cities in high-income countries had the highest average maximum greenness(0.414),which may explain their lower average greening rate compared to other income groups,as many already AsiaSouthEuropeAfricaNorthOceaniaProportion of population directly benefiting from significant urban greening(%).High-incomeUpper-middle-incomeLower-middle-incomeLow-incomeAverage greenness of urban built-up areasProportion of urban built-up areas with significant greening (%)(a)(b)50Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data Figure 4.27.Spatial distribution of significant greening ratios and direct beneficiary populations in global citieshave well-developed green infrastructure.Cities in upper-middle-and lower-middle-income countries followed,with average maximum greenness values of 0.362 and 0.346,respectively,suggesting substantial room for improvement compared with high-income countries.Although cities in low-income countries had the lowest average maximum greenness(0.341),they achieved the largest increase in the proportion of significantly greener cities(14.18%).This indicates that despite limited exist in green infrastructure,low-income countries have made notable gains in urban greenness over the past decade,contributing positively to progress toward achieving the SDG 11.7 target.Urban greening has been particularly notable in developing countries.Figure 4.27 shows the spatial distribution of significant urban greening ratios and directly benefiting populations across 1,949 cities worldwide from 2015 to 2024.Each dot represents a city,with color indicating the greening ratio Rg(R1:Rg0.01,magenta;R2:0.01Rg0.1,orange;R3:0.10.33,blue).Dot size reflects the population directly benefiting from significant greening.Cities with higher greening ratios(blue and green dots)are mainly concentrated in Northeast Asia,the Middle East,Eastern Europe,and the Caribbean,with scattered examples in Africa,Oceania,and North America.Chinese cities account for nearly half of the global significantly greened urban area and have the largest number of beneficiaries worldwide.Among the 1,949 cities analyzed,341 Chinese cities represent only 24.98%of global built-up urban area,but contribute 50.59%of the global area experiencing significant greening.This indicates remarkable improvements in the ecological environment of Chinese cities over the past decade and highlights Chinas comparative advantage at the international level.Globally,approximately 157 million people have directly benefited from significant urban greening.The distribution of beneficiaries by continent is as follows:Asia(65.20%),South America(10.76%),Europe(8.23%),Africa(8.15%),North America(6.76%),and Oceania(0.90%)(Figure 4.26b).In China alone,about 47.8 million have benefitedaccounting for 30%of the global total,thanks to both high greening ratios and a large urban population.51Recent years,the destructive power of extreme climate disasters caused by global warming has been constantly increasing.Human activities are closely linked to climate change,driving a rapid rise in global greenhouse gas concentrations,which in turn accelerates climate change,intensifies extreme disasters,and threatens human survival and development.Greenhouse gas emissions(SDG 13.2)and responses to climate-related disasters(SDG 13.1)are therefore the two major themes of SDG 13.The core objective of SDG 13 Climate Action is to take urgent action to combat climate change and its impacts.Climate change and green development are also key priorities under the Global Development Initiative.Greenhouse gas emissions(SDG 13.2)and responses to climate-related disasters(SDG 13.1)constitute the two major themes of SDG 13.At present,SDG 13 is the most data-deficient among all 17 SDGs,with only about 20%of countries having comparable data 20,and spatiotemporal data are even scarcer.Addressing climate-related disasters requires not only national-level statistics,but also information on how different disaster types impact specific regions and time periods.For greenhouse gas emissions,accurate national emission volumes are needed alongside spatially explicit source locations and temporal trends.This is thus an urgent global need for data that can capture both overall indicator progress and provide spatial detail and temporal trends to inform disaster response and climate mitigation.This section focuses on the two key themesgreenhouse gas emissions and climate-related disasters.Using Big Earth Data and globally harmonized methodologies,we developed spatiotemporally explicit and rapidly updatable data products to monitor global indicators,assess emission trends,and provide methodological,data,and decision support for climate action.Climate Action(SDG 13)52Global-Scale Sustainable Development Scientific Monitoring Report(2025)A Decade of Progress through the Lens of Big Earth Data Heatwave Frequency(SDG 13.1)Heatwaves have become one of the most severe weather disasters affecting populations worldwide.In recent years,heatwaves have repeatedly broken historical records,posing serious threats to human health and natural ecosystems.According to the Intergovernmental Panel on Climate Change(IPCC)Sixth Assessment Report,heatwave intensity and frequency are increasing with rising global temperatures,along with a surge in compound events.However,satellite-derived land surface temperature data have yet to be fully leveraged for monitoring heatwaves.Observation methods remain underdeveloped,and traditional station-based approaches suffer from limited spatial coverage and inconsistent qualityparticularly in developing countries,where observational data are often severely lacking.To address these gaps,this case study combines satellite and meteorological station data,with threshold-based extreme event analysis to develop a global heatwave monitoring dataset covering 2015 to 2022.It analyzes the spatial distribution and trends of global heatwave events and provides country-and region-level indicator assessments,offering data support for science-based disaster prevention and mitigation strategies(Figure 4.28).Figure 4.28.Status scores(a:grid level;b:country level)for heatwave frequency in 2022,along with progress trends(c:grid level;d:country level)and 95%significance levels of changes(e:grid level;f:country level)from 2015 to 202253Globally,heatwave days show marked spatial heterogeneity.The highest frequencies occur mainly in mid-and low-latitude regions of the Northern Hemispheresuch as the southern United States,central and southern Europe,northern Africa,and central and western Asia in 2022(Figure 4.29).High-latitude regions were also significantly affected in 2022,especially northern Asia,northern North America,and parts of the Arctic,underscoring the vulnerability of polar regions.Polar warming is occurring at a faster pace than in
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The state of climate response in IndiaOctober 20250302The State of Climate Response in IndiaThe State of Climate Response in IndiaTable of contentsForeword by Deloitte 4Foreword by Rainmatter Foundation 6Executive summary 9State of climate in India 21Indias current climate response 63Way forward:Pathways to climate resilience 87Conclusion 100Connect with us 1020504Climate change is no longer a future possibility;it is a present reality that is impacting communities,markets and ecosystems throughout India.With its economy now at US$3.9 trillion,India is pursuing a bold vision to grow into a US$32.4 trillion economy by the year 2047,guided by the goals of Viksit Bharat.Achieving this goal will require investments in infrastructure,technology and social systems.This large-scale build-out is estimated to generate 5 million new jobs by 2030 and could unlock US$3.54 trillion in yearly economic output,accelerating Indias transition towards a more inclusive and climate-resilient economy.Yet our growth pathway cannot replicate the carbon-intensive trajectories of developed economies.India is at a pivotal moment to“bend the curve”and chart a model of progress that is both climate-resilient and balances economic ambition with environmental stewardship.This is an economic opportunity and a social responsibility.By embedding adaptation and resilience into every stage of planning and investment,India can demonstrate that large-scale development and ecological stewardship are mutually reinforcing pillars of sustainable prosperity.Such an approach offers ForewordDeloitteAshwin JacobPartner&Leader,Energy,Resources and Industrials Deloitte India Prashanth NutulaPartner,Deloitte Indiaa blueprint for the broader Global South,showing how countries can pursue rapid growth while maintaining a low-emissions,climate-aware trajectory.Indias strength also lies in designing population-scale systems that combine innovation,inclusion and efficiency.Using interoperable digital infrastructure,data-driven systems and AI-enabled solutions can break silos,reduce costs and accelerate coordinated,evidence-based climate action across sectors.For Indias corporate sector,this moment calls for growth that goes beyond business performance,towards a model of resilient growth that places risk awareness,adaptive planning and social inclusion at its core.Businesses must deepen risk modelling to craft robust adaptation strategies in high-stress zones,integrate climate considerations into long-term investment and innovation decisions and rewire value chains to withstand emerging shocks.Companies can enhance community resources,support suppliers and create integrated solutions to build resilient ecosystems that benefit both business and society.This report is intended to guide those very conversations.By drawing together data,insights and best practices from across sectors,it seeks to provide a shared evidence base to shape Indias path forward.Our hope is that it will spark collaboration,inform strategic choices and inspire leadership,helping India prove that climate resilience and economic transformation can advance hand in hand.The state of climate response in IndiaThe state of climate response in India0706The last few years have brought the climate and planetary crisis to every doorstep.Every region,every country,every industry and every part of the economy has felt its impact in some way.More recently,we just crossed the seventh of the nine planetary boundaries that scientists have been tracking.The need for urgency in climate action and in limiting and recovering from the damage caused cannot be emphasized enough.India is one of the largest and fastest-growing economies in the world,and it also needs to lift many out of poverty and into the next level of economic prosperity.It is also one of the countries predicted to be most vulnerable to the impacts of climate change.And so it is imperative that we recognise the risks posed by climate change and the connected crises and spot and solve proactively for the blind spots it is rapidly exposing.For generations,societies have depended on nature to provide raw materials and sustain industries,often without fully appreciating the value of the ecosystems that make this possible.Today,these natural systems are under significant strain,and disregarding their limits could lead to serious consequences for individuals,communities and economies.ForewordRainmatterFoundationThere is a growing awareness of the deep interconnections that span geographies,industries and domains.Yet,in the relentless pursuit of efficiency and growth,focus has narrowed to such an extent that the broader picture is often overlooked.Many risks now lie hidden in the links that have faded from view,especially as specialisation continues to increase.Deloittes role as a strategic advisor to industry players across geographies,domains and governments affords it a deep understanding of a wide cross-section of the real world.At the Rainmatter Foundation,we started with exploring and understanding intersections and trade-offs across various facets of our lived realities that led to outcomes such as the climate and biodiversity crises,a weakening of natural assets and various dimensions of the linked human crises across the country.The coming together of these organisations and a wide variety of partners helped us understand where we are as a country,where action is needed the most and where we have already seen strides made.Thankfully,on many fronts,government,civil society and businesses have led from the front and created some really wonderful examples of change that inspire and create hope.However,we have realised through the research and consultations done for this report that there are ways to go with respect to whats really needed to have any hope of meaningfully addressing the crisis we are in.We cannot continue to look at sustainability and climate action in terms of a separate,siloed bucket different from the core of our businesses or activities-we have to solve the trade-offs we make in those ground up and design up.The action needs to be imagined in terms of sourcing,materials,how we view the product mix and lifecycles,and how hard we drive efficiency across the spectrum.We need to embrace the idea of resilience as a core focus rather than the singular metric of growth that ignores the clear and present risks to not just the upside,but the very existence of many businesses.It was also alarming that many central banks across the world,numerous actuaries and other risk managers are already chasing a better Dr.Kailash Nadh CTO,Zerodha Founder,Rainmatter FoundationSameer ShisodiaCEO,Rainmatter Foundationunderstanding of this.Still,in mainstream business planning and operations,as well as in the investment world,this is not yet a significant consideration,except in pockets.The years ahead will force a change in this approach,and it is clear that the coming decades will belong to those preparing early and even identifying opportunities for antifragility amidst these crises.There will be a huge shift is in the level of complexity businesses and governments will need to manage,but given that today we possess the tools and technologies to manage and analyse mammoth amounts of data,there is reason to imagine that many will rise to the challenge and reimagine and recreate the methods,processes,industries and economies in a manner that is more in sync with the planet than we have ever seen in modern human history.The state of climate response in IndiaThe state of climate response in India0908India stands at a critical inflection point in its development journey.As India charts its path ahead,climate risk must be recognised as a core economic concern.According to Deloittes Turning Point research,if India pursues rapid decarbonisation and climate action,it could gain nearly US$11 trillion in economic value by 2070.In contrast,failure to act could result in a loss of up to US$35 trillion.1Climate risks are no longer distant threats;they are present and intensifying,manifesting through deteriorating air quality,erratic rainfall,depleting freshwater reserves,increasing waste volumes,rising temperatures and more frequent extreme weather events,such as floods and landslides.These impacts are being felt across both rural and urban landscapes,driving biodiversity loss,disrupting vital natural ecosystems and threatening nutritional security.Given the high exposure to climate risks and its status as the worlds fourth-largest economy2,India occupies a central role in global climate action.Today,no meaningful Executive summaryconversation on climate change can take place without keeping India at the centre.Its ambitious climate vision,spanning renewables,biofuels,decarbonisation and sustainable infrastructure,supported by a strong regulatory framework,aims to balance growth with climate resilience.According to Deloittes report The climate response:Tapping into Indias climate and energy transition opportunity,achieving this vision will require an estimated US$1.5 trillion by 2030.3 Such an investment can unlock pathways to cut emissions,generate jobs,and safeguard communities.This large-scale build-out is estimated to generate 5 million new jobs by 2030.The investments would drive large-scale employment across sectors,including feedstock aggregation,production,warehousing and logistics,creating both direct and indirect opportunities.Overall,it could unlock US$3.54 trillion in yearly economic output,accelerating Indias transition towards a more inclusive and climate-resilient economy.The state of climate response in IndiaThe state of climate response in India1110State of climate in IndiaAtmosphereHydrosphereLithosphereForests&biodiversity Decline in forest cover inside recorded forest areas of 11,000 Sq km across states over the past decade Eco-sensitive Western Ghats and Northeast lost 3,190 km forest in a decadeAgricultural resources Agricultural land share declined,but yield rose by 49 percent in 20 years Fertiliser use also rose by 49 percent About 50 percent of soils show Low organic carbon levels Urban infrastructure Built-up land expanded 31%(20062023)Groundwater Groundwater recharge dropped 13 percent over the last two decades Rivers About 15 states report reservoir levels below the 10-year averageGlaciers Himalayan glaciers have lost over 40 percent of their area and mass since the 20th century Glacier-fed water spread area rose 30 percent between 2011 and 2024Oceans and seas Since 1950,sea surface temperatures in the Indian Ocean have risen by 1.2C Arabian Sea cyclone frequency rose by 52 percent in the past two decadesHeat 47x increase in heatwave days by mid-century can be potentially experienced by major Indian citiesRainfall patterns Monsoons are increasingly erratic and unpredictable Extreme rainfall events surged(1.4x in the last five years)Delayed monsoon withdrawals disrupting agriculture(55 percent rainfed)Air quality India is the third most polluted country PM2.5 levels are 8x above WHO limits;80 percent of cities lack air quality monitoring stationsRealising this vision depends on a deeper understanding of the environmental systems that shape Indias climate reality.The report,thus,helps examine the climate landscape through the lens of three interconnected environmental spheres:the atmosphere,hydrosphere and lithosphere.Each sphere,with its own set of indicators,together forms the foundation of environmental conditions,societal engagement,collective well-being and economic impact.These climate indicators are deeply interconnected,creating compounding pressures across systems.Changes in the atmosphere influence rainfall and temperature patterns;water availability affects land use and soil health;and land degradation increases vulnerability to floods and erosion.Further,loss of biodiversity and ecosystem degradation weaken natural buffers,reducing the ability of ecosystems to provide essential services and increasing the cost of adaptation.The map below illustrates these cause-and-effect relationships,showing that Indias climate challenge involves more than isolated shocks.It represents a systemic transformation unfolding across regions,sectors and communities,with cascading impacts on businesses and societal well-being.Climate in motion:Mapping the web of systemic impactsEmissionsRapidUrbanisationUrban HeatIslandTemperatureLand useLand changeForest CoverBiodiversity(agri species)UnsustainableAgriculturalPracticesR2R1R3R4Soil QualityAgri YieldDroughtsFresh/Ground WaterAvailabilityIncomeTransportDisruptionDiseasesOperational Disruptions toProduction and Supply ChainsPropertyDamageWorkforceProductivity RisksRegulatory andCompliance ExposureTransition Risks andChanging Market DynamicsSocietalWell-BeingRisks to BusinessesClimateExtremesAir QualityRainfallSeverity of Impactof Natural Disasters(land slides,flooding,heatwaves,etc)Transition|-Time Delay between the cause and the effectR-Reinforcing Loop(The behaviour of the system is amplified in one direction)Dashed lines-Causal pathways showing impacts on people and businessesBlue-Impacts to peopleRed-Impacts to businessesThe state of climate response in IndiaThe state of climate response in India1312This evolving climate landscape calls for coordinated,systems-based responses.Hence,governments,policymakers,corporates,civil society groups and city planners must move beyond siloed interventions,adopting a systematic approach to assess risks and design integrated responses that anticipate cascading risks and create co-benefits.Equally important is understanding how citizens perceive and respond to climate change,as individual behaviour affects both policy and market outcomes.Deloittes Citizen Climate Survey 2025,covering over 1,700 households across Indias diverse climatic zones,examines how people understand and experience climate change,and how limited access to resources and support mechanisms continues to shape their ability to adapt.The findings reveal that the burden of climate impacts is unevenly shared.Women(37%)report higher rates of severe impact than men(30%),underscoring gendered vulnerabilities linked to care responsibilities and unequal access to resources.Climate change tends to reinforce existing gender inequalities,as both its impacts and the responses that follow often perpetuate existing social and structural disparities.Similarly,those aged 3544 face the most pronounced impacts(40%),likely due to greater livelihood and family responsibilities,while younger adults(1824)are less affected(26%).In the Himalayan regions,the most frequently reported climate concerns are erratic rainfall(49 percent)and rising temperatures(40 percent).These also remain key issues in the Northeast,alongside a heightened incidence of flooding(38 percent),with rising temperatures(54 percent)and erratic rainfall(39 percent)among the top concerns reported.As these individuals are both customers and employees,companies need to assess the risks arising from shifts in customer behaviour and purchasing power.At the same time,evolving societal expectations are placing greater emphasis on businesses to take a proactive role in addressing climate change.Climate change also poses direct risks to business operations and growth.Extreme weather events disrupt supply chains,reduce workforce productivity and damage physical assets.At the same time,transition risks,such as carbon regulations and investor scrutiny,are reshaping markets.Climate risks vary by sector,with each of the sectors facing unique vulnerabilities based on geographic location,resource dependence,operations and value chain.Some industries face immediate,direct consequences(first-order effects),while others experience indirect,cascading impacts(second-order effects).Recognising these sector-specific exposures is critical for designing targeted adaptation strategies.Citizen Climate Survey 2025 findings:Living the climate impactFeeling the impactHow people are adaptingBarriers to actionReady to collaborateClimate stresses reported 86%report experiencing climate change effects,with 1 in 3 describing them as“significant”37%of women and 40%aged 35-44 report higher exposurecite rising temperatures as top concernreport health and livelihood losses(crop/livestock)of landowning farmers report crop loss as their main impact604Q%Yet 22%of respondents remain inactive,indicating a gap in climate awareness and action.44%practice waste segregation40%cut back on electricity and water use30%cut single-use plastics33lieve individual actions make little difference30ll for subsidies or incentives25%seek better awareness and access to information77%willing to join community-driven climate initiativesThe state of climate response in IndiaThe state of climate response in India1514Key business risks due to climate changeWhile mitigation helps address the causes of climate change,adaptation tackles its immediate impacts,making it critical for protecting lives,infrastructure and economic stability.A WRI study shows every dollar invested in adaptation can yield over US$10 returns,positioning climate resilience as a smart economic opportunity for businesses and investors.4Operational and supply chain disruptionsKey business risks due to climate change Transition risks and changing marketdynamicsRegulatoryand complianceexposureFinancial and insurancerisksReputational,workforce and consumer riskHarnessing this opportunity requires businesses to embrace an integrated approach that strengthens core operations,rewires value chains and invests in shared community resources.This layered model protects enterprise value,builds systemic resilience and unlocks new avenues of growth that can be effectively guided through a corporate climate action framework.Corporate climate action frameworkInvest in solutions with clear business cases and market demandMeet regulatory requirements;ensure compliancein core operationsPursue transformative innovation for environmental and societal benefitBuild trust with communities,employees,and stakeholdersCompetitive advantageSocietal licenseto operateLicense to operateCommercially viableThe state of climate response in IndiaThe state of climate response in India16Recognising the opportunities presented by climate action,businesses are moving from intent to action.Deloittes Corporate Climate Readiness Survey 2025,which engaged more than 50 leading corporates across sectors,offers a candid view of how Indian businesses are navigating a changing climate.The results reveal that climate risk has moved to the centre of strategy,shaping how organisations plan,operate and grow.Nearly 84 percent of respondents say climate change is already influencing their decisions,with one in six reporting a significant impact.Looking ahead,over a third of respondents expect this influence to grow in the next three years,underscoring companies view of climate risk as a pressing,fast-moving challenge.The nature of that reality is both physical and operational.Extreme heat and water stress top the list of concerns,followed by flooding,sea-level rise and poor air quality.These pressures are disrupting production,straining supply chains and impacting workforce health,highlighting that business continuity now hinges as much on resilience as on performance.While operational disruption remains the most visible challenge,gradual pressures,too,are emerging,such as shifting regulations,evolving consumer expectations and workforce wellbeing concerns.These are now surfacing in financial terms through rising insurance costs and tighter access to capital.Resilience,it appears,now carries a price tag.Despite these pressures,investment in climate action is increasing,reflecting a growing understanding that sustainability drives growth,innovation and long-term competitiveness.Nearly two-thirds plan to increase climate-related investments over the next three years,with some anticipating substantial growth of over 20 percent.While efforts often remain fragmented,many firms are working closely with suppliers,regulators,customers and financial stakeholders to build resilience,innovate low-carbon solutions and future-proof their value chains.However,building resilience at the corporate level is only part of the equation;meaningful climate action also requires national-scale coordination and innovation.India,as a nation,has the tools,talent and tenacity to lead in climate resilience and green innovation.The government is taking critical steps through climate policies and action plans at both the Central and state levels.Start-ups are driving breakthroughs in climate-tech,from waste management to precision agriculture.States and cities are piloting climate-smart agriculture,green infrastructure and circular economy models.Forward-looking businesses are embedding sustainability into core operations and supply chains,while Public-Private Partnerships(PPPs)are beginning to unlock scale.Civil society,an equally important actor,is playing a vital role in mobilising grassroots awareness,driving behavioural change,strengthening accountability,bridging the last-mile gap in adaptation,supporting the development of infrastructure for the climate action ecosystem and guiding policy action.17The state of climate response in IndiaCorporate Climate Readiness Survey 2025Key findings84%say climate change already impacts business strategy and operations47%cite employee health challenges driven by changing environmental conditions28%say they are supporting innovation to drive new climate solutions44%report changing consumption patterns and regulations affecting operations41%respondents are building climate risk mitigation and adaptation capabilities21%cite increased insurance costs or lack of insurance availability 40%are setting standards,specifications,and guidelines to strengthen industry alignment38%are collaborating with government and civil society to advance climate action64%plan to increase climate-related investments in the next three years72%report operational disruption as the most significant business impact54%cite extreme heat and water stress as top operational challengesClimate impacts businessesBusinesses are facing operational,financial and workforce risks due to climate-related eventsHowever,they are also beginning to innovate,collaborate and build resilience across operationsThe state of climate response in India18Call to action:Pathway to climate resilienceProtecting and enhancing ecosystem services can serve as the unifying agenda for these stakeholders,ensuring that climate action also rebuilds Indias ecological wealth.Systems thinking provides a framework to understand climate risks holistically.It highlights the connections between environmental,social and economic systems.However,these initiatives will only create a scalable,tangible impact when combined with coordinated action from government,industry,financial institutions,civil society,research,academia and communities.This includes aligning policies,integrating climate risks into planning and providing greater support for local institutions.For businesses,it means moving beyond Corporate Social Responsibility and embedding sustainability into their core operations,supported by data,talent,systems and community engagement for a just and lasting transition.The effectiveness of these efforts will shape Indias resilience in the coming decade.The choices made today will determine the nations ability to withstand climate shocks,protect vulnerable communities and safeguard critical ecosystems,turning the climate challenge into an opportunity for sustainable,resilient growth.19The state of climate response in IndiaMainstream climate into core strategy and business operationsFinance the climate transition through de-risked ecosystemsUse technology for evidence-based decision makingBuild a climate-ready workforce for future transiton Enhance institutional capacity for improved governanceBuild climate awareness and facilitate communicationThe state of climate response in India2120State of climate in IndiaClimate change is a global issue,but its impacts are felt locally and disproportionately.India stands at a defining moment in the global climate narrative,both as one of the most vulnerable nations to climate impacts and as a country whose response would shape the trajectory of its development for decades to come.With its vast and varied geography,densely populated urban centres,high agricultural dependence and rich biodiversity,it faces a unique and complex set of climate risks.As the worlds fourth-largest economy and home to nearly one-sixth of humanity,Indias climate decisions carry global significance,influencing the course of global sustainability efforts.India holds 4 percent of the worlds freshwater resources but supports 20 percent of the global populationIndia,covering 2.4 percent of the worlds land,hosts 78%of global biodiversity share,and is home to 4 of the worlds 36 biodiversity hotspotsIndia is among the top three global producers of food,leading in pulses,spices and milk and ranking high in rice,wheat,fruits and vegetablesIndia faces an acute climate crisis,given its scale of people and limited resources4,5,6,7,8,9The state of climate response in IndiaThe state of climate response in India2322Achieving this,however,requires breaking away from the legacy of siloed problem-solving that has long prioritised short-term economic gains over ecological and community well-being.This has contributed to the current planetary emergency,now understood as a web of linked risks across climate,biodiversity,soil and water.To understand the climate-related shifts more clearly,the report examines Indias climate by focusing on the atmosphere,hydrosphere and lithosphere.Uncontrolled climate change poses a significant threat to decades of economic progress and could jeopardise Indias status as a contemporary,global hub for manufacturing and services.The next frontier is resilient-led growth,where companies pursue expansion while embedding climate resilience at the core of strategy.From safeguarding supply chains to future-proofing assets and protecting workforce productivity,resilience is not a cost but a competitive advantage.The companies that grow with resilience would be the ones that sustain value,attract capital and secure relevance Interplay between climate systemsForests and biodiversityUrban land and infrastructureAgriculture and food systemsLithosphereHuman and industrial activitiesImpact of climate changeAnd others.Impacts Climate SystemsAnd others.Land use changeUnsustainable agricultural practicesVehicular emissionsOver-extraction and over-consumptionIndustrialisationWater scarcityHabitat lossProductivity lossThreat to food securityHealth impactSocio-economic inequityRiversGroundwaterGlaciersOceans and seasHydrosphereHeatRainfall PatternsAir QualityAtmosphere Atmospheric change captures heat,rainfall patterns and air qualityIndias Viksit Bharat2047 is at risk without effective climate action10,11To achieve the Viksit Bharat2047 vision,India will need to sustain large-scale investments in infrastructure and industrial growth,driving up energy demand and emissions footprint.Ensuring this pathway remains resilient-balancing economic progress with sustainability will be critical,moving beyond a narrow focus on financial goals aloneIf climate action is not integrated into Indias growth strategy,the country risks falling short of its GDP ambitionsCumulative estimated impacts on Indias GDP from climate change(if high emissions continue)33 percentof GDP is generated in sectors that are highly dependent on nature,including forestry,agriculture,aquaculture,food,beverages,tobacco,hydropower,etc.2.8 percent13 percentloss of GDP by 2050in the decade ahead.Hydrosphere indicators track rivers and groundwater,glacial systems,oceans and seas1,395 kWh per capita energy demand4,000 kWh 3 times of current per capita energy demand3.4%of GDP infrastructure spending7%of GDP infrastructure spending targets under the National Infrastructure Pipeline initiative US$32.4 T Indias projected GDPIndian economy under Viksit Bharat 2047US$3.9 T Indias GDPIndian economy in 2024 Lithosphere shifts reveal changes in forests and biodiversity,soil health and agriculture practices,as well as urban land use and infrastructureestimated impact on GDP due to drop in agricultural output,equivalent to a 16 percent drop in agricultural output by 2050The state of climate response in IndiaThe state of climate response in India25AtmosphereAbout 60 percent of citizens surveyed reported rising temperatures and 30 percent reported erratic rainfall as the most prominent and primary effects of climate change affecting themErratic rainfall patterns and rising temperatures were the top two issues reported in the Himalayan region About 14 percent of the citizens surveyed cited poor air quality as the most prominent effect of climate change impacting themClimate indicatorClimate trendsInsights from Deloittes citizen surveyAir qualitymost polluted country in the world after Bangladesh and Pakistanlack air quality monitoring stations,15 percent with 1,5 percent with 13rd 80 percent of cities/towns 3increase in extreme heat wave days across the March to May and June to September months in the last three decadesincrease in heatwave days by mid-century can be potentially experienced by major Indian cities15-fold4-7x Heat1In Central India LPA,from 1110 mm(19512000)to 1590 mm(19712020)in East and Northeast LPA,from 2036 mm(19512000)to 1951 mm(19712020)Rise in extreme rainfall events in the last 5 yearsresulting in higher rainfall(22%increase b/w Oct to Jan as compared with 7%b/w Jun to Sept in the last four decades)43%increase4crease1.4 times Delayed monsoon withdrawalRainfall patterns2Indias climate dashboard:Tracking the pulseToday,the signs of disruption are all around.India continues to experience extreme climate events,such as devastating heatwaves that impair agricultural productivity and torrential rains leading to flooding,which affects Indias infrastructure and communities.Glaciers are retreating at alarming rates.Water tables are dropping,forests are burning and air pollution has breached safe limits across dozens of cities.These changes signal growing stress on natural systems,underscoring the urgent need to understand the countrys climate risks through a holistic,integrated and multi-dimensional lens.Climate trends in India24The climate dashboard aims to bring together a high-level summary of trends across key critical climate indicators to offer a consolidated view of where India stands today.HydrosphereeLithosphereRiversForests and biodiversityWater reservoir levels in 15 states decline in recharge rates over the past 20 years.loss in glacial area and mass during the 20th centuryin sea level in parts of Indiadecrease in annual rainfall across key river basins:Ganga,Brahmaputra,Cauvery,and Narmada over the past two decades compared with the last century(1901-2000)in 2024;Himachal Pradesh experienced a 6.7x increase and Uttarakhand 2.7x riseFlooding was one of the top three impacts of climate change reported in the North-Eastern region About 20 percent of the citizens surveyed cited water shortage as one of the most prominent effects of climate change affecting them Nearly 27 percent of respondents reported disruptions in water and electricity supply(27 percent)as a leading climate issue Approximately 40 percent of respondents reduce their water and electricity usage to lessen environmental impact.33 percent of respondents across urban and rural areas report experiencing significant climate impacts.At the same time,a considerable share,over 12 percent,reports feeling no impact.More than 41 percent of those in cities and towns reported health issues as a major impact of climate change.About 51 percent of the respondents identify crop and livestock loss as a primary effect of climate change.of groundwater faced in in regions such as Rajasthan,Haryana,Punjab and Delhiincrease in water spread area from 2011 to 2024loss in West Bengals coastline since 1990across Indian rivers report levels above safe thresholdsof samples collected exceed the Nitrate limits,hinting at rising toxic contaminationFaster loss of glacier mass in the Hindu Kush Himalayasincrease in Arabian Sea cyclones(200119);very severe ones up 150 percentBelow the 10-year average13 percent40 percent2.5 mm/year rise 4%to 14 states,11,097 fires Overexploitation30percent60percent43 percent of BOD stations lost in the past decade across the biodiversity-rich Western Ghats and northeastern states3,190 km of forest cover 20 percent 65 percent 52 percent GroundwaterGlaciersOceans and SeasClimate indicatorClimate indicatorClimate trendsClimate trendsInsights from Deloittescitizen surveyInsights from Deloittescitizen survey48567The state of climate response in IndiaThe state of climate response in India2726The climate dashboard is designed to support decision-making and foster coordinated action.By bringing together environmental data and public perception,it helps create a shared language for engagement among governments,civil society,businesses and citizens.The following section offers an in-depth exploration of each indicator,examining the trends,challenges and implications in greater detail.Insights from the Citizen Survey reveal how individuals experience climate change in their daily lives,while Deloittes Corporate Climate Readiness Survey shows that most businesses already see it influencing their strategy and operations.Taken together,these perspectives reflect how climate change cuts across personal,social and economic spheres,affecting both people and the systems that sustain them.It is this combination of data-driven insight and human-centred perspective that would be essential for designing equitable,resilient and scalable climate solutions for India.Given that its impacts are interconnected,applying an integrated approach to building such solutions would be crucial.LithosphereAgriculture and food systemsin agricultural productivity mirrored with equal growth in fertiliser use(in response to shrinking cultivation areas)Soil samples show low organic carbon levels,due to excessive fertiliser use(high degradation in Punjab,Haryana)Of Indias usable Freshwater resources is consumed by Agriculture49 percent50 percent80 percentSocietal indicatorClimate trendsInsights from Deloittescitizen survey12Urban land and infrastructuregrowth in built-up land in India(20062023)More nigh-time warming in over 140 prominentIndian citiescompared with non-urban areas surrounding themresulting from rapid urbanisation(growth in built-up areas,increased vehicular density,etc.)31 percent60 percentUHI,higher emissions,ineffective waste managementNearly half of respondents are already taking adaptive steps such as waste segregation(44 percent)and cutting electricity or water use(40 percent)and almost one-third(30 percent)have reduced single-use plastics;however,22 percent remain inactive,across urban and rural areas.About 34 percent of rural respondents doubt any impact from their actions(compared with about 30 percent in towns/cities),while city dwellers more frequently(31 percent)cite limited awareness compared with town(21 percent)and village(24 percent)residents.Willingness to participate in community initiatives is higher in villages(79 percent)and towns(76 percent)than in cities(72 percent)As illustrated above,these cause-and-effect relationships underline that Indias climate challenge is beyond a series of isolated shocks;it is a systemic transformation unfolding across regions,sectors and communities.Unsustainable agricultural practices,for instance,degrade soil health and reduce crop productivity,triggering a self-reinforcing cycle where declining yields push farmers towards even more extractive methods,further accelerating land and ecosystem degradation.By integrating this data with systems thinking,the climate dashboard helps shift from fragmented efforts to coordinated strategies that strengthen resilience at scale.This report aims to shift the conversation from reactive adaptation to proactive,equitable climate action,anchoring the pathways that India must pursue to safeguard its future growth and societal well-being.EmissionsRapidUrbanisationUrban HeatIslandTemperatureLand useLand changeForest CoverBiodiversity(agri species)UnsustainableAgriculturalPracticesR2R1R3R4Soil QualityAgri YieldDroughtsFresh/Ground WaterAvailabilityIncomeTransportDisruptionDiseasesOperational Disruptions toProduction and Supply ChainsPropertyDamageWorkforceProductivity RisksRegulatory andCompliance ExposureTransition Risks andChanging Market DynamicsSocietalWell-BeingRisks to BusinessesClimateExtremesAir QualityRainfallSeverity of Impactof Natural Disasters(land slides,flooding,heatwaves,etc)Transition|-Time Delay between the cause and the effectR-Reinforcing Loop(The behaviour of the system is amplified in one direction)Dashed lines-Causal pathways showing impacts on people and businessesBlue-Impacts to peopleRed-Impacts to businessesClimate in motion:Mapping the web of systemic impacts well-beingThe state of climate response in IndiaThe state of climate response in India2928India is entering an era of chronic heat:Climate change is leading to more frequent,deadly and economically costly heatwavesHeat stress spans Indias diverse geographies-from its vast plains to its peninsular interior and its long coastlinesRising heat stress is reducing labour productivity and threatening income security In 2024,India recorded 48,156 heat stroke cases and 161 heat stroke deaths 181 billion potential labour hours were lost due to heat exposure in 2023,an increase of 50%from the 1990-1999 annual average Heat-induced productivity loss is highest in Southeast Asia.By 2030,India could lose 5.8 percent of working hours Sectors such as agriculture,construction and transport face growing cost burdens from climate-exacerbated heatExtreme heat is intensifying public health risks and imposing growing economic costsIndia:A nation under heat stress 15-fold increase in extreme heatwave days between March to September in the last 3 decadesSource:CEEW“How Extreme Heat is Impacting India”,Navigating Indias Urban Heat Landscape,Times of India interview(Co-chair of the IPCC Working Group),Indian Meteorological Department(IMD).Lancet Countdown on Health and Climate Change Data Sheet 2024,ILO Working on a warmer planet,SRPF.in,TERI:The Silent Disaster:Why India Must Build Stronger Heatwave Resilience 12,13,14,15,16,17About 75 percent of Indias workforce(380 million)is exposed to heat stress due to outdoor or heat-intensive jobs Average mean surface area temperature departuresThe average mean surface temperature during 19912020 has risen across the country compared to the average of previous three decades(19611990)Departure from previous normal temperature in C(1961 1990)Average mean surface area temperature in C(1991-2020)East-Coast India:Temperatures 400C common,humidity amplifying heat stress,40oC common,humidity amplified stress.Interior Peninsula:Duration spans across multiple days-48 days Climate indicator 1:HeatNorth-west India:Frequency among the highest,many stations showing rising events,lasting 48 days,with uptrends across stations;Delhi and Rajasthan:Extreme temperatures breached 50C in 2024,triggering widespread health emergencies.Central India:Elevated frequency;pockets with 24 events/season,with durations spanning 48 days,increasing at many stations. 0.55(3.22)Ladakh,J&K 0.57(8.78)Himachal Pradesh 0.6(14.06)Uttarakhand 0.57(25.91)Uttar Pradesh 0.47(25.64)Bihar 0.59(6.00)Sikkim 0.51(28.1)Andhra Pradesh 0.51(25.28)Haryana 0.51(26.27)Rajasthan 0.58(27.72)Tamil Nadu 0.45(25.95)Madhya Pradesh 0.35(26.22)Odisha 0.54(27.35)Gujarat 0.33(25.93)West Bengal 0.58(26.45)Kerala 0.41(23.48)Assam 0.51(19.26)Arunachal Pradesh 0.49(26.04)Karnataka 0.43(26.88)MaharashtraThe state of climate response in IndiaThe state of climate response in India3130Indias monsoon is becoming increasingly erratic,with shifting paths,delayed withdrawal and surging extremesRainfall extremes are surging:Heavy rainfall events have risen 1.4x in five years,while dry spells persistHigh rainfall events in 2020-2024 SW monsoonIncludes very high rainfall and extremely high rainfall eventsFurthermore,Inadequate data systems are masking the full extent of monsoon volatilityLow-resolution gridsRainfall data still captured at coarse 25 km x 25 km resolution,limiting precision in analysis and responseReal-time data availabilityData transmission from remote or difficult-to-access locations can be slow,potentially leading to outdated information being used for forecasts Geographical coverage can varyGeographical coverage can vary,particularly in rural and remote areas,leading to potential underrepresentation of some regionsMonsoon is changing course:Indias rainfall belt is drifting westward,leaving traditionally wetter regions drierOND monsoonJJAS monsoon2,253202020212022202320241,9092,1762,7923,105 Rains now skewed towards western states(Gujarat,Rajasthan,Maharashtra),receiving Higher rainfall Deficits seen in Indo-Gangetic Plains and Northeast,including Bihar,West Bengal and Assam Low-pressure systems are veering West from the Bay of Bengal,disrupting historical monsoon pathsWithdrawal is delayed:Monsoon rains are spilling into new months,disrupting seasonal cyclesJunJulAugSepOctNovDecJanFebMarAprMay-8%4%8H1%-37%-14%-16%-70%-35%Month-wise trends for rainfall in 2022 when compared to the long period average increase About 55 percent of Indias sown land is rain-fed,and highly exposed to erratic precipitation Extreme rainfall events have been experienced across regions,some examples include Dharali,Uttarakhand(August 2025)cloudburst,Kerala landslide(July 2024),Vijaywada Floods(September 2024)intensified by rain surge Southwest monsoon patterns are increasingly extending into October,indicating a shift in seasonal timelines.Northeast monsoon activity has been recorded as late as January,reflecting growing unpredictability in rainfall cycles.Excess rainfall during key harvest periods has adversely impacted crops such as rice,maize and pulses,affecting yield and quality.Between 2012 and 2022,48 percent of districts witnessed elevated rainfall in October,overlapping with critical sowing and harvesting phases and disrupting agricultural operations.Climate indicator 2:RainfallSource:IMD Rainfall Statistics(2020-24),CEEW,Carbon Debrief.org,India Today News Article 18,19,20,21Rainfall in East and north-east India in 2022in mmRainfall in North-west India in 2022 in mm286424209261-33% 25%Long period average rainfall(LPA)Actual rainfall1.4xThe state of climate response in IndiaThe state of climate response in IndiaThe Indo-Gangetic Plain remains the most affected region,with the highest concentration of cities in the global top 50-illustrating how geography,urbanisation and industrial activity converge to create a persistent air quality hotspotClimate indicator 3:Air qualityIndia leads global pollution charts:23 of the top 25 most polluted cities in 2024 were in India.with India ranking among the bottom three globally in terms of Air Quality IndexAverage Annual AQI in 2024 in g/mPM 2.5 Average Annual Concentration-Top 10 Cities,202433Air quality crisis:A national public health and environmental riskByrnihat,Assam126Delhi105Gurugram,Haryana91Sri Ganganagar,Rajasthan86Faridabad,Haryana84Greater Noida,UP84Muzzarfarnagar,UP83Bhiwadi,Rajasthan80Noida,UP80Ghaziabad,UP8040 NAAQS standard5 WHO standardIndias air-quality monitoring network has grown from 655 stations in 2016 to over 1,500 in 2024,an increase of over 130 percent in eight years.While this represents a major expansion of coverage,about 80 percent of cities are still served by only one station,with five or more stations mainly found in larger metros and Tier-1 citiesNationally,the total number of stations-spanning both the National Air Monitoring programmes and the Continuous Ambient Air Quality Monitoring System-remains just over 1,500,far below the estimated minimum requirement of 4,000 Emerging solutions such as low-cost microsensors could complement existing infrastructure by expanding coverage and enabling more granular,real-time air quality data.Rising pollution levels are straining health systems,economic output and climate stabilityClimatic disruptionsChronic exposure risksPollution affects cloud formation and rainfall patternsLong-term AQI exposure linked to respiratory illness,lower labour productivity and increased public health burden.In 2021,2.1 million early deaths linked to air pollutionSource:IQAir,Central Pollution Control Board,Urban Emissions,Centre for Research on Energy and Clean Air,CSE analysis of CPCBs real-time air quality data,Air Quality Report 2024,State of Global Air Report 2024 16,17,18,19,20,21,22,23,24,25,26,27,28,2933Three most polluted countries globally111India140Bangladesh115Pakistan86China35Germany32USAMar-16655Mar-17738Mar-18813Mar-19896Mar-201,007Mar-211,097Mar-221,215Dec-221,296Dec-231,462Dec-241,524About 966 operating NAMP stations in 419 citiesNearly 559 operating CAAQMS2 stations in 292 citiesThe limited scope of monitoring infrastructure masks the actual magnitude of Indias air pollution challenge#of NAMP stations#of CAAQMS stations32The state of climate response in IndiaThe state of climate response in IndiaWith river volumes shrinking,water quality is deteriorating as well;untreated sewage and industrial waste are compounding ecological stress and undermining water securityIndia treats only 28 percent of the 112,000 MLD sewage it generates;cities are discharging more than they can cleanUrban sewage is the main load.About 65 percent of Indias sewage is generated in cities,much of it dumped untreated into water bodies.While insufficient capacity still contributes to river pollution and higher flood risk during monsoon seasons,treatment capacity has improved,rising from 21,589 MLD in 201516 to 26,665 MLD in 202021.This growth reflects ongoing efforts to better manage runoff and reduce environmental impacts.Water reservoir levels in 2024 were below the 10-year average in 15 statesSource:Central Water Commission,MOEFCC Press release,DPCC Delhi Government,DowntoEarth.org 36,37,38,39,40,41,42Capacity across India(%of total capacity)North IndiaEastern IndiaWestern IndiaCentral IndiaSouthern India11!0%Climate indicator 4:Rivers About 43 percent of BOD stations across Indian rivers report levels above safe thresholds,indicating widespread organic pollution.Yamuna through Delhi:BOD rises from 4 mg/L at entry to 70 mg/L at exit,due to 22 major drains discharging untreated sewage and effluents.Heavy metals crisis:About 50 percent of monitoring stations detect harmful levels of arsenic,cadmium,copper,chromium and iron(many linked to industrial waste).About 81 rivers and tributaries have at least one toxic metal exceeding safety thresholds.Biochemical Oxygen demandHeavy metal contamination 3534Additionally,India is witnessing a troubling pattern of droughts followed quickly by floods(a sign of intensifying hydrological extremes).In 2016,the Ganga in Bihar ran completely dry by May,only to flood three months later,displacing over 33 lakh people.Floods are becoming more frequent and intense,not necessarily due to more rainfall overall,but due to short bursts of high-intensity rain over fewer days.Indias rivers are increasingly stressed due to extreme weather,diminishing water flows and rising pollutionKA-28%ta not availableUP-33%KA-28%TN-20%Punjab-16%Bihar-44%Chhattisgarh-22%Andhra Pradesh-49%Raj.-15%The state of climate response in IndiaThe state of climate response in India3787%Groundwater monitoring capacity remains limited and is reliant on fragmented data sources;However assessment units have increased over the past two decadespercent of Indias groundwater is used for agricultural purposes.AboutSource:CGWB,Economic Survey 2022-23,West Zone Water Partnership(WZWP),Climate Fact checks.org,BWSSB43,44,45,46,47,48,49,50Indias groundwater crisis is worsening due to excessive extraction and insufficient recharge,leading to faster depletion of reserves in major cities than they can naturally replenish.Stage of groundwater extraction(%)across Indian states in 2024JaipurGurgaonBengaluruAmritsarChennaiIndoreAgraHyderabadGandhinagarAmravati(Maharashtra)PuriMumbai223212187177125119117103103795446CityExtraction-to-Recharge(%).Feeding a growing population will demand more crop per drop.Climate indicator 5:GroundwaterAbout 20 percent of samples exceed nitrate limits(2024),trend stable since 2017Nearly 66M exposed to fluorosis;108M to nitrate-contaminated waterKey contaminants:Arsenic,fluoride,nitrate,ironSoil degradation,crop loss and public health risks are mountingGroundwater quality is deteriorating due to rising levels of contamination driven by excessive fertiliser use,industrial discharge and inadequate sanitation.%of groundwater samples beyond permissible limit per Bureau of Indian Standards drinking water specificationNitrate20%9%7%7%4%3%IronFluorideUraniumArsenicChlorideElectricalconductivityFragmented data from multiple sourcesLimited monitoring in hilly regionsUneven distribution of assessment unitsAlthough monitoring capacity remains limited,it has grown from 5,723 units in 2004 to 6,746 units in 202436Indias groundwater systems are under severe pressure from overextraction and rising contamination,affecting agriculture,urban water supply and public healthKA-280%)UP71Kerala52TN83Punjab164Delhi101Chhattisgarh-22%Andhra Pradesh-49%Raj.150Haryana135Guj.53Mah.55KA 65The state of climate response in IndiaThe state of climate response in IndiaExtreme events are surging in the Himalayan region Data blind spots undermine risk assessment2024 saw the lowest snow persistence in 20 years across three major basins.Ganga and Brahmaputra basins were 17 percent and 15 percent below long-term snow cover averagesThe decreasing duration of snow cover is affecting seasonal water patterns,which is essential for agriculture,drinking water supply and industrial activityA disaster-prone region due to geography:About 44 percent of Indias disasters(20132022)occurred in the Himalayas,which cover just 18 percent of land.Fragile terrain:Young mountains prone to landslides,erosion and quakes.Climate stress rising:Flash floods,GLOFs and landslides are becoming more frequent.Glacial lakes are expanding fast:More glaciers are melting into unstable lakes,creating new and growing hazards such as Glacial Lake Outburst Floods(GLOFs)10.8%increase in area of glacial lakes and water bodies across Himalayan Region from 2011 to 2024 due to climate change signaling heightened risk of GLOFsSource:ICIMOD,Downtoearth,Ministry of Earth Sciences,International Centre for Integrated Mountain Development 2024 HKH snow update,ISRO satellite data observations spanning from 1984 to 2023,EM DAT International Disaster Database 51,52,53,54,55%split between disaster events between 1963-72(Himalayan states and rest of India)“The ice-melt from the glaciers is forming glacial lakes across the Himalayan range.The number of such lakes in Uttarakhand and east of Himachal Pradesh has increased from 127 in 2005 to 365 in 2015.”Gaps in field dataIndia lacks weather stations above 4,000 metres-where most glaciers originate.Most recent insights stem from satellite imagery,with sparse ground-truth validation.Satellite dependencyWhile India has initiatives such as the National Mission for Himalayan Ecosystem(DST,2022)and NDMA GLOF Guidelines(2020),it still lacks a dedicated agency for cryosphere research,despite being home to one of the worlds largest glacier systems.Fragmented research landscapeClimate indicator 6:GlaciersThe Hindu Kush Himalayas experienced a 65 percent faster loss of glacier mass in the 20th century,resulting in a loss of more than 40 percent of ice mass.Snow cover is vanishing earlier each year,disturbing the timing and volume of downstream water flows.Glaciers and snowmelt feed some of Indias major rivers,sustaining millions across the subcontinent.River basinPopulation dependent%contribution from glacier and snow meltIndus#4060 percent233270 million7080 million600 million1520 percent1020 percentBrahmaputraGanga#Sutlej,Beas,Ravi,Jhelum and Chenab3938Rest of IndiaHimalayan states1963-721973-821983-921993-022003-122013-2273yYfYV!A4AD%Glacial retreat in the Himalayas is disrupting river flow,increasing flood risk and threatening long-term water securityThe state of climate response in IndiaThe state of climate response in IndiaClimate response remains fragmentedWhile climate response efforts exists Implementation gaps exist and require more funding2021 report by the Intergovernmental Panel on Climate Change(IPCC)indicated that the Indian Ocean has warmed faster than any other ocean since the 1950s.Down to Earth,Ministry of Earth Sciences,India Today,The Guardian,National Library of Medicine,World Bank,Indian National Centre for Ocean 56,57,58,59,60,61,62,63Need to deploy more real-time ocean monitoring systems to gather data on temperature changes,salinity levels and ocean currents.MoES has proposed National Coastal Mission to be included within the NAPCC,which will address climate-change threats to coastal zones,mangroves,corals and seawater intrusion into freshwater systems.However,to be comprehensive,this mission must also cover deep-sea systems,pelagic ecosystems and the entire ocean ecosystem.Enhanced international cooperationand investment in oceanographic research and infrastructure are necessary to better understand and mitigate the impacts of ocean warming.Climate indicator 7:Ocean ecosystems and marine biodiversity Western Indian Ocean phytoplankton down 20 percent since the 1950s Coral reefs are threatened as ocean pH is projected to fall from 8.1 to 7.7 by 2100Oceans are losing oxygen and pH:Deoxygenation and acidification are triggering ecosystem collapse,especially for coral reefsCoastal communities are at risk:Sea-level rise and stronger cyclones are pushing millions in Indias coastal belt into climate risk Arabian Sea cyclones up 52 percent(200119);very severe ones up 150 percent Cyclone Amphan(2020)caused inland flooding up to 25 km Livelihoods of coastal fisherfolk under threat from fish stock shifts4140The Indian Ocean is warming more rapidly than any other tropical ocean or sea,significantly impacting marine ecosystemsIndian Ocean warmed 1.2C since 1950;projected 3.8C by 2100The Indian Ocean has experienced a mean sea-level rise of 3.3 mm per year between 1993 and 2015;significantly higher than the 20th-century global average of 1.8 mm per yearSea surface temperature in the Northwestern Indian Ocean(Arabian Sea)rising 0.12 C per decade(19502020)the fastest among tropical oceansHeat penetrates to depths of 2,000 m,reshaping marine ecosystemsThe state of climate response in IndiaThe state of climate response in IndiaForest degradation is driving species towards extinction;shrinking habitats and food sources are triggering biodiversity collapseMillions of people rely on forests for food,fuel and income;degradation threatens survival About 300 million people are dependent on forests Forest degradation impacts the collection of fuelwood,bamboo,honey and medicinal plants Erosion in forest-based incomes threatens food and livelihood security in rural IndiaForest loss is escalating across states:While overall forest cover is rising,core forest areas are decliningBiodiversity hotspots are being eroded:Forest loss is concentrated in ecologically rich areas such as the Western Ghats and the NortheastForest loss is escalating across states as more forest land is being diverted,and fires are rising in vulnerable regions.hectares of forest land diverted for non-forest use in 202223forest fires recorded in 2024:A 6.7x rise in Himachal,2.7x in Uttarakhand Total forest and tree cover has increased by 4.8%over the past decade Decline in forest cover inside Recorded At an absolute level,Total forest and tree cover has increased by 4.8 percent over the past decade About 55 percent of the national forest/tree cover increase is from outside RFAs Andhra Pradesh,Kerala,Karnataka,TN and Odisha saw 14,800 km net rise,but 84 percent of that is outside RFA boundaries Western Ghats and the Northeast lost over 3,190 km of forest cover over the last decade Tamil Nadu lost 284 km alone;Goa,Gujarat,Maharashtra and Tamil Nadu lost 381 km collectively Only partial recovery in Karnataka and Kerala;net loss remains high in biodiverse zonesSource:DownToEarth.org,India Forest Survey(2013-2023),IUCN India Red list 1993,MOSPI Data,Business Standard,1994 ZSI Red book India,MOEFCC,Press Release 64,65,66,67,68India forest and tree cover trends(area in lakh sq km)Forest cover inside RFACAGR(FY13-23)Forest cover outside RFATree coverFY13FY19FY231.121.958.275.200.951.958.075.170.911.677.895.31 0.47%(0.2%)1.55%2.07%Threatened plant species in IndiaThreatened animal species in India1,25543320141997202420142,32367520241,236153199717,38211,097Data gaps undermine forest conservation:Fragmented forest data makes it difficult to take effective actionCloud cover,terrain complexity and mixed vegetation confuse satellite readingsInconsistent legal definitions and ground verification methods across statesForest fires rose across 13 states in 2023-24,straining fragile ecosystemsForest cover losses(km2)during 2013-2023Arunachal PradeshAssamManipurMizoramNagalandSikkimTripuraMeghalayaWestern Ghats-1,085-376-988-79520 percent PM10reduction99 INR13,000 crore disbursed across 130 cities.1001.Climate indicator:HeatKey policiesKey achievements State/City Heat Action Plans(HAPs)under NDMA guidance National Disaster Management(Heatwave)Guidelines,2016 About 23 heat-vulnerable states/UTs are implementing city/regional HAPs,or are implementing HAPs92 IMD issues five-day colour-coded alerts and seasonal heat outlooks93,942.Climate indicator:Rainfall patternsKey policiesKey achievements Doppler Radar Modernisation Plan(MoES/IMD)National Water Mission(MoWR/Jal Shakti)“Catch the Rain”(Jal Shakti Abhiyan)Doppler radars expanded from 15(2013)to 37 in 2023)95 Increase in the number of Automatic Rain Gauges(ARG)from 1350 in 2014 to 1382 in 202396 Since 2021,IMD has started an online interface to collect weather data and the associated impact for six weather events initially(rain,hail,dust storm,wind speed,thunderstorm/lightning and fog)97 Jal Shakti Abhiyans“Catch the Rain”campaign and 2022 Amrit Sarovar scheme are boosting rainwater harvesting and recharge98 Building on existing frameworks,four critical opportunities for policymaking to set direction and mobilise industry and capital are emerging:future fuels,critical minerals,batteries and storage,and industrial decarbonisation91.Each of these areas represents a strategic lever for reducing emissions and scaling low-carbon solutions across sectors.Progress in these domains would help address the direct sources of emissions and strengthen the broader industrial and energy ecosystem,enabling meaningful decarbonisation by 2030 and beyond.The central government has introduced a wide range of policies and missions to address climate risks.At the national level,India has developed comprehensive frameworks,such as the National Action Plan on Climate Change(NAPCC)and its eight associated missions,alongside thematic policies on renewable energy,energy efficiency and disaster resilience.Many states have developed State Action Plans on Climate Change(SAPCCs),incorporating state-specific priorities.The state of climate response in IndiaThe state of climate response in India67664.Climate indicator:RiversKey policiesKey achievements National Mission for Clean Ganga(NMCG)Water(P&CP)Act,1974 Environmental flow norms(2018)About 3,446 MLD sewage capacity added under Namami Gange(June 2025,surpassing the pre-2014 capacity by over 30 times)101 Ganga water quality improved in key stretches(e.g.,from Class III to V in UP),60 polluting drains tapped in Prayagraj102 Namami Gange declared a UN“World Restoration Flagship”(2022)1035.Climate indicator:GroundwaterKey policiesKey achievements Atal Bhujal(Water)Yojana(2020)Master Plan for Artificial Recharge(MoJS)State Groundwater Acts(select states)About 61.1 percent of CGWB-monitored wells showed rising water levels(Nov 2022 versus Decadal mean of 2012-21)1046.Climate indicator:GlaciersKey policiesKey achievements National Mission for Himalayan Ecosystem(DST,2022)NDMA GLOF(Glacial Lake Outburst Flood)Guidelines(2020)India is piloting GLOF early warning systems post-Sikkim 2023 disaster1057.Climate indicator:Oceans and seasKey policiesKey achievements Coastal Regulation Zone(CRZ)Notification,2019 Deep Ocean Mission(MoPSW,2021)ICZM/MISHTI coastal programmes Zero casualties due to Cyclone Biparjoy,which hit the Gujarat coast in 2023,and Cyclone Dana,which hit the Odisha coast in 2024,due to monitoring and forecasting106 Mangrove cover expanded by 16.7 km(201923)107 ICZM Project developed institutional capacities,advanced structural reforms and supported the creation of scientific data sets to improve the enabling environment for coastal zone management initiatives1088.Climate indicator:Forests and biodiversityKey policiesKey achievements National Forest Policy,1988 Forest(Conservation)Act,1980 Wildlife Protection Act,1972 Project Tiger(1973)and Project Elephant(1992)Forest cover reached 21.76 percent of Indias area(715,343 km)in 2023(up 156 km since 2021);tree cover added 1,289 km109 Carbon stock in Indias forests rose by 81.5 Mt(between 2021 and 2023)110 Tiger population rose to 3,682(2023)from 1,706(2010);Elephant numbers reached 29,964(2017)from 27,694(2007)111The state of climate response in IndiaThe state of climate response in India696810.Societal indicator:Urban and Industrial Activity Key policiesKey achievements India Cooling Action Plan(2019)Nagar Van Scheme(2020)About 111 Nagar Vans approved against the target of 100 Nagar Vans in 100 Days Action Plan,Scheme Offers INR4 lakh per hectare to promote urban forests with citizen involvement across 6 States and 1 UT across the country116 Ahmedabad,Surat,showing lower surface temperatures post Heat adaptation measures117,118Key policiesKey achievements NDMA Urban Flood Guidelines AMRUT Mission(Urban Infrastructure)/Smart Cities Mission About 772 AMRUT-funded storm-water drainage projects(INR2,140 crore)completed(as of 2024),eliminating 3,556 urban waterlogging points and another 372 waterlogging points at the implementation stage119 Under AMRUT 2.0,2,713 urban water-body rejuvenation projects(INR5,432 crore)approved120Key policiesKey achievements Swachh Bharat Mission-Urban(2014,SBM 2.0 in 2021)Solid Waste Management Rules(2016)Plastic Waste Management Rules(2022)Nearly 75 percent of MSW is now processed(up from 18 percent in 2014)121 1,191 ULBs are certified ODF (faecal sludge management)1229.Societal indicator:Agriculture and food systemsKey policiesKey achievements National Innovations in Climate Resilient Agriculture(NICRA)Krishi Vigyan Kendra(KVKs)/Gramin Krishi Mausam Seva(GKMS)Per Drop More Crop Micro Irrigation(Department of Agriculture and Cooperation)Soil Health Card Scheme NICRA has established 448 Climate-Resilient Villages(CRVs)across 151 vulnerable districts in 28 states/UTs,demonstrating adaptive technologies for farmers against drought,flood,heat,etc.ICAR has released 2,661 varieties of crops,livestock,horticulture and fisheries tolerant to biotic and/or abiotic stresses over the last decade(2014-24)under NICRA and associated programmes112 Under the GKMS/Agromet Advisory Services,43 million farmers have access to weather-based advisories(SMS/mobile/block level)113 Over 25 crore Soil Health Cards distributed across the country114 Micro-irrigation coverage expanded to over 83.46 lakh hectares115RBI,with the release of the Draft Disclosure framework for climate-related financial risks,2024 guidelines123,is moving towards mandating compliance to climate-related disclosures.Regulated entities(the“REs”)i.e.Scheduled Commercial Banks,Tier IV Primary(Urban)Co-operative Banks,All India financial institutions and Upper layer and top layer NBFCs are expected to implement robust climate-related financial risk management policies and processes to effectively counter the impact of climate-related financial risks.This addresses the need for a better,consistent and comparable disclosure framework for REs,as inadequate information about climate-related financial risks can lead to mispricing of assets and misallocation of capital by the REs.The guidelines mandate disclosure of information about climate-related financial risks and opportunities for the users of financial statements and is expected to foster an early assessment of climate-related financial risks and opportunities and also facilitate market discipline.The disclosures areas are on four thematic pillars of Governance,Strategy,Risk Management and Metrics and Targets.The disclosures are applicable in glide path manner starting from 2025-26 onwards.Indias institutional ecosystem is beginning to respond to the climate crisis with increasing scale and visibility.The next frontier lies in deepening local implementation,documenting and integrating local knowledge into policy,ensuring continuity and enabling adaptive capacity across all levels of governance.The state of climate response in IndiaThe state of climate response in India7170Corporate response to the climate crisis As government policies on climate change are steadily evolving,the private sector is beginning to respond meaningfully.Though much of this action is occurring in silos,engagement is steadily growing.A few large corporations are emerging as climate leaders.They integrate sustainability into operations and treat climate action as central to future business growth.This shift signals the rise Compliance-driven climate action:Actions where regulations and compliance enable the business case,e.g.,hazardous waste management.While they may lack a financial case,they represent necessary actions for the continued functioning of an industry,often linked to negative environmental externalities such as water pollution,air pollution and biodiversity protection.Policy adherence and strict implementation with necessary compliance mechanisms should be the focus here;updating regulations and guidelines to stay current with industry practice and learn from best-in-class global practices is required.of a more evolved climate philosophy that views corporate leadership as a key driver of systemic change rather than a peripheral actor.Commercially viable climate action:Initiatives that deliver clear and tangible financial benefits and have a clear business case,with relatively mature technology,established and growing markets and sufficient returns for private capital.Herein,climate action aligns with cost savings,brand positioning,access to capital and new revenue opportunities,among other strategic considerations.Commercially viable climate action covers areas such as renewable energy and energy efficiency,which are economically and environmentally value accretive from the outset.Policy must be supported by removing obstacles to accelerate progress,bring more capital in,especially global capital and encourage technological advancement.124“Sustainability is not just a good to do,but very much an integral strategic part for businesses-a driver for significant economic value;green initiatives reduce risks,reduce costs and drive-up revenue and market cap and in turn offer a substantial IRR on investments.To scale,we need enabling policies,clear market signals and a desire to change the status quo.”Ankit Todi,Chief Sustainability Officer,Mahindra Group Strategic and transformative climate action:Corporate initiatives that go beyond compliance obligations and short-term commercial viability,positioning climate response as a lever for long-term competitive advantage and resilience.These actions often shape or anticipate future policy,create new markets and redefine business models,embedding sustainability at the core of corporate strategy.Examples include early investments in circular economy practices,green hydrogen or large-scale ecosystem restoration,where the immediate payoff may be uncertain but the long-term strategic benefit,from future readiness to reputational leadership and systemic risk reduction,is significant.These responses reflect a deeper shift in how businesses view their role in the climate transition,signalling leadership and ambition rather than obligation.Corporate responses to climate change are shaped by motivations,falling broadly into three overlapping patterns:Insights from Deloittes Corporate Climate Readiness Survey 202564%plan to increase climate-related investments in the next three yearsThe state of climate response in IndiaThe state of climate response in India7372Case study 1:Aditya Birla Group Company overviewAditya Birla Group is a diversified multinational conglomerate headquartered in India,with leading businesses across sectors like metals,cement,textiles,financial services,and telecommunicationsEvolution of climate philosophyIn the 2010s,Aditya Birla Group adopted a Risk based approach,implementing systems for air,water,and waste,and launching Sustainability Reports.In the 2020s it shifted to Business Contextualization,setting group-wide sustainability targets.Looking ahead,the Group aims to position itself as a strategic enabler of climate resilience,circularity and greener products through initiatives such as Liva Reviva and Ecocycle.Key sustainability initiativeWater resilience programReclaim and rebuildABG tackles water stress through strategic resilience measures such as reducing consumption,enhancing efficiency,and building climate smart infrastructure within and outside operating sites.ABG adopted Waste to Wealth approach and drives circularity by conserving resources and reducing environmental impact.Birla Cellulose(Aditya Birla Group)launched LIVA Reviva that promotes circular economy in the textileChallenges ABG Upgraded drainage infrastructure in coordination with local authorities to enhance stormwater handling capacity UltraTech Cement achieved water positivity ratio of 5 times,ABFRL recycled 76%of its water in FY24,LIVA Reviva uses pre-consumer cotton waste wood pulp,which leads to significantly lower greenhouse gas emissions and water usage compared to standard(virgin)viscose Recycles pre-consumer textile waste that might otherwise go to landfill/incinerationInitiativeImpacts 50%reduction in freshwater consumption per tonne of product on a FY16 baseline at critical locations 27 operational units have achieved Zero Liquid Discharge status.24 out of 31 mines have achieved water positive status Liva Reviva is enabled with blend of 30%textile waste and wood pulp Birla Cellulose disposed of nearly 90%waste through recycling or reuse in FY24.HydrosphereAtmosphereCorporateCommunitySource:Aditya Birla GroupCorporate case studiesCase study 2:Godrej industries GroupThrough initiatives like integrated watershed development,and regenerative agriculture,the Group integrates ecological restoration with community impactCompany overviewEvolution of climate philosophyGodrej Industries Group is a prominent Indian multinational conglomerate with a rich legacy spanning over a century.The Group operates across diverse sectors including consumer goods,real estate development,agriculture,industrial engineering,and more.Key sustainability initiativeIntegrated watershed developmentDrought and water scarcity in key Agri-regions made Godrejs operations vulnerableSoil degradation from excessive fertilizer use and water-intensive practicesChallengesLow-cost watershed developmentPartnered with NABARD to scale groundwater recharge in drought-prone regionOver 10,000 ha of land area developed50 Mn m3 of water captured by FY24 25,13 times the companys water consumption Climate-Smart Irrigation&Intercropping 1st in India to use drip irrigation for oil palm Introduced intercropping with multiple crop species 4 tons oil/ha Yields achieved as compared to national average of 3 3.5 tonnes/hectareInitiativeImpactsSource:Godrej Industries GroupLithosphereHydrosphereCommunityGovernmentGodrej Industries Groups climate philosophy has evolved over time.In the mid 2010s,the focus was on Compliance and Risk Management,marked by the first Sustainability Report and pollution control systems at GCPL and Agrovet units.By the mid to late 2010s,it shifted to Business Integration and Innovation,with biodegradable packaging and sustainable agriculture.From the 2020s onwards,the Group embraced Strategic Transformation and Purpose Led Growth,including smart irrigation and precision soil management.Regenerative agricultureThe following section showcases illustrative examples of climate action undertaken by Indian corporates and start-ups:Aditya Birla Group enhances water resilience and reduces waste through infrastructure upgrades,nature-based solutions,and innovative resource repurposingThe state of climate response in IndiaThe state of climate response in India7574Case study 4:Mahindra GroupMahindra Group integrates sustainability into core business strategy,focusing on carbon neutrality,water positivity,and regenerative agricultureCompany overviewMahindra Group is a global federation of businesses(India headquartered),operating across 20 industries with core business in auto&farm sectors.Additionally,services span across diverse industries incl.tech,finance,RE,real estate,hospitality,logistics etc.Evolution of climate philosophyMahindras journey started in the early 2000s with building Foundation and Compliance,publishing Sustainability Reports from 2008.In the 2010s,it advanced to Integration&Innovation,investing in renewable energy and sustainable agri-solutions.From 2019 onwards,it focused on Building Momentum on Nature,by Business for Nature,targeting carbon neutrality by 2040 and expanding the EV ecosystem.Key sustainability initiativeBiodiversity transformation at Igatpuri PlantRegenerative agricultureEnd of life vehicle recyclingChallengesThe engine manufacturing plant at Igatpuri(Maharashtra)had limited green area,resulting in high dust levels,erosion,and low biodiversitySoil erosion,water scarcity,and declining farm productivity threatened sustainable agriculture22 Mn vehicles will reach the end of their operational life by 2025-emit up to 8X more pollutantsInitiatives Planted over 80,000 trees and 29 species of shrubs,and created butterfly and botanical gardens Implemented water conservation measures to support biodiversity and green cover Innovative Equipment&Irrigation:No-till seeders and micro-irrigation save water,energy and protect soil health Early-Maturing Seeds:Crop varieties that reduce water and fertilizer use Organic Crop Protection:Biological products ensure residue-free,sustainable farmingCERO(JV with MSTC Ltd)-Indias 1st authorized vehicle recycling system:ELV dismantling with eco-friendly recovery Maximizes metal recycling to reduce virgin material use Indias largest network in 45 cities(RVSFs&customer touchpoints.Impacts 63%Increase in green cover(from 25%)75%Reduction in dust levels and 2C decrease in ambient temperature 1 million tonnes of carbon sequestered 33 billion litres of water conserved through micro-irrigation systems 8.4 MU energy savings estimated in FY25 30,000 ELVs recycled to date 31,000 tonnes of iron ore saved 20,000 tonnes of ferrous scrap recoveredSource:Mahindra GroupLithosphereHydrosphereCorporateAtmosphereNGOCommunityGovernmentCase study 3:Gainwell IndiaGainwell advances sustainability through its UNNATI green facility and the Reclaim&Rebuild program,focused on energy efficiency and circularityCompany overviewEvolution of climate philosophyGainwell India is a leading provider of Caterpillar equipment and integrated solutions across construction,mining,and energy sectors.With over 80 years of experience,it offers machines,power systems,and comprehensive after-sales support.In the early 2010s,Gainwell focused on Compliance&Safety Foundations,embedding EHS systems and legal compliance.By the mid to late 2010s,it moved to Operational Integration&Efficiency with the UNNATI LEED-certified facility and sustainability upgrades.From the 2020s onwards,it emphasised Leading with Technology&Circularity,partnering with World Coal Association and scaling component remanufacturing.Key sustainability initiativeChallengesInitiativeImpactsSource:Gainwell India LithosphereHydrosphereAtmosphereNavigating UHI through UnnatiCorporate offices in Greater Noida needed a zero-emission,ultra-efficient workspace that embodied sustainability Achieved LEED v4 Platinum certification,through full-building life-cycle assessment and recycled materials Integrated radiant cooling with tempered fresh air,advanced shading,green roofs Treated and reused grey water and rainwater onsite 13%reduction in embodied carbon 50%Lower HVAC Energy load 70%Water recycling achieved onsiteHeavy equipment often discarded after decades-high cost,high resource use,and emissions associated with new manufacturing The program extends asset lifespan via comprehensive overhaul,restoring performance at fraction of new cost Leverages circular economy via remanufacturing:reuse of steel and parts to conserve resources and reduce emissions Aim is to get both the material and water usage down to 70%Reclaim and rebuild 2,000 tonnes of steel/iron saved from scrap,avoiding waste and carbon footprint 60%used parts in every rebuilt machine,with no additional carbon footprint compared to new parts.8,00020,000 hours of extended machine life,lowering overall environmental impact.CorporateNGOCommunityGovernmentThe state of climate response in IndiaThe state of climate response in India7776Thermax delivers integrated solutions for cleaner air,efficient energy,and sustainable water management powered by digital technologies that drive smarter,more reliable industrial performance.Company overviewThermax is a leading provider of energy&environment solutions,serving industries globally with its extensive portfolio across power,heating,cooling,air pollution control,water and wastewater management.With nearly six decades of expertise,it delivers future ready solutions,backed by innovation and strategic collaborations.Key sustainability initiativeWind,solar and hybrid captive power plants across indiaBiomass steam boilers for an fmcg major in gujarat,indiaChallengesElectrical heat pump enables sustainable heating for vietnams textile majorTo meet customers captive energy needs while enabling cleaner,more sustainable power to support the decarbonisation of their industrial operations.To reduce reliance on natural gas for steam generation in noodle production,thereby lowering fossil fuel dependence and carbon emissionsAimed to cut carbon footprint and energy costs,but faced challenges in recovering heat from wastewater due to variable pH,contaminants,and temperaturesInitiative Thermax commissioned 225 MWp of solar,wind and hybrid projects spread over multiple sites in the states of GJ,TN and MH Deployed modules over 3.25 lakhs in number,plus twenty units of 3 MW class WTGs Installed two 16 TPH biomass briquette-fired hybrid boilers with Thermaxs Reciprocating Grate combustion technology The boilers featured the Danblast system,offering online soot blowing for enhanced uptime Deployed a turnkey solution with air pollution control systems per GPCB norms Proposed 140 kW electrical heat pump with rotary heat exchanger Captured heat from hot effluent and upgraded it from 65.8C to 75.5C Used ambient water and electricity for efficient heat transferImpact 4,00,000 tonnes of CO2-e emissions avoided 225 MWp of renewable energy capacity deployed for industrial operations Over 16,000 tonnes of CO2savings estimated per year with consistent steam supply High boiler uptime and efficiency delivered 1,927 tonnes of steam saved 148 tonnes of CO2 reduced ROI 2 years COP:3.4Evolution of climate philosophyThermax began in the late 2000s early 2010s with Environmental&Regulatory Compliance,installing ETPs and emission controls.In the mid to late 2010s,it focused on Operationalizing Sustainability through energy-efficient boilers.From the 2020s onwards,it embraced Innovation-Led Sustainable Growth,aiming for 50rbon reduction by 2030(vs.FY19)and introducing circular economy solutions.Source:Thermax LimitedLithosphereCorporateAtmosphereAarti Industries Limited(AIL)strengthens its waste,water,and energy management through strategic investments in renewable energy,advanced treatment technologies,and sustainable operational practices.Company overviewAIL is a leading Indian specialty chemicals company focused on benzene,toluene downstream,and sulphuric acid value chains,catering to global markets across agrochemicals,dyes&pigments,polymers,pharmaceuticals,and energy sectors.Key sustainability initiativeEvolution of climate philosophyAarti Industries started publishing standalone sustainability report from FY19 and is committed to Net Zero by 2050.It has invested in the areas of clean energy,water management,has embraced circularity by reducing waste and has set future sustainability targets across several areas.Case study 5:Thermax LimitedCase study 6:Aarti Industries LimitedWaste management&recyclingMismanaged plastic and hazardous waste-rooted in fossil-based production and worsened by open burning and leakage-releases GHGs and toxic pollutants that contaminate air,water,and soil,degrading ecosystems,harming health,and imposing significant economic costs.Inefficient water and effluent management drives pollution and public-health risks,depletes vital freshwater sources,harms ecosystems and agriculture,and imposes economic costs-making robust water and effluent management essential.Challenges Over 50%of manufacturing units are currently Zero Waste to Landfill(ZWL)certified,with a target to achieve 100rtification by FY28 Authorised waste disposal vendors selected by auditing before starting disposal of waste 50%Manufacturing units are Zero Liquid Discharge compliant with 8 ZLD units and another 3 units are ZLD-ready established greener Water Risk Assessment for all units Rainwater Harvesting,Greywater Recycling,Treated Wastewater being reusedInitiativeWater management&recycling 90%hazardous waste recycled/recovered 4%hazardous waste co-processed 26%of the total raw material requirement is met through the internal reuse of generated hazardous waste 0 major Tier-1 chemical spills reported 42%Water Recycled amounting to 1.2 Mn kL of water recycled 8.24%of water consumption from desalinated sources 4.37%reduction in specific water consumption from FY19 100%of wastewater undergoes in-house treatmentImpactsSource:Aarti Industries LimitedLithosphereHydrosphereCorporateThe state of climate response in IndiaThe state of climate response in India7978Start-up case studies Indian start-ups,with their innovation-first mindset,are rapidly emerging as critical catalysts in Indias climate response.These ventures are reimagining solutions across waste management and smart farming initiatives.They are are forging collaborations with corporates,government bodies and investors,unlocking new opportunities for pilots,co-development and scaled deployment.“It is imperative to broaden the perspective and go beyond viewing climate action as a compliance obligation to embracing it as a driver of real,systemic impact.The most agile players are no longer waiting at the sidelines and being risk-averse;rather,they are taking bold steps for transformative impact at scale along with collaborators who believe in learning by doing.”Rupali Mehra Chief Marketing Officer and Head of Asia,SpowdiPidilite enhances waste management,water assets and energy management through its community water stewardship and energy infrastructure upgrade programmesCompany overviewPidilite is the leading Indian consumer and speciality chemicals manufacturer headquartered in Mumbai(known for Fevicol and Dr.Fixit).Its product range includes adhesives and sealants,waterproofing and construction chemicals,art and craft materials,industrial resins and pigments.Key sustainability initiativeEnergy transition and efficiencyCommunity water stewardshipChallengesCircularity and waste reductionUsage of energy in manufacturing and power generation is still fossil-heavy,and decarbonising manufacturing processes is a difficult taskIndia has high water stress and water scarcity in semi-arid districts,coupled with erratic monsoons lead to low farm productivity and put strain on farmers livelihoods,making community water assets vital for their livelihoodsMismanaged plastic and hazardous waste fuels climate and ecosystem harm with fossil-based production and open burning releases GHGs,while leakage contaminates soil and water with toxic chemicalsInitiative Switched boiler fuels to briquettes and less carbon-intensive fuels such as PNG.Expanded renewable electricity footprint by investing in windmills and solar farms Built and restored community water assets(check dams,ponds,farm ponds)and repaired canal links while scaling micro-irrigation Collaboration with the Government of Gujarat in the Bhavnagar and Amreli districts of Gujarat Waste management and recycling are implemented through the EPR plan and processed by CPCB-authorised recyclers Co-processing of waste through cement plants,reusing of wash water and process effluents Impact About 47 percent of energy usage comes from renewables Nearly 14 percent YoY reduction of fuel energy consumption About 9 percent YoY reduction of electricity consumption 6,500 ha of farmland converted to micro-irrigation across 100 villages About 1,800 community check dams and ponds have been constructed About 100 percent of plastic packaging introduced by the company to the market is collected and recycled from post-consumer wasteEvolution of climate philosophyPidilite has published standalone Sustainability Reports since FY19.It is consistently expanding its renewable energy footprint and increasing installed capacity each year.Since 2022,the company has been reducing the use of virgin plastics.Pidilite also leads community watershed management initiatives and promotes advanced agricultural and horticultural practices.It is actively tracking progress towards its Target 2030 Sustainability Goals.Source:Pidilite Industries LimitedCase study 7:Pidilite Industries LimitedLithosphereHydrosphereCorporateAtmosphereCommunityThe state of climate response in IndiaThe state of climate response in India8180Case study 2:Indra WaterRedefining Wastewater Management with Compact&Sustainable SolutionsCompany overviewA Mumbai-based cleantech startup founded in 2018,Indra has indigenously developed ElectroX,a compact,and automated electrochemical wastewater treatment solution.These plug-and-play units recover up to 95%of water,reduce sludge by 70%and shrink plant footprint by 90%Challenges India generates around 72,368 MLD of sewage,but only about 28%is effectively treated,leading to widespread water contamination Rapid urbanization has overwhelmed aging infrastructure,causing untreated effluents to pollute rivers,lakes,and groundwaterSignificant projectsImpactInstalled a 1,600 KLD Effluent Treatment Plant at Unilever Oleochemical Indonesia for personal care product wastewater streamDeployed around 25 installations across the globe and a 2.5 MLD water and wastewater treatment plant in installation phase in Mexico&Egypt with UnileverDeployed a 250 KLD Sewage&80KLD Laundry Effluent treatment plant at Taj Mahal Palace,Mumbai,a flagship commercial property of IHCL Groupliters of water treated by Indra so far95,000 tonnes of harmful sludge reduced till date with Indra solution as compared to chemical treatmentwater recovery at installations in commercial&industrial properties to offset freshwater requirement95%HydrosphereCorporate 9,000 tonnes of hazardous chemicals saved to date with Indra solution in comparison to conventional approachespotential carbon offset as compared to conventional treatment methods74%Source:Indra WaterCase study 1:SpowdiSolar-Powered Mobile Irrigation System for Small-Scale FarmersCompany overviewA greentech company(IndiaSweden JV,Sweden headquartered with 100%India subsidiary)delivering solar-powered drip irrigation systems for small-hold farms-lightweight,portable,and emission-free-enabling precise irrigation for up to 1 acre using only solar power and saving up to 80%water compared to traditional methodsChallenges Small-scale farmers produce about one-third of the worlds food but face severe challenges including climate shocks,limited access to efficient irrigation,low productivity per acre and depleting water tables.Traditional irrigation systems are energy and water intensive(typically 1HP ),and often unsuitable for land sizes of smallholder farmsImplementation model through partnersImpactCollaborates with implementing organisations,farmer groups,and financial institutions on a scalable structured Smart Farming initiatives with recorded impact dataFarmers gain through intensive training,entrepreneurship opportunities,increased production and higher income;soft financing ensures affordability and long-term sustainabilityIn food production for smallholder farmers using the Spowdi system200%increase80%reductionIn water use compared to conventional irrigation methods.Source:SpowdiTechnology and solutionSpowdi focused on enabling water-efficient,climate-resilient farming Developed a patented,lightweight,solar-powered mobile irrigation system operating on just 0.1 HP,vastly more efficient than conventional 1 HP pumps.Designed for mobility to serve multiple small farms with minimal setupProjects across multiple water scare areas in India Focusing on sustainable farming practices using shallow water sources,rainwater harvesting,to allow ground water recharge.HydrosphereCommunityThe state of climate response in IndiaThe state of climate response in India8382Civil society response to the climate crisisClimate change affects every citizen and community across the country.While corporations and governments play vital roles in driving systemic change,numerous examples show how civil society organisations and citizen groups actively address hyperlocal challenges.These groups understand that many issues demand solutions tailored to local contexts,particularly where institutional reach is limited.As such,they are uniquely positioned to make meaningful contributions towards positive change.The following section presents select illustrative case studies where civil society initiatives have successfully scaled impactful,on-the-ground climate solutions.Case study 3:Saahas Zero WasteProfessional waste management for companies,enterprise customers,townships etc.Company overviewA Bengaluru-based social enterprise offering end-to-end zero-waste solutions for bulk waste generators across major Indian citiesManages over 100 tons of waste daily,helping clients achieve up to 96%landfill diversion through segregation,processing,and recyclingChallenges Inadequate enforcement of policy Insufficient authorised end-destinations Inadequate segregation of waste at source,leading to lower material recoverySignificant projectsImpact Ecoworld Tech Park:On-site decentralized unit managing 1.52 TPD wet waste;dry waste segregated across 10 office blocks Thapar Institute of Engineering and Technology(TIET):Integrated Solid Waste Management Unit set up on-site,formalised 21 waste workers,behavioural change Rain Cements:Implemented door-to-door source segregation and built integrated waste management units with composting and dry waste processing Hindalco(Belagavi&Muri):Established integrated solid waste management units with in-vessel composters and dry waste segregation,launched awareness campaigns,and trained staff to institutionalize circular systemsLandfill diversion improved from 40%while processing 350 tons of waste monthly;compost is reused in landscaping across the SEZ95%Diversion from landfill achieved so farFully stopped waste dumping and burning;transitioned to resource recovery mode,with compost reused and dry waste sent to authorized recyclers100%Diversion of waste;20,264 kg waste collected,sorted,aggregated and resources recovered,9,206 kg compost produced84%Source:Saahas Zero WasteHydrosphereLithosphereCorporateCommunityThe state of climate response in IndiaThe state of climate response in India8584Case study 2:Waste Warriors in the Indian Himalayan RegionBuilding Climate-Resilient Communities through Decentralized Waste SolutionsCompany overviewWaste Warriors is a community-based NGO dedicated to systemic waste management across the Indian Himalayan Region,focusing especially on high-tourism areas in Uttarakhand and Himachal Pradesh where over 60%of waste is dumped or burned.Challenges The Indian Himalayan Region generates 8.4 million metric tons of waste annually,with over 60%dumped or burned-causing black carbon emissions,glacier melt,and ecosystem damage.Tourism and weak local infrastructure intensify the crisisInitiativeImpactWaste Warriors focused on decentralized waste systems,climate education,and green livelihoods via:Built waste management systems through training,infrastructure,and coordination,primarily in rural areas Engaged communities and youth with awareness campaigns and educational programs.Supported policy improvements and empowered waste workers,especially women,through formal jobs and recycling income.of waste diverted from landfills.3614 MT 25 Waste management infrastructure established,including 5 Material Recovery Facilities and 20 Waste BanksDays of Dignified Livelihood for our green workers 60000 Source:Waste Warriors in the Indian Himalayan RegionHydrosphereCommunity1.5 LacPeople enabled to voluntarily take climate-positive actionsGovernmentLocal Partnerships created across 50 Gram Panchayats200 Case study 1:Paani FoundationNon-profit,non-governmental organization active in the area of drought prevention and watershed management in the state of MaharashtraSource:Paani FoundationHydrosphereCommunityCompany overviewPaani Foundation is a non-profit,non-governmental organization which is active in the area of drought prevention and watershed management in the state of MaharashtraChallenges Paani Foundation seeks to tackle the chronic drought crisis in rural Maharashtra by addressing both water scarcity and unsustainable agricultural practices The challenge lies in motivating farmers to adopt water-wise and sustainable methods by linking ecological restoration with direct,measurable improvements in their livelihoods.InitiativeImpactSatyamev Jayate Water Cup”by the Paani Foundation Paani Foundation launched the“Satyamev Jayate Water Cup”in 2016 This model combined grassroots mobilization with corporate and philanthropic funding The initiative invited villages to compete in implementing watershed management activities before the monsoon This included the construction of contour trenches,farm ponds,check dams,and recharge pitsIn food production for smallholder farmers using the Spowdi system6,000 7,006 kmLength of continuous contour trenches(CCTs)builtVillagers trained in a 4-day residential training55,000 550 billion litersOf water storage capacity created from 2016-2019,across 76 talukasGovernmentPolicy reforms,corporate action,and local innovation are advancing coordinated climate efforts.Yet the scale and urgency of the challenge demand more.Climate readiness must now become a shared national endeavour,driven by strong governance,sustained collaboration,innovation and inclusivity.The state of climate response in IndiaThe state of climate response in India8786Way forward:Pathways to climate resilienceIndias climate efforts must evolve into a unified strategy that engages all stakeholders.As India stands at the crossroads of development and sustainability,a coordinated,forward-looking approach is essential to address the scale and complexity of climate risks.As momentum builds across sectors,the next phase of climate action must focus on coherence,coordination and creativity.This means not only scaling existing solutions but also redesigning the systems that shape how capital flows,how businesses operate and how communities adapt.Indias focus,therefore,must now shift towards advancing priority pathways that bring together policy,finance,technology and collaboration,creating an integrated framework for resilience and low-carbon growth.“This is an opportunity for India to get it right by embedding sustainability,innovation and resilience at the core of its industrial and economic progress.”Mirik Gogri Head of Growth,Aarti Industries LimitedStrategic pathways for Indias climate resilienceMainstream climate into core strategy and business operationsFinance the climate transition through de-risked ecosystemsUse technology for evidence-based decision makingBuild a climate-ready workforce for future transiton Enhance institutional capacity for improved governanceBuild climate awareness and facilitate communicationThe state of climate response in IndiaThe state of climate response in India8988Mainstream climate into core strategy and business operationsMaking climate central to business and policy strategy will be essential for building long-term resilience and competitiveness.By integrating risk and opportunity assessments into planning,investment and governance,companies can better anticipate disruptions and strengthen decision-making.Further,embedding board-level accountability and linking leadership KPIs to climate performance builds ownership and drives consistent action across organisations.In parallel,decarbonising operations,building resilient supply chains,and aligning disclosures with global frameworks help ensure transparency and investor confidence.To translate these actions into sustained outcomes,businesses require a structured approach that links climate action directly to strategy,governance,and performance.A helpful way to think about this is through a Corporate Climate Action Framework,which will enable organisations to act across four concentric circles simultaneously.Each circle represents a distinct but interconnected domain of influence and responsibility:The following sections delve deeper into each pathway,highlighting how coordinated action across these areas can drive Indias climate resilience agenda forward:Corporate climate action frameworkInvest in solutions with clear business cases and market demandMeet regulatory requirements;ensure compliancein core operationsPursue transformative innovation for environmental and societal benefitBuild trust with communities,employees,and stakeholdersCompetitive advantageSocietal License to OperateLicense to OperateCommercially ViableThe state of climate response in IndiaThe state of climate response in India9190 License to operate:At the core,companies must comply with regulations and meet minimum standards for continued operation-adhering to environmental laws,fulfilling reporting obligations,and embedding climate risk into business processes.Strong compliance systems safeguard continuity,mitigate risk,and form the foundation for all future climate action.Societal license to operate:Beyond compliance,companies must build trust and legitimacy with communities,employees,and customers.This involves transparency,responsible sourcing,and investments in community and workforce well-being.Earning this societal license enhances reputation,talent attraction,and long-term stakeholder support.Commercially viable:Here,climate action aligns with business value-scaling proven technologies
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BRAZILS BIOFUEL INDUSTRY LESSONS,CHALLENGES AND OPPORTUNITIESDisclaimerThis publication and the material herein are provided“as is”.All reasonable precautions have been taken by IRENA to verify the reliability of the material in this publication.However,neither IRENA nor any of its officials,agents,data or other third-party content providers provides a warranty of any kind,either expressed or implied,and they accept no responsibility or liability for any consequence of use of the publication or material herein.The information contained herein does not necessarily represent the views of all Members of IRENA.The mention of specific companies or certain projects or products does not imply that they are endorsed or recommended by IRENA in preference to others of a similar nature that are not mentioned.The designations employed and the presentation of material herein do not imply the expression of any opinion on the part of IRENA concerning the legal status of any region,country,territory,city or area or of its authorities,or concerning the delimitation of frontiers or boundaries.IRENA 2025Unless otherwise stated,material in this publication may be freely used,shared,copied,reproduced,printed and/or stored,provided that appropriate acknowledgement is given of IRENA as the source and copyright holder.Material in this publication that is attributed to third parties may be subject to separate terms of use and restrictions,and appropriate permissions from these third parties may need to be secured before any use of such material.ISBN:978-92-9260-688-6 Citation:IRENA,(2025),Brazils biofuel industry:Lessons,challenges and opportunities,International Renewable Energy Agency,Abu Dhabi.About IRENA The International Renewable Energy Agency(IRENA)is an intergovernmental organisation that supports countries in their transition to a sustainable energy future,and serves as the principal platform for international co-operation,a centre of excellence,and a repository of policy,technology,resource and financial knowledge on renewable energy.IRENA promotes the widespread adoption and sustainable use of all forms of renewable energy,including bioenergy,geothermal,hydropower,ocean,solar and wind energy,in the pursuit of sustainable development,energy access,energy security and low-carbon economic growth and prosperity.www.irena.orgAcknowledgementsThis report was authored by Emilio Matsumura(consultant)and Ricardo Gorini(IRENA).The authors are grateful for the inputs from the Brazilian Development Bank(BNDES),Ministry of Mines and Energy(MME),Ministry of Foreign Affairs(MRE),Energy Research Office(EPE)and National Civil Aviation Agency(ANAC),and particularly from Artur Yabe Milanez(BNDES);Otvio Forattini Lemos Igreja and Las de Souza Garcia(MRE);Angela Oliveira da Costa and Rachel Martins Henriques(EPE);Luis Augusto Horta Nogueira(Unifei and Unicamp);Binu Parthan,Michael Renner and Chun Sheng Goh(IRENA);and Marcela Braga Anselmi(ANAC).Publication and production support were provided by Francis Field and Stephanie Clarke;communications and digital support were provided by Daria Gazzola.The report was edited by Erin Crum,with graphic design by Phoenix Design Aid.IRENA is grateful to the Government of the United Arab Emirates for generously supporting the work that formed the basis of this report.|3LESSONS,CHALLENGES AND OPPORTUNITIESFOREWORDBrazils experience in the development of sustainable biofuels represents a valuable example of how innovation,policy design and long-term vision can drive the decarbonisation of the energy sector.It offers key insights and a compelling model for countries seeking to advance their own energy transitions while fostering economic growth and social inclusion.According to IRENAs 1.5C Scenario,sustainable fuels including biofuels and green hydrogen derivatives will play an increasingly important role in the global energy transition.Their share in total final energy consumption is expected to reach around 10%by 2030 and at least 20%by 2050;however,this will require concerted action,international collaboration and the mobilisation of investment at scale.International co-operation is also vital in establishing sustainability criteria and ensureing their application.The Brazilian experience highlights the crucial need for strategies and clear policy frameworks that enhance sustainability,reduce investment risks and foster innovation.These include:creating appropriate institutional environments;establishing consistent long-term objectives through effective policies;encouraging constructive discussions between public and private stakeholders;promoting international collaboration;and supporting research and development to unlock the next generation of biofuel technologies.As we navigate the road from Baku to Belm,the focus must shift from commitment to implementation.We encourage countries to deepen cooperation bilaterally,regionally and multilaterally to unlock the full potential of sustainable fuels in global decarbonisation efforts.Through shared learning,coordinated action and collective ambition,we can accelerate the deployment of sustainable solutions;to this end,the Brazilian experience may inspire policy makers to translate ambition into tangible progress.Francesco La CameraDirector-GeneralInternational Renewable Energy Agency4|BRAZILS BIOFUEL INDUSTRYCONTENTSFOREWORD.3EXECUTIVE SUMMARY.61.INTRODUCTION.82.THE IMPORTANCE OF MODERN BIOENERGY IN THE ENERGY TRANSITION .93.OVERVIEW OF BIOENERGY IN BRAZIL.113.1 Bioethanol.133.2 Biodiesel.153.3 Industrial capacity:Biorefineries.174.INSTITUTIONAL GOVERNANCE.195.POLICIES,PLANS,PROGRAMMES AND OTHER GOVERNMENT INITIATIVES.205.1 Energy policies.205.2 Climate policies.235.3 Tax policy.255.4 Public funding and low-interest credit lines.265.5 Other incentives.276.NEW POLICIES ON BIOFUELS UNDER THE BRAZILIAN ENERGY TRANSITION.296.1 The National Energy Transition Policy .296.2 Fuel of the Future Law.296.3 The New Industry Brazil Plan .337.TECHNOLOGICAL INNOVATIONS.348.LESSONS FROM THE BRAZILIAN EXPERIENCE WITH BIOFUELS.358.1 Adequate regulatory framework and institutional governance.358.2 Balanced and predictable public policies.368.3 The power of collaborative international engagement.36REFERENCES .38FIGURESFigure 1 The essential role of sustainable fuels in decarbonising the global energy mix.9Figure 2 Share of bioenergy in total final energy consumption(2023).11Figure 3 Evolution of the renewable energy share in the total energy consumption of the transport sector.11Figure 4 Land use and land cover in Brazil in 2022.12Figure 5 Ethanol consumption,1975-2024.13Figure 6 Ethanol domestic supply forecast.14Figure 7 Biodiesel consumption evolution,2005-2023.15Figure 8 Biodiesel consumption forecast.17Figure 9 Ethanol production capacity forecast.18Figure 10 Historical evolution of the ethanol blending mandate in Brazil.22Figure 11 Historical biodiesel blending mandate in Brazil and biodiesel annual consumption.23TABLESTable 1 RenovaBio CBIO targets and projected emissions mitigation values.24BOXESBox 1 The Social Biofuel Stamp programme.16Box 2 Estimating employment in Brazils biofuel sector.27|5LESSONS,CHALLENGES AND OPPORTUNITIES6|BRAZILS BIOFUEL INDUSTRYEXECUTIVE SUMMARYThe goal of the Paris Agreement to keep global temperature rise to within 1.5C of pre-industrial levels will not be met without sustainable biomass and biofuels.The role they will play in the global transition and the diversification of renewable energy sources will also bring significant benefits in terms of energy and supply chain security.Under IRENAs 1.5C Scenario,drawn from the Agencys world energy transition outlook workstream,sustainable biomass should account for at least 15%of final energy consumption(55 Exajoules EJ)by 2050,equating to around three-times todays level.Ethanol and biodiesel are well-established markets in road transport and many other new applications are under development,such as bio-based sustainable aviation fuels(SAF);bio-bunkers for maritime use;and sustainable biomass for a variety of industrial applications such as heating.They are essential solutions for the transport sector and the decarbonisation of hard-to-abatesectors.Consequently,global production will need to increase whilst global trade barriers are reduced,if the energy transition is to be competitive and beneficial to local communities.Scaling up investments on the ground is crucial at both the regional and national levels.Regions such South America have significant sustainable biomass potential,according to IRENAs forthcoming Regional energy transition outlook:South America report,and are well placed to assist global decarbonisation efforts.Learning from successful cases and champions is an effective way to accelerate the energy transition.For example,around 25%of final energy consumption in Brazil is met by biomass(in all forms),which contributes to the 50%share of renewable energy in the countrys primary energy mix.Indeed,energy security crises such as the oil shocks of the 1970s,combined with the need for diversification,and the search for affordability and competitiveness,have all been important drivers for the decisions by Brazils policy makers to implement biofuels policies and programmes.A similar constellation of interests is developing in more places around the globe today.Therefore,this report presents the following key conclusions:Legal frameworks,stable long-term policies and clear perspectives all provide clear positive signals for the development of the biofuels sector among investors,consumers and industry.A successful biofuels sector requires multiple,co-ordinated governance regimes,covering national energy planning,transport planning,climate and environmental policies,land use and agriculture policies,and industrial and innovation policies.|7 It is essential to ensure that a nascent biofuels industry adopts clear,transparent and traceable sustainable practices in relation to employment,the environment and society third party independent certification is a necessary step in this regard.Establishing a successful and sustainable industry requires a roadmap with clear milestones that accentuates coordination among the various stakeholders,especially at government level.Developing a sustainable biofuel sector will also bring positive results for the economy in terms of job creation,local development and supply chain diversification.Therefore,it is well suited for both for sustainable development goals and decarbonisation.The biofuel sector in Brazil has benefitted from tax benefits,biofuel blend programmes,financial incentives,support for flex fuel cars,regulation of technical certification,and carbon trade markets.This report provides a description of the evolution of these instruments in Brazil.International co-operation can play an important role in promoting the development of sustainable fuels,such as promoting technology exchange,sustainable best practices,the removal of trade and regulatory barriers,setting certification and standards,and raising awareness for funding requirements and opportunities.This report,issued at the request of the Brazilian COP30 Presidency,is part of IRENAs contribution to showcasing existing solutions and fostering plans for the acceleration of the energy transition under the COP30 Activation Groups.It informs also the Global Coalition for Energy Planning(GCEP)initiative,led by Brazil,with IRENA as Secretariat.National policy makers and regional energy forums,such as OLADE,ASEAN,and African countries,may find it particularly useful as a guide or roadmap to complement their energy transition strategies,plans and policies.15 5012 30BIOENERGYBIOENERGYBRAZILS BIOFUEL INDUSTRY8|1.INTRODUCTION1 The IRENA 1.5C Scenario outlines an energy transition pathway designed to restrict the rise in global average temperature to 1.5C above preindustrial levels by the end of the century.This strategy prioritises readily available technological solutions that can be scaled up to meet this objective(IRENA,2024a).2 Brazils regulatory framework supports the biofuel industry by avoiding direct government intervention in fuel pricing and promoting market competition.Federal taxes such as CIDE(Contribution for Intervention in the Economic Domain),PIS/COFINS(federal social contributions)and the statelevel ICMS tax(valueadded tax)play a role in regulating fuel economics.The government actively employs tax policies to incentivise ethanol consumption relative to gasoline consumption,thereby contributing to the energy transition.Modern bioenergy is expected to play an increasingly vital role in the energy transition.It accounts for a sizeable portion of total final energy consumption in the coming years and will need to contribute 12%by 2030 and 15%by 2050 in the 1.5C Scenario(BNDES,2008;IRENA,2024a).1 However,realising bioenergys full potential requires a comprehensive approach(encompassing a suitable institutional framework,consistent long-term goals,productive engagement with private stakeholders,international co-operation,and innovation)to address key barriers to wider bioenergy deployment such as policy uncertainty,technology readiness,cost and financing issues,limited market access,supply chain complexities and sustainability risks(IRENA,2024a).Aligned with the International Renewable Energy Agencys(IRENAs)global perspective,Brazils experience,particularly with bioethanol,exemplifies a compelling model for sustainable decarbonisation.It offers a low-cost and competitive pathway,significantly contributing to global energy transitions.By fostering market competition through a conducive regulatory environment and strategically employing tax policies to influence fuel consumption,Brazil actively supports the shift towards biofuels.2 The Brazilian experience highlights the crucial need for implementing strategies and policies that enhance sustainability and address investment barriers.This includes creating an appropriate institutional framework,establishing consistent long-term objectives through effective policies,encouraging constructive discussions with private stakeholders,pursuing international collaboration,and advancing innovation to facilitate the development of biofuels in the energy mix.This report focuses on the Brazilian experience and perspectives on ethanol,biodiesel and some advanced biofuels.It does not cover other bioenergy carriers(such as solid biofuels and biogas).|9LESSONS,CHALLENGES AND OPPORTUNITIES2.THE IMPORTANCE OF MODERN BIOENERGY IN THE ENERGY TRANSITION Considered one of the key enablers together with efficiency and electrification(the main drivers to support the 1.5C goal),modern bioenergy offers existing and promising solutions to the decarbonisation of the global energy mix,and is also relevant in those sectors where direct electrification may be challenging(IRENA,2022).IRENA(IRENA,2024a)estimated that by 2050,about 15%of the energy mix will need to come from direct use of modern biomass,tripling from the level in 2022,in the 1.5C Scenario.Figure 1 The essential role of sustainable fuels in decarbonising the global energy mix2022394EJ Total final energy consumption23%Electricity(direct)6%Traditional usesof biomass5%Modern biomass uses63%Fossil fuels3%Others29%Renewable share in electricity1.5C Scenario:2030389 EJ TFEC30%Electricity(direct)12%Modern biomass uses51%Fossil fuels5%2%OthersRenewable sharein hydrogen40h%Renewable share in electricity1.5C Scenario:2050354 EJ TFEC52%Electricity(direct)15%Modern biomass uses7%Others12%Fossil fuels14%Hydrogen(direct use and e-fuels)*Renewable sharein hydrogen94%Renewable share in electricitySource:(IRENA,2024a).Note:EJ=exajoules;e-fuels=electric-fuels;TFEC=total final electricity consumption.Liquid biofuels will be a key component in this expansion,particularly in the decarbonisation of the transport sector.According to IRENA(IRENA,2023),bioenergy consumption in transport will need to grow threefold between 2020 and 2050 under the 1.5C Scenario,complementing the increasing adoption of electric vehicles and improvements in fuel efficiency.For road transport,increasing biofuel blending ratios is crucial for decarbonisation,as exemplified by Brazil and Indonesia,where biofuels are projected to reach 35%of final energy consumption by 2050,and Indias 20%blending ratio target for ethanol in gasoline by 2030(IRENA,2023).In the aviation sector,sustainable aviation fuels(SAFs)provide the high-energy-density,dispatchable fuel required,seamlessly integrating with existing infrastructure.They are projected to account for 24%of the total energy consumption in aviation by 2050,in IRENAs 1.5C Scenario(IRENA,2023).Although more limited,the shipping sector will also see a role for biofuels,expected to contribute 10%to its energy mix by 2050(IRENA,2022).10|BRAZILS BIOFUEL INDUSTRYBeyond transport,modern bioenergy significantly contributes to decarbonising the industrial and buildings sectors.In IRENAs 1.5C Scenario,its use in industry will rise fourfold from 2020 to 2050,primarily by replacing fossil-based feedstocks and energy in chemical production,cement and metals industries.In buildings,the use of modern biomass is anticipated to increase threefold from 2030 to 2050,transitioning away from inefficient traditional biomass forms towards bioheat,biogas and bioelectricity(IRENA,2022).Furthermore,modern bioenergy plays a dual role in enhancing overall energy system flexibility and enabling negative emissions.Bioenergy with carbon capture and storage(BECCS)is a critical technology for achieving net-zero goals,capable of capturing and storing approximately up to 4.5gigatonnes of carbon dioxide by 2050,thus directly removing carbon from the atmosphere(IRENA,2022).Bioenergy can also provide dispatchable electricity,complementing the variable nature of solar and wind power,thereby bolstering grid stability and resilience.The success of scaling bioenergy is intrinsically linked to its sustainability.Modern bioenergy is envisioned as an integral part of the broader bioeconomy,leveraging diverse sources such as agricultural residues,biogenic waste and by-products from ecosystem management.This approach aims to maximise greenhouse gas(GHG)reductions and avoid negative impacts on food security,biodiversity and land-use change.While residues and wastes are prioritised due to their lower carbon footprint,their practical mobilisation faces logistical and economic constraints,necessitating the exploration of energy crops on underutilised low-carbon land without compromising food security and biodiversity(IRENA,2022).Life-cycle emissions,particularly those related to land-use changes,are a key consideration,emphasising the importance of sustainable landscape management and the integration of carbon dioxide removal mechanisms such as BECCS.Finally,the realisation of bioenergys full potential hinges on a robust enabling framework.This includes addressing existing barriers such as policy uncertainty,technological readiness,cost and financing challenges,and supply chain complexities(IRENA,2022).The remainder of this paper will delve into Brazils experience,demonstrating how its approach characterised by suitable institutional structures,consistent long-term objectives,engagement with private stakeholders,regional development and sustainability goals offers a compelling model for the successful integration of modern bioenergy into a national energy mix.Alf Ribeiro/S|11LESSONS,CHALLENGES AND OPPORTUNITIES3.OVERVIEW OF BIOENERGY IN BRAZIL3 According to IRENA,traditional methods include cooking on inefficient and potentially harmful stoves,whereas modern bioenergy encompasses technologies such as the production and use of liquid biofuels,biogas and bioelectricity generation in industry,buildings and transportation(IRENA,2024a).Bioenergy from sugar cane,firewood,corn,soybeans and other sources accounted for nearly 33%of Brazils primary energy production in 2024,making it the most relevant renewable source in its energy mix.Sugar cane biomass and biodiesel represent approximately 19%of the countrys primary energy production.In the world,bioenergy accounted for approximately 11%of total final energy consumption in 2022,with roughly half of this amount corresponding to the growing use of modern bioenergy through efficient and environmentally friendly technologies,such as liquid biofuels(IRENA,2024a)(Figure 2).3Figure 2 Share of bioenergy in total final energy consumption(2023)Modern biofuelsTraditional biofuelsWorldBrazil0%5 %05%Sources:(MME/EPE,2024a;REN21,2024).In the transportation sector,the renewable share of bioenergy accounted for 3.9%of the worlds total final energy consumption in transport in 2021(REN21,2024),while in Brazil,it reached 25.7%in 2024(Figure 3).Figure 3 Evolution of the renewable energy share in the total energy consumption of the transport sector201520162017201820192020202120222024202325.7%renewable25.3%renewable21.5%renewableSource:(MME/EPE,2024a).12|BRAZILS BIOFUEL INDUSTRYRenewable energy accounts for almost 65%of the industrys energy mix in Brazil,whereas sugar cane bagasse is expected to account for 22%in 2023(MME/EPE,2024a).Worldwide,the share of renewable energy in the industry sectors total final energy consumption was 16.8%in 2021(REN21,2024).The importance of bioenergy is becoming more consolidated in Brazils energy mix through the diversification of biofuels and expansion of their production,which aligns with national goals for decarbonisation,environmental protection and economic development.Brazil is the worlds second-largest producer of ethanol and third-largest producer of biodiesel,but it has yet to introduce green renewable diesel4 or sustainable aviation fuel(USDA,2024).A natural concern regarding bioenergy production is its potential to compete with food production for land.In this regard,Brazil has made significant progress in managing land use for bioenergy production,striking a balance between conservation and agricultural expansion.The country kept the largest share of its territory(64%)covered in natural vegetation,primarily forests.One-third of the Brazilian territory is used for agriculture and livestock(Figure 4).Facing complex land allocation and forest conservation challenges in such an extensive share of its territory,the country has implemented command and control measures,national policies,and environmental legislation to conserve natural resources while promoting sustainable farming practices(BNDES and CGEE,2024).4 Green renewable diesel is a biomassbased diesel.It can be used as an additive to transport fuels,heating oil or aviation fuel,and is characterised by its ability to reduce GHG emissions by 50%or more(EPE,2020).Figure 4 Land use and land cover in Brazil in 202258%|494.1 MhaForest natural formation2%|18.3 MhaWater33%|282.5 MhaAgriculture and livestock1%|6.9 MhaNon-vegetated area6%|48.9 MhaNon-forest natural formationBrazil:850 MhaSource:(BNDES and CGEE,2024).Note:Mha=million hectares.The countrys sugar cane ethanol(first-generation biofuels E1G)production relies on areas with suitable soil and climate conditions for high-productivity cultures and high-yield plant species,using relatively small agricultural areas.Concentrated in the Central-South and Northeast regions,it has primarily expanded over degraded pastures,with 98%of this expansion occurring on previously used agricultural lands.Less than 1.6%of the area used for sugar cane was natural vegetation in 2000,indicating a low risk of deforestation(BNDES and CGEE,2024).Notably,the area designated for sugar cane cultivation has consistently remained in the range of 8Mha to 9Mha over the past decade(EPE,2024).By focusing on recovering natural vegetation and reducing its suppression,sugar cane production commits to environmental standards and biofuel production policies(BNDES and CGEE,2024).|13LESSONS,CHALLENGES AND OPPORTUNITIESMore recently,the production of bioethanol from corn has expanded significantly.Corn is grown as a secondary crop after the main soybean crop is harvested,requiring no additional land for its production.Asaresult,optimised soil management is used,eliminating competition for land with other primary crops and reducing the overall inputs required for production(BNDES and CGEE,2024).Technological advancements in agriculture and industry have led to significant cost reductions in Brazil,bringing biofuel prices close to those of conventional fuels.However,the competitiveness of biofuels is often skewed due to distortions in the price of fossil fuels(BNDES and CGEE,2024).Policies such as Californias Low Carbon Fuel Standard and Brazils RenovaBio(see section 5.2.1.1)can help make low-carbon biofuels,such as bioethanol,more competitive.3.1 BIOETHANOLEthanol is a notable option among liquid biofuels due to its versatility and efficiency in combustion engines and turbines.It is a drop-in technology that can be implemented using existing infrastructure.This helps enhance energy security by diversifying energy sources and reducing reliance on fuel imports.Brazils ethanol market,with over 30billion litres of consumption per year,is the second-largest globally,following the UnitedStates.The country has a long history with ethanol,primarily using sugar cane as the feedstock.Favourable weather conditions and previous investments in new sugar cane varieties and field renovations have improved productivity and yields.Figure 5 Ethanol consumption,1975-2024AnhydrousHydrousTotal19751976197719781979198019811982198319841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018201920202021202220232024Billion litres0510152025303540Source:(MME/EPE,2025).High mechanisation has significantly increased productivity in the production of bioethanol from sugar cane in Brazil.The adoption of mechanised sugar cane harvesting was motivated by i)economic factors(cost reduction);ii)social factors(workforce reskilling and labour market reinsertion);and iii)environmental factors(laws,protocols and incentive programmes to eliminate burning before harvesting).Currently,92%of sugar cane harvesting in Brazil is done mechanically,maintaining the trend of increasing mechanisation in the sector.14|BRAZILS BIOFUEL INDUSTRYIn the Central-Southern region,which is responsible for more than 90%of Brazils sugar cane production,with predominantly flat areas favourable for machine harvesting,harvest mechanisation already accounts for approximately 99%of the total(BNDES and CGEE,2024).Since 2017,corn ethanol production has surged due to increased grain availability and lower production costs,especially in the Central-Western region,where cheap corn supplies and poultry operations utilise distillation by-products to support the ethanol industry(USDA,2024).Second crops became predominant in corn ethanol production,which in turn accounted for approximately 20%of the total ethanol production in 2024.Moreover,Brazilian bioethanol from sugar cane and a secondary-crop corn boasts one of the best global carbon footprints(BNDES and CGEE,2024).Sugar cane production employs sustainable agricultural practices such as crop rotation,waste management and utilising degraded areas,which reduce GHG emissions and enhance soil health quality.5 Additionally,sugar cane bagasse,a by-product,is used for electricity co-generation,thereby further reducing carbon intensity(USDA,2024).Corn bioethanol is cultivated as a secondary crop after soybeans,requiring no additional land.6 As mentioned,this method ensures optimised soil management and reduces input usage.As a result,Brazilian bioethanol achieves a carbon footprint reduction of 70%to 82%compared with gasoline,reaching up to 90%in optimal cases(BNDES and CGEE,2024).3.1.1 PerspectivesOver the next decade,the Brazilian ethanol supply is projected to grow at 3.8%per year,reaching 48.5billion litres by 2034(Figure 6).This growth will primarily be driven by sugar cane,accounting for approximately 70%of production,with the remainder supplemented by corn ethanol.The second-generation(2G)ethanol production is anticipated to utilise a small fraction of the available bagasse and straw,reaching 1.2billion litres by 2034(MME/EPE,2024b).5 Crucially,by implementing crop rotation,where corn follows soybeans,this system effectively capitalises on the atmospheric nitrogen biologically fixed in the soil by the preceding soybean crop.This practice not only significantly enhances soil fertility but also substantially reduces the demand for synthetic nitrogen fertilisers for the subsequent corn(MAPA,2020).6 The second corn crop is currently larger than either the first crop or the third crop where this is planted.Figure 6 Ethanol domestic supply forecastImports E2GE1G sugarcaneE1G cornTotalBillion litres010203040502034203320322031203020292028202720262025202432.332.232.031.531.130.830.229.627.527.532.614.113.713.413.012.612.011.09.88.37.314.348474746454442403635481.61.11.61.51.31.20.80.60.20.21.1Source:(MME/EPE,2024b).Notes:E1G=first-generation biofuels;E2G=second-generation biofuels.|15LESSONS,CHALLENGES AND OPPORTUNITIESThe production volume of hydrous ethanol is expected to amount to 35billion litres,while anhydrous ethanol is projected to reach 13billion litres.Regarding ethanol imports,targeted acquisitions of anhydrous ethanol from the international market will be made,capitalising on specific seasonal windows of opportunity(MME/EPE,2024b).3.2 BIODIESELBrazil hosts the worlds third-largest biodiesel industry,following the UnitedStates and Indonesia.The countrys biodiesel production growth has been driven by an expanding diesel market and increased blending mandates under the National Programme for the Production and Use of Biodiesel(PNPB see Section 5.1.3),established in 2005(MME/EPE,2024b).From 2005 to 2023,the industry sold 67.5billion litres of biodiesel domestically(Figure 7).The current mandatory blending percentage is 14%,and as per the National Council for Energy Policy(CNPE)resolution,it will increase to 20%by 2030(see Section 5.1.4.2).7 7 The PNPB allows for voluntary biodiesel use in specific cases beyond the mandatory blending,such as for captive fleets and in agricultural,industrial and experimental applications.Some companies with authorisation from the National Agency of Petroleum,Natural Gas and Biofuels(ANP)are already using pure biodiesel(B100)in their fleets and vessels(MME/EPE,2024b).Figure 7 Biodiesel consumption evolution,2005-20232005200620072008200920102011201220132014201520162017201820192020202120222023Billion litres012345678Source:(MME/EPE,2024a).Overall,the biodiesel market in Brazil is primarily domestic,driven by concerns about the impact of imports on the local workforce and the contribution to gross domestic product(GDP)from the soybean chain.Biodiesel imports are rare and restricted to exceptional circumstances.Despite its robust production capabilities,Brazil does not export significant amounts of pure biodiesel(B100)or blends above B30.However,Brazil has become a major exporter of used cooking oil and tallow to the UnitedStates,where they are used in biodiesel 16|BRAZILS BIOFUEL INDUSTRYand renewable diesel production(USDA,2024).Moreover,strategic initiatives from the government were implemented to diversify feedstocks and increase social inclusion through programmes such as the Social Biofuel Stamp(Box 1).Box 1The Social Biofuel Stamp programmeThe Social Biofuel Stamp programme,launched in 2004 under the name Social Fuel Stamp,aims to boost rural economies,promote sustainable agriculture,ensure food security and diversify agriculture in Brazil by linking biodiesel production to the success of family farming(MME/EPE,2024b).The Social Biofuel Stamp is issued by the Ministry of Agrarian Development(MDA)and should be renewed every five years.The programme grants financial and market advantages to biodiesel manufacturers who significantly incorporate family farmers enrolled in the National Programme for Strengthening Family Farming(PRONAF)into their supply and production structures.These advantages include reduced federal tax rates,which have also been granted priority in biodiesel auctions in the past.Federal regulation requires fuel distributors to purchase at least 80%of their biodiesel sales from biodiesel producers who hold a Social Biofuel Stamp.Other key requirements for participation in the programme include providing free technical support to these farmers and sourcing a minimum percentage of feedstock from their operations.While imports are permitted,domestic sourcing,particularly from family farmers,is strongly encouraged(MME/EPE,2024b).The programme also addresses compliance and due diligence issues.Biodiesel producers must maintain detailed records of their feedstock purchases and biodiesel sales to demonstrate compliance with programme requirements.The Ministry of Agriculture,Livestock and Food Supply(MAPA)conducts regular audits to ensure that producers comply with programme rules and regulations.However,challenges still remain.Ensuring adequate technical support and that family farmers genuinely benefit from the programme requires ongoing monitoring and evaluation.Additionally,fluctuating feedstock prices can impact the economic viability of biodiesel production,calling for adjustments to programme policies and regulations(MME/EPE,2024b).The regulator must have previously approved biodiesel supply contracts,which should have a minimum duration of two months.Imported raw materials are not prohibited,and import guidelines are left to the regulator.The potential use of biodiesel in the maritime sector is also being explored to meet emission reduction targets.Biodiesel pricing in Brazil is closely linked to soybean oil,8 which accounts for about 80%of production costs.8 Brazil is a leading global producer of soybeans,accounting for nearly 40%of the global output and 55%of exports.The South and Midwest regions are major production hubs,contributing 42%and 40%of biodiesel output,respectively(USDA,2024).|17LESSONS,CHALLENGES AND OPPORTUNITIES3.2.1 PerspectivesThe Energy Research Office projects that biodiesel consumption will hit 17.8billion litres by 2034,factoring in the mandatory Fuel of the Future Law(see Section 6.2)blending rates,which will achieve 200 by 2030(EPE,2024).Figure 8 Biodiesel consumption forecastBillion litres0510152020342030202611.416.017.8Source:(EPE,2024).3.3 INDUSTRIAL CAPACITY:BIOREFINERIESBy diversifying their product portfolios,biorefineries can add significant value to biomass and related production processes.Product diversification leverages synergies across industrial operations,optimising the use of energy,materials and facilities.This,in turn,reduces production costs,minimises environmental impacts and lessens vulnerability to market price fluctuations(BNDES and MME,2022).More importantly,biorefineries are not merely a technical component of biofuel production,but they are seen as a central element in the transition to a low-carbon economy,integrating sustainability,innovation and economic development and representing a new investment frontier in the energy transition(MME/EPE,2024b).Competitive biomass supply costs could enable the transition of sectors such as petrochemicals to produce green chemicals and second-generation biofuels(E2G)within the same facility.In Brazil,sugarcane biorefineries are a good example of this model,producing ethanol,sugar,electricity and co-products such as animal feed protein,biogas/biomethane,biofertilisers,bioplastics and biochemicals.E2G could play a crucial role in strengthening and diversifying Brazils bioeconomy by repurposing existing refining structures to convert a range of inputs into high-value products(MME/EPE,2024b).The successful evolution of biorefineries depends on the establishment of new regulations.These regulations are crucial for addressing issues such as raw materials,products and the circular economy,ultimately shaping a new business model:the bioeconomy.In Brazil,existing ethanol and biodiesel plants operate under 18|BRAZILS BIOFUEL INDUSTRYcomprehensive regulations covering fuels,electricity and environmental issues.This accumulated experience across the agricultural,industrial,regulatory,distribution and final consumption phases of the Brazilian biofuel sector provides a solid foundation for advancing biorefinery development(MME/EPE,2024b).In the next ten years,in Brazil,planned investments in ethanol biorefinery capacity are estimated at roughly BRL40billion(Brazilian reals)(approximately USD6.6billion),mostly for corn ethanol,which accounts for USD3billion,and E2G,which represents USD2.6billion(MME/EPE,2024b).These investments will allow ethanol production capacity to reach 68billion litres by 2034(Figure 9).Figure 9 Ethanol production capacity forecastImports E2GE1G sugarcaneE1G cornTotalBillion litres010203040506070802034203320322031203020292028202720262025202451.551.551.551.551.551.551.050.549.348.851.515.315.014.714.313.813.612.811.810.28.615.568.067.567.166.766.165.864.362.859.857.668.21.21.00.90.90.80.70.50.50.30.21.2Source:(MME/EPE,2024b).Notes:E1G=first-generation biofuels;E2G=second-generation biofuels.|19LESSONS,CHALLENGES AND OPPORTUNITIES4.INSTITUTIONAL GOVERNANCEThe CNPE establishes the directives for the use and production of biofuels.It is also responsible for the mandatory blending of ethanol and biodiesel in the gasoline and diesel pools.The Ministry of Mines and Energy(MME)is the central authority in developing policy frameworks,ensuring market stability,fostering investment and maintaining regulatory co-ordination across Brazils evolving biofuels industry.It is responsible for evaluating fuel supply conditions and overall market evolution,including contingency measures to minimise supply disruption risks during exceptional circumstances.It also proposes guidelines for the regulator,the ANP,to follow and co-ordinate the process of grants and authorisations throughout the biofuels sector.The ANP implements the national biofuel policy,focusing on energy security and the functioning of the fuel market,which includes specifying the quality standards for biofuels.Diego Grandi/S20|BRAZILS BIOFUEL INDUSTRY5.POLICIES,PLANS,PROGRAMMES AND OTHER GOVERNMENT INITIATIVES9 Conversely,anhydrous ethanols growth was directly tied to mandatory blending requirements(see section on ethanol).Brazils five decades of experience formulating and implementing policies to promote bioenergy production and use highlight the critical role of government initiatives in supporting the integration of bioenergy into the energy mix.These initiatives include direct incentives to bioenergy through energy,climate and tax policies,among others,and indirect incentives through policies aimed at the automotive and agricultural sectors.5.1 ENERGY POLICIESBrazils energy policies supporting biofuels have primarily emerged from concerns regarding energy security and the adverse effects of fuel imports on the nations balance of payments(Goldemberg,2006).The first major initiative,Proalcool,was introduced in 1975 in response to the 1973 oil crisis,to replace gasoline with ethanol.In the 1990s,the government transitioned to a market-driven framework for the fuel sector while still addressing biofuel production through mandatory blending regulations.By 2005,social goals were integrated into the governments biodiesel expansion plan.More recently,Brazil launched the RenovaBio programme,which creates private incentives for expanding biofuels via a decarbonisation credits market.5.1.1 National Alcohol Programme(Proalcool)Proalcool was established in 1975 to promote fuel ethanol production and mitigate the impact of the 1973 oil crisis on the current account deficit by reducing oil imports(Aguiar et al.,2024).Initially,the programme focused on producing anhydrous ethanol for blending with gasoline.However,following the second oil shock in 1979,the government also implemented measures to incentivise the production of hydrated ethanol as a direct substitute for automotive gasoline used in light-duty vehicles(BNDES and CGEE,2024;EPE,2020).Proalcool successfully replaced a significant portion of gasoline consumption,increasing the share of sugarcane-derived bioenergy in the total energy supply from 4.5%in 1975 to 14.4%in 1987.By 1991,about 60%of light-duty vehicles ran on hydrous ethanol.9 However,the decline in international oil prices that began in the mid-1980s,combined with reduced government support and the sectors shift towards sugar production for global markets,led to fuel ethanol shortage crises.These crises eroded consumer confidence,leading to a decline in demand for ethanol-fuelled vehicles.This trend reversed only in 2003 with the introduction of flex-fuel technology(EPE,2020)(BNDES,2008).The government terminated Proalcool in the 1990s when it implemented a deregulation process for the ethanol market(BNDES,2008).|21LESSONS,CHALLENGES AND OPPORTUNITIES5.1.2 Plan for the Production of Vegetable Oils for Energy Purposes In 1980,following the success of Proalcool and the oil supply crises of the 1970s,Brazil initiated its biodiesel programme,known as the PRO-OLEO(Plan for the Production of Vegetable Oils for Energy Purposes)initiative.This programme required a 30%blend of vegetable oils or their derivatives with fossil diesel,with the ultimate goal of complete substitution.The proposed method for biofuel production was the transesterification of vegetable oils.Similar to Proalcool,the decline in international oil prices in the mid-1980s ultimately led to the halt of PRO-OLEO in 1986(Ekbom,2023).5.1.3 The National Programme for the Production and Use of BiodieselThe PNPB was established in 2005 with three main institutional objectives:implement a sustainable programme for biodiesel production and use while promoting social inclusion;ensure competitive pricing,quality and supply of the product;and produce biodiesel from a variety of oilseeds across different regions.Another objective was to reduce dependence on mineral diesel(BNDES,2008).The programme initially allowed the voluntary blending of 2%biodiesel(B2)into commercial diesel.This blending requirement became mandatory in 2008 and has gradually increased to the current 14%(B14)blend,as detailed in the biodiesel section.The PNPB supports research,development and innovation throughout the production chain,from the agricultural phase to industrial production processes,including storage.The regulations allow biodiesel production from various oilseeds,enabling the participation of both agribusiness and family farming.The ANP regulates fuel quality standards and oversees the production and commercialisation of biodiesel,while fuel distributors and refineries are responsible for blending biodiesel with fossil diesel.5.1.4 Mandatory blendingMandatory blending was used as an instrument to assure energy security by reducing oil imports(Aguiar et al.,2024).EthanolBrazil has a long history of mandatory ethanol blending into gasoline,dating back to the 1930s(Figure 10).Blend levels have adapted over time in response to changes in oil prices,wars,economic crises,sugar production surpluses and the magnitude of the effects of gasoline imports on the balance of payments.The government maintained the ethanol blend mandate even after deregulating the fuel market in the 1990s(BNDES,2008).Adequate fuel specifications and technological advancements in internal combustion engines(ICEs),which now incorporate digital electronic monitoring,have significantly improved efficiency and addressed challenges such as cold starts and material compatibility(BNDES and CGEE,2024).The Fuel of the Future Law,enacted in 2024,allows ethanol blends in gasoline to range from 22%to 35%(an increase from the previous range of 18%to 27.5%).Since 2015,Brazil has specifically mandated a 27%blend of anhydrous ethanol in all regular and additive gasoline,supported by extensive testing on emissions,economy and ICE performance.Additionally,in March 2025,the Brazilian government announced the technical feasibility of a 30%ethanol blend in gasoline after the conclusion of performance and compatibility tests.22|BRAZILS BIOFUEL INDUSTRYFigure 10 Historical evolution of the ethanol blending mandate in Brazil25%maximum ethanol in gasolineDecree 59,190/1966196610%to 20%minimum ethanolCNP Ordinances197620%to 25%minimum ethanolCNP Ordinances197722%ethanol in gasolineCNP 144/1984198418%ethanol in gasoline nationwideCNP 19/198919895%ethanol to foregin gasolineDecree 19,717/1931193122%ethanol in gasoline in So PauloCNP 98/1989198920%ethanol in gasolineCIMA 37/2007201024%ethanol in gasolineCIMA 37/2007200720%ethanol in gasolineCIMA 35/2006200620%to 25%ethanol minimumLaw 10,464/2002200222%to 24%ethanol minimumLaw 10,2003/2001200124%ethanol in gasoline nationwideANP 197/1999199920%ethanol in gasolineMAP 678/2011201122%ethanol in gasoline nationwideLaw 8,723/1993199327%ethanol in gasolineMAP 75/2015201527%ethanol in gasoline201627%ethanol in gasoline201727%ethanol in gasoline201827%ethanol in gasoline201927%ethanol in gasoline202025%ethanol in gasolineCIMA 1/2013201327%ethanol in gasoline2021/20235%ethanol to national gasolineDecree Law 737/19381938Source:Ekbom(2023).Notes:CNP=National Petroleum Council;CIMA=Interministerial Sugar and Ethanol Council;MAP=Ministry of Agriculture and Livestock.BiodieselThe mandatory addition of a minimum percentage of biodiesel to diesel oil was established in 2008 at 2%(B2)(Figure 11).Since then,the biodiesel blending mandate has been revised several times due to allegations regarding biodiesel quality,distributors lack of compliance with decarbonisation goals and complaints about high costs(USDA,2024).As the Brazilian market matured,the CNPE gradually increased the percentage until reaching B5 in January 2010,three years before the date established by law.In the following years,the mandate levels were steadily increased,conditioned on extensive testing of engine performance.Since March 2024,the current mixture of biodiesel in diesel commercialised in the whole country has been 14%.The Fuel of the Future Law establishes a range of mandatory biodiesel blends between 13%and 25%,with annual targets starting at 15%in 2025 and increasing to 20%by 2030.The CNPE will raise the mandate level according to the technical feasibility assessments.|23LESSONS,CHALLENGES AND OPPORTUNITIESFigure 11 Historical biodiesel blending mandate in Brazil and biodiesel annual consumption20052006200720082009201020112012201320142015201620172018201920202021202220232024Biodiesel annual consumption(kL)Law 11,097B2|Law 11,097B3|Res.CNPE 2/2008Law 11,097B5|Res.CNPE 6/2009Law 13,263B8|Res.CNPE 11/2016Law 11,097B4|Res.CNPE 2/2009Law 13,263B14|Res.CNPE 8/2023Law 13,263B12|Res.CNPE 3/2023Law 13,263B10|Res.CNPE 25/2021Law 13,263B13|Res.CNPE 16/2018B10|Res.CNPE 4/2021B12|Res.CNPE 11/2021B10|Res.CNPE 16/2021Law 13,263B12|Res.CNPE 16/2018B10|Res.ANP 821/2020B11|Res.ANP 831/2020Law 13,263B11|Res.CNPE 16/2018Law 13,263B10|Res.CNPE 23/2017Law 11,097B6|Law 13,033B7|Law 13,033Evolution of the legal framework andbiodiesel consumption in Brazil(kL)and evolution of legal frameworks foradding biodiesel to mineral diesel in BrazilSource:(MME/EPE,2024b).Note:kL=kilolitre.5.2 CLIMATE POLICIES5.2.1 The Brazilian Nationally Determined ContributionA key aspect of Brazils Nationally Determined Contribution(NDC)commitment involves increasing the production and use of biofuels,particularly advanced biofuels such as E2G.Although Brazils NDC encompasses the entire economy without sector-specific targets,the country aims to increase the share of biofuels in its energy mix to approximately 18%and renewable energies to 45%by 2030.Biofuels play a crucial role in reducing GHG emissions in Brazil.In 2023,the significant use of biofuels in Brazils energy mix avoided 85.6million tonnes(Mt)of carbon dioxide equivalent(CO2eq)of GHG emissions(EPE,2024).Since the introduction of fuel engines in 2003,the demand for bioethanol has surged,resulting in the prevention of an estimated 600MtCO2eq emissions in Brazil(UNICA,2020).The National Biofuels Policy(RenovaBio)Brazil introduced the National Biofuels Policy,known as RenovaBio,in 2017,which is in line with its climate commitments.This policy aims to reduce GHG emissions in the transportation sector and promote the expansion of bioenergy in the national energy mix.RenovaBio seeks to achieve an annual ethanol production of 50billion litres by 2030(BNDES and MME,2022).24|BRAZILS BIOFUEL INDUSTRYUnlike Proalcool,RenovaBio does not involve financial incentives from the government.Instead,it emphasises private incentives through a decarbonisation credits(CBIOs)market similar to the US Renewable Identification Number(RIN)market(Aguiar et al.,2024).Biofuels10 are valued based on their ability to mitigate GHG emissions compared with fossil fuel alternatives.The CNPE sets annual GHG emissions targets for fuel distributors,who,aside from complying with ethanol blending,must purchase CBIOs11 to meet their quotas based on their market share.CBIOs are issued by biofuel producers(or importers)who,once registered in RenovaBio,receive an efficiency score based on their GHG mitigation efforts compared with fossil fuels.Higher production volumes and lower carbon intensity lead to more CBIOs.Certification through life-cycle assessment12 ensures that biofuels are evaluated for their efficiency in reducing GHG emissions.The ANP oversees the certification process,ensuring that biofuels meet environmental compliance and help preserve native vegetation.13Since 2020,CBIOs have been traded on the Brazilian Stock Exchange.Despite economic challenges,compliance rates have remained high,reflecting the strict enforcement of policies.Ethanol dominates the CBIO market,with biodiesel and biomethane making up smaller portions.Between 2019 and 2023,105million CBIOs were issued,avoiding 105MtCO2eq(USDA,2024).It is expected that 61million to 83million CBIOs will be traded by 2034(Table 1).10 RenovaBio covers cellulosic ethanol,sugar cane and corn ethanol,biodiesel and hydrogenationderived renewable diesel(HDRD),aviation biokerosene,and biomethane.11 Each CBIO represents one tonne of CO2eq avoided by using biofuels instead of fossil fuels,incentivising lower GHG emissions.12 Based on a lifecycle assessment compared with fossil fuels,the carbon intensity of biofuels is calculated based on a welltowheels approach developed by Embrapa,the Brazilian Agricultural Research Corporation(USDA,2024).13 RenovaBio promotes the use of land that has already been cultivated and prohibits the use of raw materials from areas of native vegetation that were deforested after 2018.Additionally,rural properties are monitored to ensure compliance with the Forest Code,the primary legal framework for protecting native vegetation in Brazil(BNDES and CGEE,2024).Table 1 RenovaBio CBIO targets and projected emissions mitigation valuesCBIOS(millions)2025202620272028202920302031203220332034Target40.3948.0952.3756.4161.2464.0867.1368.8171.2972.54Upper band-55.3060.2364.8770.4373.7077.2079.1481.9883.42Lower band-40.8844.5147.9552.0554.4757.0658.4960.5961.66Source:(IRENA,2024b).Although RenovaBio provides incentives,its support for advanced biofuels such as E2G,SAFs and hydrogenated vegetable oils(HVO)is less specific than international programmes,such as the US Renewable Fuel Standard or the European Unions Renewable Energy Directive(BNDES and MME,2022).|25LESSONS,CHALLENGES AND OPPORTUNITIES5.3 TAX POLICYIn Brazil,federal and state taxes are levied on transportation fuels,with state taxes representing the largest portion.The country employs federal tax differentiation policies to distinguish between biofuels and fossil fuels,such as those that contrast ethanol and biodiesel from gasoline and diesel.Indirect tax policies are applied to the automotive industry.5.3.1 Direct instrumentsThe fuels and biofuels sector has historically benefited from direct subsidies or tax incentives to encourage production and reduce consumer prices.Tax policy is influenced by various evolving objectives,the most common being inflation control;balancing ethanol supply and demand,which is sensitive to sugar and gasoline prices;and managing public sector budgets(USDA,2024).The Constitutional Amendment No.123,enacted on 14July 2022,aims to establish a competitive advantage for biofuels over fossil fuels,particularly in terms of taxation,as a measure to foster the biofuel industry and to address the social impacts of the extraordinary rise in oil and fuel prices.The amendment adds a clause to Article 225 of the Constitution that mandates the maintenance of a favourable tax regime for biofuels used in final consumption.This ensures that biofuels will have a lower tax burden compared with fossil fuels,promoting their competitiveness.Until specific legislation is enacted,the competitive differential for biofuels will be maintained by ensuring that the percentage difference between the tax rates for fossil fuels and their biofuel substitutes,as of 15May 2022,remains unchanged.Additionally,for 20years following the amendments promulgation,federal law cannot establish a competitive differential for biofuels below the level stipulated in May 2022.Any changes in tax rates for fossil fuels,whether through new laws or judicial rulings,will result in automatic adjustments to the tax rates for biofuels to maintain the same competitive differential.This amendment strengthens Brazils commitment to supporting biofuels as a critical component of its energy mix,ensuring biofuels remain competitive in the market relative to fossil fuels.5.3.2 Indirect instrumentsFederal tax incentives apply to flex-fuel light-duty vehicles,representing a reduction in the share of taxes on the manufacturers suggested retail price of up to 2.8percentage points,depending on the vehicle size(ANFAVEA,2024).Additional tax benefits are granted through the Special Incentive Regime for Infrastructure Development(REIDI).Oriented to qualified infrastructure projects,REIDI suspends certain federal tax contributions on acquisitions,leases and imports of goods and services directly connected to approved infrastructure initiatives.These tax advantages apply during a designated time frame following the qualification of the entity managing the project.The MME has established the framework and protocols for approving energy infrastructure projects under this incentive programme.These guidelines cover various energy sectors,including electricity generation and transmission,natural gas production and processing,and pipeline development.The MMEs regulations define how energy projects can qualify for and benefit from these tax incentives,supporting broader infrastructure development goals within the national energy landscape.26|BRAZILS BIOFUEL INDUSTRY5.4 PUBLIC FUNDING AND LOW-INTEREST CREDIT LINESThe Climate Fund,established in 2009 as part of Brazils National Policy on Climate Change,is one of the main governments financial supports for projects to reduce GHG emissions and foster climate adaptation.Focusing on renewable energy,efficient equipment and climate-related innovation,it offers direct financing with favourable rates and up to 25-year terms and is managed by the Brazilian Development Bank(BNDES)(reimbursable resources)and the Ministry of the Environment(non-reimbursable funds).Funded by government revenues,donations and financing returns,it allocated roughly BRL300million(approximately USD55million)annually between 2011 and 2023.In 2023,USD2billion was added from sustainable bonds issued by the Brazilian Treasury,directed according to the Years Resource Application Plan.Despite the increased budget for 2024,concessional funding decreased.Original funds pay oil revenue participation at 1%interest,while bonds offer 8%for wind and solar projects and 6.15%for renewable hydrogen,energy storage,efficiency and sustainable fuels(IRENA,2024c).The government offers direct or indirect incentives and subsidised credit lines for biofuel production,especially through the BNDES,which focuses on expanding production capacity,fostering innovation,enhancing positive externalities and promoting sustainability(IRENA,2024b).BNDES emphasises environmental and climate change mitigation indicators in its loans and investments.Its funding lines offer extended terms and favourable rates linked to environmental goals,such as reducing GHG emissions,financing biofuel transportation,distribution infrastructure and biorefineries.Bioenergy projects benefit from diverse business and financing models,including consortia involving complementary agents such as biomass producers,system developers,financial agents and biofuel purchasers(IRENA,2024b).The Finem credit line funds projects for sustainability,biogas,biomethane production,ecosystem conservation,energy efficiency and efficient vehicle acquisition.Financing terms depend on the project type.The RenovaBio line,launched in 2021,offers interest rate discounts to biofuel producers for improved environmental performance.It sets targets for reducing carbon emissions according to each clients current energy and environmental efficiency(USDA,2024).BNDES also supports research,development and innovation projects related to biofuels.Over the last 20years,the bank has disbursed approximately USD11billion(BRL70billion)to enhance sugar cane production and the biofuel industrial sector,including innovations such as E2G and genetically modified sugar cane varieties(IRENA,2024b).The bank also promotes technological innovation through partnerships with Embrapii,14 providing up to BRL75million(approximately USD12million)in non-reimbursable funds.This funding supports the development of new biofuel technologies,including E2G.Additionally,BNDES is adapting its Fundo Clima programme to offer competitive credit rates for advanced biofuels.Through a joint initiative with Finep(the federal innovation agency),BNDES provides various instruments to support bioenergy projects,from basic research to investment in E2G production and essential inputs such as enzymes and equipment.14 Embrapii is the Brazilian Company for Research and Industrial Innovation,a federal entity created in 2013 to enhance technological research institutions and promote innovation within Brazilian industry.|27LESSONS,CHALLENGES AND OPPORTUNITIESFinep also provides competitive interest rate financing for companies and non-profit institutions,with lower rates for highly innovative projects.It offers non-reimbursable funding for technological development through economic grants and co-operative projects.In partnership with the MME,Finep allocates non-reimbursable resources to the automotive chain,including biofuel technologies.Besides BNDES and Finep,other governmental institutions such as the Research Support Foundation of the State of So Paulo(FAPESP)and the National Council for Scientific and Technological Development(CNPq)also have research and development funds to support the production and development of biofuels in Brazil(BNDES,2008).The government also offers indirect funds such as Plano Safra,the financial programme of MAPA,which,through a specific programme called RenovAgro(the programme to finance sustainable agricultural systems),supports sugar cane,corn,soybeans and other farming inputs for biofuel production.Other favourable credit conditions are provided,particularly in cases associated with adopting sustainable agricultural practices and converting pasture and degraded land to cropland(USDA,2024).5.5 OTHER INCENTIVESThe government has provided additional incentives for biofuels,including public auctions,to further promote their use in Brazil.Public auctions were utilised until 2021 to economically support the biodiesel production chain.However,the ANP concluded that this auction model was inefficient and imposed excessive public intervention in private transactions.In 2022,the government implemented a new market model for biodiesel trading,allowing biodiesel producers and distributors to negotiate directly with each other.This model enables over-the-counter(OTC)contracts to secure 80%of the biodiesel supply for a two-month period,mirroring the auction calendar.The remaining can be traded on the spot market.Fuel distributors with at least a 5%market share in any fuel category in 2020 must commit 80%of their traded volume to OTC contracts.This decision effectively rules out the reintroduction of auctions for biodiesel pricing and trading among private parties(USDA,2024).Box 2Estimating employment in Brazils biofuel sectorBrazil is among the top biofuels producers worldwide and employs the largest workforce in the sector.In the biodiesel sector,Brazil is the worlds third-largest producer after Indonesia and the United States.Continuing its growth trajectory,Brazils biodiesel production was estimated at 9.7billionlitres in 2024,up from 7.6billionlitres in 2023(ABIOVE,2025).Rio Grande do Sul accounts for a quarter of output,and altogether,the south and mid-West parts of the country for about 40ch(USDA,2024).28|BRAZILS BIOFUEL INDUSTRYOne way to calculate jobs is by estimating the share of applicable employment in the soybean industry(the largest feedstock for biodiesel).The Center for Advanced Studies in Applied Economics(CEPEA,2025),in conjunction with the Brazilian Association of Vegetable Oil Industries(ABIOVE)publishes employment figures for Brazils soybean sector.The soybean supply chain employed 2.28 million people(including agricultural and other inputs,industrial equipment,services)in 2023.The percentage of soybean output used for biodiesel production(34%)yields a figure of biodiesel-related jobs in the order of 150 000.Strong output growth may have raised this to 190 000 jobs in 2024.Soybean represents three quarters of biodiesel feedstock.Thus,a rough extrapolation suggests that including other feedstock(various vegetable oils)brings 2024 employment to some 258 000 jobs.This may be a conservative estimate.A different methodology,based on employment factors for different feedstock,suggests that biodiesel-related employment in Brazil may have amounted to 383 800 jobs in 2024,up from 320 900 jobs in 2023.This calculation is based on employment factors for individual feedstocks(Da Cunha and Da Silva,2014);the 2024 shares of the feedstocks were derived from(ABIOVE,2025).The employment factors were modified with an assumed annual rate of improvement in labour productivity,to approximate mechanisation impacts.Following the United States,Brazil is the second-largest bioethanol producer in the world.One method to estimate jobs is to assess the applicable share of employment in the sugarcane sector(the principal feedstock for bioethanol).According to the Sugarcane and Bioenergy Observatory(UNICAdata,2025),total employment in Brazils sugarcane-energy sector in 2024 was 751 377 jobs.About half of these can be regarded as biofuels jobs,reflecting the portion of Brazils sugarcane crop that is used to produce ethanol(as opposed to sugar).UNICA data indicates that close to two thirds of sugarcane jobs were in agriculture,almost a quarter in industry,and the rest in other sectors.Many relate to mechanisation efforts,implying that manual jobs will likely continue to decline in future.Government data indicate there were 378 100 bioethanol jobs as of 2024(including sugarcane harvesting and feedstock processing),up from 367 500 jobs in 2023(MTE,2025).Despite growing mechanisation,employment has steadily expanded,given rising output.Geographically sugarcane-based jobs are mostly in the countrys centre-South,especially the state of So Paulo,while corn-based operations are concentrated in Mato Grosso in the centre-West region of Brazil(USDA,2024).Corn is increasingly used as another feedstock,thus total employment is higher than the above numbers indicate.Altogether,Brazil may have had some 762 000 jobs in biofuel-related activities in 2024.|29LESSONS,CHALLENGES AND OPPORTUNITIES6.NEW POLICIES ON BIOFUELS UNDER THE BRAZILIAN ENERGY TRANSITION15 Poltica Nacional de Transio Energtica.Available(only in Portuguese)at:www.gov.br/mme/ptbr/assuntos/secretarias/sntep/dte/cgate/pnte.6.1 THE NATIONAL ENERGY TRANSITION POLICY The National Energy Transition Policy(PNTE),launched in 2024,aims to restructure the Brazilian energy mix to make it more sustainable and aligned with the countrys GHG emissions reduction goals.It is responsible for the guidelines for energy security,universal energy access and the reduction of energy inequality.15The National Energy Transition Plan(Plante)serves as a long-term action plan designed to achieve the objectives of the PNTE by directing government and stakeholder efforts towards a sustainable energy matrix with low carbon emissions,contributing to the national goal of net GHG emissions neutrality by 2050.Plante is characterised by its long-term horizon,sectoral and transversal approach,and periodic review(every four years)to adjust to changes in the energy landscape and ensure the relevance of its actions.Besides the goal of expanding the share of renewable energy sources,including biomass,in the Brazilian energy matrix,it also encourages the use of low-carbon fuels(such as biofuels and low-emission hydrogen),energy efficiency,and technological innovation in clean energy technologies.In addition,the government established a platform for dialogue with civil society and the productive sector through the National Energy Transition Forum(Fonte).Its main goal is to develop recommendations and enhance transparency and public participation in energy policy formulation,ensuring that the transition respects regional diversity and promotes social inclusion.6.2 FUEL OF THE FUTURE LAWThe Fuel of the Future Law,established in 2024,aims to promote sustainable fuels and fuel technologies for transportation by integrating various biofuels while fostering innovation and technological advancement.This law seeks to enhance environmental and energy efficiency in the fuel life cycle and includes several initiatives(e.g.for biomethane).It integrates RenovaBio with the Mover programme and the Brazilian Vehicle Labelling Programme.It also establishes the National Sustainable Aviation Fuel Programme(ProBioQAV)and the National Green Diesel Programme(PNDV).The law proposes increasing the mandatory ethanol blend in gasoline,regulating synthetic fuels,and creating a carbon capture and storage framework.ProBioQAV encourages the research,production and marketing of SAF.Starting in 2027,air operators must reduce GHG emissions in domestic operations using SAF,gradually increasing from 1%to 10%by 2037,with a 1%annual increase from 2029.30|BRAZILS BIOFUEL INDUSTRYThe PNDV promotes the research,production,marketing and energy use of renewable diesel.The CNPE annually sets the mandatory minimum renewable diesel content in the diesel blend,capped at 3%through 2037.16Implementing BECCS technology aims to enable Brazilian bioethanol to have a negative carbon footprint,significantly reducing GHG emissions.To support this,the Fuel of the Future Law establishes a legal framework for CO2 capture and geological storage,allowing its injection into underground reservoirs to meet GHG reduction targets.The ANP is responsible for regulating and authorising these activities,with 30-year renewable licences restricted to companies or consortia established in Brazil,requiring operators to ensure safety requirements.6.2.1 Advanced biofuelsAdvanced biofuels,such as biomethane derived from various biogas sources,SAF,and second-generation ethanol,are increasingly attracting interest.They represent a significant technological advancement in reducing the transportation sectors dependence on fossil fuels and are expected to attract substantial investment over the next 20years(BNDES and MME,2022).Second-generation ethanolSecond-generation ethanol(E2G)utilises lignocellulosic biomass,including plant structural fibres such as stalks,leaves and other agricultural residues,thereby maximising the energy and chemical potential of the crops and their waste.17 E2G is a significant advancement in Brazilian biofuel technology.It is primarily produced from sugar cane bagasse,which reduces concerns about the competition between biofuel and food production and mitigates direct and indirect emissions from land-use changes.In particular,E2Gs carbon footprint is approximately 90%lower than gasoline and about half that of first-generation ethanol,resulting in a 15%increase in decarbonisation credits(BNDES and MME,2022).Brazils extensive experience in first-generation ethanol production makes its E2G production competitive in export markets,especially when leveraging infrastructure and equipment from both first-generation ethanol and sugar production.Facilities in Brazil are already producing and marketing this fuel,primarily for international markets(especially in countries that favour advanced biofuels),18 indicating that key technological challenges have been overcome despite existing challenges in reducing production costs(IRENA,2024b).In 2024,Brazil was projected to produce 51million litres of cellulosic ethanol(USDA,2024).By 2031,the countrys potential production could represent up to 12%of the total ethanol supply(BNDES and MME,2022).Brazil presents a notable competitive edge in international markets thanks to lower biomass availability costs,significantly reducing its E2G production costs(Pelkmans,2024).16 The ANP defines renewable diesel as a biofuel composed of paraffinic hydrocarbons suitable for diesel engines,produced through various methods,including hydrotreatment and biomass synthesis.Among these,only HDRD is commercialised at scale in some countries as of 2024,and despite pressure from producers,there is no blend mandate in Brazil(USDA,2024).17 E2G utilises agroindustrial residues as raw material.Its production integrates new technologies into the industrial process to fractionate lignocellulosic materials into advanced sugars and lignin.The sugars are primarily used for E2G production and,to a lesser extent,for the production of highvalue biomolecules.Lignin,a byproduct,can be immediately utilised as a fuel for energy generation,but its valuation as a macromolecule or for derivative production can provide additional benefits to the biorefinery.The combination of products related to E2G production is determined on a casebycase basis,depending on market demand,the conversion processes involved,technology maturity and commercialisation prices.18 The international market for advanced biofuels offers differentiated remuneration and faces fewer entry barriers in various countries(BNDES and MME(2022).|31LESSONS,CHALLENGES AND OPPORTUNITIESSustainable aviation fuelsSustainable aviation fuels(SAFs)are not yet commercially produced in Brazil,but several ethanol plants have obtained international certification.Industry estimates suggest Brazil could make 12billion litres of SAFs annually from waste,meeting domestic and export demands(USDA,2024).This is especially noteworthy considering the global context:the aviation sector accounts for about 2-3%of worldwide anthropogenic emissions,yet global SAF production capacity is still in the early stages,making up less than 1%of total aviation fuel use,and expected to reach approximately 0.5%of global aviation fuel needs by the end of 2024(IRENA,2024d).IRENAs analysis shows that SAF will need to contribute a significant 40-60%of aviation emissions reductions by 2050(IRENA,2024d).In 2021,the ANP authorised various production routes for SAFs in Brazil,marking a step forward in the industrys development.Globally,a significant challenge for SAF adoption remains its cost,which is typically two to three times higher than conventional fossil jet fuel(IRENA,2024d).Brazil is actively promoting its SAF industry through various initiatives that align with global policy trends emphasising supply incentives,such as ProBioQAV.These ambitious projects are projected to significantly impact emissions reduction targets.Between 2027 and 2034,they are expected to collectively meet,on average,41%of the GHG emissions reduction targets set by the Carbon Offsetting and Reduction Scheme for International Aviation(CORSIA)19 and ProBioQAV.Furthermore,these efforts anticipate accounting for 12%of the projected aviation fuel demand between 2030 and 2033.Key legislative and collaborative frameworks underpin this development.The Fuel of the Future Law,for instance,established the National Biojet Fuel Programme to encourage research,production,commercialisation and use of biojet fuel produced from biomass.The Brazilian Network of Biojet Fuel and Renewable Hydrocarbons for Aviation(RBQAV)and regional platforms are actively advancing research in SAF production and market integration.The National Civil Aviation Agency(ANAC)further facilitates this through its SAF Connection forum.This platform unites public and private stakeholders to discuss and develop proposals for decarbonising Brazils aviation sector through SAF use.Such multi-stakeholder engagements and robust policy frameworks are crucial for overcoming the inherent barriers of the nascent SAF industry and driving its development a challenge observed across regions worldwide(IRENA,2024d)Hydrogenation-derived renewable diesel HDRD,20 which is produced using the same vegetable oils or animal fats as biodiesel,is not yet produced at a commercial scale in Brazil.Petrobras is leading efforts in HDRD production,with a new biorefinery expected to be operational by 2025(USDA,2024).Efforts are under way to create SAF via the HEFA(hydrotreated esters and fatty acids)process and HDRD,particularly using HVO.According to the Fuel of the Future Law,a minimum blend of up to 3%green diesel in diesel is mandated.The CNPE will establish the minimum blend requirement annually.19 Within the CORSIA framework,a netzero target by 2050 and a carbonneutral growth path(longterm global aspirational goal)were established(IRENA,2024a).The International Air Transport Association further emphasises SAFs crucial role,estimating it will need to account for 65%of the aviation sectors required emissions reduction by 2050 globally(IRENA,2024a).20 Renewable diesel(referred to“green diesel”in Brazilian legislation)is typically used as a full replacement to petroleum diesel because,unlike biodiesel,it has no blending limit in unmodified diesel engines designed to run on petroleum diesel.32|BRAZILS BIOFUEL INDUSTRYCo-processed diesel and jet keroseneCo-processed diesel(“R diesel”in Brazilian legislation)comprises fossil crude oil and biogenic renewable content.The reduction in emissions associated with the renewable portion is reported to be at least 60%compared with crude oil-based diesel.As with HDRD and all renewable types of diesels,co-processed diesel also requires no engine modification.Petrobras is currently the only company co-processing diesel on a commercial scale in Brazil,with expansion plans to produce 10.6billion litres by 2027.Petrobras is driving for its inclusion in biofuel mandates.Bunker fuel In 2024,the ANP approved the commercialisation of maritime fuel oil(bunker fuel)containing 24%biodiesel,marking Brazils first authorisation for renewable-content bunker fuel.This aligns with the International Maritime Organizations strategy to achieve net-zero GHG emissions from shipping by 2050.StockStudio Aerials/S|33LESSONS,CHALLENGES AND OPPORTUNITIES6.3 THE NEW INDUSTRY BRAZIL PLAN Launched in 2024,the New Industry Brazil Plan aims to stimulate industrial growth by 2033 through subsidies,low-interest loans,tax incentives and federal investments.In the bioeconomy sector,funding and credit access will prioritise technological solutions for reducing GHG emissions through carbon capture,utilisation and storage and BECCS,biotechnology advancements for biomass production and processing for biofuels,and innovations in renewable diesel,synthetic fuels,and SAFs,low-carbon hydrogen,and bio-products and bio-inputs from renewable sources(USDA,2024).The New Industry Brazil Plan intends to elevate the share of biofuels in the transportation energy matrix from the current 21%to 50%by 2033.One of the measures already implemented includes expediting the schedule for increasing the biodiesel blending mandates.Public financing options will be available through calls supported by Finep and BNDES(USDA,2024).6.3.1 Green Mobility and Innovation Programme In 2024,the federal government launched the Green Mobility and Innovation Programme(Mover),replacing previous initiatives.Movers guidelines promote the use of biofuels such as ethanol and biodiesel,other low-carbon fuels,and alternative propulsion methods(e.g.electric vehicles).Its core objectives include regulating the vehicle market and tax regime with clear goals for energy efficiency,material recyclability,and accessibility and structuring green taxation.The programme also encourages local research and development investment through fiscal benefits and supports the industrial and technological development of auto parts and input suppliers.Furthermore,it has a broad scope,encompassing agricultural and road machinery(BNDES and CGEE,2024).The programme aims to advance sustainability and innovation in the automotive sector,providing financial credits of BRL19billion(approximately USD3billion)between 2024 and 2028.The programmes credits are intended for companies that invest in research and development to produce electric and hybrid vehicles and will offset federal taxes,encouraging investment through tax incentives.Mover includes well-to-wheel carbon emissions measurements covering the entire energy source cycle and establishes the National Fund for Industrial and Technological Development(FNDIT).However,starting in 2027,it sets more stringent sustainability requirements for light-duty vehicles,buses,and trucks through a comprehensive cradle-to-grave life-cycle assessment.This assessment includes the carbon footprint of all vehicle components,production stages,usage,disposal and the life cycle of energy sources,including fuels.34|BRAZILS BIOFUEL INDUSTRY7.TECHNOLOGICAL INNOVATIONS21 Examples of incremental innovations include measures related to biomass production,such as biological pest control,nutrient recycling through irrigation with sugar cane vinasse,direct planting,and optimising harvesting and transport.Regarding bioenergy conversion,improvements can be made through more efficient extraction systems,enhanced boiler and steam systems control,and increased cogeneration.Despite being wellknown and readily available,these techniques have yet to be widely adopted in more conservative production units or those with limited financial access,offering a viable path to enhance bioenergy production chains(IRENA,2024b).22 A key player in Brazils sugar cane industry is the Sugar Cane Technology Centre(CTC),an innovation centre established in 1969.The CTC is renowned for its agricultural research,having launched over 60sugar cane varieties used in Brazil.While primarily focusing on agricultural research,the CTC also innovates across the entire production chain,including rural administration,cultivation and energy systems.The CTCs contributions have been pivotal in advancing innovations and improving bioethanol production efficiency in Brazils sugaralcohol agroindustry(BNDES,2008).In addition to policies promoting bioenergy,technological innovations have played a pivotal role in advancing the bioenergy industry in Brazil,significantly impacting its economic and environmental landscape.One of the most transformative innovations was the introduction of flex-fuel technology in 2003.This innovation marked Brazils second bioethanol expansion phase,with flex-fuel cars offering drivers the flexibility to use gasoline(containing anhydrous ethanol at the required blend)or hydrous ethanol(E100)at any proportion.This adaptability allowed vehicle owners to choose their fuel based on price,autonomy,performance or availability,leading to outstanding consumer acceptance(BNDES,2008).The outstanding acceptance of flex-fuel cars revitalised the domestic markets demand for hydrous bioethanol,creating new opportunities for the expansion of Brazils sugar cane industry.Despite the success of bioethanol production expansion in Brazil,with increased production efficiency and a progressive reduction in environmental impacts,there is still considerable potential for adopting incremental improvements and process refinements in converting biomass into energy vectors.These improvements present low risk and yield good short-term results,and they should be encouraged as they are more accessible and less risky than disruptive innovations(IRENA,2024b).21New possibilities for sugarcane-based bioenergy production,such as utilising lignocellulosic by-products to produce bioethanol and electricity,are highly dependent on processes still under development and are supported by the government,the private sector and academic institutions,primarily located in the state of So Paulo,the countrys largest sugarcane-producing state.22|35LESSONS,CHALLENGES AND OPPORTUNITIES8.LESSONS FROM THE BRAZILIAN EXPERIENCE WITH BIOFUELS8.1 ADEQUATE REGULATORY FRAMEWORK AND INSTITUTIONAL GOVERNANCEA sustainable regulatory framework for bioenergy is essential for a market to succeed,even when favourable natural conditions and economic potential exist.This framework should clearly define responsibilities and align goals with long-term strategies that can adapt to the broader environment.In Brazil,the national alcohol programme(Prolcool),launched in the 1970s,was a government-led market development effort that used direct subsidies,guaranteed purchases,and research and development initiatives to support the early stages of the ethanol industry.Conversely,the RenovaBio programme(National Biofuels Policy),introduced in the late 2010s,is better suited for a more market-oriented biofuel industry,implementing a decarbonisation credits system(CBIOs)that offers predictable carbon pricing and targets,thus directly encouraging long-term investments by private sector players.Furthermore,effective governance is crucial to maximising opportunities related to the bioenergy expansion while minimising its potential negative impacts.Through good governance,sustainable bioenergy addresses the risks associated with land and resource use,impacts on food security,ecosystems,carbon stocks,and challenges in managing equity,justice,economic competitiveness and affordability.The Brazilian Forest Code,mandating the protection of Permanent Preservation Areas(APPs)and Legal Reserves(RLs)on rural properties,including those cultivating biomass for bioenergy,demonstrates a broader governance commitment to environmental sustainability.Moreover,effective governance ensures that bioenergy systems align with the Sustainable Development Goals,safeguarding food and energy security,climate justice,biodiversity,land and water rights,and local development priorities(BNDES and CGEE,2024).ByDroneVideos/S36|BRAZILS BIOFUEL INDUSTRY8.2 BALANCED AND PREDICTABLE PUBLIC POLICIESThe significance of balanced and predictable public policies in bioenergy cannot be overstated.Biofuel programmes rely heavily on these policies,as there are no known cases of successful market introduction without government support(IRENA,2024b).Such support often involves mandates for biofuel use,creating favourable long-term funding conditions,a carbon price or a more balanced tax framework that incorporates the positive externalities associated with biofuel production and use,and raising awareness of the relative contributions made by biofuels.Fuel specifications and blending mandates should be carefully defined and implemented.Given the diverse range of bioenergy technologies and biofuels,the Brazilian experience suggests that a gradual implementation approach is more suitable.Starting in limited markets with low blending levels,such as ethanol/gasoline and biodiesel/diesel blends up to 10%biofuel(E10 and B10),can help gain more knowledge without creating significant issues.These blending levels can be adopted quickly;however,higher levels may require market assessments and further evaluation of engine performance,which could lead to engine modifications.These mandates could initially target captive fleets or be regionalised.When access to long-term funding is limited,government support can help address challenges.In Brazil,BNDES and FINEP offer long-term financing programmes tailored to the investment and research and development needs of the private sector in the(bio)energy sector.A carbon price or a more balanced tax framework that acknowledges the positive externalities of bioenergy is also crucial for the competitiveness of biofuels(IRENA,2024b).Reducing distortions in the price competitiveness of biofuels caused by subsidies to fossil fuels can be achieved through,for example,carbon-credit mechanisms such as Renovabio.Finally,any biofuel market development programme should include a communication plan for users,retailers,and taxpayers to explain the implications and justifications for biofuel use,such as reducing emissions and supporting the Sustainable Development Goals(SDGs).Publishing progress indicators on energy,socio-economic,and environmental results achieved and projected can also be helpful.Overcoming policy barriers(such as lack of continuity in energy policy,legal uncertainty,institutional weaknesses,difficulties aligning state players,and bureaucratic obstacles)requires inclusive and effective dialogue 8.3 THE POWER OF COLLABORATIVE INTERNATIONAL ENGAGEMENTWhether through bilateral,regional,or multilateral efforts,international co-operation is a powerful tool for realising the full potential of biofuels in global decarbonisation efforts.Biofuels offer a variety of benefits that can be adapted to different nations and communities.By co-operating,experts,legislators,regulators,and industry representatives can learn from one anothers experiences and best practices,improving policy,production efficiency,and sustainability,thus contributing to a stable biofuels market domestically and internationally.Over the past five decades,Brazil has developed substantial expertise in bioenergy and has been sharing this knowledge with other countries through technical co-operation and capacity-building initiatives.Programmes such as the Global Bioenergy Partnership,the Biofuture Platform23 and Brazils Sustainable Mobility:23 The Biofuture Platform,launched in 2016 with 22 member countries,promotes technology cooperation,consensus on sustainability,biomass governance,financing mechanisms and policy convergence.|37LESSONS,CHALLENGES AND OPPORTUNITIESEthanol Talks exemplify how country-led efforts can foster experience exchange and co-operation in the expanding biofuels market.India,benefiting from its collaboration with Brazil,has boosted biofuel production and the use of flex-fuel vehicles to reduce transportation emissions.Furthermore,the Global Biofuels Alliance,launched by India during its G20 presidency in 2023,now includes 25countries and 12international organisations,offering a platform for technical co-operation on biofuel policies(BNDES and CGEE,2024).In 2024,under Brazils G20 presidency,discussions within the Energy Transitions Working Group(ETWG)stepped up.Countries showed commitment to increasing renewable energy,enhancing energy efficiency and reducing dependency on fossil fuels.Brazil set three ETWG priorities:accelerating energy transition financing;addressing the social dimensions of the energy transition;and exploring innovative perspectives for sustainable fuels.Emerging energy sources such as hydrogen and sustainable fuels prompted Brazil and its partners to influence international certification and carbon accounting debates.Consistent standards and methodologies are essential to avoid market distortions and ensure fair competition among energy sources.Dialogue among governments,industry,financial institutions and multilateral agencies can improve knowledge and provide benchmarks for promoting bioenergy.Brazil and its partners have actively participated in international debates on certification and carbon accounting in light of the emerging market for new energy sources,such as hydrogen and sustainable fuels.There have been intense discussions about the need for consistency,common standards and comparability in carbon accounting methodologies based on life-cycle analysis.These efforts are essential to prevent market distortions,avoid discriminatory measures and create a level playing field for all energy sources 38|BRAZILS BIOFUEL INDUSTRYREFERENCES ABIOVE(2025),Estatsticas Biodiesel 2025 Biodiesel Statistics 2025,Associao Brasileira das Indstrias de leos Vegetais,https:/abiove.org.br/estatisticas-biodiesel-2025/(accessed 13 June 2025).Aguiar,D.R.D.,et al.(2024),Ethanol fuel in Brazil:Policies and carbon emission avoidance,Biofuels,Vol.16(3),pg.111,https:/doi.org/10.1080/17597269.2024.2405765ANFAVEA(2024).Anfavea Brazilian Automotive Industry Yearbook.https:/.br/site/wp-content/uploads/2024/05/ANFAVEA-ANUARIO-DIGITAL-2024-NOVOATUALIZADOalta_compressed.pdfBNDES(2008),Sugarcane-based bioethanol:Energy for sustainable development,Banco Nacional de Desenvolvimento Econmico e Social and CGEE,Rio de Janeiro.BNDES and MME(2022).Avaliao das Condies Tcnicas e Econmicas para Produo em Larga Escala do Etanol de 2 Gerao Relatrio Ciclo-Otto Assessment of Technical and Economic Conditions for Large-Scale Production of 2nd Generation Ethanol Otto Cycle Report,GT E2G E2G Working Group.Programa Combustvel do Futuro Fuel of the Future Programme.Braslia:Ministrio de Minas e EnergiaBNDES and CGEE(2024),Bioethanol:Fast track to mobility decarbonization summary for policy makers,Banco Nacional de Desenvolvimento Econmico e Social,Rio de Janeiro.CEPEA(2025),PIB da cadeia de soja e biodiesel GDP of the soybean and biodiesel chain,Centro de Estudos Avanados em Economia Aplicada Center for Advanced Studies on Applied Economics,www.cepea.org.br/br/pib-da-cadeia-de-soja-e-biodiesel-1.aspx(accessed 13 June 2025).Da Cunha,G.,and Da Silva,W.(2014),Socioeconomic and environmental assessment of biodiesel production in Brazil,In 22nd International Input-Output Conference,Lisbon,www.iioa.org/conferences/22nd/papers/files/1771_20140512071_Paper_Cunha_Guilhoto_Walter.pdfEkbom,T.(2023),Assessment of successes and lessons learned for biofuels deployment,Report Work package 1:Status of biofuels policies and market deployment in Brazil,Canada,Germany,Sweden and the United States,International Energy Agency Bioenergy Technology Collaboration Programme.EPE(2020),Renewable fuels for use in diesel cycle engines,Technical Note DPG-SDB n.1/2020,www.epe.gov.br/sites-en/publicacoes-dados-abertos/publicacoes/PublicacoesArquivos/publicacao-219/Technical_Note_Renewable_fuels_for_use_in_Diesel_cycle_engines.pdfEPE(2024),Analysis of current biofuels outlook year 2023,Technical Note EPE/DPG/SDB/2024/03,www.epe.gov.br/sites-en/publicacoes-dados-abertos/publicacoes/PublicacoesArquivos/publicacao-264/NT-EPE-DPG-SDB-2024-03_Biofuels Current Outlook_Year2023.pdfGoldemberg,Jos.(2006).The ethanol program in Brazil,Environmental Research Letters,Vol.1,014008,https:/doi.org/10.1088/1748-9326/1/1/014008IRENA(2022),World Energy Transitions Outlook 2022:1.5C Pathway,International Renewable Energy Agency,Abu Dhabi,www.irena.org/Publications/2022/Mar/World-Energy-Transitions-Outlook-2022|39LESSONS,CHALLENGES AND OPPORTUNITIESIRENA(2023),World Energy Transitions Outlook 2023:1.5C Pathway,International Renewable Energy Agency,Abu Dhabi,www.irena.org/Publications/2023/Jun/World-Energy-Transitions-Outlook-2023IRENA(2024a),World Energy Transitions Outlook 2024:1.5C Pathway,International Renewable Energy Agency,Abu Dhabi,www.irena.org/Publications/2024/Nov/World-Energy-Transitions-Outlook-2024IRENA(2024b),Sustainable bioenergy pathways in Latin America:Promoting bioenergy investment and sustainability,International Renewable Energy Agency,Abu Dhabi,www.irena.org/Publications/2024/Jan/Sustainable-bioenergy-pathways-in-Latin-America-Promoting-bioenergy-investment-and-sustainabilityIRENA(2024c),Development banks and energy planning:Attracting private investment for the energy transition-the Brazilian case,International Renewable Energy Agency,Abu Dhabi,www.irena.org/Publications/2024/Sep/Development-banks-and-energy-planning-Attracting-private-investment-for-the-energy-transition-BrazilIRENA(2024d),Sustainable aviation fuels in Southeast Asia:A regional perspective on bio-based solutions,International Renewable Energy Agency,Abu Dhabi,www.irena.org/Publications/2024/Dec/Sustainable-aviation-fuels-in-Southeast-Asia-A-regional-perspective-on-bio-based-solutionsMAPA(2020),Coletnea dos Fatores de Emisso e Remoo de Gases de Efeito Estufa da Agricultura Brasileira,Ministrio da Agricultura,Pecuria e Abastecimento/SENAR,www.gov.br/agricultura/pt-br/assuntos/noticias/fatores-nacionais-para-emissao-e-remocao-de-gases-de-efeito-estufa-na-agropecuaria-estao-em-coletanea-inedita-do-mapa/Coletanea_agricultura.pdfMME/EPE(2024a),Balano Energtico Nacional National Energy Balance,Ministrio de Minas e Energia Ministry of Mines and Energy and Empresa de Pesquisa Energtica Energy Research Office.MME/EPE(2024b),Plano Decenal de Expanso de Energia 2024 Ten-Year Energy Expansion Plan 2024,Ministrio de Minas e Energia Ministry of Mines and Energy and Empresa de Pesquisa Energtica Energy Research Office.MTE(2025),Annual list of social information:Database including active and inactive employments for sugarcane cultivation and alcohol manufacture,Relao Anual de Informaes Sociais Annual Report of Social Information,Ministrio do Trabalho Emprego Minitry of Labour and Employment.Pelkmans,L.(ed.)(2024),Implementation of bioenergy in Brazil 2024 update,International Energy Agency Bioenergy Technology Collaboration Programme.REN21(2024),Renewables 2024 Global Status Report:Renewable Energy in Energy Demand,REN21 Secretariat, sucroenergtico Sugarcane Energy Sector,Unio da Indstria de Cana-de-Acar e Bioenergia Brazilian Sugarcane and Bioenergy Association,https:/.br/setor-sucroenergetico/UNICAdata(2025),Painel de informaoes da rais sector sucroenergtico Information panel of the sugar-energy sector,Observatrio da Cana e Bioenergia,https:/.br/listagem.php?idMn=146&idioma=1USDA(2024),Brazil:Biofuels Annual,US Department of Agriculture,Foreign Agricultural Service,Sao Paulo,www.fas.usda.gov/data/brazil-biofuels-annual-11www.irena.org IRENA 2025
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Allianz Research29 October 2025The electro-state era:from Made in China to Powered,Designed&Financed by China?Allianz Research2Allianz ResearchContent Page 3-5 Executive SummaryPage 10-13The perils:from export traps to JapanificationPage 14-21 The policy pillars:AI-led productivity and domestic Page 6-9 China as the worlds first electro-state and a critical Page 22-29 The Renminbis next phase:from property shock to provider to the worldrebalancingcapital-market opening29 October 2025 China as the worlds first electro-state:a critical provider and blueprint for the world on clean-tech.China has established itself as a global frontrunner in the clean-tech industry,channeling the majority of its record investments into renewables.Projections indicate that China could double its power generation from renewables within the next five years,displacing fossil fuels within electricity supply.Massive investments have also positioned China as the global leader in clean energy related industrial products,accounting for 60%of global manufacturing capacity in solar,wind and battery technologies.Despite overcapacity concerns,Chinas clean energy developments have helped to drive down prices of key climate technologies(e.g.-80%in solar photovoltaic module in the past decade),enabling developing economies(such as in South and Southeast Asia and East Africa)to leapfrog directly into renewables.While challenges remain,Chinas clean-tech leadership demonstrates that the energy transition can be both ambitious and achievable when backed by coordinated policy,innovation and international collaboration.But as China prepares its next five-year plan(2026-2030),its economic model faces multiple threats,from the ever-fragmenting global order to the domestic threat(or reality)of Japanification.Following the 4th Plenum in Beijing on 20-23 October,a proposal for the 15th five-year plan(2026-2030)has been released,mostly highlighting policy continuity,with priority given to“scientific and technological self-reliance”and some focus on building“a robust domestic market”.But what worked in the past may not be enough to address the clouds looming over Chinas economic outlook in the years ahead.First is the risk of its export shocks turning into export traps:Since 2018,Chinas export prowess has moved decisively up the value chain into high-tech and green sectors,and it has also managed to cut reliance on foreign inputs for its manufacturing,achieving near-sovereignty in strategic sectors such as power generation equipment,high-end rail and agricultural technology.Even if the US and China reach a trade deal,the global order is changing,with more protectionist measures,industrial policies and shifts in global supply chains,potentially turning the economys heavy dependence on global trade into a trap.At the same time,declining demographics threaten the foundations of sustained private consumption growth,while youth unemployment undermines middle-class formation and spending capacity.The property downturns wealth destruction also weighs heavily on consumer confidence and consumption:we estimate that more than RMB3trn of household spending(equivalent to more than 2%of 2024 GDP)has been foregone since 2021.ExecutiveSummary33Franoise HuangSenior Economist for Asia Pacificfrancoise.huangallianz-Guillaume DejeanSenior Sector Advisorguillaume.dejeanallianz-Patrick HoffmannEconomist,ESG&AIJulia BelousovaEmerging Market Debt SLisa ChevrierAssistant ResearchAllianz Research Two policy pillars should be in focus.First,innovation and AI as growth multipliers:lifting productivity by banking on Chinas innovation potential(ranked 10th globally)and its co-leadership with the US in the global AI race.Total factor productivity growth in China has been gradually declining in the past years.In this context,Chinese authorities are likely to continue focusing policy efforts on R&D and innovation.Chinas innovation capacity has made consistent gains,with the country entering the global top 10 in 2025 on WIPOs Global Innovation Index,up from 29 in 2015.Meanwhile,China and the US are neck and neck at the front of the global AI race:China leads in research scale,industrial ecosystem depth and extensive rare earth production,while the US retains clear advantages in capital intensity and technological infrastructure.Innovation and AI could help lift productivity,especially in manufacturing sectors such as chemicals,food processing,metals and mining,electrical machinery&equipment,wood and furniture,textiles and communication equipment,computers&other electronic equipment.In these sectors,we find that a 10%increase in R&D intensity would raise productivity by 7%on average.Second,rebalancing towards domestic demand:giving jobs,time,income and confidence to consumers.Boosting household consumption requires restoring consumer confidence to free up high saving rates and Chinese authorities are likely to continue focusing on stemming the property downturn.Each-1%further decline in housing prices could reduce private consumption by around 0.2%of GDP.We estimate that RMB2trn of funding(nearly 2%of GDP)is likely needed for the government to help bringing the level of housing inventories to more sustainable levels.However,rebalancing towards domestic demand will also require giving jobs,time and income to consumers.Pairing AI-related and technology upgrades with targeted service-sector incentives can help maximizing employment gains and solidifying Chinas transition from a manufacturing powerhouse to a balanced,more service and consumption-led economy.Additionally,productivity gains,could,in theory,enable workers to work less while supporting higher living standards and domestic demand.Chinas average annual hours worked per person currently stands 40%higher than in other major economies.While this would require significant cultural change,we estimate that if Chinas working hours converged to the major-economy average and assuming productivity gains in line with the past decade,an additional 4.8pps of GDP in extra private consumption could be unlocked in the coming decade.In the meantime,a higher share of GDP provided to households would also be helpful:If China were to raise its household disposable-income share in GDP from the current 58%towards the 70-75%range observed in advanced economies,private consumption could rise by around 10pps of GDP.The RMBs next phase:the property downturn as a financial turning point?While there is no indication yet of a systemic financial crisis,the property downturn is materially affecting several critical funding channels,household wealth and investor confidence.The number of defaults and debt restructurings in the China property sector has surged over the past three years,while the pace of restructuring has been very slow and current valuations continue to 429 October 20255reflect weak market expectations.The property slump and successive developer defaults have eroded confidence in domestic assets,contributing to portfolio outflows as investors reassess Chinas risk profile.In this context,continued policy efforts to open and deepen Chinese capital markets may be even more necessary.Authorities consider banking on Chinas economic strengths to use green finance,external trade in commodity and technology as spearheads of RMB internationalization.While the global use of the RMB is still a very long way behind the USD,China seems to be pursuing the unorthodox approach of wanting to become a reserve currency provider,without full capital account convertibility.Chinas aggressive gold accumulation since 2023 serves as a strategic complement to RMB internationalization,with a de facto gold-associated RMB seemingly in the making.Allianz Research6China has established itself as a global frontrunner in the clean-tech industry,channeling the majority of its record investments into renewables.Projections indicate that China could double its power generation from renewables within the next five years.As of 2025,China accounts for 27%of global energy investments,spending around USD893bn or 4.6%of its GDP on the energy sector.Around 70%of the investments went to clean-energy sources,with solar(USD204bn;32%),wind(USD105bn;16%)and grids(USD89bn;14%)constituting the main components.Given these sizeable investments,China is the largest clean energy investor,accounting for 41%of total renewable investments.Investment trends and cost reductions have led to a boom in renewable capacity expansion in Chinas domestic market.This strategic focus has enabled China to build the largest renewable energy capacity on the planet,accounting for roughly 40%of global installed capacity in 2024.Over the past decade,China has undergone a remarkable and efficient technological shift,rapidly scaling up its clean-energy production.As a result,the share of renewables in Chinas electricity generation jumped from 24%to 30%over the past decade.Recent International Energy Agency(IEA)projections suggest that by 2030,71.5%of the countrys current electricity supply could be covered by renewables This expansion would significantly displace fossil fuels,even as total electricity consumption continues to grow,raising the share of low-carbon electricity to an estimated 4045%of total supply.China as the worlds first electro-state Figure 1:Share of renewable in total electricity capacity/Share of China in global renewable capacity323578ACEPU0123578CF%0 0P 152017201920212023ChinaWorld41&11FH %05EP 152017201920212023Total renewableHydropowerWindSolarSources:IRENA,Allianz Researchand a critical provider to the world 29 October 2025720152024Average annual changeCoal900.0931247.0454%Natural gas66.033108.146%Oil4.3422.097-6%Fossil(n.s.)9.42441.22830%Nuclear27.1760.8310%Wind131.048521.26617%Solar48.853904.1941%Hydropower296.5377.263%Pumped storage23.0358.6911%Other2.70315.24122%Sources:IRENA,Allianz ResearchFigure 2:Change in power generation capacity in China(in MW)Massive public and private investments,combined with strategic central planning,subsidies and rapid innovation,have positioned China as the global leader in manufacturing of clean energy and related industrial products.The resulting economies of scale and cost reductions have driven down the price of key technologies worldwide.Today,China accounts for over 60%of global manufacturing capacity in solar,wind,and battery technologies including roughly 80%of total solar manufacturing capacity.In international trade,China represented about 40%of value-weighted solar exports and 53%of global battery exports in 2023.Beyond energy,China has also started to integrate renewables and electricity capabilities at the industrial level,with some tangible success in automotive,for instance,where China has a global technology lead in the EV segment.Chinas clean energy developments have helped to drive down prices of key climate technologies,enabling developing economies to leapfrog directly into renewables.But there are also growing signs of oversupply for battery and solar manufacturing capacity,which even exceed demand in net-zero scenarios.Through large economies of scale,deep industrial integration and aggressive innovation,China has made renewable production more affordable.The over-80ed drawdown of solar photovoltaic(PV)module prices in the past decade is a good example.On the one hand,low prices are putting pressure on domestic profit margins,leading to potential consolidation and financial stress among smaller producers.Domestically,the mismatch between production capacity and installation demand risks creating idle assets and inefficient capital allocation.Internationally,it has sparked concerns especially in developed markets about market distortions and trade tensions as excess output is increasingly directed toward export markets.On the other hand,lower global prices for clean technologies have made them more accessible and easier to plug-in to the economy for a greater number of countries,redefining global investment patterns and enabling developing economies to leapfrog directly into renewables.Countries such as Pakistan,Indonesia and Kenya have adopted Chinese solar,battery and hydro technologies.In fact,several big infrastructure projects like the Quaid-e-Azam Solar Park in Pakistan or the Garissa Solar Power Plant in Kenya the largest solar capability built in South Asia and East Africa,respectively were supported by China.Beyond costs,China is also sharing its expertise and exporting its know-how outside borders,hitting two birds with one stone by spreading its influence outside and filling order books for an industry suffering overcapacity(solar&wind equipment-makers).See BNEF for batteries and EMBER(p.45)for solarAllianz Research80 0Pp0%CurrentProjectedCurrentProjectedCurrentProjectedCurrentProjectedCurrentProjectedSolarWindBatteriesElectrolyzersHeat pumpsChinaEUUSIndiaOtherSource:IEAFigure 3:Current and projected geographical concentration for manufacturing capacity for key clean-energy technologies,2022-20300 0Pp0 1720202023201720202023201720202023201720202023WindSolarEVsBatteriesChinaUSGermanyJapanOtherSources:UN Comtrade,Allianz ResearchFigure 4:Value-based export concentration in key transition products(in%)China offers a blueprint for the world on clean-tech.The acceleration of the clean-tech industry in China reflects both state-driven policy coordination and significant private sector engagement,serving as a blueprint for other nations that are moving towards a less fossil-dependent model(like Brazil or South Africa).The combination of industrial policy,infrastructure investment and international cooperation could be replicated not only in emerging economies but also in regions like Europe that are struggling to transition effectively and quickly seeking to decarbonize without sacrificing development.While challenges remain,Chinas clean-tech leadership demonstrates that the energy transition can be both ambitious and achievable when backed by coordinated policy,innovation and international collaboration.29 October 2025Box:China has the “rare earth”ace in its hand No digitalization would be possible without rare earths The rare in rare earths refers to the complexity of the refining process and the limited availability of substitutes,rather than the level of reserves themselves,which are quite elevated:around 100mn tons based on most recent estimations.The importance of rare earths has significantly increased over the past years,alongside the gradual“greenification”of developed economies and an increasing usage of EVs,as well as the digital revamping and automatization of manufacturing processes and consumer services,which relies on electronic devices dependent on rare earth magnets.and there would be no rare earths without China.Holding between 40-50%of global reserves and processing almost 70%of global production of rare earths since 2022,China has a strong grip on the global supply chain.By investing massively and early in rare-earth refinery capacity to leverage its own resources and control the entire value chain of production,China has almost a full monopoly in the rare-earth refinery industry(around 90%of global activity).China thus has an ace up its sleeve as it can influence the delivery pace of rare-earth production and,as a result the level of global production of EVs,smartphones,solar panels or optical lasers.It could also decide to favor one trade partner over another one.Thanks to this edge,China uses rare earths as leverage to retaliate or bargain in trade talks to alleviate sanctions addressed by the US and Europe and does not hesitate to use“national security”arguments to justify export control.In April,the tightening of foreign exports via a mandatory licensing scheme led to an over-35%contraction of export value between May and July compared to 2024.When the rules were eased following an agreement with the US in July,exports jumped by 400%over August-September.Against this backdrop,governments in North America and Europe are implementing efforts to develop domestic production of rare earth magnets(US)and/or developing further recycling(Europe)and technology alternatives(rare earth magnet-free battery)to offset a deficit of resources.But it will take time before these efforts can substitute Chinese production in quantity and quality.Thus,China has a key advantage in terms of the balance of power as political leaders of Western economies will be forced to work hand in hand with China or at least negotiate mutual interest deals to reach their green and digital transition targets.Sources:US Geological survey(2025),Allianz ResearchFigure 5:Chinas annual production of rare earths and market share in global productioncXXpiiUepu002003002018201920202021202220232024China production(in thousand of tons,Lhs)Share of global production(Rhs)9Allianz Research10The perils:China amid global fragmentation:export shocks or export traps?As China prepares its next five-year plan(2026-2030),its economic model faces multiple threats,from the ever-fragmenting global order to the domestic threat(or reality)of Japanification.Following the 4th Plenum in Beijing on 20-23 October,a proposal for the 15th five-year plan(2026-2030)has been released,mostly highlighting policy continuity,with priority given to“scientific and technological self-reliance”and some focus on building“a robust domestic market”.But what worked in the past may not be enough to address the clouds looming over Chinas economic outlook in the years ahead.We estimate that Chinas potential growth is likely to decline to 3.6%on average over 2031-2040,from 4.6%over 2021-2030 and 7%over 2011-2020.Chinas first export shock(20012016)was triggered by its accession to the World Trade Organization in December 2001,which unlocked unprecedented integration into global value chains and fueled manufacturing-led growth.In 2001,China accounted for just 4.3%of world goods exports;by 2009,it had become the worlds largest exporter and by 2016,its share had climbed to over 12%a threefold rise in under 15 years.This export surge was initially driven by low-value-added,labor-intensive sectors(textiles,footwear,toys and basic electronics)where processing trade(imports of intermediate inputs for re-export)accounted for more than half of total exports in the early 2000s.Buoyed by tariff reductions(average industrial tariffs fell from 18.5%in 1998 to 8.9%by 2004)and streamlined customs procedures,coastal provinces and special economic zones became production hubs,supplying multinational firms with cost-efficient assembly and packaging services.Cheap financing,export tax rebates and CNY undervaluation further amplified Chinas price competitiveness,compressing global manufacturing costs and compelling Western firms to shift production from export traps to Japanification 29 October 202511 The“Made in China 2025”plan names ten priority sectors.We exclude“new materials”and“energy-saving&new energy vehicles”,as they do not map to a unique,non-overlapping HS6 set of codes.Including them would introduce attribution and double-counting bias in our HS-based indicators.Sources:UN Comtrade,CEPII,Rhodium Group,Allianz ResearchFigure 6:Share of products where China imports twice as much as it exports,by key sector(axis from 0 to 70%the smaller the area,the smaller the foreign dependency)30vanced electronicsAerospaceAgricultural equipmentBiotech&medical devicesMaritimePower generationRailRobotics20152024China has cut reliance across six of the sectors analyzed,achieving near-sovereignty in power-generation equipment(6%in 2024),high-end rail(0%)and agricultural technology(4%).In maritime engineering,starting from a relatively strong base,dependency was cut from 21%to 14%.In parallel,China has gained export shares in many of the same HS6 lines,signaling a shift from import substitution toward a larger presence in global markets.Two areas remain vulnerable:progress has been more marginal in biomedicine(38%in 2024 from 42%in 2015)and aerospace engineering(32%vs.44%),where foreign inputs are still important despite policy support.Taken together,the evidence points beyond a mere catch-up with foreign competitors,towards the countrys willingness to support domestic productivity and innovation and put itself in a global dominant and self-sustained position in high-technology sectors.eastward.By 2016,with the share of processing trade declining to roughly one-third,as domestic value-added rose,Chinas export basket had graduated to include medium-tech machinery,consumer electronics and automotive parts laying the groundwork for its second export shock in higher-value sectors.While expanding its global footprint,China has also cut reliance on foreign suppliers over the past decade.Launched in 2015,the“Made in China 2025”plan aimed to expand domestic capacity in higher-value industries and support an innovation-driven economy.This established the base for subsequent leadership in global value chains.We measure dependence as the share of HS6 lines where imports are at least twice exports,and we track progress against a less than 30%foreign reliance per sector benchmark,derived from the plans target to achieve 70%self-sufficiency for core components.On this basis,Allianz ResearchSources:UN Comtrade,CEPII,Rhodium Group,Allianz ResearchFigure 7:Share of products where China holds at least 30%global market share,by key sector(axis from 0 to 40%the smaller the area,the less dominant globally)Advanced electronicsAerospaceAgricultural equipmentBiotech&medical devicesMaritimePower generationRailRobotics2024201512Chinas second export shock(2018present)has seen its export prowess move decisively up the value chain into high-tech and green sectors,even as advanced economies deploy policies to reduce reliance on Chinese suppliers.Between 2018 and 2024,Chinas high-tech manufactured exports including computers,telecom equipment and electronic components grew at a compound annual rate of nearly 10%,raising their share of total goods exports from 36%to 43%.Simultaneously,green-technology exports solar panels,lithium-ion batteries and electric vehicles soared over 15%annually,accounting for 8%of exports by 2024 versus just 2%in 2016,reflecting Beijings targeted industrial policies,such as the Dual Circulation Strategy and“Made in China 2025”.Focusing on the latter,we find that China clearly managed to increase its global footprint in the key sectors targeted by the plan:Based on HS6 product-level exports data for eight out of the ten targeted high-technology sectors,the share of products where China holds at least 30%of global market share increased from 9%in 2015 to 13%in 2024.Progress has been especially visible for products in maritime engineering(from 7%to 36%),power-generation equipment(from 12%to 24%)and robotics(from 0%to 7%).Are the export shocks becoming export traps?In recent years,the US has imposed additional tariffs on Chinese solar cells and electric vehicles(EVs)under Section 301 and the Inflation Reduction Acts content requirements.Following the US“Liberation Day”reciprocal tariffs,China is now among the countries facing the highest effective tariff rates in the US.At the same time,the EUs Critical Raw Materials Act and Chips Act incentivize friendshoring to diversify supply chains.Similarly,Japan,South Korea and ASEAN economies have signed trade agreements to attract the relocation of medium-and high-tech production.Even if the US and China reach a trade deal,the global order is changing,with more protectionist measures,industrial policies and shifts in global supply chains,potentially turning the economys heavy dependence on global trade into a trap.29 October 2025Domestic threats:declining demographics,unemployment and weak confidence drive consumption-led growth in the long run.Middle-class households in China prioritize education spending,property ownership and discretionary consumption on travel and services,but these aspirations require steady income trajectories.Chinese authorities have responded with job-placement initiatives and extended graduate employment campaigns,but these measures risk addressing symptoms rather than structural causes.The deeper challenge is that Chinas innovation-intensive growth model demands highly skilled workers yet produces more graduates than the economy can absorb at appropriate skill levels:a paradox that AI and automation may exacerbate rather than resolve if deployment destroys middle-skill jobs faster than it creates high-skill alternatives.The property downturns wealth destruction also weighs heavily on consumer confidence and consumption:We estimate that more than RMB3trn of household spending(equivalent to more than 2%of 2024 GDP)has been foregone since 2021.Consumer confidence in China remains near historic lows despite marginal improvements in 2025(consumer confidence index at 88 on average so far this year,compared with a pre-pandemic long-term average of 110),with the property markets sustained stress creating a negative wealth effect that suppresses household spending.Before the property downturn started in 2021,housing comprised approximately 70%of average household wealth in China,making the sectors multi-year correction profoundly damaging to perceived wealth and confidence.With property prices falling around-20%in the secondary market and around-10%in the primary market from 2021 peaks,we estimate that Chinas property downturn has already erased around RMB60trn in Chinese household wealth,equivalent to nearly half of 2024 GDP.Standard wealth elasticity to private consumption suggests that more than RMB3trn of household spending,equivalent to more than 2%of 2024 GDP,has been foregone since 2021.At this stage,there is no sign of a turnaround:While top-tier cities have seen temporary improvements following mortgage rate cuts,reduced down-payment requirements and relaxed purchase restrictions introduced in September 2024,these measures have largely released pent-up demand rather than generating a sustained recovery lower-tier cities with more pronounced supply-demand imbalances remain weak.While pursuing AI-led innovation to lift productivity,China should also address the multiple pressures that domestic demand is facing,including declining demographics,which threaten the foundations of sustained consumption growth.Chinas population declined for the third consecutive year in 2024,falling by 1.39mn to 1.408bn,accelerating a demographic reversal that poses fundamental challenges to domestic demand expansion.The working-age population(those aged 16 to 59)decreased to 858mn in 2024,representing 60.9%of total population compared to 61.3%the previous year,while those aged over 60 reached 310.3mn.This shift reflects the lagged effects of the one-child policy implemented from 1979 to 2015,which created a fertility collapse that remains resistant to reversal:the birth rate stood at just 6.77 per 1,000 people in 2024,barely above the 6.39 recorded in 2023.UN projections paint a stark long-term picture:Chinas population could fall to 1.26bn by 2050 and plummet to just 633mn by 2100,with those over 60 comprising 52%of the population,compared to less than 8%under age 15.Already for the 2031-2040 decade,we estimate that the decline in the labor force is contributing negatively to Chinas potential growth by-0.6pp,compared to-0.4pp in the 2021-2030,-0.3pp in 2011-2020 and 1.0pp in 2001-2010.The demographic headwinds create a vicious cycle:fewer young workers mean weaker income growth,which constrains household formation and consumer spending,which in turn reduces economic opportunities that might encourage larger families exactly the Japanification trap that policymakers hope to avoid.Youth unemployment undermines middle-class formation and spending capacity.Chinas urban youth unemployment rate for those aged 16 to 24(excluding students)surged to 18.9%in August 2025(before slightly declining to 17.7%in September),the highest level since the methodology revision in December 2023 and up sharply from 14.5%in June.This spike coincides with a record 12.2mn university graduates entering the job market in summer 2025,confronting an economy where traditional growth sectors like real estate and manufacturing have weakened and where there exists a persistent mismatch between graduates education levels and available positions.Even the 25-29 age cohort faces elevated unemployment at 7.2%in September 2025,nearly double the 3.9%rate for workers aged 30-59,suggesting employment difficulties persist beyond initial job searches.The youth unemployment issue directly threatens the formation of a stable middle class that could 13Allianz Research14The policy pillars:AI-led productivity and domestic rebalancingInnovation and AI as growth multipliers Chinas innovation capacity has made consistent gains,with the country entering the global top ten in 2025 on WIPOs Global Innovation Index,up from 29 in 2015.China overtook Germany(11th),while Switzerland(1st),Sweden(2nd)and the US(3rd)continue to hold the lead globally.The Global Innovation Index(GII)benchmarks 139 economies across 80 indicators,spanning innovation inputs(R&D,education,finance,business environment)and innovation outputs(patents,high-tech exports),capturing both invention and adoption.China outperforms expectations given the level of its GDP per capita,ranking first among upper-middle-income economies and with results driven more by outputs than inputs,demonstrating that investment is translating into measurable innovation.Its ecosystem combines rapid university expansion and deeper industry R&D as it hosts 24 of the worlds top 100 innovation clusters(versus 22 in the US),signaling a growing concentration of firms and talent.More notably,the environment is increasingly business-driven,with China ranking second for business-financed R&D(vs.US 5th)and late-stage VC deals(vs.US 1st),alongside a strong presence of top corporate R&D investors(ranking 3rd,vs.US 1st).China and the US are neck and neck at the front of the global AI race for now.The data reveal a striking balance of complementary strengths at this stage.China leads in research scale and industrial ecosystem depth:it accounts for more than half of the worlds AI researchers,nearly a quarter of total AI publications and an impressive 70%of global AI patents.While the quality of AI publications is not as high as in the US,it scores more than decently.Chinas large research base and extensive rare earth production(around 69%of global mine output)also reinforce its upstream control over key AI-enabling materials.By contrast,the US retains clear advantages in capital intensity and technological infrastructure:it commands about 62%of private investment in AI and nearly half of global computing capacity generated by datacenters.These advantages are underpinned by the sheer financial power of its hyperscalers and a dynamic private equity and venture capital market roughly 58%of the USD150bn invested by venture funds in the US in 2025 targeted the GenAI segment.This capital momentum translates into the worlds largest pipeline of datacenter expansion,at around 91 GW,or close to 75%of planned global capacity additions.These structural advantages,paired with stronger performance in highly cited publications and cutting-edge chip production,sustain the US edge in technological execution.Europe,meanwhile,shows middling results across all categories,with no singular domain of dominance.This highlights Europes challenge to translate relatively strong public R&D into scalable innovation or private capital attraction.Overall,the global AI race is becoming a dual contest between Chinas scale-driven innovation and the US capital-and technology-driven model,leaving Europe increasingly peripheral.29 October 202515Sources:Global Innovation Index Database WIPO,Allianz ResearchFigure 8:Global Innovation Index ranking,2015 vs.2025 Switzerland-1Switzerland-1Sweden-3Sweden-2United States-5United States-3China-29China-10Germany-12Germany-11India-81India-38South Korea-14South Korea-4Japan-19Japan-12Vietnam-52Vietnam-44Brazil-70Brazil-521112131415161718120152025Rank(1=best)Note:for the number of AI researchers and government R&D spending,we took EU-27 as a proxy for Europe.Sources:Stanford HAI,OECD,Cushman&Wakefield,Enerdata,IEA,US Geological Survey,SEMI,SAS,Allianz ResearchFigure 9:Key components in the global AI race,comparison between China,the US and EuropeIndicatorUnitChinaUSEuropeResearch talentNumber of AI researchersas share of global proxy(2024)51(%Research quantityNumber of AI publicationsas share of global total(2023)23%9!%Research qualityAI publication citationsNumber of highly cited publications in top 100(2023)34P%PatentsGranted AI patentsas share of global total(2023)70%3%Public fundingGovernment R&D spendingas share of global proxy(2023)20$#%Private fundingStock of private investmentas share of global total(2024)16b%Computing capacityComputing capacity generated by datacentersas share of global total(H1 2025)9G%Grid capacitiesData center electricity consumptionProjected 2030 as%of 2024 power generation capacities373%Rare earthsMine productionas share of global total(2024)69%0%Cutting-edge chipsGross value-added output(Logic10-22nm)as share of global total(2022)6(optionAI adaptation readinessImplementation of generative AI in firmsshare of firms reporting full implementation(SAS survey in 2024)19$%7%ConceptReasearchFundingInfrastructureCritical components345012IndicatorUnitChinaUSEurope2.7%9.3%3.0%Allianz ResearchBox:The semiconductor sector Over the past decade,China has managed to upgrade its semiconductor industry.Historically,China specialized in low-to mid-end chips(above 28nm),mainly used in consumer electronics such as smartphones,PCs and household devices of which around 35%are manufactured in China.Under this strategy,China focused more on scale rather than sophistication.A first technology shift occurred over the past decade,under the impulse of the rapid development and internationalization of national champions in the computer,telecom and,more recently,the automobile sectors.Pursuing its strategy to work domestically to limit external reliance,China upgraded its semiconductor branch and invested into more advanced chip capacity(10-22nm segment),but nothing comparable with the US and Taiwan,which produce over two-thirds of this category of chips.China is now pursuing another strategic transformation,from manufacturing hub to technology hub,driven by both geopolitical pressures and a broader ambition to ascend the global value chain.Another step is under way,and this time mostly driven by external forces:first trade tensions and second the AI boom.Amid escalating trade tensions with the US since 2017 and Europes new strategy of de-risking from China since the pandemic,we observe a broad reshaping of trade connections,resulting in a weaker direct footprint of Chinas manufacturing in these markets.Additionally,the US and Europe are trying to restrict Chinas access to advanced technology via export bans and license schemes,which could threaten to limit Chinas exposure to AI-related growth potential.China is multiplying efforts to deal with isolation threats,but it will take years to narrow the current technology gap to the US when it comes to the most advanced chips.In 2024,through its National Integrated Circuit Fund,China launched a third cycle of investment amounting to nearly RMB350bn as much as the sum of the two former cycles deployed over the past decade focusing specifically on advanced semiconductor and equipment.At the private level,since the pandemic,over 60%of revenue generated by the industry is reinvested into infrastructure,staff expansion or R&D,a share 3x higher than South Korean and Taiwanese peers that both currently lead AI-type chip businesses,and almost 5x higher than US peers that currently offer the most powerful chips on the market,thanks to technology lead in design and conception.Several projects of in-house AI-type chips have been launched by large Chinese tech firms to contest the US lead,but it will take years to narrow the ongoing technology gap.Despite a strategical reorientation of resources to develop higher-value semiconductors,China does not yet have enough capacity at the domestic level to compete in the ongoing race for AI leadership(currently assessed through the level of prospective computing capacity generated by data center fleets)with strictly internal solutions.This explains the strong interest in the Taiwanese industry and its well-recognized expertise in the most advanced chips(3nm and below).Contrary to the US,which multiplied partnerships in recent years and facilitated the access of Taiwanese foundries on its soil,China cannot enjoy the same benefits due to historical political tensions with Taiwan.The semiconductor industry has gained a renewed geopolitical status as it is the cornerstone of the ongoing global digital and automation transformation.It will remain a key priority for Chinese government,and accordingly influence future economic,trade and even potentially political decisions.China wants to step up,amidst geopolitical tensions and the AI boom 29 October 202517Sources:US Geological survey(2025),Allianz ResearchFigure 7:Chinas annual production of rare earths and market share in global productioncXXpiiUepu002003002018201920202021202220232024China production(in thousand of tons,Lhs)Share of global production(Rhs)Sources:SEMI,Allianz Research.Figure 10:Gross added-value output across semiconductor categories per geographical breakdown20%4i0%5%3%3(%8&%63%$R01%4%5%7%70%4%8%7%9%7%6%0%Pu0%DRAMNANDLogic 10 nm Logic 10-22nmLogic 28 nm DAOTotalTaiwanUSAChinaSouth KoreaJapanEuropeOthersMost cutting-edge chipsData as of H1 2025.Sources:LSEG Datastream,Allianz Research.Figure 11:Average capital expenditure ratio of semiconductor firms,period 2021-202513#a%0 0Pp%USAJapanEuropeTaiwanKoreaChina17Allianz Research18Innovation as the way to lift productivity.Total factor productivity growth in China has been gradually declining in the past years.We estimate that the contribution to potential growth declined from 2.4pps in 2001-2010 to 1.8pps in 2011-2020,and it is likely to reach 1.4pp over 2021-2030.Data from the Penn World Tables show that average yearly growth rate of total factor productivity exceeded 4%in the 2000s,exceeded 2%in the 2010s and reached 1.7%on average between 2000 and 2023.Academic literature and data suggest that innovation can help in lifting productivity.A granular analysis of sectoral data reveals that the correlation between R&D intensity and productivity is strongest in manufacturing sectors such as chemicals,food processing,metals and mining,electrical machinery&equipment,wood and furniture,textiles and communication equipment,computers&other electronic equipment.In these sectors,a 10%increase in R&D intensity would raise productivity by 7%on average.In contrast,sectors such as utilities display no strong relationship between innovation metrics and productivity outcomes their performance is likely more largely driven by regulatory frameworks,capital allocation and fixed-asset investment cycles,rather than by technological progress.This divergence highlights the need for sector-tailored innovation policies:while manufacturing benefits from direct R&D support and technology diffusion,service and infrastructure sectors may require institutional reforms and efficiency incentives instead.Overall,sustaining productivity growth in Chinas next phase of development will depend on strengthening the translation of innovation inputs(R&D,digital adoption and human capital)into measurable efficiency gains,particularly in medium-tech manufacturing sectors,which still account for the bulk of employment and value added.Sources:National Bureau of Statistics of China,Allianz ResearchFigure 12:R&D intensity vs.productivity,by industrial sectors and since 2015678910111244.555.566.577.58Productivity(log)R&D intensity(log)ICT&electronicsElectrical machinery&equipmentSpecial purpose machineryGeneral purpose machineryMedicinesChemical productsChemical fiberFerrous metalsPetroleum&Nuclear FuelNonmetallic mineral productsTextileFoods Wood and related productsFurniturePaper and paper productsPrinting and mediaTobacco29 October 202519Giving jobs to consumers:Chinas AI-driven education and training reforms can simultaneously create millions of new jobs and catalyze the growth of Chinas underdeveloped service sector.In 2025,China mandated AI education at all levels of education:not only universities,but throughout secondary and even primary schooling,with specific requirements to integrate AI content in thousands of micro-majors,new teaching modules and vocational centers.By embedding AI tools,Chinese authorities aim to equip 25mn students annually with skills in semiconductors,robotics,biotech and related fields,generating teaching,support and R&D roles at local education institutions,private training centers and edtech firms.Beyond high-tech pathways,AI integration into adult retraining programs can address the mismatch between graduate qualifications and market needs,reducing youth unemployment and channeling talent into emerging service industries,particularly personal services such as elder-care,healthcare,childcare and hospitality,where labor shortages persist.The personal services sector currently accounts for only 8.2%of Chinas GDP and employs 13%of the workforce,versus over 20%in advanced economies.Expanding this segment would absorb displaced workers from manufacturing and real estate while boosting domestic consumption through higher household incomes and improved social welfare.Moreover,AI-powered platforms for telemedicine,smart eldercare facilities and on-demand home services can create roles ranging from data annotation and system maintenance to customer support and specialized caregiving.Such developments not only address demographic headwinds by providing care for an ageing population but also foster a deeper middle class.As policymakers calibrate the“AI for jobs”initiative,pairing technological upgrades with targeted service-sector incentives(such as tax breaks for care-service start-ups and AI research grants,etc.)will be essential to maximize employment gains and solidify Chinas transition from a manufacturing powerhouse to a balanced,consumption-led economy.Giving time to consumers:Chinas productivity gains could,in theory,enable workers to work less while supporting higher living standards and domestic demand.The average annual hours worked per person in China reached 2328 in 2023,around 40%higher than in other major economies(1,657 on average across the US,Japan,South Korea,Germany,France,Sweden and Brazil).In theory,sustaining productivity growth could free up substantial time for workers to become consumers.To quantify this potential,we estimate how much private consumption could be unlocked if Chinas working hours converged to the major-economy average(a decline of 671 hours per person per year),assuming hourly productivity rises enough to keep annual incomes stable and a significant cultural shift takes place.Using Chinas labor income share of 56%of GDP and a medium marginal propensity to consume(MPC)of 0.6,our analysis suggests an additional 9.6pps of GDP in potential private consumption,equivalent to roughly RMB13trn.Of course,these figures hinge on important assumptions,the key one being that hourly productivity rises by about 40%,so that reduced hours do not erode incomes.To put this figure into context,historical data show that productivity in China rose by 44tween 2005 and 2015, 26tween 2010 and 2020 and 25tween 2013 and 2023(latest data available).With a hypothesis of 20%in productivity gains(and MPC still at 0.6),our analysis suggests an additional 4.8pps of GDP in potential private consumption.In practice,the translation of time into spending depends on the distribution of productivity gains,wage pass-through and households saving behavior,etc.Moreover,higher leisure time may not fully translate into higher monetary consumption,as some of it may be absorbed as non-market leisure or informal activities.Still,the exercise underscores that sustaining productivity growth could unlock a major domestic-demand dividend by allowing Chinese households to consume more and live better without sacrificing output.Rebalancing towards domestic demand:giving jobs,time,income and confidence to consumers Allianz Research20Sources:national sources,Penn World Tables,Allianz ResearchFigure 13:Gains in private consumption(in pp of GDP),should Chinas annual hours worked matched the average of 0.20.40.60.81.010%0.81.62.43.24.020%1.63.24.86.48.030%2.44.87.29.612.040%3.26.49.612.816.050%4.08.012.016.020.0Extra private consumption,in pp of GDPMarginal propensity to consumeProductivity gainsSharing more income with consumers:Chinas consumption shortfall stems more from a low household disposable-income share of GDP,than a relatively low labor-income share of GDP.In 2023,private consumption in China accounted for just 40%of GDP,far below the US(68%),Japan(55%),South Korea(49%)and Germany(50%).Yet Chinas labor-income share,at around 56%of GDP,is broadly comparable to that of the US and even higher than South Koreas(54%).The gap arises after taxes,social contributions and transfers:Chinese households retain a much smaller post-fiscal share of national income when compared to other major economies in the world.While US households gross disposable income reached roughly 81%of GDP in 2023,Chinas has hovered in the 55%-60%range since 2010,down from 66%in the 1990s.Such a phenomenon,where households capture less of national income after redistribution,seems to constrain consumption even when wages rise.Comparative evidence points in that direction:In South Korea,the labor share has remained stable since 1990(at around 55%of GDP),yet private consumption moderated from 50%to 48%of GDP,as households disposable-income share in GDP slipped by-10pps since the 1990s,partly reflecting higher taxes and contributions,retained corporate earnings and households precautionary savings.While this does not seem to be a top policy priority at this stage,if China were to raise its household disposable-income share in GDP from the current 58%towards the 70-75%range observed in advanced economies,private consumption could rise by around 10pps of GDP.This underscores how one key to unlocking Chinas consumption potential lies not simply in boosting wages,but in enabling households to retain and spend a larger share of national income.other major economies,according to assumptions of marginal propensity to consume and productivity gains29 October 202521Sources:OECD,World Bank,Allianz ResearchFigure 14:Household gross disposable income and final consumption expenditure,as shares of GDP(%)20002021200020212000202120002021200020212000202130354045505560657030405060708090Household final consumption expenditure,%of GDPHousehold gross disposable-income,%of GDPChinaBrazilFranceGermanyJapanSouth KoreaSwedenUSBoosting consumer confidence:Beyond jobs and income,boosting household consumption requires restoring consumer confidence to bring down high saving rates.To that end,we see two major avenues of policy actions that would help to incentivize spending and reduce Chinas persistent high savings rates:the establishment of a stronger and more inclusive social safety net and policy support to stabilize housing prices.Currently,Chinese households save more than 30%of their disposable income(significantly higher than in advanced economies),in part due to concerns over eldercare,healthcare and childcare expenses.Expanding coverage and improving the quality of social services in these areas would alleviate the precautionary savings motive,empowering families to shift savings into consumption and catalyze domestic demand growth.Chinas public social spending amounts to roughly 13%of GDP,compared with 19%in the US,25%in Japan,27%in Germany and 31%in France.Chinese authorities have recently enacted measures mandating employer contributions to employee benefits,including pensions and health insurance,but enforcement inconsistencies and fears among small businesses about rising costs continue to hamper progress.Local governments may also be facing fiscal constraints to comprehensively expand and strengthen the social safety net.Additionally,the government should and is prioritizing stabilizing the fragile property market to restore wealth effects that have been a major drag on consumer sentiment.We estimate that current excess housing inventories still amount to 1.6bn square meters,down-40%from the August 2021 peak,but still corresponding to 25 months of sales,creating prolonged downward pressure on prices and wealth perception.Returning to the pre-crisis inventory level of 19 months of sales,based on the current pace of sales,would imply that 389mn square meters of housing inventories will need to be absorbed.Considering the average market housing price and the fact that the government is likely to make the purchases with a discount,absorbing 389mn square meters of housing inventories would require around RMB2trn of funding(nearly 2%of GDP).To accelerate inventory absorption and bolster confidence,policy actions such as targeted homebuyer incentives,construction project completions and easing purchase restrictions are underway.Absorbing this housing surplus is critical:standard wealth elasticity to private consumption suggests that each-1%further decline in housing prices could reduce private consumption by around 0.2%of GDP.Allianz Research22The Renminbis next phase:from property shock to capital-market openingThe property downturn as a financial turning pointThe property sector in China is undergoing a multi-year correction.House price data underscore the depth and persistence of the adjustment.Since the introduction of the“three red lines”policy in 2020 and home price peaks in 2021,new home prices have fallen around-10%,while second-hand home prices have dropped by nearly-20%,returning to levels last seen in 2017.Policy interventions since 2022,such as the 16-point support plan,whitelisting financing for project completion and recent special bond issuance to absorb inventory,have so far only stabilized the pace of decline rather than triggered a rebound.While there is no indication yet of a systemic financial crisis,the property downturn is materially affecting several critical funding channels,household wealth and investor confidence.Local governments,which used to rely more on land-sale revenues(38%of total income in 2021)saw this share fall to 22%by 2024 as land-sales revenue declined from RMB8.7trn in 2021 to RMB4.9trn in 2024.This fiscal squeeze has curbed local investment capacity and tightened financial conditions.For households,the correction has weakened wealth accumulation and the resulting negative wealth effect has constrained consumption.Importantly,the property slump and successive developer defaults have eroded confidence in domestic assets,contributing to portfolio outflows as investors reassess Chinas risk profile.The number of defaults and debt restructurings in Chinas property sector has surged over the past three years,partly caused by the sectors struggles during the pandemic as well as tighter regulation and credit rules.Since the beginning of 2020,at least 60 Chinese property issuers with more than USD140bn in outstanding dollar bonds have defaulted,which has led to a spike in the default rate for Chinas high-yield(HY)property sector.29 October 202523Figure 15:Chinas housing price indices90100110120130140150Jan-17Oct-17Jul-18Apr-19Jan-20Oct-20Jul-21Apr-22Jan-23Oct-23Jul-24Apr-25New House Prices(Dec 2016=100)Second Residential Prices3 Red LinesCovid reopening,16-pt support Whitelistpolicy to supportdeliveryPolitburo stabilize callSpecial bond to buyinventory Shantytown redevelopment Housing for living,not for speculationSources:National Bureau of Statistics of China,Allianz ResearchFigure 16:Defaults in Chinas property sector12000345572410112%6%0%0%0%20UA!%0 0P020304050602012201420162018202020222024Defalut RateUSD billionDefaulted AmountDefault RateSources:JP Morgan,Bloomberg,Allianz ResearchAllianz Research24Figure 17:Average bond price of Chinese property developers05101520253035402022202320242025Average bond price of China property developersSource:BloombergThe pace of restructuring has been very slow and current valuations continue to reflect weak market expectations and low probability of future cash flows for distressed developers.Slow restructuring is largely due to the prolonged sector downturn,with overall sales remaining subdued:Property sales have declined by-6%y/y in volume terms year-to-date,and home prices have resumed their decline after some stabilization in Q4 2024 and Q1 2025,following previous policy easing measures.In this context,average bond prices of Chinas distressed property sector have mostly hovered at a mid-to-high single-digit level since Q4 2023.24Box:Focus on property developers in defaultMarkets continue to price a low probability of recovery for Chinese defaulted property developers.Except for three distressed/defaulted Chinese HY property issuers,the rest are pricing less than 15%recovery rates for their offshore USD bonds.The bucket with the highest number of issuers is those with their average bond price below 5cts.For comparison,the average recovery rate for Asian senior unsecured USD corporate bonds is around 30%.The key reason for the lack of price recovery is that restructurings do not meaningfully improve capital structures to more sustainable levels.Many of the debt plans proposed by developers have been intended to buy time,relying strongly on maturity extensions.Highly leveraged balance sheets,small equity buffers,off balance sheets and contingent liabilities are key obstacles preventing material deleveraging.By failing to address the level of debt,the issuer effectively kicks the can down the road.This may solve short-term liquidity crunches but does not tackle the bigger solvency problem.Thus,the companys post-restructuring payment ability remains a question.Key elements of restructuring should target deleveraging balance sheets and restoring going concerns.Hence,equitizations,capital injections,new strategic investors and principal haircuts support a more sustainable capital structure.29 October 202525Figure 18:Distribution of Chinese HY property issuers,according to average bond priceSources:Morgan Stanley,Allianz Research463%0%1%2%7 )%0%5 %05%0%5 %05EP%X 55 X 10 10 X 15 15 X 20 20 X 25Notional WeightsMarket Pricing Recovery Rates25Insufficient deleveraging implies the risk of repeat restructurings,which have already happened to several developers and underlined the lack of the restructuring plan viability,despite earlier creditor support.Hence,a successful offshore restructuring is only the first step.To see meaningful price recovery,issuers must also complete restructuring of onshore liabilities,fulfil construction and delivery obligations and normalize operations and cash flow.Broader recovery is also contingent on a healthier real estate sector.For property developers to genuinely function as going concerns,a recovery in market sentiment and fundamentals is critical,particularly stabilization or gradual appreciation in home prices,in line with inflation.Hence,the governments ability to stabilize the sector and restore consumer confidence is critical to sustaining the recovery in property demand and reducing the risk of further restructurings.A bifurcated initial recovery is expected to start from the medium-term with the companies that have successfully completed debt restructuring likely to outperform those slower to restructure and still in default.The first cash repayments on restructured bonds typically begin two to three years post effective date.If operations stabilize and payments are made on time,a slight recovery from a single-digit level to a low double-digit level is expected.For the long-term(5y ),for developers that survive and adapt to the new operating environment,recovery levels could reach mid double-digit levels and gradually converge towards par,contingent on the stabilization of home prices and overall sales volume.The strong urbanization drive in China as well as a renewed drive for urban renewal are expected to further support surviving developers in the long run.Chinas property crisis is unprecedented,with outcomes remaining highly uncertain.However,meaningful price recovery for China property developers is possible,as evidenced from the past restructurings due to company specific issues with bond prices dropping to low double-digits and showing full price recovery post-restructuring.Private-owned companies that avoided default are another example with price levels at high 90s,showing what a functioning private developer can trade at.Allianz Research26Selective opening and internationalization of the yuanCalibrated openness and deepening of capital markets:continued policy efforts and sequencing of reforms.China has embarked on a carefully sequenced two-decade journey of capital market liberalization,deploying initiatives such as the Qualified Foreign Institutional Investor(QFII)program in 2002,the Stock Connect in 2014,and Bond Connect in 2017.These reforms have operated through a learning-by-doing approach regulators test controlled openings,monitor outcomes and then expand gradually.The Shanghai-Hong-Kong Stock Connect has proven particularly transformative,with northbound trading surging 26-fold from RMB5.8bn in 2014 to RMB150.1bn in 2024,now accounting for over 10%of total Shanghai and Shenzhen market turnover.Recent enhancements include the 2019 removal of QFII quota limits,the 2020 merger of QFII and RQFII schemes,with expanded asset eligibility to include derivatives,and the scrapping of foreign ownership caps in financial sectors.By the end of 2024,the number of foreign investor licenses through the QFII program had climbed to 861 from just 92 in 2010.Yet,challenges remain as foreign exposure to Chinese capital markets remains small.The property downturn could become a catalyst for further reforms.Some degree of international validation of Chinas capital market openness was achieved through Chinese stocks and bonds earning entry into the worlds major financial indices since 2018.Such inclusions unlocked substantial passive investment flows as international funds tracking these indices had to buy Chinese assets to rebalance portfolios.As of March 2025,overseas holdings of Chinese bonds and equities reached approximately RMB7.4trn,reflecting sustained foreign appetite despite domestic headwinds.That said,foreign access to Chinese capital markets remains constrained:foreign investors still hold less than 5%of Chinas stock market value,derivatives access remains constrained to hedging purposes only,and capital controls continue to limit money movement.The property downturn since 2021 has paradoxically become a catalyst for reform conversations with traditional wealth channels disrupted and investor confidence dented,policymakers face renewed urgency to deepen capital markets,improve corporate governance standards,and enhance regulatory transparency to channel savings into productive investments.Figure 19:China portfolio flows(USD bn)-100-50050100150200250300201520172019202120232025*China*Year-to-date until September Sources:WIND,Allianz Research For example,MSCI EM index in 2018,FTSE Russell GEIS in 2019,Bloomberg Barclays Global Aggregate Bond Index in 2019,JP Morgan GBI-EM Index in 2020.29 October 2025Green finance as the spearhead of Renminbi internationalization?Leveraging Chinas soft power through climate capital.China has strategically positioned green finance as a distinctive pathway for Renminbi(RMB or CNY)internationalization,capitalizing on its statuses as one of the worlds largest green bond issuers,the largest carbon emitter undergoing transition and the largest manufacturer of cleantech globally.According to the Climate Bonds Initiatives taxonomy,China issued USD69bn in aligned green bonds in 2024,making it the third-largest source globally(after the US at USD85bn and Germany at USD73bn).In parallel,the Belt and Road Initiative(BRI)has become a critical vehicle for exporting RMB-denominated climate finance:in June 2024,the Bank of China issued the first USD940mn sustainability bonds,to finance both green and social projects exclusively for BRI countries,distributed in both USD and RMB.These bonds funded projects from EV battery manufacturing in Hungary to wind power in Uzbekistan and sustainable fisheries in Chile.Chinas approach leverages its technological and cost advantages in cleantech to create climate capital diplomacy.RMB-denominated green bonds offer BRI countries(typically with low credit ratings requiring comparatively higher interest rates)access to cheaper financing(Bank of Chinas recent sustainability bond carried just 2.82%interest).This strategy addresses the dual challenges of limited private capital mobilization and poor transparency in development loans by channeling funds through bonds with clearer standards,lower default risk,and mandatory disclosure requirements.The RMB as a settlement currency for commodity and technology trade.RMB-denominated trade settlements have reached unprecedented levels in 2025,driven by structural shifts in both commodity markets and high-tech supply chains that play to Chinas comparative advantages.In commodity trade,China has leveraged its position as the worlds largest importer of raw materials to gradually price strategic goods in RMB.The Shanghai International Energy Exchanges RMB-denominated crude oil futures were launched in 2018 and became the worlds third-largest oil futures market by trading volume by 2020,establishing the Shanghai Oil benchmark alongside WTI and Brent.Looking forward,battery metals and EV supply chains present a compelling opportunity for RMB pricing,given Chinas overwhelming dominance:China controls 75%of global lithium-ion battery production,70%of cathode capacity,85%of anode production,82%of electrolytes and 74%of separators(as of 2022).China imported 44%of global interregional trade in raw and processed battery minerals(nearly 12mn short tons)and exported 58%(almost 11mn short tons)of battery materials,packs,and components in 2023.This chokepoint position in the EV value chain,from lithium refining to battery cell assembly,creates natural leverage for RMB settlement.Settling transactions in RMB can help reduce currency risk for Chinese exporters while offering foreign buyers access to RMB financing instruments.In this context,the share of Chinese trade settled in RMB exceeded 40%in September this year(latest data available),up from 20%in 2021.However,an IMF working paper(September 2025)finds that even though RMB invoicing has expanded beyond Asia into Europe and Latin America,only 6.5%of Chinese exports are invoiced in RMB highlighting a gap between settlement(the currency used for payment)and invoicing(the currency in which prices are set),with the latter mattering more for economic influence because it determines how exchange rate movements affect trade flows.The discrepancy suggests that many transactions may be priced in USD for stability but paid in RMB(due to Chinese policy incentives or financing arrangements),meaning USD exchange rates not CNY rates still drive the economics of much of Chinas trade.27 Despite a-18cline from 2023s peak,the market demonstrated maturity through improved transparency 61%of labeled green bonds in 2024 were backed by second-party opinions,signaling closer alignment with international standards.In 2023,Chinas solar and wind energy engagement in BRI countries reached USD7.9bn,representing 28%of total energy engagement the greenest mix since the initiatives 2013 inception.Hydropower engagement represented an additional USD1.6bn,6%of total energy engagement.Allianz ResearchFigure 20:Use of RMB in Chinese trade and in global trade finance 010203040502013201520172019202120232025Share of global trade finance in RMBShare of China trade settled in RMBSources:national statistics,SWIFT,Allianz Research28China as a reserve currency provider:not in the traditional senseGlobal use of the RMB is still a very long way behind the USD,at least in the traditional sense,as shown by the Allianz Research Global Currency Index.The index,which aggregates the roles of major currencies across the concepts of economic size,credibility of the economy,internationalization of the currency(e.g.in payments,trade invoicing,financial markets,etc.),convertibility of the currency and presence in global FX reserves,highlights the enduring dominance of the USD.As of 2025,our Global Currency Index for the USD is still well ahead of any other currency:roughly the double the value for the EUR and four times that of the RMB.The Global Currency Index for the RMB seems to have peaked in 2022,having since declined modestly mainly due to weaker performance in the credibility component of the index,in the context of very low inflation that may hamper the perceived attractiveness of the RMB as a store of value.Meanwhile,the USDs strength rests not only on deep and liquid capital markets but also on its institutional credibility and network effects in trade and finance.While the RMB is gradually gaining transactional relevance(particularly within Asia and the Global South),it remains far from rivaling the USDs entrenched dominance in the global monetary system.China seems to be pursuing the unorthodox approach of wanting to become a reserve currency provider,without full capital account convertibility.Chinas aggressive gold accumulation since 2023 serves as a strategic complement to RMB internationalization,by building confidence in the currencys stability without requiring full capital account liberalization.The Peoples Bank of China(PBOC)purchased 225 tons in 2023,44 tons in 2024 and 21 tons through mid-2025,bringing official reserves to 2,298.5 tons as of Q2 2025,though analysts suspect actual holdings exceed official figures.This buying spree aligns with gold prices surging to record highs above USD3,790/oz in September 2025,reflecting a broader global move by central banks to diversify away from USD assets after the 2022 freezing of USD300bn in Russian reserves.Polands own gold accumulation(adding 287 tons across 2023-2025 to reach 20%of reserves)illustrates the broader international appeal of such diversification strategies in a fragmenting world.A Chinese policy expert involved in internal discussions told Reuters that Chinas gold reserves should reach at least 5,000 tons(more than double current holdings),thereby aligning Chinas monetary weight with its share of global GDP and positioning it as the worlds second-largest official gold holder after the US(8,133.5 tons).29 October 202529Figure 21:Global Currency Index0%5 %05EP 09 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025USDEURJPYGBPCNYSource:Allianz Research(for details on the methodology,see“Financial globalization:moving towards a polarized system?”,November 2022)Beyond reserve accumulation,China is pioneering a novel institutional architecture to internationalize its gold market and extend its monetary influence.The Shanghai Gold Exchange(SGE),established in 2002 and expanded through an International Board in 2014,enable foreign investors to trade RMB-priced gold contracts via Free Trade Zone accounts.The“Shanghai Gold”benchmark has since become a reference price in international markets(with derivatives linked to it listed in the Chicago Mercantile Exchange since 2019),cementing Shanghais role as the worlds largest physical gold trading hub,processing 54,000 tons in 2023,or about 75%of global spot turnover.The goal is to court foreign central banks,especially in Southeast Asia and Belt&Road Initiative countries,to store newly purchased gold in SGE-linked custodian warehouses,offering an alternative to Western custody centers,amidst growing concerns over asset security.The gold strategy complements RMB internationalization in three critical and intertwined ways.First,it provides a tangible store of value backing RMB reserves for countries hesitant to hold large RMB positions due to capital controls.Gold serves as a bridge asset that reduces USD dependence without requiring full RMB convertibility.Second,the SGEs RMB-denominated gold benchmark strengthens Chinas pricing power in a globally recognized hard assets,boosting RMBs credibility in trade invoicing.Third,by offering custody and settlement infrastructure,China fosters“sticky”bilateral relationships that deepen financial integration and RMB usage in trade and investment flows.In practice,this gold-RMB symbiosis is already visible in several commodity trade agreements,notably in energy and metals,where settlement options allow conversion from RMB receipts into gold via the SGE.This mechanism effectively provides counterparties with a“hard-asset hedge”,increasing comfort with RMB-denominated transactions.Ultimately,while China has never endorsed a formal gold peg,a de facto gold-associated RMB seems to be in the making,as evidenced by the countrys steady accumulation of gold reserves,the internationalization of the SGE and the rise of RMB-settled commodity trades.This approach recognizes the constraints usually identified by economists that RMB internationalization without full capital account liberalization requires China to provide stable,predictable access to RMB services backed by USD reserves and convertibility mechanisms.Rather than pursuing reserve-currency status through Western-style capital-account openness,China appears to be following a“hard-asset credibility”model,anchoring confidence in the RMB through tangible reserves,commodity convertibility and financial infrastructure that align with a multipolar global system.Allianz Research30ALLIANZ RESEARCHteamOur29 October 2025Chief Investment Officer&Chief Economist Allianz Investment Management SELudovic SAna Boataana.boataallianz-Arne HHead of Economic Research Allianz TradeHead of Thematic and Policy ResearchAllianz Investment Management SEFranoise HuangSenior Economist for Asia Pacificfrancoise.huangallianz-Luca MonetaSenior Economist for Emerging Marketsluca.monetaallianz-Macroeconomic ResearchMaxime LemerleLead Advisor,Insolvency Research maxime.lemerleallianz-Corporate ResearchMichaela GrimmSenior Economist,Demography&Social PKathrin StoffelEconomist,Insurance&WThematic and Policy ResearchOutreachMarkus ZimmerSenior Economist,ESGHeike BaehrContent MMaria LatorreSector Advisor,B2Bmaria.latorreallianz-Maxime Darmet CucchiariniSenior Economist for UK,US&Francemaxime.darmetallianz-Maddalena MartiniSenior Economist for Southern Europe&BJasmin GrschlSenior Economist for EMaria ThomasContent Manager and Editormaria.thomasallianz-Patrick HoffmannEconomist,ESG&AILorenz WeimannHead of Media Relations and OLluis Dalmau TaulesEconomist for Africa&Middle Eastlluis.dalmauallianz-Hazem KricheneSenior Economist,CSivagaminathan SivasubramanianESG and Data Analyst sivagaminathan.sivasubramanianallianz-Guillaume DejeanSenior Sector Advisorguillaume.dejeanallianz-Pierre LebardPublic Affair Officer pierre.lebardallianz-Katharina UHead of Outreach Allianz Investment Management SEHead of Macroeconomic and Capital Markets researchAllianz Investment Management SEBjoern GGiovanni ScarpatoEconomist for Central&Eastern EAno Kuhanathanano.kuhanathanallianz-Head of Corporate Research Allianz TradeAllianz Research32Recent PublicationsDiscover all our publications on our websites:Allianz Research and Allianz Trade Economic Research23/10/2025|What to watch 21/10/2025|Global Insolvency Outlook 2026-27:Dont look down!16/10/2025|What to watch 14/10/2025|Feeding a warming world:Securing food and economic stability in a changing climate09/10/2025|What to watch 07/10/2025|Big beautiful data centers:How AI and infrastructure are giving a second wind to an ailing construction sector02/10/2025|Economic Outlook 2025-27:10 Top-of-Mind Questions,Answered 25/09/2025|Powering ahead:Global Wealth Report 202518/09/2025|What to watch 16/09/2025|Agentic AI:The self-driving economy?11/09/2025|What to watch 10/09/2025|The fertility rate paradox:Education is key05/09/2025|What to watch 03/09/2025|Sector Atlas 2025:Trade war is a sector war after all01/08/2025|What to watch 30/07/2025|3.5%to 2035:Bridging the global infrastructure gap 25/07/2025|What to watch 18/07/2025|What to watch 11/07/2025|What to watch 08/07/2025|The market alone wont fix it:the dilemma of climate-neutral real estate 03/07/2025|Summertime Sadness:Mid-year economic outlook 2025-26 01/07/2025|What to watch 26/06/2025|What to watch 25/06/2025|Allianz Pulse 2025:Confused and disappointed but less pessimistic 20/06/2025|What to watch 18/06/2025|Cash back to shareholders or cash stuck to finance customers?American and European firms deal with trade war differently12/06/2025|What to watch 11/06/2025|No country for old robots:how can Europe leap over the robotics tech frontier?05/06/2025|What to watch 02/06/2025|Captain Europe:Five ways to forge the regions defense shield 28/05/2025|What to watch 27/05/2025|Allianz Global Insurance Report 2025:Rising demand for protection 22/05/2025|What to watch 20/05/2025|Allianz Trade Global Survey 2025:Trade war,trade deals and their impacts on companies 15/05/2025|What to watch 09/05/2025|What to watch 02/05/2025|What to watch 29/04/2025|Eight lessons learned from 20 years of ESG investing29 October 20253333Director of PublicationsLudovic Subran,Chief EconomistAllianz ResearchPhone 49 89 3800 7859Allianz Group Economic Researchhttps:/ 28|80802 Munich|GallianzallianzAllianz Trade Economic Researchhttp:/www.allianz- Place des Saisons|92048 Paris-La-Dfense Cedex|Franceresearchallianz-allianz-tradeallianz-tradeAbout Allianz ResearchAllianz Research encompasses Allianz Group Economic Research and the Economic Research department of Allianz Trade.Forward looking statementsThe statements contained herein may include prospects,statements of future expectations and other forward-looking statements that are based on managements current views and assumptions and involve known and unknown risks and uncertainties.Actual results,performance or events may differ materially from those expressed or implied in such 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SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITIONSOUTHEAST ASIA2ND EDITION2|SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA DisclaimerThis publication and the material herein are provided“as is”.All reasonable precautions have been taken by IRENA to verify the reliability of the material in this publication.However,neither IRENA nor any of its officials,agents,data or other third-party content providers provides a warranty of any kind,either expressed or implied,and they accept no responsibility or liability for any consequence of use of the publication or material herein.The information contained herein does not necessarily represent the views of all Members of IRENA.The mention of specific companies or certain projects or products does not imply that they are endorsed or recommended by IRENA in preference to others of a similar nature that are not mentioned.The designations employed and the presentation of material herein do not imply the expression of any opinion on the part of IRENA concerning the legal status of any region,country,territory,city or area or of its authorities,or concerning the delimitation of frontiers or boundaries.IRENA 2025Unless otherwise stated,material in this publication may be freely used,shared,copied,reproduced,printed and/or stored,provided that appropriate acknowledgement is given of IRENA as the source and copyright holder.Material in this publication that is attributed to third parties may be subject to separate terms of use and restrictions,and appropriate permissions from these third parties may need to be secured before any use of such material.ISBN:978-92-9260-689-3Citation:IRENA(2025),Socio-economic footprint of the energy transition:Southeast Asia(2nd edition),International Renewable Energy Agency,Abu Dhabi.Available for download:www.irena.org/publicationsFor further information or to provide feedback:publicationsirena.orgAbout IRENAThe International Renewable Energy Agency(IRENA)is an intergovernmental organisation that supports countries in their transition to a sustainable energy future and serves as the principal platform for international co-operation,a centre of excellence,and a repository of policy,technology,resource and financial knowledge on renewable energy.IRENA promotes the widespread adoption and sustainable use of all forms of renewable energy,including bioenergy,geothermal,hydropower,ocean,solar and wind energy,in the pursuit of sustainable development,energy access,energy security and low-carbon economic growth and prosperity.www.irena.orgAcknowledgementsThis report was authored by Bishal Parajuli,Gondia Sokhna Seck and Assiya Hasni(IRENA).IRENA expresses gratitude for the valuable contributions made by Nora Yusma binti Mohamed Yusoff(Malaysia Universiti Tenaga Nasional-UNITEN).The modelling results were provided by Alistair Smith,Ha Bui and Jon Stenning(Cambridge Econometrics).The report benefited from the reviews and inputs from IRENA colleagues Adam Adiwinata,Sean Collins,Ricardo Gorini,Hannah Sofia Guinto,Maisarah Abdul Kadir,Karanpreet Kaur and Michael Renner,as well as from IRENA technical reviewer Paul Komor.The report also benefited from valuable contributions and the review of the external expert Badariah Yosiyana(Clean Energy Ministerial).Editorial and publication support was provided by Francis Field and Stephanie Clarke.The report was copy-edited by Steven Kennedy,with design by Myrto Petrou.IRENA would like to thank the Government of Denmark for supporting IRENA in the work that formed the basis for this report.SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA|3CONTENTSABBREVIATIONS.6EXECUTIVE SUMMARY.71.ASEANS TRIPLE CHALLENGE:NAVIGATING GEO-ECONOMICS,REGIONAL INTEGRATION AND THE ENERGY TRANSITION.112.SOCIO-ECONOMIC IMPACTS OF THE ENERGY TRANSITION.162.1 Economic impacts,as measured by GDP.162.2 Employment.222.3 Welfare.282.CONCLUSION.31REFERENCES.33 ANNEX:COMPARING THE RESULTS OF THE FIRST EDITION(2023)OF THE SOCIO-ECONOMIC FOOTPRINT ASSESSMENT AND THIS(2025)UPDATED ASSESSMENT.354|SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA FIGURESFigure S1 GDP in ASEAN region:Percentage differences between the 1.5C Scenario and the PES,by driver,2023-2050.8Figure S2 Economy-wide employment in ASEAN,percentage differences between the 1.5C Scenario and the PES,by driver,2023-2050.8Figure S3 Overview of energy sector jobs in ASEAN under the PES and the 1.5C Scenario,by sector,2021-2050.9Figure S4 Overview of renewable energy jobs in ASEAN under the PES and the 1.5C Scenario,2021-2050.9Figure 1 Evolution of energy-related CO2 emissions in Southeast Asia,by technology type,under the 1.5C Scenario,2018,2030 and 2050(top)and installed power capacity under the PES and the 1.5C Scenario,2030 and 2050(bottom).13Figure 2 Socio-economic assessment framework.14Figure 3 Percentage differences in regional GDP between the 1.5C Scenario and the PES,by driver,2023-2050.16Figure 4 Top 7 sources of FDI into ASEAN,2021-2023(in USD billion).17Figure 5 International investment in ASEAN EV-related sectors,2019-2022(in USD billion).18Figure 6 Examples of initiatives established in the ASEAN region.20Figure 7 Economy-wide employment in ASEAN,percentage differences between the 1.5C Scenario and the PES,by driver,2023-2050.22Figure 8 Overview of energy sector jobs in ASEAN under the PES and the 1.5C Scenario,by sector,2021-2050.25Figure 9 Overview of renewable energy jobs in ASEAN under the PES and the 1.5C Scenario,2021-2050.26Figure 10 Renewable energy jobs in ASEAN under the 1.5C Scenario,by country,2050.27Figure 11 Structure of IRENAs Energy Transition Welfare Index.28Figure 12 IRENA ETWI under the PES and the 1.5C Scenario for selected regions,2023-2050.29Figure 13 Overall ETWI and its dimensional indices under the 1.5C Scenario in 2050 for EU27 and Southeast Asia.30Figure 14 GDP in ASEAN,percentage differences between the 1.5C Scenario and the PES,by driver,2023-2050.36Figure 15 Economy-wide employment in ASEAN,percentage differences between the 1.5C Scenario and the PES,by driver,2023-2050.37SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA|5TABLESTable 1 GDP,labour force and population growth projections under the PES(CAGR%).15Table 2 National strategies for strengthening mineral sector development and value addition in the Association of Southeast Asian Nations.24BOXESBox 1 Foreign direct investment in ASEAN.17Box 2 Mapping out the geopolitical landscape.19Box 3 Critical materials and development goals.236|SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA ABBREVIATIONS ACE ASEAN Centre for EnergyAEC ASEAN Economic CommunityAfDB African Development BankAPAEC ASEAN Plan of Action for Energy CooperationASEAN Association of Southeast Asian NationsCAGR compound annual growth rateCO carbon dioxideETWI Energy Transition Welfare IndexEU European Union EV electric vehicleFDI foreign direct investmentGDP gross domestic productGHG greenhouse gasIRENA International Renewable Energy AgencyLao PDR Lao Peoples Democratic RepublicLULUCF land use,land-use change and forestryPES Planned Energy ScenarioPV photovoltaicUNIDO United Nations Industrial Development OrganizationUS United StatesUSD United States dollarSOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA|7EXECUTIVE SUMMARYThe transition of the Association of Southeast Asian Nations(ASEAN)1 towards renewable energy is marked by strategic ambitions,shifting policies and complex geopolitics.As the world leans towards a greener future,member countries of ASEAN are amplifying their focus on renewable energy sources to reduce dependence on fossil fuels and fortify energy security.Their commitment to advancing the clean energy transition is underscored by comprehensive policy integration efforts.Through the ASEAN Plan of Action for Energy Cooperation and with the support of the ASEAN Centre for Energy,member states have agreed on regional initiatives such as the ASEAN Power Grid and ambitious renewable energy targets.As ASEAN prepares the next phase of the ASEAN Plan of Action for Energy Cooperation(2026-2030),it is reaffirming its commitment to an increasingly integrated,secure and sustainable energy transition that will define its energy landscape in the decades ahead.The region is at a pivotal crossroads:shifting global power,the rapid energy transition and closer co-operation within the region are re-defining its strategic course.As one of the worlds most dynamic and diverse regions,ASEAN needs to balance the imperatives of geo-economics,a just and secure energy transition,and enhanced regional integration(including through power inter-connection).These interlinked dimensionsnot only define the present challenges the region faces,but also are key to unlocking a more resilient,inclusive and sustainable future.Since COVID-19,the ASEAN energy landscape has seen notable shifts.Economic recovery has driven energy demand,which has been addressed while keeping sustainability in focus.The pandemic highlighted energy security vulnerabilities,prompting enhanced measures towards a more sustainable,more resilient energy future for the region.This is all happening alongside the wider geopolitical changes in the world.At the 42nd ASEAN Meeting of Energy Ministers in September 2024,the International Renewable Energy Agency(IRENA)elevated the importance of interconnection benefits to the ministerial level,reflecting an update of the ASEAN renewable outlook(IRENA and ACE,2022).The present document is an updated brief evaluating the socio-economic impact of that updated ASEAN outlook.As such,it provides insights into how a comprehensive energy transition could affect the regions economies and people.Under the 1.5C Scenario,ASEANs gross domestic product(GDP)in 2023-2050 is expected to increase by a yearly average of 2.6yond the growth already anticipated in the Planned Energy Scenario(PES).The new estimates in the updated outlook indicate a more stable and evenly distributed gain across all three decades of the transition(Figure S1).This would translate to an estimated difference of roughly USD 4.8 trillion2 in average cumulative GDP between the 1.5C Scenario and the PES from 2023 to 2050.Transition-related investments(in energy efficiency and other end uses,grids and energy flexibility,and mainly renewables),along with an improved trade position,would play a key role in this GDP difference,offsetting declining investments in and imports of fossil fuels.1 The ASEAN member states are Brunei Darussalam,Cambodia,Indonesia,the Lao Peoples Democratic Republic(Lao PDR),Malaysia,Myanmar,the Philippines,Singapore,Thailand and Viet Nam.Timor-Leste at the time of drafting this report(May 2025)was not a member,they officially joined ASEAN on 26 October 2025.The terms“ASEAN”and“Southeast Asia”are used interchangeably to refer to this group of countries unless otherwise mentioned.2 In 2021 USD.8|SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA Economy-wide employment is expected to be consistently higher(by a yearly average of 0.9%)in the 1.5C Scenario than the PES between 2023 and 2050(Figure S2).This would translate to over 3.3 million additional jobs in 2050.This updated assessment also demonstrates a more equitable distribution of economy-wide employment gains across the transition period,underpinned by a more evenly spread contribution from key macroeconomic drivers,particularly investment,and induced and indirect effects,while trade has a minor impact.Figure S1 GDP in ASEAN region:Percentage differences between the 1.5C Scenario and the PES,by driver,2023-2050Figure S2 Economy-wide employment in ASEAN,percentage differences between the 1.5C Scenario and the PES,by driver,2023-2050Notes:ASEAN=Association of Southeast Asian Nations;GDP=gross domestic product;PES=Planned Energy Scenario.Notes:ASEAN=Association of Southeast Asian Nations;PES=Planned Energy Scenario.-3-2-1012342.82.62.4562023-20302031-20402041-2050GDP,percentage diference between 1.5C Scenario and PES(%)Investment:privateInvestment and expenditure:publicTradeInduced:aggregate pricesInduced:social-directed paymentsInduced and indirect:otherChange in GDP2023-20302031-20402041-2050Employment,percentage diference between 1.5C Scenario and PES(%)Investment-privateInvestment and expenditure-publicTradeInduced and indirect efectsChange in employment-0.4-0.20.00.20.40.60.81.01.21.40.90.81.0SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA|9The energy sector is expected to have roughly 14.3 million jobs in 2050 under the 1.5C Scenario.This is well above the 11 million jobs under the PES and close to 2.5 times the jobs in 2021(around 6.1 million jobs)(Figure S3).Employment in fossil fuels would remain substantial(at around 4.1 million jobs)up to 2030 but gradually contract(to 3.7 million)by 2050 under the 1.5C Scenario.However,jobs in renewables,energy efficiency,grids and emerging sectors such as hydrogen and electric mobility would expand significantly.The structure of this report is as follows:Figure S3 Overview of energy sector jobs in ASEAN under the PES and the 1.5C Scenario,by sector,2021-2050Figure S4 Overview of renewable energy jobs in ASEAN under the PES and the 1.5C Scenario,2021-2050Notes:ASEAN=Association of Southeast Asian Nations;PES=Planned Energy Scenario.Notes:ASEAN=Association of Southeast Asian Nations;PES=Planned Energy Scenario.RenewablesEnergy efciencyPower grids and energy flexibilityVehicle charging infrastructureHydrogenFossilNuclear02468101214162021PES1.5C ScenarioPES1.5C Scenario20302050Jobs(in millions)BioenergyHydropowerSolarWindOther0123452021PES1.5C ScenarioPES1.5C Scenario20302050Jobs(in millions)The growth in renewable energy jobs is substantial in the 1.5C Scenario,reaching about 4.6 million by 2050.This is almost double the new renewable energy jobs expected in the PES and almost four times the 1.2 million jobs in 2021(Figure S4).This growth results from increased use of all types of renewables and a ramp-up of local manufacturing,installation and maintenance.Indonesia leads ASEAN in total renewable energy employment in 2050 under the 1.5C Scenario,accounting for 43%of the regions renewable energy jobs.Malaysia contributes 9%,while the remaining eight ASEAN countries together contribute 48%.Bioenergy jobs dominate,at more than 2.1 million,followed by solar at 1.9 million.Wind,hydro and emerging renewables together add nearly 530 000 jobs.10|SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA The energy transitions societal impacts are important to evaluate.Considering key aspects of societal well-being,IRENA has developed and refined its Energy Transition Welfare Index(ETWI)for an extended impact analysis.The methodological framework of the IRENA ETWI allows a direct comparison between scenarios,identifying potential opportunities and challenges for policy makers.The framework defines ten indicators,across five dimensions(Economic,Social,Environmental,Distributional and Access)to illustrate how targeted policies can improve socio-economic outcomes.ASEANs ETWI score would improve through the transition period under the 1.5C Scenario,reflecting better quality of life driven by early renewables deployment,electrification,energy efficiency,and greater investment in infrastructure and social spending.However,the social and distributional dimensions still see only modest contributions,which indicates that structural challenges remain embedded,and that targeted policies to tackle inequality and social protection are required.To maximise socio-economic benefits,ASEAN would therefore need to harmonise regional policies,develop just transition strategies,improve grid inter-connection,develop critical minerals and launch targeted upskilling initiatives,while carefully balancing geopolitical influences from external actors and ensuring equitable and resilient development across all member states.SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA|11ASEANS TRIPLE CHALLENGE:NAVIGATING GEO-ECONOMICS,REGIONAL INTEGRATION AND THE ENERGY TRANSITIONCHAPTER 1The Association of Southeast Asian Nations(ASEAN)3 is at a pivotal crossroads:shifting global power,the rapid energy transition and closer regional co-operation are redefining its strategic direction.The rapidly growing region,one of the worlds most dynamic and diverse,has a strong economic presence on the global stage.Meanwhile,it needs to ensure a just and secure energy transition and improve regional integration through enhanced power inter-connection while giving geo-economics full consideration.These are inter-linked dimensionsthat not only define ASEANs present challenges,but also are key to accelerating the transition towards a more resilient,inclusive and sustainable future.Thefirst part of the triple challenge,geo-economics,reflects the increased entanglement of economics and geopolitics in a multi-polar world.ASEANs central position in the Indo-Pacific has made it an arena of competition amongthe major powers looking to exert their influence through trade,infrastructure and investment.As global competition deepens,the region will need to navigate these external pressures with prudence and assertits strategic independence in the process.This requires not only diplomatic nimbleness but also structural transformations to diversify partnerships andstrengthen internal cohesion.Addressing the second challenge,regional integration through power inter-connection,is becoming crucial for energy security and political co-operation.Initiatives such as the ASEAN Power Grid and efforts towards greater cross-border energy trade seek to optimise the allocation of resources,bolster the resilience of the inter-connection system and realise the region-wide sharing of benefits.As ASEAN economies are increasingly inter-linked,deeper infrastructureand policy integration will be critical,to realise the full potential of the energy transition and avoid geopolitical fragmentation.Thethird challenge,accelerating the energy transition,is a strategic imperative.ASEANs energy sector holds significant macroeconomic importance as it supports economic activities,strengthens energy security and promotes sustainable development.Amid rising global energy demand,elevated climate risks and a deepening commitment todecarbonisation,ASEANs energy landscape is evolving,with profound implications although at a varying rate across member countries.Theshift from fossil fuels to renewables brings the promise of energy security,economic diversification and environmental sustainability.But it also exposes the region to fresh vulnerabilities,ranging from supply chain dependencies to the geopolitics ofcritical materials.The connections between macroeconomic factors and the energy sector have grown stronger,with implications for policy decisions,investment strategies and regional co-operation efforts.ASEANs journey towards renewable energy is marked by strategic ambitions,shifting policies and complex geopolitics.As the world leans towards a greener future,ASEAN countries are amplifying their focus on renewables,both as alternatives to fossil fuels and to fortify energy security.ASEANs total greenhouse gas(GHG)emissions in 2019 were almost 25%greater than the EU27s and constituted 7.8%of global 3 The ASEAN member states are Brunei Darussalam,Cambodia,Indonesia,the Lao Peoples Democratic Republic(Lao PDR),Malaysia,Myanmar,the Philippines,Singapore,Thailand and Viet Nam.Timor-Leste at the time of drafting this report(May 2025)was not a member,they officially joined ASEAN on 26 October 2025.The terms“ASEAN”and“Southeast Asia”are used interchangeably to refer to this group of countries unless otherwise mentioned.12|SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA GHG emissions.Indonesia leads regional emissions,and ranks fifth in the world,owing to its forests and carbon-rich peatlands(IRENA,2023a).The land use,land-use change and forestry(LULUCF)sector is the greatest emitter,4 representing more than half of global LULUCF emissions(WRI,2022).Energy is central to achieving the ASEAN Economic Communitys(AECs)vision of a well-connected,integrated,competitive and resilient region.Since the AECs establishment in 2015,primary energy has continued to rise significantly in the region,and is expected to more than double between 2017 and 2040(ACE,2021).The latest outlook published by the ASEAN Centre for Energy(ACE,2024)forecasts an almost three-fold increase by 2050.All ASEAN member states have aligned their commitments through the ASEAN Plan of Action for Energy Cooperation(APAEC).ACE,meanwhile,is facilitating regional collaboration,aligned with the ASEAN Community Vision 2045.APAEC 2016-2025 laid the groundwork for a co-ordinated regional response.Encompassing a broad range of initiatives,from advancing the ASEAN Power Grid to setting ambitious renewable energy targets,APAEC reflected a collective drive to not only enhance energy security but also position ASEAN as a key player in the global energy transition.As ASEAN countries navigate these priorities,their strategies will shape the contours of the regions energy landscape for years to come.The year 2025 marks an important point in the regions energy trajectory:as APAEC 2026-2030 takes shape,it reaffirms the regions commitment to an ambitious and integrated energy transformation(ACE,2025).The International Renewable Energy Agency(IRENA)launched the report Socio-economic Footprint of the Energy Transition:Southeast Asia(IRENA,2023a),which draws on the results of the 2021 edition of an annual flagship report,the World Energy Transitions Outlook:1.5C Scenario Pathway(IRENA,2021a).The 2023 report explored the potential socio-economic impacts of the energy transition in Southeast Asia under two scenarios:a scenario based on current plans(the Planned Energy Scenario,PES),5 and an ambitious energy transition scenario(1.5C Scenario)6 that seeks to limit the global rise in temperature to 1.5C,consistent with the Paris Agreement.The analysis found that a comprehensive and increasingly ambitious energy transition will lead to improved socio-economic outcomes.Annual average GDP growth in Southeast Asia could be 3.4%higher under IRENAs 1.5C Scenario than the PES between 2021 and 2050.Employment in energy would reach 11 million under the 1.5C Scenario by 2050,of which renewable energy jobs would constitute roughly 45.8%(i.e.around 5.1 million jobs).Later in 2022,IRENA also launched the 2nd edition of the Renewable Energy Outlook for ASEAN:Towards a Regional Energy Transition(IRENA et al.,2022)in collaboration with ACE and the ASEAN Renewable Energy Sub-Sector Network.The report details comprehensive pathways for the development of a sustainable and cleaner regional energy system,exploring the role of end-use sector electrification;expansion of renewable generation;energy efficiency solutions;and emerging technologies such as electric vehicles,hydrogen and battery storage-systems,as well as the importance of expanding regional power sector integration.According to the report,ASEANs energy-related carbon dioxide(CO2)emissions rise to 2.1 gigatonnes(Gt)and 2.8 Gt in 2030 and 2050,respectively,under the PES(Figure 1).The power sector would be the largest emitter,followed by transport and industry.Together,these sectors constitute over 90%of the regions energy-related CO2 emissions.The 1.5C Scenario sees a decline in ASEANs emissions of around 15%by 2030 and 75%by 2050 compared with the PES,after which emissions are fully curbed(Figure 1).Total installed renewable energy capacity increases substantially,from 27%in 2018 to 77%by 2050,under the PES.Variable renewable 4 It reached emissions of 1 gigatonne of carbon dioxide equivalent in 2019(WRI,2022).5 The PES is the reference case for this study,providing a perspective on energy system developments based on governments energy plans,as well as other targets and policies planned before 2020,including Nationally Determined Contributions under the Paris Agreement.Policy changes and targets announced since 2020 are not considered in the modelling exercise but are mentioned to provide insights on the latest developments.6 The 1.5C Scenario describes an energy transition pathway in which the increase in global average temperature by the end of the present century is limited to 1.5C,relative to pre industrial levels.The 1.5C Scenario prioritises readily available technology solutions,including all sources of renewable energy,electrification measures and energy efficiency,that can be scaled up at the needed pace to reach the 1.5C goal.SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA|13energy(mostly solar photovoltaic PV)constitutes nearly three-quarters of this capacity.Under the 1.5C Scenario,installed renewable energy capacity exceeds 80%of all installed capacity by 2050;total renewable generation surpasses 90%.This allows for some remaining fossil fuel generators(mostly based on natural gas).Figure 1 Evolution of energy-related CO2 emissions in Southeast Asia,by technology type,under the 1.5C Scenario,2018,2030 and 2050(bottom)and installed power capacity under the PES and the 1.5C Scenario,2030 and 2050(top)Source:(IRENA et al.,2022).Notes:1.5-S=1.5C Scenario;1.5-S RE90=1.5C Scenario with 90%renewable power generation;CCS=carbon capture and storage;GW=gigawatt;MtCO2=million tonnes carbon dioxide;PES=Planned Energy Scenario;PV=photovoltaic;RE=renewable energy;VRE=variable renewable energy.GW 0 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000Ocean energyGeothermalThermal-municipal solid wasteThermal-biomass CCSThermal-biomassOnshore windHydropowerOfshore windSolar PV rooftopThermal-hydrogenSolar PV utilityNuclearThermal-gas CCSThermal-natural gasThermal-coal CCSThermal-coalThermal-oil2030PES20301.5-S2050PES1.5-SRE900 0Pp0%VRE shareRE share201820302050-2 000-3 000-1 000 01 0002 0003 000Energy-related emissions(MtC02)Natural GasElectrification of end uses(direct)Hydrogen and its derivativesBECCS and other carbon removal measuresCoalOilPES Emissions1.5-S EmissionsEnergy conservation and efciencyRenewables(power and direct uses)14|SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA Through to 2030,several energy transition technologies will see significant investment.Solar PV is a good example,as it will be key to the regions short-term energy transition.The additional 240 gigawatts(GW)of installed solar PV capacity needed for the energy transition will require investment of roughly USD 160 billion.Investment related to electric vehicle(EV)development will also play an important role in the transition.Electric chargers are a necessity;nearly 4 million units will have to be installed by 2030,requiring nearly USD 50 billion.Investments in enabling infrastructure will also be crucial.International and domestic transmission will need around USD 105 billion,and local distribution another USD 69 billion.In the long term,through to 2050,investment in fossil fuel plants(including carbon capture and storage)decrease by one-third under the 1.5C Scenario.The 1.5C Scenario sees an average annual investment of USD 210 billion up to 2050;this is more than 2.5 times the investment required in the PES over the same time horizon.Since COVID-19,the ASEAN energy landscape has seen notable shifts.Economic recovery has driven energy demand,which has been managed while giving priority to sustainability.The pandemic revealed gaps in energy security,prompting enhanced measures seeking a more sustainable and more resilient energy future for the region.This is all happening amid wider geopolitical changes at the global scale.At the 42nd ASEAN Meeting of Energy Ministers in September 2024,IRENA elevated the importance of inter-connection benefits to the ministerial level,reflecting an update to the ASEAN renewables outlook.This present document,an updated brief,assesses the socio-economic impact of that updated outlook and provides insights into how a comprehensive energy transition could affect the regions economies and people.Through its analysis of key drivers and impacts,IRENA has offered insights that support energy transition planning and implementation at the global,regional,and national levels since 2016(IRENA,2016,2018,2019a,2019b,2020,2021b,2021b,2022a,2023b,2023c,2023d).For the energy transition to be effective and broadly beneficial,IRENA has stressed the importance of a holistic socio-economic assessment framework that extends beyond the technology focus of traditional roadmaps(Figure 2).The framework proposed encompasses key policy aspects,spanning diverse technological,social and economic challenges,that mutually complement and support one another to hasten the transition and ensure its advantages are widely shared and difficulties minimised.Figure 2 Socio-economic assessment frameworkNote:GDP=gross domestic product.Energy-economy-environmentmodelGDPEmploymentWelfarePolicy measuresEnergy transitionroadmapSocio-economicsystem outlookSocio-economic footprintThe socio-economic analysis conducted for this brief used a macro-econometric model(Energy-Environment-Economy Global Macroeconomic,E3ME)7 that integrates the energy system and global economies into a single quantitative framework.The model sheds light on the trade-offs between economic prosperity and employment,while examining welfare aspects,including the distributional implications of policy choices.7 The E3ME global macro econometric model()is used for assessing socio economic impacts.Energy mixes and the related investments,based on the World energy transitions outlook(IRENA,2023d)and informed by the 2nd edition of the Renewable energy outlook for ASEAN(IRENA and ACE,2022),are used as exogenous inputs for each scenario,as well as climate-and transition-related policies.SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA|15Policy makers need to be aware of how such choices will affect peoples well-being and overall welfare,and of the potential gaps and hurdles that could affect progress.This brief provides valuable insights and recommendations for Southeast Asias policy makers as they work to achieve a just and equitable low-carbon regional transition that creates jobs and reduces inequalities.Importantly,the brief updates the socio-economic differences between the PES and the 1.5C Scenario in Southeast Asia,taking into account the importance of regional inter-connection.It uses the same inputs and assumptions as the 2023 edition of the World Energy Transitions Outlook(IRENA,2023d),which is informed by the 2nd edition of the Renewable Energy Outlook for ASEAN(IRENA et al.,2022).Under the PES,ASEANs economy is expected to maintain strong growth.Between 2023 and 2050,regional real GDP is projected to increase at a compound annual growth rate(CAGR)of around 4.7%;economy-wide employment is expected to increase at a CAGR of around 0.2%;and the regions population is projected to grow at a CAGR of 0.5%,reaching over 787 million in 2050(Table 1).Table 1 GDP,labour force and population growth projections under the PES(CAGR%)VARIABLE2023-20302031-20402041-2050Real GDP 4.64.94.5Economy-wide employment0.40.20.0Total population0.80.50.3Notes:CAGR=compound annual growth rate;GDP=gross domestic product;PES=Planned Energy Scenario.As in previous regional analyses,IRENAs analysis continues to explore the socio-economic impacts of various assumptions included in the climate policy basket.These encompass a range of measures to support a just and inclusive transition carbon pricing,international collaboration,subsidies,progressive fiscal regimes to address distributional aspects,investments in public infrastructure and spending on social initiatives.They also include policies that encourage the deployment,integration and promotion of energy transition technologies.The next chapter presents the key findings of IRENAs socio-economic analysis for ASEAN until 2050.It outlines potential impacts on economic growth(GDP),employment and welfare,and considers underlying drivers.The findings delineate the differences between the 1.5C Scenario and the PES.16|SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA SOCIO-ECONOMIC IMPACTS OF THE ENERGY TRANSITIONCHAPTER 22.1 ECONOMIC IMPACTS,AS MEASURED BY GDP The 1.5C Scenario would generate steady and substantial socio-economic benefits for the ASEAN region relative to the PES.A GDP difference is observed between the scenarios throughout the transition period,due to investment,trade and social policy interventions supported by regional integration efforts.Under the 1.5C Scenario,ASEANs GDP wouldrise by a yearly average of 2.6tween 2023 and 2050 against the growth already anticipated under the PES;this highlights economic benefits from the transition.The new estimates in this updated brief indicate a more stable and evenly distributed regional gain across all three decades of the transition(see Annex 1 for a detailed comparison of the previous edition and this updated version).GDP is estimated to be 2.8%,2.6%and 2.4%higher on yearly average terms under the 1.5C Scenario than under the PES for the first decade(2024-2030),second decade(2031-2040)and third decade (2041-2050),respectively(Figure 3).Over 2023-2050,the regions economy is estimated to record an average cumulative GDP gain of around USD 4.8 trillion between the 1.5C scenario and the PES;GDP will reach around USD 12.0 trillion by 2050 under the 1.5C Scenario.8 This shift towards balanced long-term effects from a pattern of more front-loaded growth is enabled by the inclusion of regional power inter-connection,and additional social-directed spending,which makes the transition more resilient and inclusive.It also mirrors a maturing policy environment across the ASEAN region,with increasing focus on sustaining the economic momentum beyond the initial wave of transition-related investments.8 Both monetary figures are in 2021 USD.Figure 3 GDP in ASEAN region:Percentage differences between the 1.5C Scenario and the PES,by driver,2023-2050Notes:ASEAN=Association of Southeast Asian Nations;GDP=gross domestic product;PES=Planned Energy Scenario.-3-2-1012342.82.62.4562023-20302031-20402041-2050GDP,percentage diference between 1.5C Scenario and PES(%)Investment:privateInvestment and expenditure:publicTradeInduced:aggregate pricesInduced:social-directed paymentsInduced and indirect:otherChange in GDPSOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA|17To help understand the fundamental structural elements behind these trends,IRENAs macroeconomic analysis disaggregates the GDP difference by drivers over the transition period.Investment and trade are still the main drivers,while indirect and induced effects have a much smaller role(Figure 3).Private investment emerges as a key driver of the GDP difference,with a positive impact throughout the transition.Cumulative private investment remains robust,increasing from USD 457 billion in the first decade to over USD 1.1 trillion by 2050.Foreign direct investment(FDI)could also play a catalytic role in not only supplementing domestic capital but also facilitating access to advanced technologies and wider supply chains(Box 1).Although declining fossil fuel investment in the power sector and reduced capital flows to fossil fuel supply exert downward pressure,this is more than offset by strong growth in private transition-related investments(energy efficiency and other end uses,grids and energy flexibility,and mainly renewables).But the reallocation of capital to the power sector can simultaneously crowd out investments in other sectors,such as construction,resulting in mixed sectoral outcomes.Box 1 Foreign direct investment in ASEANThe supply chain disruptions triggered by geopolitical tensions and COVID-19 in the early 2020s have benefited Association of Southeast Asian Nations(ASEAN)countries.They saw a crucial inflow of supply-chain-related foreign direct investment(FDI),which helped existing investors expand their capacities and new investors establish a presence in the region.Overall,ASEAN is among the leading recipients of investment among developing countries.FDI into the region grew remarkably between 2013 and 2023,from roughly USD 120.5 billion to over USD 234 billion;six ASEAN member states(Cambodia,Indonesia,Lao PDR,Philippines,Singapore and Viet Nam)saw FDI inflows increase over this period(ASEAN Stats,n.d.).In 2023,seven countries/regions led FDI into ASEAN:the United States(USD 75 billion,or 32%of the total FDI),EU27(USD 25.4 billion,or 10.9%),intra-ASEAN(9.6%),China(7.5%),Japan(6.9%),the Republic of Korea(4.6%)and India(2.4%).Their combined contribution was almost three-quarters of the overall FDI flows into the region(approximately USD 173 billion)(Figure 4).Singapore maintained its position as the top FDI destination in the region,receiving about USD 159.6 billion in 2023,followed by Indonesia and Viet Nam,at around USD 22 billion and USD 18.5 billion,respectively.Figure 4 Top 7 sources of FDI into ASEAN,2021-2023(in USD billion)Source:(ASEAN Stats,n.d.).Notes:ASEAN=Association of Southeast Asian Nations;EU27=European Union,27 countries;FDI=foreign direct investment.-5005010015020020132014201520162017201820192020202120222023USD billionUnited states of AmericaEU27Intra-ASEANChinaJapanRepublic of KoreaIndia18|SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA Electric vehicles(EVs)are among the top targets of investment in the region.International investment in ASEANs EV sector reached USD 18 billion in 2022.This was a six-fold increase from the previous year(Figure 5).EV production,which received fluctuating investments between 2019 and 2021,saw an FDI spike.While member states differ in their specific policy commitments to advancing the EV industry,these trends indicate strong regional support overall.Figure 5 International investment in ASEAN EV-related sectors,2019-2022(in USD billion)Source:(ASEAN Secretariat and UNCTAD,2024).Notes:The figure covers mostly mining of critical minerals(nickel and cobalt),battery production and EV manufacturing.ASEAN=Association of Southeast Asian Nations;EV=electric vehicle.Many ASEAN countries encourage EV adoption through purchase incentives,subsidies,and tax cuts and exemptions.For instance,in 2021,Cambodia cut its import duty on EVs from 30%to 10%,while Lao PDR cut annual road taxes by 30%for EVs against internal combustion engine vehicles.Myanmar exempts battery EVs from various taxes,while Viet Nam has waived registration fees for battery EVs for the first three years and offers a 50%reduction for the subsequent two years.To attract investment in the EV supply chain,countries like Indonesia are lowering electricity tariffs for charging stations and focusing on high-value nickel processing.Thailand has expanded investment incentives and streamlined project approvals,while Malaysia is increasing support for EV charging stations.Singapore employs tax incentives and regulatory frameworks to encourage investment in the EV ecosystem.Meanwhile,Cambodia and Lao PDR are at early stages of EV adoption and are actively promoting private investments in charging infrastructure.18.12.72.15.52019202020212022 570%SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA|19Public investment and expenditure are less front-loaded than in the briefs earlier edition,but follow a steadier trajectory now.They are 1.0%higher yearly on average under the 1.5C Scenario than under the PES(Figure 3).This indicates ASEANs shift of focus towards greater balance and longer-term fiscal planning,as well as on sustaining momentum beyond the initial cycles of capital deployment.Annual public investment and expenditure are expected to be roughly 1.0%higher on average throughout the transition period under the 1.5C Scenario than under the PES,mainly driven by transition-related investments and government social spending.Consistent with previous results,the analysis shows trade playing a positive role in the economy.Southeast Asia could become a net energy importer,given that rapid energy demand growth in the region is expected to outstrip domestic supply and trigger greater fossil fuel imports through to 2030(Samanta and Tan,2019).Under the 1.5C Scenario,as ASEAN cuts fossil fuel imports,its savings and GDP gains multiply,due to lower energy intensity and greater efficiency,further reducing import dependency.The energy transition also opens opportunities for ASEAN countries and the region as a whole to engage in trade,intra-regionally as well as with other countries and regions.However,the worlds shifting geopolitics imply competing arguments for various policy directions;going forward,ASEAN countries must tread carefully(Box 2).Box 2 Mapping out the geopolitical landscapeAs the world pivots towards renewable energy,the member countries of ASEAN are emerging as critical players,both as consumers and producers of green power.ASEAN is strategically positioned at a crucial trade crossroads,with the Strait of Malacca connecting the Indian Ocean and Pacific Ocean.This strait is the shortest maritime route between major oil producers and key Asian markets,including Japan,the Republic of Korea and China.Yet,as trade patterns shift and decarbonisation advances,these long-standing energy dependencies are being reshaped.As a result,and as investments in renewable energy and local manufacturing of transition-related technologies(electric vehicles,batteries)accelerate,control over strategic chokepoints(such as the Strait of Malacca)may become more about influence over emerging technologies.20|SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA Figure 6 Examples of initiatives established in the ASEAN region Notes:The figure does not include intra-ASEAN initiatives/economic frameworks.The Asia Energy Transition Initiative is part of the wider Asia Zero Emission Community(AZEC),a co-operation platform launched by Japan to accelerate Asias energy transition and decarbonisation.According to the Leaders Joint Statement Action Plan for the Next Decade (11 October 2024),AZEC collaborates closely with Asian countries through various initiatives,including the Asia Energy Transition Initiative,the Cleaner Energy Future Initiative for ASEAN,the Asia GX Consortium,the Strategic Program for ASEAN Climate and Environment,the ASEAN-Japan Transport Partnership,the ASEAN-Japan Smart Cities Network High Level Meeting and the ASEAN-Japan MIDORI Cooperation Plan.This integrated approach highlights AZECs role as an umbrella platform for collaboration among these key energy transition efforts.ASEAN=Association of Southeast Asian Nations;EU27=European Union.Within this shifting landscape,ASEAN nations must navigate the balance of power between established energy consumers and prosumers like China,the United States and the European Union(EU27)as they compete to dominate the renewable sector and secure their energy futures.Figure 6 highlights some of the initiatives that these countries/regions have established in ASEAN,specifically,(1)initiatives that are directly supporting or collaborating with ASEAN(overlaps with ASEAN in the figure);(2)initiatives that are competing or in conflict with ASEANs interests(non-overlapping part of the circle);(3)multi-regional collaboration(with multiple overlaps in the figure)and(4)cross-regional conflicting/competing initiatives,that is,initiatives of one country/region conflicting with the interest of another country/region(shown with red arrows).Carbon Border Adjustment Mechanism(CBAM)Inflation Reduction Act(IRA)Regional ComprehensiveEconomic Partnership(RCEP)Comprehensive and Progressive Agreement for Trans-Pacific Partnership(CPTPP)US TarifsCritical Raw MaterialsAct(CRMA)Green New DealIndo-Pacifc EconomicFrameworkAmericas Partnership for Economic ProsperityBelt and Road Initiative(BRI)ASEAN-China Free Trade AgreementRegional Comprehensive Economic PartnershipAsia EnergyTransitionInitiativeAsia CarbonCapture,Utilisationand Storage(CCUS)ASEAN 3 initiativeJust Energy TransitionPartneshipConflicting or competing initiatives amongst other Regions/CountriesCommon interest orinitiatives that supportASEAN interestASEANJapanChinaEU27United StatesRegional interest that conflicts or competes with ASEAN interestRegional interest that conflicts or competes with ASEAN interestRegional interest that conflicts or competes with ASEAN interestRegional interest that conflicts or competes with ASEAN interestSOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA|21Chinas Belt and Road Initiative,combined with its ambitious domestic investments in renewables,has expanded its geopolitical influence both regionally and globally.China has heavily invested in ASEAN solar photovoltaic(PV)manufacturing capacity to circumvent US tariffs on Chinese-made PV products;however,during 2025 and beyond,with tariffs rising,ASEAN-based PV suppliers(most of which are Chinese owned)are likely to come under mounting pressure.Meanwhile,the EU27 and the United States are advancing their own energy and trade strategies.They are pushing to fortify energy security and improve clean technology,while also seeking to strengthen their presence and partnerships in Southeast Asia through infrastructure investment,supply chain partnerships,and diplomatic engagement.The region is significantly engaged in the global market of metals and minerals supply chain.This expansion reflects ASEANs strategic diversification of trade partnerships beyond Asia,notably with European markets,with an evolving role in the global supply chain of critical minerals.Within this supply chain competition,ASEAN countries have opportunities and also face challenges.The race to secure access to critical raw materials,essential for renewable technologies,presents new dimensions of economic leverage and strategic partnerships but also risks of dependency and conflict.ASEANs role is crucial in this evolving landscape;it could become a hub for renewable energy development but also the centre of geopolitical rivalries.The outcome will depend on how ASEAN nations manage their resources,establish partnerships and leverage their position in the new energy order.After exploring some of the intricate dynamics and the strategic interests of the regions key geopolitical players,it becomes clear that ASEAN countries must balance two tasks:convincing major powers of the importance of the regions strategic autonomy,and navigating intra-regional competition.A key approach is to embrace a broad range of international investment partners,to avoid over-reliance on any player.A diversified foreign direct investment portfolio not only reflects global confidence in the regions stability and growth potential but also serves as a crucial driver for economic development,technology transfer,and job creation.The consumption of manufactured fuels in road transport,and solid fuels and oil for heating,is expected to reduce substantially due to the increased use of biofuels.Improvements in net fuel trade alone are worth an estimated USD 123.2 billion by 2050.A significant portion of thesegains,about one-third,is associated with Indonesias reduced dependence on imports,while the rest is divided among the other ASEAN economies.As in earlier analysis,the effects of non-fuel trade are moderately negative,because conventional motor vehicles are exported less and advanced vehicles are imported more(due to the supply-demand mismatch for advanced vehicles among ASEANmember states).Collectively,these investment and trade patterns indicate a need to strategically co-ordinate policies and plan infrastructure to optimise the economic benefits of ASEANs energy transition.Induced and indirect effects(including aggregate prices and lump-sum payments,and others9)have a negative but minor impact on the ASEAN economy over the transition period.10 This is mainly due to consumer expenditure.In the first two decades,household consumption remains under financial strain due to heightened prices,given carbon taxes and an energy sector that is still fossil-fuel based.The negative effect wears off in the last decade,due to the delayed effect of large lump-sum payments in earlier years,income tax and carbon tax cuts,and increased inflows from global collaboration on the energy transition.Over the transition period,the regional power inter-connection reduces the negative impact of the induced component aggregate prices(which reflect the domestic response to changes in carbon prices,technology costs,power sector capacity,fossil fuel subsidies and investment expenditure)on the GDP difference.Carbon prices and the deployment of high-cost renewable technologies under the 1.5C Scenario drive up energy prices.9 Others include the changes in consumer expenditure(due to income tax rate responses,indirect or induced effects).10 A result consistent with the previous report(IRENA,2023).22|SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA Revenue recycling one of the key policy assumptions of the analysis leads to lump-sum payments being made directly to lower-quintile households in the 1.5C Scenario,when the government accumulates excess tax revenues after paying for transition-related investments and other policy costs.By dealing with domestic distribution issues(i.e.providing support to the lower-quintile population),revenue recycling thus supports the GDP difference throughout the transition period.The positive effect peaks in the second decade and slightly wears off in the last decade as carbon tax receipts fall in line with emissions.Higher carbon taxes under the 1.5C Scenario could be a lever to increase the fiscal space for lump-sum payments and their socio-economic benefits.Those additional revenues could help enable additional investments in a just transition.2.2 EMPLOYMENTEconomy-wide employmentThe energy transition under the 1.5C Scenario still generates net positive employment impacts for ASEAN(Figure 7).This updated assessment also shows economy-wide employment gains more equitably distributed across the transition period,supported by more evenly spread contributions from key macroeconomic drivers,especially investments and induced and indirect effects,with a minor impact from trade.In all three decades of the transition,economy-wide employment is expected to be consistently higher under the 1.5C Scenario than the PES.The employment difference between scenarios is 0.9%in the first decade (i.e.2023-2030)and 0.8%in the second decade(i.e.2031-2040);it then peaks,at 1.0%,in 2041-2050 (Figure 7).In 2050,the employment difference translates into over 3.5 million additional jobs.The analysis shows that greater regional power inter-connection and more inclusive investment can sustain the upward trend in job creation to the middle of the century.Figure 7 Economy-wide employment in ASEAN region:Percentage differences between the 1.5C Scenario and the PES,by driver,2023-2050 Notes:ASEAN=Association of Southeast Asian Nations;PES=Planned Energy Scenario.2023-20302031-20402041-2050Employment,percentage diference between 1.5C Scenario and PES(%)Investment-privateInvestment and expenditure-publicTradeInduced and indirect efectsChange in employment-0.4-0.20.00.20.40.60.81.01.21.40.90.81.0SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA|23The positive impact of induced and indirect effects on the employment difference is due to increased consumer spending,increased wages and a shift in consumption patterns across the transitions decades.Constrained labour supply in the region may positively affect wages driving them upwards and drive companies to expand workforces in line with demand.Increased household consumption(led by investment stimulus and lump-sum transfers;see section 2.1)continues to drive employment growth.Under the 1.5C Scenario,theshift of consumer spending away from fuels to other services,including hospitality,education and personal care,positively affects the economy-wide employment difference.This expenditure reallocation boosts job creation,since labour-intensive activities,required progressively less in declining fossil-fuel-based sectors,gain more from the rising demand.The renewable energy manufacturing sector could also contribute to job growth,as countries scale up domestic production of renewable energy technologies to meet regional and global demand.In ASEAN,industrial policies could position member states as competitive manufacturing hubs for solar PV,battery and EV components.While trade has a positive role to play in the GDP difference,it has a more minor and slightly negative influence on the employment difference between scenarios.This is due to an adjustment in some industries,which are affected by higher imports of advanced technology goods due to increased consumer expenditure (as discussed in the trade patterns and GDP drivers outlined in section 2.1).Public and private investments are key employment drivers,especially in infrastructure,clean energy programmes and service sectors.The positive effect of these drivers becomes increasingly significant throughout the transition as fiscal policies and international financing under global partnerships continue to stimulate employment.Regional power sector inter-connection and more inclusive investment help offset the loss of investment in fossil fuels.Their benefit grows slowly in influence throughout the transition by way of a steady accrual of capital and a rising presence of domestic and regional players in clean energy value chains in particular,high in the manufacturing value chain of critical materials as well as EV and battery production(Box 3).The ASEAN region holds world-class reserves of several key minerals,such as nickel,tin,rare earth elements,copper and bauxite,many of which remain largely unexplored for commercial purposes.Meanwhile,member states are key producers and refiners of many essential metals and minerals required for the energy and digital revolutions.This gives ASEAN countries a central position in global supply chains as vital domestic and regional manufacturing hubs for critical metals and minerals.Box 3 Critical materials and development goalsThe resource abundance of the Association of Southeast Asian Nations(ASEAN)positions it at the heart of the global energy landscape.But even as member states have access to energy resources,that is no longer the sole challenge;they must consider renewable energy market developments in terms of technologies and research,basing future energy strategies on the ability to convert energy resources into usable energy at a competitive cost.The energy transition could translate into first and foremost a technological revolution where research and development policies are critical to fostering innovation,with intellectual property rights shaping energy capacity(Criekemans,2018).Nevertheless,the surge in demand for critical materials raises important questions about the potential emergence of a resource curse.It is essential to consider whether nations rich in critical minerals will truly benefit from increased market demand or whether they will experience a modern iteration of the“Dutch Disease”.Historically,the resource curse has been associated with oil,natural gas and traditional metals,but the energy transition has shifted focus to previously underutilised resources(Hache et al.,2023).This phenomenon is particularly pertinent for developing countries,which are often more susceptible to over-reliance on a single economic sector and face structural challenges within their political,economic and environmental frameworks.For instance,nickels new status as a critical transition mineral has notably altered development agendas in Indonesia(IRENA,2023e),which held 24|SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA roughly 45%of the worlds nickel reserves in 2024(USGS,2025).While the rapid expansion of the nickel industry in Indonesia was cast as a national success story due its economic benefit,it has also resulted in the creation of new extractive enclaves marked by limited distribution of benefits,strong foreign and politically connected capital influence,and significant environmental and social externalities,including deforestation and disruption to local communities(Warburton,2024).Building resilience and competitiveness in todays globalised and digitally driven world require strong industrial policies.Having a comprehensive grasp of the intricate relationship between industrial growth,sustainability and technological advancement is of utmost importance,especially in the current global transition towards renewable energy.The industrial policies implemented in ASEAN countries strive to foster economic growth by establishing a favourable atmosphere for innovation,investment and technological progress,but these policies must remain resilient and flexible amid shifting global dynamics,such as changes in trade,technology and geopolitics.A more resilient ASEAN framework requires economic systems that can effectively endure and adjust to both internal and external disruptions.This will contribute to the long-term and balanced progress of all member states.ASEAN must integrate its regional value chains into global value chains and boost productivity through innovation and skill development.These factors have become critical determinants of the regions competitiveness.ASEAN nations must implement strategies that capitalise on their unique strengths,foster co-operation among member countries,and simplify trade and investment procedures.The global transition to renewable energy brings numerous challenges and opportunities for ASEAN:sustainable practices necessitate substantial infrastructural,technological and regulatory adjustments.As ASEAN countries navigate their position within the critical minerals markets,innovation plays a vital role in ensuring they remain available,affordable and sustainable.Investing in advanced extraction methods,recycling technologies and efficient supply chain management can help ASEAN secure a stable supply of critical minerals while minimising environmental impacts(Table 2).Collaboration among governments,industry stakeholders and financial institutions is essential to accelerate innovation in this sector.By advancing technology and fostering partnerships,ASEAN can strengthen its competitive position in the global critical minerals market,supporting its clean energy goals and economic growth.Table 2 National strategies for strengthening mineral sector development and value addition in the Association of Southeast Asian NationsCOUNTRYSTRATEGYPhilippines Plans to expand the extractives and refining sectors to increase domestic value addition and boost manufacturing capabilities across multiple sectors.MalaysiaLaunched the National Mineral Industry Transformation Plan 2021-2030,emphasising downstream value addition,technology and innovation.IndonesiaImplemented robust policies for adding value to mineral production,including a ban on raw mineral exports and a domestic processing requirement,and supports vertical integration into advanced value chains.Viet NamThe Mineral Resources Strategy to 2020,with a vision towards 2030,focusses on maximising the potential of the mineral sector and promoting domestic value addition.CambodiaThe National Policy on Mineral Resources 2018-2028 highlights potential for mineral exploration and development.Lao PDRThe National Green Growth Strategy 2030 identifies the mining and mineral sectors as key areas for economic and social development.SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA|25These findings highlight a need for long-term policy frameworks incorporating just transition mechanisms,labour market strategies and regional co-operation to ensure the energy transition not only helps ASEAN mitigate climate risks but also promote region-wide inclusive growth and employment.Energy sector jobsThis 2025 update provides a breakdown and an optimistic projection of employment in the ASEAN energy sector under the 1.5C Scenario.The newly updated analysis paints a more consistent picture than the previous edition,which foresaw modest job growth and fossil fuel employment waning more quickly than clean energy job growth could make up for.In this update,total energy sector employment under the 1.5C Scenario is expected to amount to about 14.3 million jobs in 2050,well more than the 11.0 million under the PES and close to 2.5 times the 6.1 million jobs of 2021(Figure 8).Figure 8 Overview of energy sector jobs in ASEAN under the PES and the 1.5C Scenario,by sector,2021-2050Notes:ASEAN=Association of Southeast Asian Nations;PES=Planned Energy Scenario.RenewablesEnergy efciencyPower grids and energy flexibilityVehicle charging infrastructureHydrogenFossilNuclear02468101214162021PES1.5C ScenarioPES1.5C Scenario20302050Jobs(in millions)This growth runs parallel to an important change in the energy workforce.Fossil fuel jobs remain substantial in the near term 4.1 million by 2030 but fall to 3.7 million by 2050 under the 1.5C Scenario.Their reduction reflects declining,yet ongoing,investments in coal,oil and gas,alongside the gradual phasing out of fossil fuel infrastructure.By contrast,jobs in renewable energy are almost four times higher in 2050 under the 1.5C Scenario(4.6 million,up from 1.2 million in 2021)than the PES(approximately 2.4 million).Energy efficiency stands out as a major job creator,with jobs growing from 0.4 million in 2021 to 2.8 million in 2050 under the 1.5C Scenario.This is due to deep building retrofits,electrification of industry and transport,and massive efficiency gains across end-use sectors enabled by regional power sector inter-connection and more inclusive investment.Employment related to power grids and energy system flexibility also grows,though at a slower pace,from 0.6 million in 2021 to 2.4 million in 2050 under the 1.5C Scenario.This is almost double the 1.3 million reported in the first edition of the Socio-economic Footprint of the Energy Transition:Southeast Asia(IRENA,2023a),which reflected assumptions in line with the 2021 edition of the World Energy Transitions Outlook(IRENA,2021a).The positive trend indicates increasing spending on inter-connection infrastructure,digitalisation and the storage required to accommodate a renewables-based power system.26|SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA Figure 9 Overview of renewable energy jobs in ASEAN under the PES and the 1.5C Scenario,2021-2050Notes:ASEAN=Association of Southeast Asian Nations;PES=Planned Energy Scenario.BioenergyHydropowerSolarWindOther0123452021PES1.5C ScenarioPES1.5C Scenario20302050Jobs(in millions)Thereare also new jobs in emerging sectors.While hydrogen sectors have negligible jobs today,demand for low-carbon fuels is expected to increase employment to more than 450 000 jobs by 2050.Charginginfrastructure for cars,crucial for ASEANs switch to electric mobility,could create around 330 000 jobs by 2050.Together,thesechanges suggest a structural transformation in the ASEAN energy labour market towards a more sustainable,decentralised and skilled workforce.While the transition is expected to generate more employment across renewable energy,energy efficiency and the transition-related manufacturing sectors by 2050,fossil fuels,which still supply a majority of the regions energy demand,absorb a significant portion of the workforce in the near term.This structural dependence creates a skill mismatch:many workers currently employed in conventional energy sectors may not possess the technical competencies required in emerging green industries.Targeted re-skilling and upskilling programmes will be needed,as well as just transition policies that help displaced workers move into quality jobs in the low-carbon economy and also equip new entrants to meet the growing labour demand of the energy transition.Regional co-operation on training standards,vocational education and labour mobility could help harmonise workforce development across member states.Renewable energy jobsRenewable energy will likely be the biggest source of energy sector jobs in ASEAN in the 1.5C Scenario;total renewable energy employment will amount to 4.6 million jobs by 2050;this is almost double the renewable energy jobs under the PES and almost four times the 1.2 million jobs in 2021(Figure 9).The increase is due to morewidespread use of all types of renewables and increased local manufacturing,installation and maintenance.In the renewables sector,bioenergy continues to be the largest employer,despite declining labour intensity;this is because the sector has a high workforce requirement and rural value chains are extensive.Employment in bioenergy grows from over 812 000 jobs in 2021 to more than 2.1 million jobs in 2050 under the 1.5C Scenario.This strong growth reflects bioenergys role in ASEAN as an essential driver of both clean energy and rural development.Jobs in solar also increase over the period,from fewer than 100 000 jobs in 2021 to more than 1.9 million jobs by 2050 under the 1.5C Scenario.The ongoing worldwide roll-out of rooftop systems combined with utility-scale installations and capacity expansion of value chains in countries that include Viet Nam,Malaysia and Thailand,drives this expansion.SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA|27Wind energy jobs also grow steadily,from just below 50 000 jobs in 2021 to more than 220 000 by 2050.While this is modest compared with solar and bioenergy,it nevertheless indicates incremental expansion inon-shore and off-shore wind capacity in ASEAN markets.Hydropower jobs,which remain relatively consistent,rise slightly,from around 203 000 in 2021 to 253 000 in 2050.The deployment of small hydropower and efficiency improvements in existing facilities mainly drives this growth.Geothermal,marine and other emerging renewables continue to represent a small share but are expected to generate more than 50 000 jobs by 2050,reflecting specialised market developments in regions with specific resource endowments.In summary,the renewable energy workforce in ASEAN gradually becomes more heterogeneous and technologically advanced,calling for co-ordinated investment in vocational training,certification programmes and industry-academia collaboration.Figure 10 shows a breakdown of the regions energy sector jobs in the year 2050 under the 1.5C Scenario.Indonesia leads,contributing 43%of the regions renewable energy jobs.Its dominance is mainly driven by bioenergy,at more than 1.1 million jobs(or more than 57%of the countrys renewable jobs)and solar(i.e.PV and concentrated solar power),at around 746 000 jobs(or 38%).Malaysia contributes 9%of the regions renewable jobs,largely from solar,at 224 000,and bioenergy,at 162 000.The other ASEAN countries contribute the remaining 48%of the regions renewable jobs.By 2050,solar stands at 936 000 jobs,bioenergy at 843 000 jobs,hydro at 208 000 jobs and wind at 175 000 jobs.Figure 10 Renewable energy jobs in ASEAN region under the 1.5C Scenario,by country,2050Notes:“Other”includes geothermal and tidal/wave.ASEAN=Association of Southeast Asian Nations.BioenergyHydropowerSolarWindOtherShare in ASEAN renewable energy jobs0 0P%0.00.51.01.52.02.5Rest of ASEANIndonesiaMalaysia20501.5C ScenarioShare in ASEAN renewable energy jobs(%)Jobs(in millions)48C%9%Compared with the previous edition,this updated analysis highlights that the region has significant employment potential under the 1.5C Scenario,to be unlocked by appropriate policies.One such measure would be the regional inter-connection that supports in building a more dynamic employment landscape.Region-wide inclusive job creation and economic transformation would be driven by ambitious climate action combined with regional power inter-connection consistent with the 1.5C goal.28|SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA 2.3 WELFAREGDP is the standard measure of economic output.The concerns of citizens,however,go beyond GDP,which does not include or consider factors that are not priced into the market,such as human health,jobs and environmental quality.And while climate change will likely negatively impact future GDP,it also will have significant social,nature and economic impacts that no measure of GDP captures.Conventional indicators such as GDP are thus incomplete and potentially misleading,as they do not consider future constraints of natural resources and climate.To consider key aspects of societal well-being,IRENA has developed and refined its Energy Transition Welfare Index(ETWI)(IRENA,2016,2019a,2019c,2020,2021a,2022b,2023d,2024)for an extended impact analyses.The methodological framework of the ETWI allows direct comparison between scenarios,revealing potential challenges(and opportunities)for policy makers.The index measures ten indicators across five dimensions(economic,11 social,12 environmental,13 distributional14 and access15 Figure 11;IRENA,2021a)to illustrate how targeted policies can improve socio-economic outcomes.Once indicators are normalised,they are aggregated through an equally weighted geometric mean to generate the dimension indices,and in turn aggregated to the overall welfare index using the logarithmic shares.Similar methodological frameworks are used by other international and multilateral organisations for their respective indices,for example,the Competitive Industrial Performance of the United Nations Industrial Development Organization(UNIDO)and the Africa Industrialisation Index of the African Development Bank(AfDB).The indices of UNIDO and AfDB measure industrial performance and competitiveness based on a set of 8 and 19 indicators,respectively (AfDB et al.,2022;UNIDO,2013).11 The economic dimension is composed of two indicators:(1)per capita consumption and investment;and(2)the non-employment rate,which is the share of the working age population that is neither employed nor under education.12 The social dimension is composed of two indicators:(1)social expenditure,expressed as per capita public expenditure;and (2)health impacts of pollution,expressed as capita health damages due to energy-related air pollution.13 The environmental dimension consists of two indicators:(1)cumulative CO emissions;and(2)per capita materials consumption,which is expressed in terms of domestic materials consumption and includes metals,non-metallic minerals and biomass(wood,food)but excludes fossil fuels.14 The distributional dimension measures income and wealth inequality within and across ASEAN countries.15 The access dimension is informed by(1)the rate of access to basic energy and(2)progress in energy sufficiency level(assumed at 20 kilowatt hours/capita/day)in line with the literature(Millward-Hopkins et al.,2020).Figure 11 Structure of IRENAs Energy Transition Welfare IndexSource:(IRENA,2021a).Notes:CO2=carbon dioxide;IRENA=International Renewable Energy Agency.DistributionalSocialEnviron-SocialAccessIndexIndexIndexIndexIndexDistri-butionalEconomicWELFAREINDEXWithin country/regionSocial expenditureHealth impact(pollution)Acrosscountries/regionsDimensionsIndicatorsEnvironmentalCO2 emissionsMaterialsconsumptionAccessSufciencyBasic energyaccessEconomicConsumptionand investmentNon-employmentmentalSOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA|29The five dimensions of the ETWI are evaluated on a scale from 0(low performance)to 1(high performance).Figure 12 presents the average ETWI values for the PES and the 1.5C Scenario in selected regions throughout the transition period(2023-2050).The highest-performing cases have an ETWI value of 0.5,at most,indicating non-achievement of substantial socio-economic goals and considerable room for improvement.The Southeast Asian energy transition is not just boosting economic development and employment,but also driving the regional ETWI up across the period,indicating significant improvement in quality of life in the region.This improvement reflects gains from the early deployment of renewable energy,electrification and energy efficiency and greater investment in public infrastructure and social spending under the 1.5C Scenario.Figure 12 IRENA ETWI under the PES and the 1.5C Scenario for selected regions,2023-2050Notes:The IRENA ETWI is on a scale from 0(low performance)to 1(high performance)and represents the absolute value of the overall welfare index.G20=Group of Twenty;ETWI=Energy Transition Welfare Index;EU=European Union;IRENA=International Renewable Energy Agency;PES=Planned Energy Scenario.PES1.5C Scenario00.10.20.30.40.50.6AustraliaUSAMiddle-EastNorth AmericaAfricaEU27North AfricaBrazilSoutheast AsiaG20GlobalEast AsiaWelfare IndexBut although the ETWI allows for clear comparisons,it explains neither the results drivers nor which policy instruments enable specific improvements.IRENA therefore provides indices for each dimension to shed light on the drivers.Figure 13 shows the five dimensions for Southeast Asia and EU27 in 2050 under the 1.5C Scenario.30|SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA Figure 13 Overall ETWI and its dimensional indices under the 1.5C Scenario in 2050 for EU27 and Southeast AsiaNotes:The five petals are on a scale from 0(low performance)to 1(high performance)and represent the absolute values of the five dimensions of the welfare index.The number in the centre is also on a scale from 0 to 1 and represents the absolute value of the overall welfare index.ETWI=Energy Transition Welfare Index;EU=European Union.Southeast AsiaEU27Environmental0.90.80.70.60.50.40.30.20.10.90.80.70.60.50.40.30.20.10.90.80.70.60.50.40.30.20.10.90.80.70.60.50.40.30.20.10.90.80.70.60.50.40.30.20.10.510.90.80.70.60.50.40.30.20.10.90.80.70.60.50.40.30.20.10.90.80.70.60.50.40.30.20.10.90.80.70.60.50.40.30.20.10.90.80.70.60.50.40.30.20.10.43EconomicDistributionalSocialAccessFigure 13 shows that the regions could have very different dimensional profiles.EU27 scores higher in the economic,social and distributional dimensions,while Southeast Asia performs significantly better in the environmental dimension,due to much-reduced CO2 emissions.It also suggests that Southeast Asia could improve significantly in the social dimension,although potential for additional improvement in the economic,environmental and distributional dimensions is less.While the economic aspect has been largely discussed(in section 2.2),another focus area is the environmental dimension,which is the third-largest driver of welfare improvement under the 1.5C Scenario.Almost all the welfare benefits of the energy transition result from much-reduced CO2 emissions,which mitigates the effects of climate change,although material consumption continues to increase under the PES and the 1.5C Scenario,dragging down the absolute environmental dimension.The increase in material consumption could be due to an expected increase in critical materials production in the region,which,though presenting an adverse environmental impact,is also a sector that Southeast Asia is relying on heavily for its development and clean energy transition(see Box 4 in section 2.2).This new analysis also highlights the potentialrole of regional energy inter-connection and lower fossil fuel consumption in improving the trade balance and public health,both key determinants of regional welfare.Regional infrastructure integration facilitates a fair and inclusive energy transition that enables wide sharing of welfare benefits through adequate cross-border access to clean energy.The modest contributions of the social and distributional dimensions reflect that structural challenges remain embedded,calling for targeted policies to address inequality and social protection.The welfare gains under the 1.5C Scenario therefore not only result from economic output,but also represent a more general shift towards healthier environments,greater access to energy and resilient livelihoods.Policy supportand regional co-operation can help build up these gains post 2050.SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA|31CONCLUSIONCHAPTER 3ASEANs energy transition in the 1.5C Scenario provides an opportunity to achieve inclusive growth by leveraging regional power inter-connection,clean energy investments and structural transformation to support growing GDP and employment.Member countries could support renewable energy deployment,energy efficiency and grid modernisation to boost public investment,drive job creation and raise household consumption.By 2050,ASEAN is expected to create 3.5 million additional jobs and achieve 3.7%higher GDP than under the PES.The jobs growth is driven by renewable energy,notably bioenergy and solar PV.Bioenergy remains the leading renewable due to its reliance on rural labour,while solar jobs grow significantly across the value chain in Malaysia,Viet Nam and Thailand.Both GDP and employment continue to be structurally driven by private and public investment and trade.ASEAN stands at a crossroads in its transition,and external actors,from Japans pragmatic energy diplomacy and the United Statess selective partnerships to Chinas infrastructure-based investments and the European Unions regulatory ambitions,are profoundly shaping its strategic choices.The region must navigate simultaneous challenges:accelerating its shift towards renewable-energy-based systems,capitalising on its increasing presence in the global critical mineral market,and balancing these economic opportunities with geopolitical complexities and urgent sustainability imperatives.This updated brief therefore highlights key priorities for ASEAN to maximise its energy transition benefits.It provides a roadmap to guide policy design and efficiently navigate the transitions complexity while ensuring sustainable and equitable growth,paired with socio-economic advancement,across member states.Policy makers must consider several axes of strategic significance:Harmonising renewable energy policies through the development of common standards for grid integration,procurement and investment;this would be crucial for horizontal growth and inter-operability across member states.Anchoring energy transition policies within just transition frameworks,and also deepening co-operation at the regional level,especially on infrastructure and grid inter-connection.The region could fortify energy security and increase strategic autonomy by leveraging national strategies with added value in mineral sectors,promoting innovation and enabling regional inter-connection.Boosting regional energy security through critical minerals development and grid inter-connections while mandating technology transfer and environmentally aligned FDI;these steps promise mutual gains for energy security and efficiency across the region.Leveraging renewable energy growth,particularly of solar PV and bioenergy,to maximise socio-economic benefits.PV holds considerable potential for creating jobs in industry and for attracting private investment across ASEAN countries.In parallel,bioenergy could be beneficial for decentralised energy systems,particularly in rural areas.Targeted re-skilling and upskilling initiatives,vocational training programmes,and stronger integration between education systems and industry needs are crucial to leverage the potential of these technologies to contribute socio-economic and overall welfare benefits.32|SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA Facilitating the just transition in fossil-fuel-dependent ASEAN countries particularly Indonesia,where coal constitutes over 60%of power generation by scaling up re-skilling programmes,social protection schemes and targeted investments in renewable energy industries as coal is phased out.Co-ordinating policies through established ASEAN institutions to prioritise cross-border clean energy projects with transparent FDI rules that align with local priorities.This also would include information sharing and the incentivisation of research and development to ensure regional resilience while preventing dependency on external actors.Implementing just transition policies that convert geopolitical challenges into opportunities,and balance external partnerships with domestic priorities.To ensure equitable benefit sharing,ASEAN must therefore follow a path that balances development goals with sustained resilience.SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY 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Dhabi,www.irena.org/publications/2019/Apr/Global-energy-transformation-A-roadmap-to-2050-2019Edition.IRENA(2019b),Renewable energy:A gender perspective,International Renewable Energy Agency,Abu Dhabi,www.irena.org/publications/2019/Jan/Renewable-Energy-A-Gender-Perspective(accessed 31 January 2022).IRENA(2019c),Measuring the socio-economic footprint of the energy transition:the role of supply chains,International Renewable Energy Agency,Abu Dhabi,www.irena.org/-/media/Files/IRENA/Agency/Publication/2019/Jan/IRENA_-Measuring_socio-economic_footprint_2019_summary.pdf?la=en&hash=98F94BCC01598931E91BF49A47969B97ABD374B5.IRENA(2020),Global renewables outlook:Energy transformation 2050,International Renewable Energy Agency,Abu Dhabi,www.irena.org/publications/2020/Apr/Global-Renewables-Outlook-2020.IRENA(2021a),World energy transitions outlook:1.5C pathway,International Renewable Energy Agency,Abu Dhabi,www.irena.org/publications/2021/Jun/World-Energy-Transitions-Outlook.34|SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA IRENA(2021b),World energy transitions outlook:1.5C pathway,International Renewable Energy Agency,Abu Dhabi,www.irena.org/publications/2021/Jun/World-Energy-Transitions-Outlook.IRENA(2022a),Socio-economic footprint of the energy transition:Japan,International Renewable Energy Agency,Abu Dhabi,www.irena.org/publications/2022/Sep/Socio-economic-Footprint-of-the-Energy-Transition-Japan.IRENA(2022b),World energy transitions outlook 2022:1.5C pathway,International Renewable Energy Agency,Abu Dhabi,www.irena.org/publications/2022/Mar/World-Energy-Transitions-Outlook-2022.IRENA(2023a),Socio-economic footprint of the energy transition:Indonesia,International Renewable Energy Agency,Abu Dhabi,www.irena.org/Publications/2023/Jan/Socio-economics-of-the-energy-transition-Indonesia.IRENA(2023b),Socio-economic footprint of the energy transition:Southeast Asia,International Renewable Energy Agency,Abu Dhabi,www.irena.org/Publications/2023/Jul/Socio-economic-footprint-of-the-energy-transition-Southeast-Asia.IRENA(2023d),World Energy Transitions Outlook 2023:1.5C Pathway,International Renewable Energy Agency,Abu Dhabi,www.irena.org/Publications/2023/Jun/World-Energy-Transitions-Outlook-2023.IRENA(2023e),Geopolitics of the energy transition:Critical materials,International Renewable Energy Agency,Abu Dhabi,www.irena.org/Publications/2023/Jul/Geopolitics-of-the-Energy-Transition-Critical-Materials.IRENA(2024),World energy transitions outlook 2024:1.5C pathway,International Renewable Energy Agency,Abu Dhabi,www.irena.org/Publications/2024/Nov/World-Energy-Transitions-Outlook-2024.IRENA and ACE(2022),Renewable energy outlook for ASEAN:Towards a regional energy transition,2nd Edition,International Renewable Energy Agency and ASEAN Centre for Energy,Abu Dhabi,www.irena.org/publications/2022/Sep/Renewable-Energy-Outlook-for-ASEAN-2nd-edition.Millward-Hopkins,J.,et al.(2020),Providing decent living with minimum energy:A global scenario,Global Environmental Change,vol.65,102168,https:/doi.org/10.1016/j.gloenvcha.2020.102168.Samanta,K.,and Tan,F.(2019),South-east Asia may become net fossil fuel importer in coming years:IEA,Reuters, measure of industrial performance for cross-country analysis,United Nations Industrial Development Organization,https:/unstats.un.org/unsd/ccsa/isi/2013/Paper-UNIDO.pdf.USGS(2025),Nickel,United States Geological Survey,https:/pubs.usgs.gov/periodicals/mcs2025/mcs2025-nickel.pdf.Warburton,E.(2024),Nationalist enclaves:Industrialising the critical mineral boom in Indonesia,The Extractive Industries and Society,vol.20,pp.101564,https:/doi.org/10.1016/j.exis.2024.101564.WRI(2022),Climate Watch Historical GHG Emissions,World Resources Institute,www.climatewatchdata.org/ghg-emissions.SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA|35COMPARING THE RESULTS OF THE FIRST EDITION(2023)OF THE SOCIO-ECONOMIC FOOTPRINT ASSESSMENT AND THIS(2025)UPDATED ASSESSMENTANNEX This annex compares the results for gross domestic product(GDP)and employment in the Association of Southeast Asian Nations(ASEAN)between the first edition of the Socio-economic footprint of the energy transition:Southeast Asia(IRENA,2023a)and this updated brief(2025).The first edition(IRENA,2023a),which reflected assumptions in line with the 2021 edition of the World Energy Transitions Outlook(IRENA,2021a),estimated that annual average GDP and employment growth in ASEAN could be,respectively,3.4%higher and 1.0%higher between 2021 and 2050 under IRENAs 1.5C Scenario,compared with the Planned Energy Scenario(PES).In contrast to the previous analysis,this updated version,informed by the 2nd edition of the Renewable Energy Outlook For ASEAN:Towards a Regional Energy Transition(IRENA et al.,2022),projects slightly more conservative gains,of 2.6%and 0.9%.Both analyses conclude that pursuing an energy transition aligned with the 1.5C goal can bring economic and employment opportunities in the region.GROSS DOMESTIC PRODUCTThis updated version estimates that ASEANs GDP would rise by a yearly average of 2.6tween 2023 and 2050 under the 1.5C Scenario against the PES,highlighting economic benefits.But this growth is slightly below the 3.4%reported in the first edition of the assessment(IRENA,2023a),which evaluated outcomes between 2021 and 2050.However,in contrast to the previous analysis,where the GDP difference started strong at 4.9%in the first decade(i.e.2023-2030)and slowed towards 1.8%at the end of the 2040s (i.e.2041-2050),the new estimates present a more stable and evenly distributed gain across all three decades.This shift towards balanced long-term impacts from a pattern of more front-loaded growth results from the inclusion of regional power inter-connection and additional social-directed spending,which make the transition more resilient and inclusive.It also mirrors a maturing policy environment across ASEAN that has amplified focus on sustaining the economic momentum beyond the initial wave of transition-related investments.Investment and trade remain the main drivers of the GDP difference between the scenarios,while indirect and induced effects play a much smaller role(Figure 14).36|SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA Figure 14 GDP in ASEAN region:Percentage differences between the 1.5C Scenario and the PES,by driver,2023-2050Notes:ASEAN=Association of Southeast Asian Nations;GDP=gross domestic product;PES=Planned Energy Scenario.121086420-2-4-6-82023-20302023analysis2025analysis2023analysis2025analysis2023analysis2025analysis2031-20402041-2050GDP,percentage diference between 1.5C Scenario and PES(%)Investment:privateInvestment and expenditure:publicTradeInduced:aggregate pricesInduced:social-directed paymentsInduced and indirect:otherChange in GDP4.92.83.42.61.82.4ECONOMY-WIDE EMPLOYMENT The energy transition under the 1.5C Scenario still results in net positive employment impacts for ASEAN,of 0.9%,compared with 1.0%in the previous edition(Figure 15).Meanwhile,this updated assessment also demonstrates a more balanced distribution of economy-wide employment gains across the transition period,supported by a more evenly spread contribution from key macroeconomic drivers,especially investment,and induced and indirect effects,while trade has a minor impact.The updated analysis projects consistently higher economy-wide employment in all three decades under the 1.5C Scenario versus the PES.The employment difference between the scenarios is 0.9%in the first decade(i.e.2023-2030),then 0.8%in the second(i.e.2031-2040)and peaks,at 1.0%,by 2041-2050 (Figure 15).This translates to over 3.3 million additional jobs every year throughout the transition period(i.e.2023-2050).This is a more evenly sustained gain in employment throughout the transition than in the first edition(IRENA,2023a),which had projected a front-loaded job growth,with the largest differential concentrated in the earlier years(1.4%through to 2030),tapering down to 0.7%in the last decade,2050.The updated modelling shows that embedding regional power sector inter-connection and more inclusive investment can sustain the upward job creation trend to mid-century.The positive impact of induced and indirect effects on the employment difference is still driven by increased consumer spending,increased wages and a pattern of consumption change across the transitions decades.In this updated analysis,the role of indirect and induced effects becomes increasingly important in the total job creation throughout the transition.SOCIO-ECONOMIC FOOTPRINT OF THE ENERGY TRANSITION:SOUTHEAST ASIA|37Figure 15 Economy-wide employment in ASEAN,percentage differences between the 1.5C Scenario and the PES,by driver,2023-2050Notes:ASEAN=Association of Southeast Asian Nations;PES=Planned Energy Scenario.2.52.01.51.00.50-0.5-1.0-1.5-2.02023-20302023analysis2025analysis2023analysis2025analysis2023analysis2025analysis2031-20402041-2050GDP,percentage diference between 1.5C Scenario and PES(%)Investment-privateInvestment and expenditure-publicTradeInduced and indirect efectsChange in employment1.40.91.01.00.80.7www.irena.org IRENA 2025www.irena.org
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Digitalisation and AI for power system transformation Perspectives for the G7DisclaimerThis publication and the material herein are provided“as is”.All reasonable precautions have been taken by IRENA to verify the reliability of the material in this publication.However,neither IRENA nor any of its officials,agents,data,or other third-party content providers provides a warranty of any kind,either expressed or implied,and they accept no responsibility or liability for any consequence of use of the publication or material herein.The information contained herein does not necessarily represent the views of all Members of IRENA.The mention of specific companies or certain projects or products does not imply that they are endorsed or recommended by IRENA in preference to others of a similar nature that are not mentioned.The designations employed and the presentation of material herein do not imply the expression of any opinion on the part of IRENA concerning the legal status of any region,country,territory,city or area or of its authorities,or concerning the delimitation of frontiers or boundaries.IRENA 2025Unless otherwise stated,material in this publication may be freely used,shared,copied,reproduced,printed and/or stored,provided that appropriate acknowledgement is given of IRENA as the source and copyright holder.Material in this publication that is attributed to third parties may be subject to separate terms of use and restrictions,and appropriate permissions from these third parties may need to be secured before any use of such material.ISBN:978-92-9260-690-9 Citation:IRENA(2025),Digitalisation and AI for power system transformation:Perspectives for the G7,International Renewable Energy Agency,Abu Dhabi.About IRENA The International Renewable Energy Agency(IRENA)is an intergovernmental organisation that supports countries in their transition to a sustainable energy future,and serves as the principal platform for international co-operation,a centre of excellence,and a repository of policy,technology,resource and financial knowledge on renewable energy.IRENA promotes the widespread adoption and sustainable use of all forms of renewable energy,including bioenergy,geothermal,hydropower,ocean,solar and wind energy in the pursuit of sustainable development,energy access,energy security and low-carbon economic growth and prosperity.This report can be downloaded from:www.irena.org/publications For further information or to provide feedback,please contact:publicationsirena.org.AcknowledgementsThis report was authored by Adrian Gonzalez,Alina Gilmanova,Anke Schoenlau,Ines Jacob,Rayan Dankar,Rebecca Bisangwa,and Simon Benmarraze under the guidance of Norela Constantinescu(Acting Director,IRENA Innovation and Technology Centre).It benefitted from the inputs and comments of experts,including Marcio Venicio Pilar Alcantara(Brazil,ANEEL),Alena Profit(Siemens),Siddesh Gandhi(ENTSO-E),Ulrich Mans(Quantum Delta),Liesbeth Switten(AIB-Association of Issuing Bodies),Kilian Daly(EnergyTag),Semih Tetik(CharIN),Yunshu Li(IAEA),Marcia Poletti(Octopus Energy),Deger Saygin and Joseph Cordonnier(OECD),Mari Angeles Major-Sosias(EPRI),Seong Choi(NREL,Global PST Consortium),Julie Evans(United Kingdom,DESZN),Kentaro Oe(Japan,METI),Maximilian Schuelling(Germany,BMWE),Vincent Berrutto(European Commission,DG ENER),Martina Lyons(IEA),Peter Markussen(Energinet),Karoline Steinbacher,Katja Eisbrenner and Romain Capaldi(Guidehouse).Valuable input was also provided by IRENA colleagues,including Paul Komor,Toyo Kawabata,Zafar Samadov,Samah Elsayed,Celia Garca-Baos,Diala Hawila,Gayathri Nair,Thierry Odou,Arina Anisie,Yasuhiro Sakuma,Bilal Hussain,Francisco Gafaro,Binu Parthan,James Walker,and Luis Janeiro(ex-IRENA).Publication and editorial support were provided by Francis Field and Stephanie Clarke.The report was copy-edited by Fayre Makeig,and technical review was provided by Paul Komor.Graphic design was provided by Phoenix Design Aid.IRENA is grateful for the support received from the Government of Canada to produce this report.|3PERSPECTIVES FOR THE G7CONTENTSABBREVIATIONS.5EXECUTIVE SUMMARY.6A call for digitalising power systems.6A qualitative assessment of the value added by digital solutions .7An action agenda for G7 and international partners.81.INTRODUCTION.102.THE DIGITAL VANTAGE:ADDED VALUE OF DIGITALISING POWER SYSTEMS.142.1 Value clusters.152.2 Power system digitalisation:A benefits-oriented approach .222.3 High performers in delivering benefits case studies .263.IMPLEMENTING DIGITAL SOLUTIONS:CHALLENGES AND STRATEGIC RESPONSES .403.1 Implementation barriers:Understanding challenges to define actions .424.RECOMMENDATIONS FOR THE G7 AND INTERNATIONAL COMMUNITY .524.1 Unlock system value through tailored digitalisation strategies.524.2 Accelerate digital orchestration through system-wide co-ordination.534.3 Fundamentals first:Data collection and management,interoperability and cyber security.534.4 Rethink skills and training:The integration of education topics and digital literacy.544.5 Enabling factors:Long-term planning,incentivising investments and supporting innovation.544.6 Strengthen(international)co-operation to support power system transformation,including in EMDEs.55REFERENCES.56ANNEX.64Glossary.64Survey methodology.66FIGURESFigure 1.1 IRENAs 1.5C Scenario.11Figure 1.2 Number of digital projects and partnerships tracked by BNEF in the power sector,2017-2023.12Figure 1.3 Power sector digitalisation by technology area,2023 and 2024.13Figure 2.1 Value clusters.15Figure 2.2 Quantifying the value creation of digitalisation for renewable developers(in a 50GW portfolio).21Figure 2.3 Smart charging of EVs for electricity cost reduction.28Figure 2.4 Advanced forms of smart charging.29Figure 2.5 Basic building blocks of predictive maintenance.31Figure 2.6 Comparison of alternative approaches to power-asset maintenance.31Figure 2.7 AI-enhanced forecasting of variable renewable generation.33Figure 2.8 The steps automated in FLISR technology.38Figure 3.1 Anticipated timeline for impact of digitalisation use cases.40Figure 3.2 Perceived barriers to the implementation of data in the energy sector.42Figure 3.3 Perceived barriers to digital solutions in the energy sector.45Figure 3.4 Global priorities for supporting digital energy solutions.48Figure A.1 A framework for power system digitalisation .64Figure A.2 Survey respondents by sector.67TABLESTable 2.1 Value cluster use cases and digitalisation benefits.25Table 2.2 Enabling steps for the deployment of smart charging.28Table 2.3 Enabling steps for the deployment of predictive maintenance.32Table 2.4 Enabling steps for the deployment of AI-enhanced VRE forecasting.34Table 2.5 Enabling steps for the deployment of energy attribute certificates.36Table 2.6 Enabling steps for the deployment of FLISR.39BOXESBox 2.1 Creating value through digitalisation.21Box 2.2 Energinet project.22Box 2.3 Smart charging.30Box 2.4 How digitalisation helps integrate more renewables:Case studies.34Box 2.5 Real-life examples of how granular certificates add value for the customer .37Box 2.6 Real-world application of FLISR.394|DIGITALISATION AND AI FOR POWER SYSTEM TRANSFORMATION|5PERSPECTIVES FOR THE G7ABBREVIATIONS3DEN digital demand-driven electricity networksAI artificial intelligenceAMI advanced metering infrastructureAPUA AssociationofPowerUtilitiesofAfricaBEMS building energy management systemBESS battery energy storage systemBNEF Bloomberg New Energy FinanceCRA Cyber Resilience ActDERs distributed energy resourcesDKK Danish kroneDLR dynamic line ratingDR demand responseDSO distribution system operatorEAC Energy Attribute CertificateECOWAS EconomicCommunity ofWest AfricanStatesECREEE ECOWAS Centre for Renewable Energy and Energy EfficiencyEDF lectricit de FranceEHRC Electricity Human Resources CanadaEIF European Interoperability FrameworkEMDEs emerging and developing economiesEMS energy management systemENTSO-E European Network of Transmission System Operators for ElectricityESG environmental,social and governanceEU European UnionEUR euroEV electric vehicleFACTS Flexible Alternating Current Transmission SystemFEMS Factory Energy Management SystemFLISR fault location,isolation,service restorationFSC Future Skills CentreG7 Group of SevenGO guarantee of originGW gigawattGWh gigawatt hourIEA International Energy AgencyIoT Internet of ThingsIRENA International Renewable Energy AgencyMASE Ministry of the Environment and Energy SecuritymFRR manual frequency restoration reserveO&M operation and maintenancePAYGO pay-as-you-goPMUs phasor measurement unitsR&D research and developmentRE renewable energyREC Renewable Energy CertificateRETA Regulatory Energy Transition AcceleratorSAIDI System Average Interruption Duration IndexSAIFI System Average Interruption Frequency IndexSCADA supervisory control and data acquisitionToU time-of-useTWh terawatt hourUE United EnergyUN United NationsUSD United States dollarV2G vehicle-to-gridVRE variable renewable energyWAMPACS Wide Area Monitoring Protection and Control SystemsXAI explainable AI6|DIGITALISATION AND AI FOR POWER SYSTEM TRANSFORMATIONEXECUTIVE SUMMARY1 In stakeholder consultations,66%of respondents indicated that they are incorporating digitalisation in their national energy strategies.Only 15%indicated that digital solutions are not addressed in the national energy strategy or in planning.Digital solutions hold great potential to accelerate the transformation of power systems to contribute to energy security,affordability,sustainability and reliability,and thereby support the global community on its pathway to prosperity for everyone.In this report,the International Renewable Energy Agency(IRENA)explores how digitalisation,using sensors,smart meters and data platforms and new,artificial intelligence(AI)-based applications,for predictions or automation can create value for actors across the system.The ongoing transformation of power systems is characterised by increasing complexity.As electricitys share of final energy consumption reaches 52%by 2050,doubling the current electrification rate(as projected by IRENA IRENA,2024a)digitalisation will become essential to manage the unprecedented scale.The variability of the growing demand and generation,and the rising number of distributed energy resources,require a digital transformation of power systems to maintain service reliability without diminishing the cost reductions brought by renewables.The Group of Seven(G7),representing an informal grouping of advanced economies and the European Union,has an important role to play an important role in addressing the needs for global power system transformation.Key steps are to address barriers to the deployment and integration of digital solutions,and to support emerging and developing economies in the use of digital solutions to improve energy access,creating socio-economic opportunities worldwide.A CALL FOR DIGITALISING POWER SYSTEMS A digitalised power system is no longer a nice option but a decisive enabler of electrification and decarbonisation.In fact,the reported need for accelerating the deployment of renewable energy capacities,to meet the UAE Consensus tripling target by 2030,can be catalysed by digitalisation(IRENA et al.,2025).Digital solutions can add value along the entire electricity supply chain,especially through the integration of AI,helping to benefit a diversity of stakeholders.To foster the adoption of digital solutions,including through the needed policy support and investments,it is important to identify their concrete benefits.Many countries recognise digitalisation as a strategic priority in energy planning.1 This represents a critical window of opportunity to shape corresponding efforts such that energy security is strengthened,costs are reduced and broader energy transition goals are supported.The current stage of policy development offers a timely moment to align digitalisation efforts with regulatory and investment frameworks.As this report demonstrates,digitalisation in the power sector demands a holistic approach.For the G7,this moment in time is an opportunity.A targeted,ambitious action agenda,setting the direction for power system transformation,would unlock benefits for consumers and businesses(from system operators to data centres)and boost energy security and affordability.|7PERSPECTIVES FOR THE G7A QUALITATIVE ASSESSMENT OF THE VALUE ADDED BY DIGITAL SOLUTIONS IRENA proposes a qualitative framework for assessing the benefits of value-added digitalisation solutions for power system transformation.Key benefits of digital solutions are:Reduced electricity costs for end users through optimisation of operation,market participation and integration of low-cost generation assets.AI-enhanced forecasting in Denmark reduced operating reserve costs by 10-15%,yielding annual savings of more than USD9million for customers(Bjrn Godske,2025).Improved security of supply by ensuring continuous,reliable electricity delivery even under stress conditions,during outages or during extreme events,with faster recovery from disruptions.Compared with traditional grids,grids equipped with automation technologies have been proven to reduce supply interruptions by up to 45%and the duration of outages by over 50%in controlled trials(T&D World,2019).Greater integration of renewables through effective management of variability in the generation mix.AI-enhanced forecasting and automation can effectively minimise renewable energy curtailments.AI can enable grids to operate beyond their traditional operational limits(IRENA,2025a).Examples from Australia,India and the United Kingdom show how AI has enabled up to 45%more accurate forecasts compared with traditional methods,enabling better anticipation of wind and solar variability and reduced curtailment(Solcast,2025;Sustainable Future Australia,2025).Added value for end users,helping them experience greater comfort and have more control and awareness of optimisation opportunities.Beyond cost,comfort plays a significant role in energy-related decision making,especially in demand response programmes,and digitalisation can avoid trade-offs.Smart energy technologies(e.g.smart thermostats,electric vehicle chargers,home energy management systems)enabled about 70%of United States consumers to gain greater control of their energy consumption while making their homes more comfortable(Smart Energy Consumer Collaborative,2025).Improved business performance of energy companies and in other sectors,which demonstrate greater operational and economic efficiency,higher asset utilisation and more competitiveness.In Germany,42%of manufacturing companies stated energy savings as the motivation for recent digitalisation projects(ZEW,2023).AI-driven optimisation can reduce energy consumption by 10-60ross the buildings,manufacturing and logistics sectors(WEF,2025).IRENA categorises the added value of digital solutions in monitoring,forecasting,operational optimisation,end-use automation and transparency.Even simple measures contributing to these value propositions can lead to powerful outcomes in a digitally orchestrated system:Monitoring is the foundational layer of power system digitalisation;it enables all other solutions by providing the data needed for intelligent decision making,automation and optimisation.Forecasting is among the prominent applications of AI today.Continuous machine learning anticipates weather and consumption patterns,helping to plan and operate systems more efficiently.Thanks to these advances,short-term forecasts have mean absolute percentage errors under 5%today;the result is more efficient dispatch and reserve planning(GET.transform,GIZ,2024).Operational optimisation through digital devices deployed by grid operators reduces losses and congestion,balances the system and increases reliability.These advanced technologies can deliver greater granularity and speed,enabling corrective measures at all system levels beyond traditional operating timelines.8|DIGITALISATION AND AI FOR POWER SYSTEM TRANSFORMATION End-use automation using digital market tools,demand-side management platforms and energy efficiency technologies reduce consumer costs.At the system level,they promote more efficient utilisation of existing grid assets and help alleviate stress in grids by time shifting peak loads.Transparency enables visibility across the energy value chain and fosters innovation among all actors in the power system.To harness the benefits of digital solutions for power systems,the global community will have to overcome a set of barriers to implementation.Based on consultations with IRENA member states and experts from all around the world,IRENA identified four key challenges in both advanced and emerging and developing economies.AN ACTION AGENDA FOR G7 AND INTERNATIONAL PARTNERSIRENA has the following recommendations for a G7 action agenda that supports worldwide power system transformation using digital solutions and promotes universal prosperity:Data and interoperability:Support the improved collection,processing and exchange of data,alongside appropriate cyber security measures,to lay the foundation for digital solutions.Digital skills:Support measures that train the global workforce in digital skills for everyday application,preparing them for a new age in power systems.Enabling factors:Encourage the innovative regulations required for digital solutions integration in power system applications(whose lead times and life cycles vary),even while prioritising energy security.Long-term planning across both the electricity and digital sectors is vital for the cost-effective implementation of digitalisation efforts.Co-ordination:Improve stakeholder co-ordination supporting specialised local,regional and global initiatives,as many successful initiatives in this report show.Partnerships between grid operators,member states,digital innovators,data centres and regulators are key to accelerating power system transformation in a digital age.IRENA stands ready to support the G7 and the IRENA membership on this promising pathway to create more affordable,secure and reliable power systems with digital solutions.DIGITAL ADVANTAGEAI and digitalisationElectrification of end-uses(heat,mobility,industries,etc.)and demandgrowth(data centers,electrolysers,EMDES,etc.)Barriers:Regulation and investment Cyber security risks Data interoperability Digital skills deficit Co-ordination gapsAI and digitalisation allow EMDEs to rapidly advance power system developmentMONITORINGFORECASTINGOPERATIONAL OPTIMISATIONEND-USER AUTOMATIONTRANSPARENCYPolicy focus:Value clusters in the power systemREDUCTION OF ELECTRICITY COST FOR END-USERSINCREASED SECURITY OF SUPPLYGREATER INTEGRATION OF RENEWABLESADDEDVALUE FOR CUSTOMERSIMPROVED BUSINESS PERFORMANCEBenefitsDigital pylons:In the absence of immediate grid expansion,digital solutions are required to help meet increasing demand.Note:AI=artificial intelligence;EMDEs=emerging markets and developing economies.|9PERSPECTIVES FOR THE G710|DIGITALISATION AND AI FOR POWER SYSTEM TRANSFORMATION1.INTRODUCTIONAmid growing global electrification efforts,the efficient management of power systems to deliver affordable,reliable and sustainable energy is becoming ever more important.In this context,both advanced as well as emerging markets and developing economies(EMDEs)can gain from innovative digital solutions supported by revolutionary advances in artificial intelligence(AI)that provide new means to achieve affordable,reliable and sustainable supply.The Group of Seven(G7)has already highlighted the key role of digitalisation in accelerating the energy transition particularly in making energy systems more flexible,modernising grids and integrating renewable energy as reflected in its statements on the digitalisation of power grids,efforts to boost flexibility by integrating demand response and energy storage,and international co-operation on digital energy solutions(G7,2024).Canadas 2025 presidency is committed to accelerate this development and drive power system transformation,recognising its importance to broader energy,economic and national security imperatives,by advancing a G7 Energy and AI Workplan to address the energy challenges of AI,harness its innovative potential,and drive integration of digital technologies into the energy sector to strengthen affordable,secure,and reliable energy access globally.Building on an established advisory to the G7(IRENA,2024b,2024c,2024d,2024a),work on innovation in energy systems(IRENA,2019a,2020,2023a)and its global tracking work(IRENA,2024a;IRENA et al.,2025),IRENA,with its membership of 170 countries worldwide,is committed to supporting the G7 in advancing power system transformation for the benefit of the global community.End use electrification(e.g.transport,heating and cooling)is expected to drive the growth of electricity demand in the coming years.Renewable energy holds strong potential in this context.Robust economic drivers are enabling renewable capacity additions.In the year 2024,91%of all newly commissioned utility-scale renewable energy projects delivered electricity at a lower cost than the cheapest new fossil fuelfired alternative(IRENA,2025b).Renewables constituted 92.5%of all capacity additions(against 85.8%in 2023),with Asia hosting 72%of these additions.The G7 countries(excluding the European Union)accounted for 14.3%of new renewable capacity.IRENAs 1.5C Scenario indicates a 52%share of electricity in final energy by 2050.Power system reliability and cost efficiency are foundational for energy security and affordability in this scenario,implying a larger role for digitalisation to deliver on those outcomes(Figure 1.1)(IRENA,2024a).In some countries,additional consumption from data centres is expected to surge.For example,Irelands data centres are forecasted to consume 31%of the countrys yearly electricity production by 2030,and those in the United States are estimated to consume 7-12%by 2028(Berkeley Lab,2024;EirGrid,SONI,2024).Other factors such as the electrification of mobility and,in many countries,heating,contribute to global energy efficiency gains and sustainability but also to potential stress on electricity grids.These possibilities further underline the need to harness the benefits of digitalisation and AI across technological,regulatory and operational dimensions.|11PERSPECTIVES FOR THE G7Figure 1.1 IRENAs 1.5C ScenarioOcean/tidal/waveGeothermalWind onshoreCSPSolar PVBioenergyHydro(excl.pumped)NuclearNatural gasOilCoalElectricity generation(TWh)15 00030 00045 00060 00075 00090 000Renewable energy shareVRE share20301.5-S202020501.5-S01.5C Scenario:2050354 EJ TFEC52%Electricity(direct)15%Modern biomass uses7%Others12%Fossil fuels14%Hydrogen(direct use and e-fuels)*Renewable sharein hydrogen94%Renewable share in electricityWind ofshore28689194670%Note:Renewables dominate the supply side and electricity demand dominates the demand side.Renewables are now clearly driving the global expansion of power supply;solar photovoltaic alone accounts for approximately 73%of all new renewable capacity in 2023.The graph illustrates the projected global electricity generation through 2050,which reaches nearly 90 000 terawatt hours and is increasingly dominated by wind and solar,consistent with the goals of the Paris Agreement.The right-hand figure depicts the rising importance of electricity on the demand side.The share of electricity is expected to grow from around 20%today to 52%by 2050,highlighting the critical role of electrification in a sustainable energy future(IRENA,2023b,2024a).CSP=concentrated solar power;EJ=exajoule;PV=photovoltaic;TFEC=total final energy consumption;TWh=terawatt hour;VRE=variable renewable energy.This report looks to digitalisation as a key enabler of power system transformation.Digitalisation,in the context of power systems,is defined as the integration of digital technologies in system planning,operation and management.This includes the use of sensors,smart meters,communication networks,data platforms and automation tools to make grids more reliable,efficient and flexible and increase customer engagement.AI for energy systems refers to the use of computational models and algorithms that are capable of analysing data from energy environments and monitoring,predicting,optimising and automating operations with some autonomy across the energy value chain.The term“digital solutions”encompasses digitalisation as well as AI applications(European Commission,2018).While efficiency gains are inherently desirable for system management,they also help to accommodate the rising deployment of variable renewable energy,thereby amplifying the benefits of low-cost technologies.Digital solutions enable faster,more efficient system response by automating repetitive tasks or tasks that involve large volumes of data.From smart grids and predictive maintenance to real-time data analytics and AI,digitalisation can drive efficiencies,make grids more flexible,improve system planning,increase effective network capacity and optimise energy consumption.At the same time,implementation of a more co-ordinated approach is needed to fully realise the potential of digital solutions to accelerate the energy transition.The rise of digitalisation in energy also brings its own risks.Increasing reliance on digital infrastructure creates data privacy concerns,exposes infrastructure to cyber attack and might lead to vulnerable populations getting left behind.This report explores the complexity of digitalisation,offering a balanced perspective on a digital transition in the energy sector.12|DIGITALISATION AND AI FOR POWER SYSTEM TRANSFORMATIONThe G7,through its global leadership,can support and accelerate the worldwide adoption of digital solutions in the energy transition.Digital solutions can yield energy efficiency gains and make energy systems more resilient and sustainable.There is significant potential to leverage them for the public good in EMDEs that are working to modernise and expand their energy systems.Advanced economies and EMDEs face mostly similar challenges to deploying digital solutions skills,investment,regulatory gaps and a lack of co-ordination are the major barriers,as IRENA finds.Yet,the number of digital projects deployed and the implementation rates are higher in the North American and European energy sectors than elsewhere in the world.BloombergNEFs analysis of publicly available project information suggests that,in 2023,more than 3.5 times as many digital projects were deployed in North America and Europe as in the Asia-Pacific,and more than 10 times as many as in the rest of the world(Figure 1.2).Figure 1.2 Number of digital projects and partnerships tracked by BNEF in the power sector,2017-2023Number of activitiesAsia PacificEuropeNorth AmericaMiddle East and AfricaLatin AmericaMultinational050100752515012520022517512451201722211281472018533227274132019943333247152020103362527682021102263864741520221544260943382023210Source:(BNEF,2024).Apart from the regional differences and the global trend,an assessment of the focus of the projects can give a sense of the fields that are concentrating higher attention(Figure 1.3).|13PERSPECTIVES FOR THE G7Figure 1.3 Power sector digitalisation by technology area,2023 and 202427%Analytics software29%Grid control Sensors/edge control 17%Cyber security 6%Automation 8%Cloud/data 9%Communications 4%Source:(BNEF,2024).Note:BNEF tracked 353 projects,in 2023 and 2024,in the areas of grid control,automation,analytics software,cloud/data,communications,sensors/edge control and cyber security.Overall,grid control activities accounted for almost a third of the total activities,due to distributed energy resource management systems,virtual power plants,advanced distribution management systems,vehicle-to-grid,demand response and digital substations.Beyond the regional differences,in EMDEs,challenges differ in scale and can be exacerbated by a weak ecosystem that does not fully support those technologies.Infrastructure coverage is poor(i.e.Sub-Saharan Africa accounted for 85%of the global population without electricity as of 2023 IEA et al.,2025),as well as spending on research and development(R&D).Although R&D spending in Northern Africa and Western Asia slightly increased in 2023,they received only 4%of global R&D spending that year(Bonaglia et al.,2024).Low-income countries are 2.5 times as likely to default on private investments as high-income countries(Galizia and Lund,2024).IRENA finds that,in 2024,the weighted average cost of capital for generation projects was roughly 3.8%in Europe,versus 12%in Africa(IRENA,2025b).Overall,these challenges slow the adoption of digital solutions.Meanwhile,IRENA recognises that EMDEs are a diverse group of countries with very different structures and challenges.Some of these countries are realising digital achievements in many areas of society,not just energy,and have much deeper digital penetration than more advanced economies.For example,the Democratic Republic of Congo,Sierra Leone and Bangladesh have implemented innovative pay-as-you-go business models and integrated digital solutions,such as Internet of Things(IoT),smart meters and mobile payments to increase access to clean electricity(IRENA,forthcoming).As this report addresses the challenges facing EMDEs,it does not imply that those challenges apply to all EMDEs,or that a particular pathway could benefit all of them equally.Instead,it showcases several successful,innovative initiatives towards power system transformation in EMDEs and encourages the global sharing of best practices,learning and innovation.The report begins with a discussion of five value clusters of digital solutions in power systems transformation,monitoring,forecasting,operational optimisation,end-use automation and transparency.It then explores the concrete benefits of digital solutions and lists use cases related to each cluster(Chapter 2).In Chapter3,the report will identify and discuss the barriers to implementing digital solutions and discuss innovative initiatives to overcome them.Building on IRENAs innovation work stream,stakeholder surveys and multiple interviews,the report seeks to outline an action-oriented roadmap to accelerate the deployment of digital solutions in the G7 and international community to enable a power system transformation that delivers energy security,affordability and reliability.14|DIGITALISATION AND AI FOR POWER SYSTEM TRANSFORMATION2.THE DIGITAL VANTAGE:ADDED VALUE OF DIGITALISING POWER SYSTEMSDigitalisation is a broad concept that extends beyond a mere analogue-digital substitution to encompass diverse and evolving applications that enable automation and smart systems by harnessing computational capabilities.Digitalisation,therefore,is not a closed-end task but the transformational process that leverages innovations in information technologies to enhance the systems where they are applied.Digitalisation initiatives in power systems are not new.Examples such as supervisory control and data acquisition(SCADA)systems and phasor measurements have been used by utilities for decades.However,the scale(millions of endpoints),needs(managing growing complexities from variability to congestion to flexibility)and tools(advanced and ubiquitous sensors/meters,revolutionary computational capabilities as AI and quantum)that extend and advance these legacy capabilities are more relevant today than ever before.Digital technologies can support the operation of energy systems with complex and diverse assets;they can do so using optimised forecasting,operation and maintenance,among other approaches.This is expected to boost efficiency and support energy security by making systems more reliable and resilient(IRENA,2025a).Categorisation is a needed step to sort the ever-growing and evolving initiatives and solutions that digitalisation entails for the power system.The following sections categorise digital solutions by added value and benefits.Selected use cases are described based on short-term implementation potential,highlighting the solutions that can be delivered soon,especially with the right stakeholder support.|15PERSPECTIVES FOR THE G72.1 VALUE CLUSTERSInitiatives or solutions included under power system digitalisation can be categorised following multiple approaches.This report considers the value proposition as the originator of specific use cases.Such an understanding implies that digital technologies,policy measures and business models can be classified into the value clusters of monitoring,forecasting,operational optimisation,end-user automation and transparency.These are selected under the rationale that even the simplest value proposition of a digitalisation business model or policy action can address specifically one of these clusters.Together,these clusters lead to the digital orchestration of power systems towards the diverse benefits described later in this chapter.Figure2.1 illustrates the value clusters of power system digitalisation.Figure 2.1 Value clustersMONITORINGSmart sensors,DLR,digital twins,SCADA,thermal imaging,WAMPAC,asset-health diagnosis,PMU,satellite imagery,etc.FORECASTINGDemand prediction,renewable energy production forecast,long-term capacity projections,predictive maintenance,etc.OPERATIONAL OPTIMISATIONFACTS,dynamic voltage control,optimal power fows,grid forming,probabilistic risk assessment,automated power reduction,etc.END-USER AUTOMATIONSmart appliances,vehicle-to-grid,industry 4.0,demand response,micro-grids trading,HEMS,smart thermostats,etc.TRANSPARENCYData exchange,carbon credits,interoperability,digital permitting,guarantees of origin,stakeholder dashboard,etc.Notes:DLR=dynamic line rating;FACTS=flexible alternating current transmission system;HEMS=home energy management system;PMU=phasor measurement unit;SCADA=Supervisory Control and Data Acquisition;WAMPAC=wide area monitoring protection and control systems.2.1.1 MonitoringMonitoring is the foundational layer of power system digitalisation.All other digital solutions rely on monitoring,which supplies the raw,structured and contextual data necessary for intelligent decisions,automation and optimisation.Without robust monitoring,effective implementation of forecasting,operational optimisation,end-user automation and transparency are not possible.Monitoring encompasses acquiring,transmitting and handling data from across the entire energy supply chain,from generation systems and transmission to distribution networks to end users.It relies on real-time and historical data on electrical parameters,asset conditions,environmental factors and user behaviour,among other data.Several basic technologies come under this value cluster:Sensors:These are the primary data acquisition tools.They gather data on physical and environmental parameters,such as voltage,current,temperature,vibration and humidity.Advanced sensors,including nanoscale and AI-enhanced variants,enable high-resolution,context-aware monitoring.16|DIGITALISATION AND AI FOR POWER SYSTEM TRANSFORMATION Smart meters:Installed at consumer endpoints,smart meters provide granular consumption data and support two-way communication with utilities.They form the backbone of advanced metering infrastructure(AMI)and help produce insights on demand and respond appropriately to flexible pricing schemes(EPICO,Guidehouse,2025).SCADA systems:They integrate field devices,communication networks and central processors to monitor and control grid operations,as well as generators and power assets in general.They are essential for real-time situational awareness and remote asset management.Phasor measurement units(PMUs)and wide area monitoring protection and control systems(WAMPACS)provide synchronised,high-frequency measurements across large grid areas.They increase visibility and enable fast response to disruptions.Digital twins:These virtual replicas of physical assets continuously ingest sensor data to simulate behaviour,detect anomalies and forecast degradation.They are increasingly used for testing digital systems in the design phase,conducting predictive maintenance and optimising asset life cycles,as well as for system surveillance and assisted operation.Monitoring is the foremost step in the digital transformation of power systems.Monitoring based on comprehensive,high-quality data(acquired and managed)enables the development and implementation of the solutions envisioned in the other value clusters.It is the basis for smarter,and thus more resilient,and more sustainable,energy systems.Specific use cases under monitoring include highly granular monitoring of system parameters,real-time monitoring of asset health,wide-area situational awareness(WAMPACSs/PMUs),system communications and cyber security anomaly detection,and monitoring of the environment and weather conditions.2.1.2 ForecastingAdvanced digital solutions and technologies(e.g.AI)strengthen power systems through their enhanced forecasting capabilities that produce meaningful insights by combining highly accurate data with ever-evolving analytics.Multidimensional predictive modelling and continuous machine learning,which are among the best-known areas of AI application,anticipate weather and consumption patterns.With these applications,generation and demand,as well as their scale-ups,among other aspects,can be efficiently scheduled and managed.Better forecasting enables better system planning and operation.It relies on advanced algorithms for the handling of specialised datasets.Forecasts are crucial in performing unit commitment(i.e.scheduling the power generators to be connected in each time period)and in managing reserves(i.e.scheduling the amount of stand-by power to handle variations in generation demand)and grid congestion.As the shares of variable renewable energy(VRE)and other distributed energy resources grow,power systems are having to adapt to rapid variability;this may incur additional costs to ensure reliability.Better forecasts effectively cut system costs by reducing the need for reserves,and reducing renewable energy curtailments and imbalances.A pilot project across the United States and Canada shows that integrating probabilistic solar forecasts could save 10-25%in regulation(i.e.reserves)procurement,exemplifying the significant potential of advanced forecasting in reducing costs and increasing reliability(The Johns Hopkins University,2022).Specific use cases can be categorised as follows:AI-enhanced demand forecasting:Advanced analytics(machine learning,neural networks)leverage weather data,historical usage data,data on social events and patterns,and real-time data to generate more accurate predictions of electricity demand than conventional methods.Advanced analytics models|17PERSPECTIVES FOR THE G7continuously retrain on new data to capture evolving patterns(e.g.electric vehicle EV charging,prosumer behaviours,industrial loads,heating or cooling inertias,or even cooking times).Better forecasts allow generators,grid operators and aggregators to plan dispatch and reserves optimally.Studies show that AI can markedly improve load prediction and demand-response planning;for instance,linear regression and machine learning algorithms can effectively predict power demand at both system and regional levels.AI-enhanced forecasting of variable renewable generation:AI and statistical models analyse weather forecasts and historical output to predict wind and solar generation.Advanced AI techniques known as ensemble learning or convolutional neural networks can now produce highly accurate short-term forecasts(minutes to hours ahead).Better VRE forecasts allow operators to ramp up other resources and manage reserves correctly.On the other hand,highly accurate weather-based forecasts,with high temporal and geographical granularity,improve load balancing and renewable integration,making operations more reliable and cost-effective.Short-term market price forecasting:AI models can predict short-term electricity prices by combining demand and generation forecasts.This enables dynamic pricing,supports market operations and empowers consumers to make cost-effective decisions either through behind-the-meter automations that leverage arbitrage opportunities,or by selecting a provider that implements these advanced forecasts to offer lower prices.Predictive maintenance:AI and machine learning algorithms process real-time data on the state and condition of power system assets,resulting in predictive maintenance that reduces equipment downtime,maximises system reliability and extends asset life.2.1.3 Operational optimisationOperating existing assets more efficiently(and more securely)minimises losses and congestion,helps balance the system,contributes to reliability and increases effective grid capacity.Modern digital solutions add granularity to and speed up established practices(state estimation,optimal power flows,stochastic planning)followed at the transmission and distribution levels and enable fault correction in less than the time needed by human operators.In addition,digitally enabled operational optimisation supports the development of reliable off-grid solutions.While monitoring helps detect losses,digital loss reduction solutions focus on specific actions to reconfigure the grid based on real-time analysis,smart management of power flow and voltage,and operational reserves optimisation.Power flow optimisation:Advanced optimisation tools(real-time optimal power flow,flexible alternating current transmission system FACTS controllers,distributed algorithms)adjust voltage and currents to minimise losses and maximise grid usage.Controlling capacitor banks,tap-changers and phase shifters smartly keep power factors near unity.State estimators and machine learning continually refine power flow models.In distribution,smart inverters and controllable devices rebalance phase loads.In the last decade,diverse studies of the US Department of Energy have proven that using real-time control of reactive power and balancing can reduce distribution losses by up to 30%(US DOE,2015,2024).Probabilistic assessment:Digitalisation empowers stochastic planning solutions.Stochastic planning is particularly relevant for systems with large hydropower reservoirs,such as in Canada and Brazil,where water inflows and storage levels introduce significant uncertainty.Digitalisation also makes it possible to quantify disruptive events(equipment failure,demand surges,weather volatility).Instead of using worst-case deterministic rules,operators leveraging advanced AI solutions can run multiple simulations of uncertain scenarios using data-driven forecasts of renewables and loads.Extended simulation capacity increases operators ability to identify vulnerable lines and set reserves more flexibly;this reduces power 18|DIGITALISATION AND AI FOR POWER SYSTEM TRANSFORMATIONlosses.Further,such analytics let planners weigh a small probability of failure against cost and help find more cost-optimal approaches to operate.Quantum computing is explored as a means to solve complex optimisation problems in power systems(e.g.load flow analysis and grid reconfiguration),which require increasingly more computation as distributed renewable energy sources and flexible loads are integrated.By performing system-scale simulations at unprecedented speeds,quantum algorithms can efficiently identify optimal solutions for power flows and for preventing and mitigating contingencies,in turn enabling real-time action to,for example,boost supply security and renewables integration(Thomas Morstyn,2022;TNO,Quantum Delta,2025).Co-ordination/aggregation of distributed energy resources(DERs):Aggregation services aggregate multiple small resources as one resource.For instance,aggregators or virtual power plants bundle DERs like rooftop photovoltaic,batteries,controllable loads and EV chargers and then optimise their combined output or consumption via cloud-based control.Aggregation means multiple distributed resources can be observed and eventually controlled collectively;this enables maximum visibility for system operators,to maintain efficiency and security of supply,and enables smarter system operation.2.1.4 End-use automationThis cluster includes digital market tools,demand-side management platforms and energy-efficiency technologies that help reduce costs for consumers.At the system level,demand-side automation can flatten peaks,shifting demand to minimise the curtailment of renewable energy sources,and relieves congestion,improving the utilisation of existing grid assets and preserving grid reliability,until it is reinforced.These are user-facing or market-integrated solutions that translate system efficiencies from demand response into direct financial benefits for end users,often through smart pricing or utilising energy usage insights.But although the kind of devices capable of providing these services are effective,they often have long replacement cycles(e.g.a decade or more).Therefore,this requires timely implementation of related policies and regulations to support the replacement of legacy devices lacking demand response capabilities,with these smart alternatives.Adaptive demand from appliances and devices:Digital home/building systems(smart thermostats,IoT appliances)can automatically on their own or via an aggregator shift loads to periods of low wholesale market prices or high renewables.For example,a smart dishwasher may delay washing until electricity prices drop(e.g.when solar photovoltaic PV generation is abundant).This is because smart appliances(e.g.a smart fridge)can smartly adjust their functioning time or thermal hysteresis to these factors,without any impact in performance.This demand response,enabled by real-time pricing signals,can considerably reduce bills.Among other devices,heat pumps can help achieve relevant peak demand cuts even just with their smart behaviour,as research shows.A wide implementation of these peak load shifting measures can help not only residential consumers but all users save up to 25%on bills,by avoiding the need to run extremely costly peaker power plants(IRENA,2024e).Adaptive behaviour from battery energy storage systems(BESSs)and EVs:Smart charging and discharging of batteries and EVs make them active participants in balancing the grid.An EV can charge during off-peak periods or when solar is plentiful,and even feed power back into the grid during peak periods(vehicle to grid).Home batteries can store cheap overnight power for daytime use.These devices decide charging rates based on digital signals(real-time prices or aggregator commands).Given that smart charging avoids adding to peak loads and enables smart appliances to act as distributed storage resources,its application beyond standard uses significantly boosts flexibility.Adaptive demand from industries:Industry 4.0 is defined as the integration of intelligent digital technologies(e.g.IoT,AI and big data analytics)into manufacturing and other industrial processes,|19PERSPECTIVES FOR THE G7enabling the smart operation of machines(e.g.electric motors).For example,companies can use short-time pricing and signals to adjust operations(e.g.slowing non-critical processes during peaks or adapting parallel workstreams in factories into batches that leverage dynamic tariffs while not impacting delivery times,or using thermal storage systems for processes utilising heat).Several opportunities lie in industrial hardware digitalisation.For example,only a handful of large industrial motors use variable speed drives,which can,however,reduce motor energy by up to 60%and respond to price signals.Such smart control yields significant savings:studies estimate that using efficient motors and drives on a price-response basis could help US industry save 85gigawatthours/year(GWh)(Fraunhofer ICT,2023).2.1.5 TransparencyTransparency solutions do not directly impact technical performance but are essential for governance.They are crucial for building trust among stakeholders and making informed decisions.They enable visibility across the energy value chain and foster innovation.Because electricity networks and most electricity markets are regulated,transparency and access to information are design principles that promote fair competition and enable improved outcomes for consumers.Digital platforms(e.g.open data platforms,visualisation dashboards,traceability tools for renewable energy certificates)offer regulators,planners,developers and investors access to actionable information.For users,access to clear metrics(e.g.electricity hourly consumption data)through a web platform or a digital display panel on meters along with recommendations for efficient consumption,significantly influences a shift in their behaviour towards energy efficiency.Tailored automation on these platforms can help produce user-friendly insights and enable transparency,making this information accessible and understandable for non-technical stakeholders also.Transparency solutions do not directly optimise energy flows or technical performance;rather they improve governance,induce trust and enhance decision making by increasing visibility,which also triggers innovation and fosters evolution along the energy value chain.20|DIGITALISATION AND AI FOR POWER SYSTEM TRANSFORMATIONEnergy attribute certificates(EACs),known as renewable energy certificates(RECs)or guarantees of origin(GOs)depending on the region,are another instrument that increases transparency.They are unique digital certificates that verify the source of electricity generation,particularly from renewable sources.EACs make energy markets more transparent by allowing consumers and businesses trace the origins of their energy and make informed choices.Digital platforms streamline the issuance,tracking and trading of EACs,supporting voluntary green procurement,helping consumers make informed choices and ensuring regulatory compliance.However,EACs today typically lack the exact time of generation.This is a key upgrade needed as power systems move towards real-time green power balancing,that can be enabled by digital technologies such as blockchain.Digital permitting refers to the use of digital tools to streamline and automate the permitting process for energy infrastructure projects.By digitising workflows,integrating geospatial data and enabling real-time stakeholder collaboration,digital permitting reduces administrative bottlenecks and accelerates project timelines.For example,AI can ease administrative bottlenecks by accelerating the evaluation of environmental impact assessments a common case where duplicities cause inefficiencies,but assisted systematic analysis can considerably accelerate processes.Digital permitting also boosts transparency by allowing developers and the public greater access to permitting criteria,progress and decisions.Market transactions and retail:Digital platforms improve bidding and make settlement and billing transparent.In turn,they reduce disputes and costs for retailers and market operators(G7 Communiqu,2024).Further,Explainable AI(XAI)techniques make AI models more interpretable and transparent.In turn,stakeholders are better able to understand the rationale behind AI-driven decisions in renewable energy systems(e.g.generation dispatch,maintenance scheduling,storage charging and discharging patterns).This fosters trust and accountability,especially in areas like grid planning,market forecasting and asset management(Ukoba et al.,2024).2.1.6 Quantifying value for the power systemIRENAs proposal of five value clusters qualifies how implementing digital solutions in different areas can add value at the system level.Quantifying value forecasts across these clusters,however,is inherently complex.It depends on the perspective of the stakeholder whether a utility,developer,consumer or regulator as well as on market structures,regulatory frameworks and the maturity of digital adoption.Metrics such as operational and capital expenditure savings,reliability improvements,revenue growth,avoided outages(continuity of supply)or consumer cost reductions vary widely across contexts.To illustrate how value can be quantified from a specific stakeholders perspective,Figure 2.2 presents aggregated data from mature renewable energy developers mainly from Europe,the United States and the Middle East.The figure presents consolidated minimum and maximum savings for each type of digital platform.In turn it shows potential cost reductions via efficiency in operational cost(and annualised capital costs),but also potential for additional revenue,summing up to EUR417-461million for this exemplary portfolio(e.g.by maximising the energy outputthanks to reducing the maintenance time).Across area ranges,the difference from the mean for most areas(excluding energy management systems EMSs/power management systems PMSs/BESSs)is 4.6%-5.2%(5%for the overall portfolio),giving mature developers a good indication of what to expect.According to Guidehouse,these figures are more conservative and based on projects of established developers that have formalised and implemented operation and maintenance(O&M)processes and organised O&M structures,but have potentially more significant effects on less mature utilities or emerging markets and developing economies(EMDEs)(Guidehouse,2025).The value of data management and analytics is not shown here but is foundational for digital solutions to operate.|21PERSPECTIVES FOR THE G7Box 2.1 Creating value through digitalisationFigure 2.2 depicts an aggregated portfolio(of 50gigawatts GW;solar 60%and wind 40%,onshore and offshore)of multiple developers.The total value creation potential varies widely across portfolio areas;it is rather moderate in energy management systems,power management systems and battery energy storage systems(EUR12-13million)and grows to become quite significant in asset monitoring and control(EUR165-183million).Data management and cyber security are not accounted for,but especially cyber security is seen as“insurance”against value losses resulting from non-compliance or cyberattack.Figure 2.2 Quantifying the value creation of digitalisation for renewable developers(in a 50GW portfolio)COMMENTSValue creation shown includes solar and wind assets(onshore/offshore)and includes reductions in OPEX&annualised CAPEX and increases in revenue(electricity outputs)Value of data management and analytics not quantifed but expected to add high-value(building the foundations via integrated database and AI and analytics for many of the functions)Cyber security seen as insurance against signifcant losses of value due to non-compliance or cyber attacks68529228Design,modelling&simulationProjectmgt.&installationData mgt.Customerand PPAplatformEMS/PMS/BESS75571831213312025 valuecreated(gross)Asset&maintenancemgt.417Cyber securityAssetmonitoring&control102MAIN VALUE POTENTIAL IS ON MONITORING AND CONTROLValues shown for higher and lower range461165Value creation potential(EUR million,2025,for a 50 GW portfolio)Source:(Guidehouse,2025).Notes:2025 Guidehouse Inc.All rights reserved.As per the copyright holder,this content is for general informational purposes only and should not be used as a substitute for consultation with professional advisors.AI=artificial intelligence;BESS=battery energy storage system;CAPEX=capital expenditure;EMS=energy management system;GW=gigawatt;mgt=management;OPEX=operational expenditure;PMS=power management system;PPA=power purchase agreement.In an example of value creation,the Danish system operator Energinet reduced costs as of 2025,shifting its traditional procurement of operational reserves by implementing an AI-enhanced weather forecast.The model leverages weather data for improved forecasts and informs the procurement of the day-ahead reserve.In its test phase in early 2025,Energinet reported savings of 10-15%in operational reserves for the first week in comparison with conventional procurement,corresponding to savings of DKK1.1million weekly or approximately DKK60million annually(above USD9million);further improvements are expected(Bjrn Godske,2025).The Belgian Elia Group started a dynamic dimensioning test phase as early as 2020 and served as an inspiration for the Energinet project(described further in Box 2.2).Elia Groups test phase showcased how successful development of innovative solutions can be spread via peer learning(Elia Group,2023).22|DIGITALISATION AND AI FOR POWER SYSTEM TRANSFORMATIONBox 2.2 Energinet projectEnerginets new approach to the procurement of the manual frequency restoration reserve(mFRR)leverages AI-based weather forecasting.Before it introduced this approach,Energinet purchased a day-ahead reserve of 900megawatts(MW)every day(distributed between the two major grids Great Belt DK2 with 600MW in the east and Great Belt DK1 with 300MW in the west).Improved weather forecasting can help Energinet limit its day-ahead mFRR purchase.During the test phase,no purchases under 800MW were allowed,regardless of the forecast,although effectively,the threshold of 800MW was met across all the test-phase days.The expectation is that savings can further increase relative to the test-phase results.The examples provided illustrate how added value from digitalisation can translate into tangible financial benefits for a specific stakeholder.While extrapolation to other contexts may require caution,it serves as a compelling conclusion to the value cluster framework,highlighting the real-world impact of digital solutions.2.2 POWER SYSTEM DIGITALISATION:A BENEFITS-ORIENTED APPROACH While the different areas of digitalisations added value for power systems need to be understood to evaluate digital solutions true potential,unlocking investment decisions requires identifying final benefits.Any energy value chain stakeholder needs to be able to conduct a qualitative and quantitative cost-benefit analysis.Power system digitalisation can bring many benefits,including socio-economic benefits,which are beyond the scope of this report.In the context of the present analysis,IRENA,focusing on direct implications for power systems,has identified several key benefits that digitalisation can effectively deliver:Reduction of electricity costs for end users:Decreasing the final cost of electricity for consumers and businesses through improved operational efficiency,optimised market participation of distributed resources and integration of low-cost generation based on renewables.Greater security of supply:Ensuring continuous,reliable electricity delivery even under stress conditions,during outages or during extreme events,with faster recovery from disruptions.Greater integration of Greater integration of renewables:Increasing the share of renewable energy in the generation mix by enabling flexible integration and managing variability effectively.Added value for customers:Providing end users with greater control of their consumption,greater comfort,and greater awareness and knowledge of the opportunities they have for optimising costs and cutting emissions.Improved business performance:Improving the operational and economic efficiency of companies in the energy sector or directly linked to it,increasing asset utilisation and strengthening competitiveness.|23PERSPECTIVES FOR THE G7To map the degree to which the different digital solutions included in each value cluster deliver these benefits,additional sub-categorisation is needed;use cases derive from the value clusters and touch upon their technical specificities.The use cases identified by IRENA are as follows.In the monitoring value cluster:Highly granular monitoring of system parameters:High-resolution,real-time measurement of voltage,current,frequency and other critical grid parameters.This includes smart metering infrastructure for granular billing,outage detection and flexibility signals.Real-time asset health monitoring:Continuous monitoring of grid assets(e.g.transformers,lines and substations)using advanced sensors to detect early signs of failure and to optimise maintenance.Wide-area situational awareness(WAMPACS/PMUs):Co-ordinated real-time monitoring across large grid areas using the so-called synchrophasor technology,enabling WAMPACSs,which help co-ordinate security along regions.System communications and cyber security anomaly detection:Continuous digital surveillance to detect,analyse and respond to cyber threats in critical energy systems.Monitoring of environmental and weather conditions:Monitoring meteorological and environmental conditions that affect grid operation and asset performance,using advanced weather and climate sensors,drone-based sensors and satellite imagery.In the forecasting value cluster:AI-enhanced demand forecasting:Using machine learning for more accurate electricity demand predictions over different time horizons.AI-enhanced forecasting of variable renewable generation:Predicting wind and solar output with AI to better match generation to demand.Predictive maintenance:Anticipating equipment failure and scheduling preventive interventions to reduce downtime and costs,using big data and AI-based recommendations for organising maintenance actions,considering not only asset status but also the availability of resources and optimal grid conditions to efficiently plan outages.Short-term market price forecasting:Optimising power market trading strategies based on wholesale electricity price predictions,utilising machine learning models,fed with granular input of hours to days from cross-sector datasets(e.g.grid outages,weather,behavioural demand patterns).Early awareness of grid constraints:Early detection of potential network bottlenecks and violations of stability parameters,leveraging advanced and constant power flow calculations based on multifactorial algorithms,to prevent overloads and inefficient remedial actions.In the operational optimisation value cluster:Power flow optimisation:Adjusting electrical flows to minimise losses,avoid congestion and boost system efficiency.Probabilistic risk assessment:Using probability-based models to evaluate operational risks and prioritise mitigations.24|DIGITALISATION AND AI FOR POWER SYSTEM TRANSFORMATION Virtual power plants:Aggregating distributed generation,storage and flexible loads to operate as a single dispatchable unit.Control centre of the future and automated fault location,isolation and service restoration(FLISR):Fault detection,isolation and service restoration enabling remedial actions in less than the time needed by human operators,minimising outage duration and cascading effects.Dynamic line rating(DLR):Calculating transmission line capacity in real time based on temperature,wind and other factors,allowing system operators to determine the continuously changing thermal limits of each conductor.This,in contrast to annual or seasonal ratings,implies that each line can be safely operated at higher-than-usual capacities,preventing unnecessary limitations,such as renewable energy curtailments,or other costly measures related to grid congestion.In the end user automation value cluster:Adaptive demand from appliances/devices:Automatically adjusting appliance usage timing to shift power consumption in response to price or grid signals.Adaptive behaviour from BESSs and EVs:Using BESSs and EVs to charge or discharge energy dynamically,benefitting from their role as providers of grid flexibility services.Adaptive demand from industries:Shifting industrial energy usage to reduce costs and support grid stability and enabling to offer flexibility services to the grid automatically.Energy management systems for end users(i.e.HEMSs home,BEMS commercial buildings and FEMS factories):Smart systems optimising energy consumption and production for a household or commercial facility.In the transparency value cluster:Improved information flow among stakeholders:Improving data exchange and co-ordination between grid operators,generators,suppliers and consumers.Granular renewable energy certificates:Secure and traceable renewable electricity certificates issued via digital platforms and implementing technology such as blockchain for traceability.Digital permitting:Streamlining licensing and permitting processes through digital platforms.Consumer-friendly dashboards:Intuitive interfaces helping consumers understand and manage their energy consumption.Open data platforms:Publicly accessible data hubs providing transparent information on energy systems,supporting interoperability.Looking at the presented use cases and the defined benefits,a comprehensive link can be drawn showing which use cases excel at delivering which targeted benefits.In table 2.1,IRENA labels each digitalisation use case according to its relevance as a major catalyst of(full circle)or a relevant contributor towards(half circle)the five benefits listed.The table is a result of extensive research,including expert surveys and interviews of stakeholders around the world.While some of the use cases identified may be at a mature stage of adoption in some regions,they could be game-changers for other regions,especially EMDEs or small island developing states,or deserve renewed attention for their increased potential brought by AI integration.|25PERSPECTIVES FOR THE G7Table 2.1 Value cluster use cases and digitalisation benefitsValue ClustersUse case/digitalisation benefitMONITORINGHighly granular monitoring of system parametersReal-time asset health monitoringWide-area situational awareness(WAMPACS/PMUs)System communications and cyber security anomaly detectionMonitoring of environment and weather conditionsFORECASTINGAI-enhanced demand forecastingAI-enhanced forecasting of variable renewable generationPredictive maintenanceShort-term market price forecastingEarly awareness of grid constraintsOPERATIONAL OPTIMISATIONPower flow optimisationProbabilistic risk assessmentVirtual power plantsControl centre of the future and automated FLISRDynamic line ratingEND USER AUTOMATIONAdaptative demand patterns from appliances/devicesAdaptative behaviour from BESSs and EVsAdaptative demand from industriesEnergy management systems for end users(HEMS/BEMS/FEMS)TRANSPARENCYImproved information flow among energy stakeholdersGranular renewable energy certificatesDigital permittingCustomer-friendly dashboardsOpen data platformsNote:Excels at delivering that benefit directly.Relevant in achieving this benefit.Its contribution to it is a side effect.AI=artificial intelligence;BEMS=building energy management system;BESS=battery energy storage system;EV=electric vehicle;FEMS=factory energy management system;FLISR=fault location,isolation and service restoration;HEMS=home energy management system;PMU=phasor measurement unit;WAMPACS=Wide Area Monitoring Protection and Control Systems.Greater security of supplyAdded value for customers(fort,control)Reduction of electricity costs for end usersHigher renewables penetrationImproved business performance26|DIGITALISATION AND AI FOR POWER SYSTEM TRANSFORMATIONThis analysis of digitalisation use cases across value clusters and benefits provides actionable insights for diverse stakeholders.Policy makers can identify which value clusters to prioritise depending on the national or regional context.For instance,regions targeting greater security of supply should focus on foundational monitoring solutions,which also enable the other value clusters.The rollout of monitoring systems,especially smart meters,is a pre-condition for capturing the benefits associated with demand-side management and other demand optimisation strategies for customers,with delays jeopardising progress in other areas.Meanwhile,regions with mature monitoring systems,for example,regions where smart meters and advanced grid observability have already been massively deployed,could focus on reducing electricity costs via enhanced forecasting and end user automation.Added value for customers comes primarily from digital solutions as smart appliances/devices delivering adaptive demand,energy management systems,and traceable and granular energy attribute certificates.These are specially relevant to build trust among stakeholders and give visibility to energy policies.Companies in the power sector can achieve internal efficiencies by implementing real-time asset health monitoring and control centre of the future and FLISR,while diverse industries can greatly benefit from digital permitting and take advantage of short term price market price forecasting.Use cases that boost renewables penetration include,among others,monitoring of environment and weather conditions,AI-enhanced forecasting of variable renewable generation,probabilistic risk assessment and digital permitting.Digitalisation initiatives resulting in higher renewables penetration are present in all the value clusters,and they tend to have a secondary positive impact on the other benefits pursued.An illustrative set of case studies helps identify how these digitalisation benefits are realised.2.3 HIGH PERFORMERS IN DELIVERING BENEFITS CASE STUDIES Digitalisation in the power sector is already delivering tangible benefits across diverse contexts.This section presents use cases of high performance that exemplify how digital solutions contribute to the five core benefits outlined reducing electricity costs for end users,increasing security of supply,enabling higher renewables penetration,enhancing added value for the customer and boosting business performance.Each subsection explores a specific use case,by detailing its architecture and operational mechanisms,explaining how the use case delivers the targeted benefits and offering a forward-looking perspective on its evolution between 2026 and 2030.These examples serve not only to illustrate impact but also to guide policy makers,regulators and market actors in identifying scalable,replicable digitalisation pathways.In addition,one example is selected from each value cluster but monitoring which is the primary step for all the other value clusters.|27PERSPECTIVES FOR THE G72.3.1 Reduction of electricity costs for end users:adaptative behaviour of plugged-in EVs(smart charging)Smart charging refers to adapting the charging cycle of EVs to both the conditions of the power system and the needs of vehicle users.Thus,smart charging is optimised based on real-time data such as data on grid constraints,local renewable energy production,price signals and user preferences.Digital technologies including but not limited to AMI and smart meters,cloud-based platforms and IoT,communication infrastructure,and machine learning algorithms for projecting energy demand and forecasting VRE generation form the basis of smart charging of end-user loads like EVs.Meanwhile,interoperability between EVs,chargers and grid systems remains a challenge.Standardised communication protocols and open application programming interfaces(APIs)are essential for seamless integration across manufacturers and platforms.Applications of smart charging include automatically shifting charging to when energy costs are low,minimising the wholesale cost of energy(customers can be on a fixed low-cost tariff for the device)or charging during off-peak hours when electricity prices are generally lower(by leveraging time-of-use tariffs).Automated load shifting and peak shaving to participate in ancillary services markets(for instance,balancing)or local flexibility markets are also common existing applications.How smart charging via digitalisation helps reduce electricity costs for the end userThere are a variety of approaches to smart charging.In unbundled markets,where suppliers/retailers are managing EVs,they can offer a very low per kilowatt hour price for the power consumed by the device;this significantly lowers the cost of vehicle ownership.In power systems where utilities offer time-of-use prices,smart charging systems could automatically schedule charging during off-peak hours,when prices are lower.End users are thus able to benefit from reduced prices overall,while still charging their EVs and maintaining the required mobility.End-user costs would reduce also if EVs participate in demand response markets or ancillary services markets as flexibility providers for third parties in exchange for revenue(ICCT,2025).Smart charging and vehicle-to-grid(V2G)could lower the total cost of ownership of EVs by 7%to 29ross Europe(EY,2025).Recent studies indicate that shifting charging to periods of lower electricity prices in Belgium and Germany can lower the annual electricity costs of EV users by 15%(EUR30-35)when electricity flows only from the grid to the vehicles,and by 25%(EUR50-55)when the vehicles feed electricity back into the grid(IRENA,2023b).28|DIGITALISATION AND AI FOR POWER SYSTEM TRANSFORMATIONTable 2.2 Enabling steps for the deployment of smart chargingCategoryKey steps and requirementsHARDWARE AND SOFTWARE Widespread adoption of electric vehicles(EVs).Smart charging infrastructure.Smart meters and energy management systems.Grid connection upgrades for fast charging.TECHNICAL AND OPERATIONAL ASPECTS Interoperability among EVs,chargers and management platforms.Common standards and communication protocols.Data privacy and cyber security regulations for smart charging.Development of standards,including on metering,and conformity programmes(i.e.a quality infrastructure system),resulting in more reliable products.POLICY AND REGULATION Policy support for widespread time-of-use tariffs and dynamic pricing.Regulatory frameworks that enable EVs to participate in ancillary services and incentivising smart charging by allowing revenue streams.Equitable access to smart charging infrastructure across urban and rural areas and designing incentives to support low-income EV users in adopting flexible charging behaviours.Streamlined permitting procedures for charging infrastructure.Defining vehicle-to-grid codes to allow bidirectional charging.CONSUMER ENGAGEMENT Consumer education and awareness campaigns.Transparency in charging process,price and privacy.Incentives and compensation schemes for flexibility and easy participation in energy markets.Based on:IRENA(2023).Figure 2.3 Smart charging of EVs for electricity cost reductionV2G efect on EV load807060504030201001 4001 2001 0008006004002000200400EV electricity demand(MW)EUR/MWhHour of the day01234567891011121314151617181920212223Average load unco-ordinated Average electricity price(/MWh)Average load smart V1G Average load smart V2G Source:(ENTSO-E,2021).Notes:EUR=euro;EV=electric vehicle;MWh=megawatt hour;V2G=vehicle to grid.|29PERSPECTIVES FOR THE G7Outlook 2026-2030Future advances in digital technologies will enable greater optimisation at a local level(optimising EV charging,solar output and local grid conditions).Greater penetration of V2G-enabled EVs will enable higher dynamic response in low-voltage networks,help ensure reliability in constrained grids and improve voltage management.Other advances,related to monitoring and forecasting,will drive more optimised and accurate adaptive behaviour in EVs.Advanced forms of smart charging that could support wider EV adoption include unidirectional controlled charging(V1G)and bidirectional charging(vehicle-to-grid or vehicle-to-building)using the vehicle as a source to provide flexibility to the grid and/or to buildings.V1G,which utilises standard smart chargers with basic metering and relatively simple grid integration,is already a mature,extensively used technology governed by regulation in many regions.However,bidirectional charging is still in early development,facing challenges due to its requirement of advanced two-way chargers;more robust communication infrastructure;and advanced metering systems that can manage reverse power flows.Widespread adoption of bidirectional charging requires upgrading grid safety and protection protocols and developing regulatory and market frameworks(e.g.new standards,revenue methods for grid services,and clear guidelines to promote standardisation and interoperability of V2G technologies).Although V2G can provide more benefits than V1G(e.g.grid flexibility services),it is also more costly and requires further technological and regulatory development.Unidirectional controlled charging,which uses off-peak hours to charge,allows the end user to pay less while providing peak shaving services.Hence,an iterative approach is generally appropriate;economies without specific regulation for V2G can leverage the benefits provided by V1G early as regulatory frameworks for V2G evolve(IRENA,2023a,2025c).Figure 2.4 Advanced forms of smart chargingV1G=Unidirectional controlled chargingVehicles or charging infrastructureadjust their rate of chargingV2H/B=Vehicle-to-home/-buildingVehicles will act as supplement power suppliers to the homeV2G=Vehicle-to-gridSmart grid controls vehicle charging and returns electricity to the gridSource:(IRENA,2019b).30|DIGITALISATION AND AI FOR POWER SYSTEM TRANSFORMATIONBox 2.3 Smart chargingMarket players already use smart device management:by connecting to a car,heat pump or charging equipment via the manufacturer,the system is able to manage the consumption of devices.AI cluster devices based on their flexibility and charging behaviour,and the aggregated portfolio can participate in balancing,capacity and local flexibility markets,as well as in minimising the electricity cost(delivering significant cost savings to EV users up to 70%lower electricity costs for charging).For example,Octopus Energy with its flagship product,Intelligent Octopus Go optimises EV charging by shifting it away from peak hours.Octopus Energy claims that Intelligent Octopus Go reduces costs by up to 70%while supporting grid stability.With over 270 000 customers in 2025 and over 2GW under management,Intelligent Octopus Go has become Europes largest virtual power plant;it participates in both the wholesale arbitrage market and distribution system operators market and in the balancing mechanism,provides demand flexibility services and participates in the capacity market.Intelligent Octopus Go was launched in Spain at the end of 2024.There,it currently manages over 1 500 EVs.It has also been launched in New Zealand(2023),the United States(2023),Germany(2023),France(2025)and Italy(2025).This kind of digital solution unlock demand flexibility,reduce reliance on fossil fuels and accelerate the global integration of renewables.However,cyber security concerns must be addressed and managed carefully to safeguard user privacy and ensure the devices cannot be maliciously operated to disrupt the power system.In the European Union,smart charging can save the regional energy system an estimated EUR22billion(USD23billion)per year by 2040.EV owners can also save up to EUR780(USD813)annually in electricity bills(or more than half of the average annual electricity bills).In addition,smart charging helps reduce stress on distribution grids,supporting the optimisation of investments in strengthening networks.Source:(Octopus Energy,n.d.;IRENA,2024e,2025a).2.3.2 Bolstering security of supply:Predictive maintenancePredictive maintenance leverages real-time condition-and status-related data for specific power system assets and components,collected by digital monitoring equipment(e.g.sensors and IoT-enabled devices).AI-and machine-learning-based processing of these data yields projections of equipment failure risk and triggers just-in-time maintenance;this in turn minimises downtime,optimises system reliability(ensuring continuity of power supply)and extends asset life(Platform Executive,2025).Predictive maintenance architecture includes layers,for data collection(sensors,IoT),communication(5G,edge),analytics(cloud)and operational visualisation dashboards for actionable insights(IEA,2025;IRENA,2019c;Righetto et al.,2021).But although predictive maintenance relies on foundational monitoring technologies,at its core it uses data analytics to anticipate asset failure and schedule maintenance just-in-time.Within the power sector,applications of predictive maintenance are diverse and critical for ensuring reliability and efficiency.These include vibration analysis for rotating machinery,such as turbines,generators and pumps;continuous temperature monitoring to detect overheating;analysis of moisture content and dissolved gases in transformers to assess insulation health;detection of partial discharge in high-voltage components;and real-time monitoring of the condition of circuit breakers,switchgears and other critical assets(Mazi Hosseini,2024;WorkTrek,2025).|31PERSPECTIVES FOR THE G7Figure 2.5 Basic building blocks of predictive maintenanceCONDITION ANALYSISOPTIMAL MAINTENANCE PLANDATA ACQUISITIONPREDICT MAINTENANCE NEEDBased on:(Righetto et al.,2021).How predictive maintenance boosts security of supply Through early detections of faults or anomalies detection,predictive maintenance can contribute significantly to reduced downtime through proactive maintenance planning.The continuous data collection,analysis,monitoring and reporting for power system equipment through numerous IoT-enabled interconnected sensors,can enable maintenance scheduling and timely maintenance of power generation,transmission and distribution assets.This prevents cascading failures and boosts security of supply across the power system(Cademix Institute of Technology,2024;IRENA,2019c;Platform Executive,2025).In addition,this gain in security of supply is achieved while reducing maintenance operational expenditures,due to avoidance of inefficiencies(e.g.early replacement of healthy components)that alternative approaches often entail because of lacking advanced analyses.Figure 2.6 Comparison of alternative approaches to power-asset maintenancePREDICTIVE MAINTENANCEUse advanced analytics to predict failures and act just-in-timePROACTIVE MAINTENANCERepair any defect at frst symptomsPERIODIC MAINTENANCEScheduled maintenance regardless of equipment analyticsREACTIVE/CORRECTIVE MAINTENANCERepair only when the equipment is down Afordability(-OPEX) Security of supply32|DIGITALISATION AND AI FOR POWER SYSTEM TRANSFORMATIONIn 2019,Enel Italy launched a project to improve the reliability of its power lines using predictive maintenance.Sensors were installed to collect data,analysed using machine learning algorithms to detect potential issues before they occurred.As a result,Enel successfully reduced power outages by 15%(Clou,2023).Table 2.3 Enabling steps for the deployment of predictive maintenanceCategoryKey steps and requirementsHARDWARE AND SOFTWARE Research and development supporting the wider adoption of digital technologies such as loT sensors,AMI and digital twins.POLICY AND REGULATION Regulations that promote data formats that are interoperable and favour communication protocols that are standardised across multiple systems and manufacturers.National and regional grid codes that include provisions for and guidance on predictive maintenance.TECHNICAL AND OPERATIONAL ASPECTS Policies and procedures that incentivise data sharing among utilities,original equipment manufacturers,and key services providers(e.g.of cloud-based platforms),while strictly enforcing cyber security protocols and standards to protect sensitive power system operational data(Won Shin et al.,2021).Outlook 2026-2030The implementation of digital twins for predictive maintenance could lead to significant improvements in fault and anomaly detection and other analysis,as digital twins are constantly updated with real-time data on the physical condition of power systems.Using edge computing for predictive maintenance could be a future step as it reduces latency,improves security and reliability,lowers cloud storage costs and enables business scalability by eliminating overloaded centralised data systems.Prescriptive maintenance adds value by providing digital advisory on the optimal course of action based on predictive maintenance outputs,moving beyond simply predicting failures to recommending solutions.2.3.3 Greater renewables penetration:AI-enhanced VRE forecastingAI-enhanced VRE forecasting leverages the use of relevant AI algorithms(e.g.neural networks,ensemble or other hybrid methods)for analysing historical and real-time weather data and data on power plant characteristics to predict(from forecasting to nowcasting)VRE power output levels with increased accuracy and time granularity.Weather data are collected using advanced weather and climate sensors,including drone-based sensors,which can collect high-resolution measurements of different parameters,such as temperature,air pressure and even wind speed at high altitudes(NIPR,2025).AI models and machine learning techniques can process satellite imagery to produce better forecasts for parameters such as solar radiation and cloud cover compared with classic numerical models alone.|33PERSPECTIVES FOR THE G7Figure 2.7 AI-enhanced forecasting of variable renewable generation567891011121314151617181920212223Available PV generation vs.forecastsHoursTraditional PV forecastAI-enhanced PV forecastAdditional reserves can result in market imbalances or curtailed renewable energy.AI forecasting can use near real-time data,such as from satellite imagery or drone-based sensors,to feed neural networks which maximise accuracy and reliability of forecasts.Higher uncertainty implies additional reserves,increasing total system costs.Note:AI=artificial intelligence;PV=photovoltaic.VRE forecasting helps power plant operators effectively plan operations,minimises curtailments and optimises the use of the resources for participation in ancillary markets,supporting frequency regulation and reserve functions(Arosio and Falabretti,2023).How AI-enhanced VRE forecasting contributes to higher renewables penetration AI-enhanced VRE forecasting improves forecast accuracy at a smaller time granularity(short-to long-term predictions).The reduced need for operating reserves and,consequently,the higher efficiency of generation dispatch,make power system management more effective.More precise forecasts also allow more renewable energy generators to participate in electricity markets,thereby reducing potential curtailments and/or imbalancing penalties(IRENA,2020).Recent studies show advances in nowcasting algorithms by combining geostationary satellite imagery with recurrent neural networks to predict cloud cover at PV plants with a lead time of up to fourhours.A pilot system was tested across five PV plants in China and showed a strong correlation(0.8)between predicted clear-sky ratios and actual power generation.This enabled more accurate short-term forecasts,allowing grid operators to optimise reserve dispatch and reduce the need for conservative curtailment buffers.The study highlights how satellite-based nowcasting can significantly improve solar PV integration by enabling just-in-time balancing and minimising curtailments resulting from forecast uncertainty(Xia et al.,2024).34|DIGITALISATION AND AI FOR POWER SYSTEM TRANSFORMATIONTable 2.4 Enabling steps for the deployment of AI-enhanced VRE forecastingCategoryKey steps and requirementsHARDWARE AND SOFTWARE Wide deployment of innovative solutions for collecting weather data,such as drone-based sensors and satellite imagery leveraging Al and machine learning.TECHNICAL AND OPERATIONAL ASPECTS Development of protocols between developers,asset owners and system operators for interoperability.Open weather data databases(e.g.Copernicus)can enable asset owners to implement AI-enhanced variable renewable energy forecasting more quickly.POLICY AND REGULATION Market incentives to improve forecasting accuracy(e.g.rewards for reliable predictions and penalties for deviations costs of imbalances),access to flexibility markets and support for aggregated bidding.Outlook 2026-2030Future advancements in upstream digital technologies,which form the building blocks of forecasting efforts,are expected to make forecasting even more accurate.Such advances include the development of advanced AI algorithms and agents for AI-driven energy and grid management under high VRE penetration(Enlitia,2025),the proliferation of cloud and edge computing,and the creation of scalable and transferable/adaptable AI models that are critical for wider adoption and impact(Ukoba et al.,2024).The latest advancements in quantum computing are opening new possibilities for improving wind energy forecasting.Quantum computers are being used to simulate fluid dynamics equations such as the Navier-Stokes equations,which govern atmospheric processes but require enormous classic computing resources to manage.This new capability enables more accurate short-term weather forecasts,allowing wind turbine operators to optimise power generation,reduce energy costs and add to grid stability.Hybrid models that combine classical deep learning with quantum neural networks have demonstrated higher accuracy in short-term wind speed predictions.These models leverage quantum computings ability to recognise complex patterns;in turn they produce more robust forecasts,despite seasonal variations in wind data,improving energy yield and integration(Hong et al.,2023).Box 2.4 How digitalisation helps integrate more renewables:Case studiesCompanies like Solcast and RisingStack Engineering are utilising satellite imagery and AI to nowcast solar irradiance and solar PV output with high spatial and temporal resolution.Solcasts three-dimensional cloud modelling and live satellite feeds update every 5-15minutes.Grid operators can use the cloud modelling and live satellite feed data to anticipate solar fluctuations and dispatch reserves just in time.RisingStacks deep learning model,trained on MSG-SEVIRI satellite data,achieved a 7.72%normalised mean absolute error at 150-minute horizons.These systems make more accurate reserve planning possible,reducing the need for conservative curtailment buffers,and improve the integration of solar PV(Boros,2025;Solcast,2025).Another practical case can be found at the Hornsdale Wind Farm in South Australia,where AI forecasting systems analyse wind patterns,atmospheric conditions and turbine performance data to optimise energy production and grid integration.These systems have achieved up to 45%greater accuracy compared with traditional forecasting methods,enabling operators to anticipate wind variability better and reduce curtailments.By combining real-time weather data with historical performance metrics,the AI models support dynamic reserve scheduling and more efficient dispatch decisions(Sustainable Future Australia,2025).|35PERSPECTIVES FOR THE G72.3.4 Added value for customers:Granular renewable energy certificatesEnergy attribute certificates,for example,guarantees of origin in Europe and renewable energy certificates(RECs or international renewable energy certificates I-RECs)in other regions,certify that electricity comes from renewable sources.They allow companies and households to demonstrate green energy use.Most energy attribute certificates today are issued monthly or annually.Consequently,it is difficult to verify whether renewable generation coincides with consumption,an important aspect for 24/7clean energy goals.Granular certificates,issued hourly,enable closer alignment between generation and use.This strengthens credibility,supports demand flexibility and storage,and enables services like automated hourly reporting(AFRY et al.,2024;EnergyTag,2025).Digitalisation can make energy attribute certificate systems faster and more transparent.Blockchain can add value by creating tamper-proof,time-stamped records;automating processes;and enabling participation by smaller producers.It is particularly relevant where institutional capacity is limited,or cross-border co-ordination is needed.Blockchain also supports features such as real-time monitoring and community energy sharing,while promoting decentralisation and equal access.(IRENA,2019d,2019e)These capabilities can also be achieved with other technologies,but blockchain embeds them in a distributed and transparent framework.However,broader adoption of blockchain-based energy attribute certificates depends on regulatory updates and interoperability with existing registries.In mature markets,trust in central registries is high,and so,blockchain often complements rather than replaces these registries.In emerging markets,cryptographic verification can help offset weaker institutional frameworks,provided integration with recognised systems like I-RECs is maintained.How energy attribute certificates add value for customers Smart system design based on granular certificates adds value for the customer by blending precision and transparency,building trust.Granular,timestamped GOs/RECs matching hourly consumption empower buyers with transparent,immutable proof of their clean energy use,enabling them to substantiate their environmental,social and governance claims and protect their reputation.Blockchain further streamlines GO issuance and trading by reducing administrative burdens,as well as by lowering market friction enabling prosumers,energy communities and industrial users to access certificates directly and efficiently.These features boost consumers trust,increase market participation,and elevate GOs from mere compliance tools to strategic assets that differentiate brands and industrial consumers,support decarbonisation,and enable domestic customers to be engaged and empowered(Powerledger,2023).To ensure compatibility with existing GO/REC systems,platforms must support integration with legacy registries and enable seamless data exchange across national and regional systems.36|DIGITALISATION AND AI FOR POWER SYSTEM TRANSFORMATIONTable 2.5 Enabling steps for the deployment of energy attribute certificatesCategoryKey steps and requirementsHARDWARE AND SOFTWARE Deployment of software platforms including but not limited to blockchain.Interoperability of national registries and new digital solutions.TECHNICAL AND OPERATIONAL ASPECTS Open standards for data storage and smart contracts.POLICY AND REGULATION Regulations that incentivise hourly guarantees of origin/renewable energy certificate(GO/REC)systems.Regulations across different sectors that incentivise or mandate the use of energy certificates.Pilots in emerging markets where digital tools can fill gaps in market infrastructure.CONSUMER ENGAGEMENT Consumer education and awareness campaigns.Engaging with consumers through pilot projects.Outlook 2026-2030By 2026,granular certificates are expected to move beyond pilot projects into targeted deployment,especially in markets with advanced renewables penetration and liberalised electricity trading.Early adoption is likely to focus on industrial corporate power purchase agreements,where precise,auditable sourcing is already in high demand.Regulatory recognition of blockchain-based systems will be a decisive factor in scaling the adoption of granular certificates.Between 2026 and 2030,three major trends are likely to unfold.The first is the integration of granular certificates with flexibility services like demand response and energy storage programmes,allowing both industrial and residential consumers to maximise financial and environmental value by aligning consumption with the availability of renewables.The second is the expansion of energy communities,wherein the adoption of granular certificate systems by local co-operatives and municipalities to certify,trade in and consume locally generated renewable power will strengthen engagement within communities and keep value within local economies.The third is the mainstreaming of granular certificates,supported by blockchain and other digital enabling tools,in corporate procurement standards,with leading multinational companies potentially making them a contractual requirement in renewable energy sourcing,setting new market norms(AFRY etal.,2024;WRI,2023).|37PERSPECTIVES FOR THE G7Box 2.5 Real-life examples of how granular certificates add value for the customer lectricit de France has tested automated tokenised renewable energy certificates(RECs)at an electric vehicle charging station in Singapore.Electric vehicle owners in Singapore,who often prefer charging their vehicles with renewable energy sources,could purchase RECs.The charging station was connected to a micro-grid,and the proof of concept also gathered data on the green energy produced by the micro-grid,besides issuing the RECs.This arrangement was to ensure green energy production by the micro-grid matched the consumption for charging the electric vehicles(Ledger Insights,2023).In Chile,Google partnered with the I-REC Standard to test the matching of hourly renewable generation and its consumption by a data centre based in the country.The pilot showed that granular certificates add transparency and credibility,as they significantly increase the share of consumption matched with renewable generation(The International Tracking Standard Foundation,2022).The US registry of CleanCounts(formerly M-RETS)enables hourly RECs in a database framework;it offers producers a choice between hourly or monthly RECs(CleanCounts,n.d.).In South Africa,Fuel Switch launched Africas first blockchain-based REC exchange.It integrates with the system of international RECs and allows businesses and tenants to track and trade certificates in real time;this in turn reduces costs and builds trust in markets where central registries are less developed(African News Agency,2025).2.3.5 Improved business performance:Control centre of the future and automated fault location,isolation,service,restoration(FLISR)Within the operational optimisation value cluster,the so-called control centre of the future the nodes from where power systems are managed,when integrating advanced analytics,automation and AI is redefining how system operators and utilities manage increasingly complex power systems.With new monitoring technologies generating vast data streams from sensors,phasor measurement units and smart meters,opportunities emerge for extracting meaningful insights and automatically executing optimal and just-in-time operational actions.In this environment,automated FLISR is a cornerstone technology.Its operation involves four automated steps:1.Fault detection:Intelligent algorithms continuously analyse incoming data from SCADA systems,relays and field sensors to identify anomalies that indicate faults(G-PST,2023).2.Fault location:These algorithms correlate multiple sensor inputs with the networks topology model to pinpoint fault location without waiting for field confirmation.3.Isolation:Switching commands are issued automatically to remotely controlled circuit breakers or switches,containing the affected section and preventing equipment damage.4.Service restoration:The system reconfigures the network dynamically.Power gets rerouted through alternative feeders and supply is restored to unaffected areas,often within seconds.38|DIGITALISATION AND AI FOR POWER SYSTEM TRANSFORMATIONFigure 2.8 The steps automated in FLISR technologyService restoration 4Isolation 3Fault location2Fault detection 1This real-time closed-loop process,an integral part of“control centre of the future”initiatives,represents a fundamental operational shift:decision making and execution occur in seconds,with human operators supervising and intervening only when needed,rather than driving every step(G-PST,2024).How automated FLISR improves business performanceAutomated FLISR eliminates many manual steps in fault-finding and switching,reducing the need for crew mobilisation,travel and overtime.Dynamic network reconfiguration avoids unnecessary equipment stress,balances the load across the network and enables more targeted maintenance scheduling.This helps defer capital investment in ne
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Global Corporate Sustainability Report 2025Global Corporate Sustainability Report 2025Global Corporate Sustainability Report2025This work is published under the responsibility of the Secretary-General of the OECD.The opinions expressed andarguments employed herein do not necessarily reflect the official views of the Member countries of the OECD.This document,as well as any data and map included herein,are without prejudice to the status of or sovereignty overany territory,to the delimitation of international frontiers and boundaries and to the name of any territory,city or area.Please cite this publication as:OECD(2025),Global Corporate Sustainability Report 2025,OECD Publishing,Paris,https:/doi.org/10.1787/bc25ce1e-en.ISBN 978-92-64-72759-5(print)ISBN 978-92-64-58803-5(PDF)ISBN 978-92-64-71224-9(HTML)Photo credits:Cover rusm/Getty Images.Corrigenda to OECD publications may be found at:https:/www.oecd.org/en/publications/support/corrigenda.html.OECD 2025 Attribution 4.0 International(CC BY 4.0)This work is made available under the Creative Commons Attribution 4.0 International licence.By using this work,you accept to be bound by the terms of this licence(https:/creativecommons.org/licenses/by/4.0/).Attribution you must cite the work.Translations you must cite the original work,identify changes to the original and add the following text:In the event of any discrepancy between the original work and the translation,only the text of the original work should be considered valid.Adaptations you must cite the original work and add the following text:This is an adaptation of an original work by the OECD.The opinions expressed and arguments employed in this adaptation should not be reported as representing the official views of the OECD or of its Member countries.Third-party material the licence does not apply to third-party material in the work.If using such material,you are responsible for obtaining permission from the third party and for any claims of infringement.You must not use the OECD logo,visual identity or cover image without express permission or suggest the OECD endorses your use of the work.Any dispute arising under this licence shall be settled by arbitration in accordance with the Permanent Court of Arbitration(PCA)Arbitration Rules 2012.The seat of arbitration shall be Paris(France).The number of arbitrators shall be one.3 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Foreword The OECD Global Corporate Sustainability Report aims to support the adoption of corporate governance policies and practices that strengthen the sustainability and resilience of companies.It provides easily accessible information to help policymakers,regulators,and market participants understand how sustainability-related practices are evolving.The issues covered in this report relate to the recommendations on sustainability of the G20/OECD Principles of Corporate Governance(Chapter VI).Chapter 1 presents policy insights based on the G20/OECD Principles of Corporate Governance and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct,to support policymakers,regulators and market participants who may consider reviewing some of their policies and practices in light of evolving market practices.Chapter 2 compares the main features and trends in corporate sustainability globally using the OECD Corporate Sustainability dataset.It presents information,for instance,on whether companies disclose sustainability information,GHG emission reduction targets,executive remuneration linked to sustainability factors and human rights-related information.The dataset includes information on 12 900 companies disclosing sustainability-related information,representing 91%of global market capitalisation as of September 2025.Unless otherwise mentioned,all shares of companies and in market capitalisation are calculated over 44 152 listed companies worldwide with a market capitalisation of USD 125 trillion.Chapter 3 outlines how the energy sector,as both the largest emitter of greenhouse gases and enabler of the clean energy transition,discloses material information regarding corporate sustainability,including GHG emissions and corporate governance.It dives into the disclosure practices of energy companies on GHG emissions,lobbying practices,research and development(R&D),capital expenditure,and executive remuneration.The chapter also presents findings from the analysis of 42 double materiality assessments conducted by energy companies under the first reporting cycle of the EUs Corporate Sustainability Reporting Directive(CSRD).This report has been developed by the Capital Markets and Financial Institutions Division of the OECD Directorate for Financial and Enterprise Affairs.It was prepared by Adriana De La Cruz,Eliot Evain-Wilkes,Valentina Cociancich and Matthis Cadeau,under the supervision of Caio de Oliveira,Head of the Sustainable Finance and Corporate Governance Team,and Serdar elik,Head of Division.Barbara Bijelic,Benjamin Michel and Konstantin Mann from the OECD Centre for Responsible Business Conduct prepared the sections on human rights due diligence.The authors are also grateful for comments from OECD colleagues Sebastian Abudoj,Pauline Bertrand,Thomas Dannequin,Daniel Blume,Antonio Gomes,Liv Gudmundson,Arijete Idrizi,Raphael Jachnik,Allan Jorgensen,Flora Monsaingeon-Lavuri,John OShea,Nicolas Pinaud,Sara Sultan,Hitesh Tank,and Devran Zeyrek.For a comprehensive review of regulatory frameworks on corporate sustainability including disclosure requirements,governance arrangements and market service providers readers are invited to consult the OECD Corporate Governance Factbook 2025.4 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Table of contents Foreword 3 Abbreviations and acronyms 7 Executive summary 8 1 Key policy insights 13 2 Market practices 21 2.1.Sustainability-related disclosure 22 2.2.Investor landscape 34 2.3.The board of directors 41 2.4.The interests of stakeholders and engagement 43 2.5.Disclosure of human rights information 49 References 53 3 Corporate sustainability in the energy sector 55 3.1.Greenhouse gas emissions 57 3.2.Emission reduction targets 60 3.3.Lobbying and influence 63 3.4.R&D and capital expenditure 66 3.5.Executive remuneration 70 3.6.Double materiality assessments 72 References 74 Annex A.Methodology for data collection and classification 77 References 94 FIGURES Figure 2.1.Disclosure of sustainability-related information by listed companies in 2024 22 Figure 2.2.Share of companies disclosing sustainability information by industry in 2024 23 Figure 2.3.Disclosure of scope 1 and 2 GHG emissions by listed companies in 2024 24 Figure 2.4.Share of companies disclosing scope 1 and 2 GHG emissions by industry in 2024 24 Figure 2.5.Disclosure of scope 3 GHG emissions by listed companies in 2024 25 Figure 2.6.Share of companies disclosing scope 3 GHG emissions by industry in 2024 25 Figure 2.7.Share of companies with assurance of the sustainability-related information in 2024 26 Figure 2.8.Levels of assurance of sustainability-related information in 2024 27 Figure 2.9.Levels of assurance of GHG emissions in 2024 28 5 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Figure 2.10.Assurance of the sustainability-related information by auditors in 2024 29 Figure 2.11.Assurance of the sustainability information by the auditor of the financial statement in 2024 29 Figure 2.12.Use of sustainability standards by listed companies in 2024 30 Figure 2.13.Disclosure of GHG emissions and energy-use targets by listed companies in 2024 32 Figure 2.14.Target year of the earliest GHG emission reduction target in 2024 33 Figure 2.15.Disclosure of a baseline year by listed companies with GHG emission targets in 2024 33 Figure 2.16.Metrics of the GHG targets in 2024 34 Figure 2.17.The share of market capitalisation by selected sustainability risks in 2024 35 Figure 2.18.Sustainability indicators where risks are considered to be financially material in 2024 36 Figure 2.19.100 listed companies with the highest disclosed GHG emissions in 2024 37 Figure 2.20.Investor holdings of the 100 highest-emitting companies in 2024 38 Figure 2.21.Ownership concentration at the company level in the 100 highest-emitting companies in 2024 38 Figure 2.22.Green patents of listed companies in 2024 39 Figure 2.23.The 100 listed companies with the highest number of green patents in 2024 40 Figure 2.24.Investor holdings of the top 100 companies by green patents in 2024 40 Figure 2.25.Ownership concentration in the top 100 companies by green patents in 2024 41 Figure 2.26.Board committees responsible for sustainability in 2024 41 Figure 2.27.Board-level oversight of sustainability-related issues in 2024 42 Figure 2.28.Executive compensation linked to sustainability matters in 2024 43 Figure 2.29.Private and listed companies with public benefit objectives 44 Figure 2.30.Policies on shareholder engagement in 2024 44 Figure 2.31.Employee representation on boards in 2024 45 Figure 2.32.Employees represented in trade unions or covered by collective bargaining agreements in 2024 46 Figure 2.33.Employee turnover in 2024 47 Figure 2.34.Average hours of training per year per employee in 2024 48 Figure 2.35.Disclosure on stakeholder engagement in 2024 49 Figure 2.36.Artificial intelligence ethics policy in 2024 49 Figure 2.37.Disclosure of human rights policies in 2024 51 Figure 2.38.Disclosure of human rights due diligence-related measures in 2024 51 Figure 2.39.Disclosure of human rights due diligence-related measures by geography in 2024 53 Figure 3.1.All listed energy companies overview in 2024 56 Figure 3.2.All listed energy companies disclosure of scope 1&2 and scope 3 emissions in 2024 57 Figure 3.3.Listed energy companies total disclosed GHG emissions by scope in 2024 59 Figure 3.4.Listed energy companies disclosed emissions by scope:SOE and non-SOE companies in 2024 60 Figure 3.5.Scope 1 and 2 emissions and targets for a sample of 100 energy companies in 2024 61 Figure 3.6.Scope 3 emissions and targets for a sample of 100 energy companies in 2024 61 Figure 3.7.External assurance of GHG emissions in 2024 62 Figure 3.8.Retired carbon credits against total emissions in 2024 63 Figure 3.9.Energy companies lobbying activities in 2024 65 Figure 3.10.Lobbying activities for a sample of 100 energy companies in 2024 66 Figure 3.11.Listed companies disclosing environmental R&D in 2024 67 Figure 3.12.Environmental R&D over all R&D for companies disclosing this information in 2024 67 Figure 3.13.Listed companies disclosing environmental CapEx in 2024 68 Figure 3.14.Environmental CapEx over all CapEx for companies disclosing this information in 2024 69 Figure 3.15.Cash flows and R&D expenses of listed energy companies from 2015 to 2024 70 Figure 3.16.All listed companies and energy listed companies linking executive pay to sustainability in 2024 71 Figure 3.17.Ten most common non-financial KPIs in executive remuneration in 100 energy companies in 2024 72 Figure 3.18.Outcomes of energy companies double materiality assessments in 2024 73 Figure 3.19.Share of material negative impacts and financial risks in upstream and downstream value chain segments vs.own operations in 2024 74 Figure A A.1.Share of companies disclosing sustainability information by industry in 2024,by number of companies and by market capitalisation 79 Figure A A.2.Share of companies disclosing scope 1 and 2 GHG emissions by industry in 2024,by number of companies and by market capitalisation 80 Figure A A.3.Share of companies disclosing scope 3 GHG emissions by industry in 2024,by number of companies and by market capitalisation 81 6 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 INFOGRAPHICS Infographic 1.Key facts and figures 11 TABLES Table 3.1.Lobbying frameworks across selected jurisdictions 64 Table A A.1.Categories of owners defined and used in the report 94 7 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Abbreviations and acronyms ASEAN Association of South-East Asian Nations IPCC Intergovernmental Panel of Climate Change CapEx capital expenditures ISAE International Standard on Assurance Engagements CCUS carbon capture,use and storage ISSA International Standard on Sustainability Assurance CEO chief executive officer ISSB International Sustainability Standards Board CSR corporate social responsibility KPI key performance indicator CSRD Corporate Sustainability Reporting Directive LSEG London Stock Exchange Group DEI diversity,equity and inclusion OECD Organisation for Economic Co-Operation and Development DMA double materiality assessment PBC public benefit corporation EFRAG European Financial Reporting Advisory Group R&D research and development ESG environmental,social and governance SASB Sustainability Accounting Standards Board ESRS European Sustainability Reporting Standards SBTi Science Based Targets initiative EU European Union SICS Sustainable Industry Classification System G20 Group of Twenty SOE state-owned enterprise GHG greenhouse gases TCFD Task Force on Climate-Related Financial Disclosures GRI Global Reporting Initiative TNFD Taskforce on Nature-related Financial Disclosures HSE health,safety and environment UK United Kingdom IEA International Energy Agency US United States IFRS International Financial Reporting Standards USD United States dollar IMF International Monetary Fund 8 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Executive summary Sound sustainability-related practices enable companies to recognise and respond to evolving environmental and social trends.Evidence presented in this report shows that sustainability disclosure practices have improved globally,yet continued efforts remain essential to enhance companies capacity to generate long-term growth.Between 2022 and 2024,sustainability-related disclosure expanded from 86%to 91%of global market capitalisation.In 2024,almost 12 900 companies representing 91%of listed companies by global market capitalisation disclosed sustainability-related information,up from 9 600 companies representing 86%of market capitalisation in 2022.Sector-wise,energy companies have the highest rate of disclosure,covering 94%of the industrys market capitalisation;the real estate sector has the lowest share at 78%.In 2024,companies representing 88%of market capitalisation disclosed scope 1 and 2 GHG emissions and 76%disclosed at least one category of scope 3 emissions.In 2024,42%of companies disclosing sustainability-related information obtained assurance of this information by an external service provider.Most companies rely on limited assurance(56%),with far fewer relying on reasonable assurance(17%).Globally,more than half of the sustainability-related assurances are performed by an auditor.Companies use different accounting standards and frameworks to disclose sustainability information.The top three globally are the Global Reporting Initiative(GRI)Standards,used by more than 6 500 companies,the Task Force on Climate-Related Financial Disclosures(TCFD)recommendations by more than 4 800 companies,and SASB Standards by almost 3 500 companies.Globally,582 companies use IFRS S1 and S2 from the International Sustainability Standards Board(ISSB).At least 1 800 companies listed in the European Union are subject to the use of the European Sustainability Reporting Standards(ESRS)in 2025.Institutional investors hold large equity stakes(35%)in both the 100 highest GHG emitters and the 100 leading green-patent filers,while the public sector has a sizeable share(20%)only among the high emitters.Climate change is considered to be a financially material risk for listed companies that account for 65%of global market capitalisation.Companies considered to be facing risks related to climate change,data security and human capital have larger market capitalisation than those primarily facing other sustainability-related risks such as ecological impacts or human rights.Among the 100 listed companies that disclose the highest GHG emissions,35 are from the energy industry.Institutional investors hold the largest share of equity in these 100 companies(36%),followed by the public sector with 18%.While the adoption of existing green technologies by high-emitting companies is essential for the transition to a low-carbon economy,the development of new technologies will also be necessary for a successful transition.Japanese companies account for just over half of the 100 listed companies with the highest number of green patents,followed by the United States,Developed Asia-Pacific excl.Japan and US,and Europe(15ch).Institutional investors own 37%of the equity in these companies,and the public sector a much smaller portion(4%).9 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Listed companies increasingly adopted practices that more fully integrate sustainability considerations between 2022 and 2024.In 2024,two-thirds of companies by market capitalisation had a board-level committee whose mandate included overseeing sustainability risks.The board itself may also consider sustainability-related issues.In 2024,the board in 70%of companies by market capitalisation oversaw climate-related issues,up from 53%in 2022.Boards can also consider sustainability matters when establishing senior executives compensation.Among companies with variable executive compensation,67%by market capitalisation linked it to sustainability factors in 2024,raising from 60%in 2022.To promote stakeholder and shareholder engagement,companies can establish a range of policies.Companies representing 11%of global market capitalisation include employee representatives on the board of directors,and 60%disclose the employee turnover rate.This high rate may reflect the financial materiality of human capital in many industries.Concerning shareholder engagement,86%disclose their policies including,for instance,how shareholders can question the board or management or table proposals at shareholder meetings.A growing number of human rights-related due diligence legislations requiring companies to disclose human rights information has driven increased consideration of these risks by companies.Yet,disclosure of meaningful information remains limited in practice.Disclosure of human rights information remains focused largely on reporting on key human rights policies and commitments(81%of global market capitalisation report having human rights policy)and is also correlated with companys size and geography.The energy sector is both a major emitter of greenhouse gases and a pivotal actor for deploying clean technologies.The energy industry has the highest rate of sustainability-related disclosure globally,with 94%of companies(by market capitalisation)reporting information.At the global level,listed energy companies account for 31%of total emissions disclosed.The role of governments in curbing the sectors emissions is significant.Listed state-owned enterprises(SOEs)account for almost a third of listed energy companies GHG emissions.As part of their functions,boards should effectively oversee the lobbying activities that management conducts and finances.This ensures that management gives due regard to the boards long-term sustainability strategy.Globally,7%of listed energy companies publicly disclose their position on climate-related public policy and 6%assess whether their climate policies are consistent with those of the associations to which they belong.Aligning corporate behaviour with sustainability goals will also require massive investment in alternative technologies to replace the combustion of fossil fuels.Between 2015 and 2024,net cash flow from listed energy companies operating activities increased by 32%,enabling them to triple dividend payments and share repurchase.Concurrently,net cash used in investing activities grew by less than 5%.The analysis of 42 double materiality assessments undertaken by energy companies under the first reporting cycle of the EUs Corporate Sustainability Reporting Directive(CSRD)shows that nearly all companies(98%)identified climate change as both a material negative impact and financial risk,making it the most consistently reported material issue.For most sustainability topics,companies assessed the materiality of impacts as higher than the materiality of financial risk,suggesting that companies may lack incentives to address the sustainability impacts they identify.10 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Sustainability-related corporate disclosure increased between 2022 and 2024,but additional progress is needed to further align with the G20/OECD Principles of Corporate Governance.The state of play of sustainability-related disclosure in 2024 suggests several directions for standard-setters and policymakers.The adoption of the International Standard on Sustainability Assurance(ISSA)5000 by more jurisdictions could strengthen confidence in sustainability-related assurance and ensure a common understanding of what“limited”and“reasonable”assurance mean across jurisdictions.To enhance comparability and reliability of sustainability information,regulators could also encourage reasonable assurance for companies disclosing scope 1 and 2 emissions and ensure that appropriate monitoring is in place to prevent potential conflicts of interest where the same firm provides both financial and sustainability assurance services.These efforts to enhance comparability could be supported by efforts from standard-setters to strengthen interoperability among sustainability-related disclosure frameworks,which would also help reduce compliance costs for companies operating across jurisdictions.Both the public and private sectors have a strong role to play in aligning market practices with disclosed objectives.SOEs can lead by example on sustainability and shape outcomes for a low-carbon transition.Meanwhile,institutional investors may consider the long-term returns of investing in companies developing clean energy technologies.Boards growing recognition of climate change as a core financial and strategic issue can support these orientations,particularly when coupled with enhanced transparency on lobbying activities.Given that companies representing more than two-thirds of global market capitalisation are considered to face financially material human-capital risks,greater attention to widely disclosed related metrics such as employee turnover may be warranted.Similarly,energy companies disclosure and target-setting for scope 3 emissions largely linked to the use of sold products may have limited global impact if adopted only by listed firms.Still,scope 3 emissions dwarf the operational footprint of energy companies and may therefore be too significant to be overlooked.While disclosure of environmental R&D and capital expenditure remains fragmented,evidence suggests expectations of a gradual transition to a low-carbon economy.Yet,concerns remain regarding energy companies limited expansion of capital expenditure,as recent trends show rising dividends and share buybacks significantly outpacing investment growth.11 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Infographic 1.Key facts and figures Board committees responsible for sustainability in 2024,by market cap.Executive compensation linked to sustainability matters as a share of companies with variable compensation in 2024,by market cap.Boards increasingly recognisesustainability as a strategic issue0%Pu0%GlobalChinaDev.APexcl.USEm.Asiaexcl.ChinaEuropeLatinAmericaMiddleEast andAfricaUnitedStatesOthersDev.Asia-Pacific excl.US 7 24 20 14 7 11 2 0 90%Pu0%GlobalChinaDev.APexcl.USEm.Asiaexcl.ChinaEuropeLatinAmericaMiddleEast andAfricaUnitedStatesOthersDev.Asia-Pacific excl.US 10 25 19 2 4 6 3 2 4 x Change from 2022 in percentage pointsScope 1 and 2,in 2024 Energy companies scope 1 and 2 disclosures are relatively high,but scope 3 disclosure remains limited0 0%GlobalChinaDev.APexcl.USEm.Asiaexcl.ChinaEuropeLatinAmericaMiddleEast andAfricaUnitedStatesOthersDev.Asia-Pacific excl.USScope 3,in 2024By number of companiesBy market capitalisation0 0%GlobalChinaDev.APexcl.USEm.Asiaexcl.ChinaEuropeLatinAmericaMiddleEast andAfricaUnitedStatesOthersDev.Asia-Pacific excl.USPublic sector0%Pu00 highest emittingcompanies100 companies with thehighest number of greenpatentsCorporationsStrategic individualsInstitutional investorsOther free-floatInstitutional investors portfolio allocations do not differentiate between high-emitting companies and those investingin new green technologies91%of companies by market capitalisation disclose sustainability-related information globally,20240%Pu0%GlobalChinaDev.APexcl.USEm.Asiaexcl.ChinaEuropeLatinAmericaMiddleEast andAfricaUnitedStatesOthers 7 7 5 6 6 7 7 7-4 4 5 2 13 4 6 6 1 x Change from 2022 in percentage pointsDev.Asia-Pacific excl.US 1By number of companiesBy market capitalisation0%Pu0%GlobalChinaDev.APexcl.USEm.Asiaexcl.ChinaEuropeLatinAmericaMiddleEast andAfricaUnitedStatesOthersAssurance of sustainability-related information is widespread,even in markets with no regulatory requirementsShare of companies that had their sustainability-related information assured in 2024,by market capitalisationDev.Asia-Pacific excl.US2024 USD,billionsFrom 2015 to 2024,listed energy companies tripled dividend payments and share repurchase,while net cash used in investing activities grew by less than 5001 0001 5002 0002 5002015201620172018201920202021202220232024Net cash flow fromoperating activitiesDividends paid and net repurchase of sharesNet cash used in investing activities 13 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 This chapter presents policy insights to support policymakers and regulators in further aligning market practices with the G20/OECD Principles of Corporate Governance and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct.It provides insights on sustainability-related disclosure,the role of third-party assurance in strengthening credibility of disclosures,and opportunities for enhancing interoperability among sustainability-related frameworks to reduce compliance costs and enhance comparability.The chapter provides further insights on ownership in high-emitting companies and innovative ones,the role of boards to adequately consider material sustainability matters,and the adoption of policies on shareholder and stakeholder engagement mechanisms.1 Key policy insights 14 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Managing companies and allocating capital have always required understanding how environmental,social,and technological trends shape business cash flows.Public policy developments,evolving social preferences,and technological innovation have influenced corporate behaviour and investment decisions since the earliest corporations were established.What is new is the breadth and depth of information now disclosed by companies and investors on the environmental and social aspects of their activities.Both updated in 2023,the G20/OECD Principles of Corporate Governance(G20/OECD Principles)and the OECD Guidelines for Multinational Enterprises for Responsible Business Conduct(OECD MNE Guidelines)are aligned and complementary.The G20/OECD Principles include a Chapter VI on sustainability and resilience to support companies and their investors to make decisions and manage their risks in a way that contributes to the sustainability and resilience of the corporation.The G20/OECD Principles emphasise that sound governance frameworks,combined with transparent and decision useful sustainability related disclosures,are essential to ensuring fair markets,the efficient allocation of capital,and the long-term growth and resilience of companies.The OECD MNE Guidelines recommend that enterprises conduct due diligence to address responsible business conduct issues and include a chapter(Chapter III)related to corporate disclosure of information on responsible business conduct and due diligence.This edition of the OECD Global Corporate Sustainability Report provides data driven insights to support policymakers and regulators in advancing these objectives and in implementing the recommendations of the G20/OECD Principles and OECD MNE Guidelines.1.Sustainability-related disclosure Over the past two years,sustainability-related disclosure has expanded further,rising from 86%of global market capitalisation in 2022 to 91%in 2024(Figure 2.1).This reflects continued demand for such information from large companies and investors.However,the absolute number of companies disclosing sustainability information 12 900 remains only a moderate share of the 44 152 listed companies worldwide.While this may represent an efficient equilibrium given the potentially disproportionate costs of disclosure for smaller companies,the limited disclosure by state-owned enterprises(SOEs)is noteworthy,given typically heightened expectations regarding their environmental and social impacts.In 2024,63%of SOEs(95%by market capitalisation)disclosed sustainability-related information.Across industries,disclosure levels vary significantly.In 2024,coverage by market capitalisation ranged from 78%to 94%(Figure 2.2).The real estate sector has the lowest level of disclosure,with only 78%of market capitalisation reporting sustainability information.Disclosure in the sector is particularly weak for scope 1 and 2 GHG emissions(74%,Figure 2.4)and at least one category of scope 3 emissions(55%,Figure 2.6).Considering the real estate sectors exposure to climate-related physical risks and its high emissions intensity linked to the use of cement and steel,these low levels of disclosure are notable.Standard setters and policymakers may therefore consider whether additional sector-specific guidance,or capacity building measures,could strengthen sustainability reporting in the real estate sector particularly in Emerging Asia and the Middle East and Africa,where disclosure rates are the lowest.Commercial data providers have sought to fill investor demand for emissions data,particularly on smaller companies and scope 3 emissions.In 2024,11 135 companies representing 88%of global market capitalisation disclosed scope 1 and 2 emissions,while estimates are available for 16 000 companies covering 95%of market capitalisation(Figure 2.3)The gap is even more striking for scope 3 emissions:7 712 companies(76%of market capitalisation)disclosed at least one category,but estimates extend coverage to nearly 15 900 companies,or 94%of market capitalisation(Figure 2.5).These estimates,while useful,cannot fully substitute for high-quality disclosure.Even the most sophisticated estimation models often rely on industry and location averages,which may not capture company-specific innovations or operational efficiencies that investors seek when allocating capital in the expectation of a transition to a low-carbon economy.15 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 2.Third-party assurance As recognised in Sub-principle VI.A.5 of the G20/OECD Principles,“sustainability-related disclosures reviewed by an independent,competent and qualified attestation service provider may enhance investors confidence in the information disclosed and the possibility to compare sustainability-related information between companies.”Between 2022 and 2024,assurance practices expanded,with coverage increasing from 66%of global market capitalisation to 81%(Figure 2.7).Assurance is common even in jurisdictions where it is not required or recommended,such as the Peoples Republic of China(hereafter“China”)(19%of companies,51%of market capitalisation)and the United States(39%and 83%).Limited assurance remains considerably more widespread(56%)than reasonable assurance(17%)(Figure 2.8).In this context,the adoption of the International Standard on Sustainability Assurance(ISSA)5000,finalised in November 2024,is timely.Its adoption by many jurisdictions could strengthen confidence in sustainability reporting and ensure a common understanding of what“limited”and“reasonable”assurance mean across jurisdictions,including in Emerging Asia where“reasonable”assurance is more commonly cited.Two other developments may require attention by policymakers and regulators.First,among companies that provide assurance of their scope 1 and 2 emissions,just under 15%provide reasonable assurance(Figure 2.9).Given that climate change is a financially material risk for most listed companies(Figure 2.17),and that scope 1 and 2 emissions are relatively straightforward to measure,policymakers may wish to consider encouraging reasonable assurance for companies that disclose scope 1 and 2 emissions.This would be in line with sub-Principle VI.A.5,which states says that“greater convergence of the level of assurance between financial statements and sustainability-related disclosures should be the long-term goal.”Second,contrary to other regions,many European companies hire the same firm both for auditing financial statements and sustainability assurance(Figure 2.11).Regulators in Europe may,therefore,wish to monitor whether boards,audit committees or shareholders adequately oversee this practice in order to prevent potential conflicts of interest and safeguard the credibility of sustainability disclosures.3.Sustainability-related disclosure standards In 2023,two new sets of standards were introduced:the IFRS S1 and S2,developed by the International Sustainability Standards Board(ISSB),and the European Sustainability Reporting Standards(ESRS).Globally,582 companies use the International Sustainability Standards Board(ISSB)standards,either stating a partial alignment,or asserting compliance,still well below the number of companies using the TCFD recommendations(4 857)or SASB Standards(3 497),which provided the foundations for the ISSBs standard-setting work(Figure 2.12).The use of ESRS remains limited,reflecting their recent adoption in July 2023.Under the recently revised Corporate Sustainability Reporting Directive(CSRD),large,listed companies are applying ESRS for the first time in 2025,with other companies to phase them in from 2028 onwards.At least 1 800 EU-listed companies are expected to fall under ESRS requirements starting in 2025.Taken together,these developments mean that the global disclosure landscape is expected to converge around three standards in the short term:the GRI Standards,used by over 6 500 companies;ISSB standards,potentially to be implemented by around 5 000 companies if issuers focused on financial materiality-only choose these standards;and ESRS,applying to approximately 2 000 companies by end-2025.Strengthening interoperability among these three frameworks may be critical to reducing compliance costs for companies operating across jurisdictions and to enhancing the comparability,reliability,and decision usefulness of sustainability-related information.4.The rights of shareholders and institutional investors An analysis of the 100 listed companies with the highest disclosed GHG emissions yields two key insights(see Figure 2.19 for company characteristics).16 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 First,institutional investors hold the largest equity share in these high-emitting firms,accounting for 36%overall,with double the share in the United States(Figure 2.20).This underscores the importance of corporate governance frameworks in enabling and supporting effective shareholder engagement,as highlighted in Principle III.A of the G20/OECD Principles.However,investor engagement may be less effective in markets where most high-emitting companies are characterised by a dominant controlling shareholder,such as in Emerging Asia,Latin America,and the Middle East and Africa.By contrast,in Japan,the ownership of the 5 largest shareholders in many high-emitting companies is limited,but the 20 largest shareholders hold on average 42%of the shares(Figure 2.21).Second,the public sector is a significant shareholder in high-emitting companies in many emerging markets(Figure 2.20).Public ownership among the top-100 emitting companies is particularly high in China(51%),other Emerging Asian markets(51%),Latin America(47%),and the Middle East and Africa(41%).Most top-100 emitting companies in these regions are state-owned,highlighting the role SOEs can play in leading by example on sustainability and shaping outcomes for a low-carbon transition in emerging economies.While the adoption of existing green technologies by high-emitting companies is essential for the transition to a low-carbon economy,the development of new technologies may also be required to ensure a successful transition while safeguarding living standards and energy security.An analysis of the 100 listed companies with the largest number of green patents provides two additional insights(see Figure 2.23 for company characteristics).First,“other free-float”investors hold the largest share of equity in these highly innovative firms(40%),compared to just 31%in the group of highest emitters(Figure 2.24).This suggests that individual investors may be inclined to allocate capital to innovative companies with strong green R&D performance.A policy implication may be that the democratisation of finance where individuals invest directly in securities could not only enhance individual investors returns by reducing intermediation costs,but also channel greater capital towards companies developing green technologies.Second,institutional investors hold a 37%stake in these highly innovative companies,almost the same as their 36%share in the highest emitters.This may indicate that,despite public commitments to support the low-carbon transition,institutional investors portfolio allocations have not differentiated between high emitting companies and those investing in new green technologies.As such,investor led engagement initiatives targeting high emitters,such as Climate Action 100 ,may need to be complemented by new initiatives that also consider investment allocation and stewardship efforts towards highly innovative companies.5.The board of directors Principle VI.C of the G20/OECD Principles recommends that“the corporate governance framework should ensure that boards adequately consider material sustainability risks and opportunities when fulfilling their key functions.”Importantly,such considerations should be pursued in the best interest of the company and its shareholders,taking into account the interests of stakeholders,as set out in Principle V.A.Assessing whether boards are fulfilling these responsibilities necessarily requires a case-by-case evaluation.In 2024,companies representing 70%of global market capitalisation reported that their board of directors oversees climate-related issues(Figure 2.27,Panel A).This is an increase from 53%in 2022 and surpasses the share of companies representing 65%of market capitalisation for which climate change is considered a financially material risk(Figure 2.17).This is a notable development,underscoring the growing recognition by boards of directors of climate change as a core financial and strategic matter.6.The interests of stakeholders and shareholder engagement Globally,more than 9 600 companies representing 86%of market capitalisation disclosed policies on shareholder engagement in 2024(Figure 2.30).These typically set out how shareholders can question the board or management,or table proposals at shareholder meetings.This is 1 000 more companies than 17 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 in 2022.While the disclosure of such policies does not by itself guarantee effective engagement,it signals a willingness by companies to facilitate dialogue with shareholders particularly where disclosure is not mandated by regulation.This trend is therefore a positive indicator of progress towards the implementation of Principle VI.B of the G20/OECD Principles,which encourages“dialogue between a company,its shareholders and stakeholders to exchange views on sustainability matters as relevant for the companys business strategy.”Principle VI.D of the G20/OECD Principles further recommends that“the corporate governance framework should consider the rights,roles and interests of stakeholders.”To promote value-creating co-operation with employees in particular,companies may establish mechanisms for participation,such as workers councils or employee representation on boards.These mechanisms between companies and their employees may be particularly relevant for the two-thirds of employees of listed companies who are neither represented in trade unions nor covered by collective bargaining agreements(Figure 2.32).In 2024,companies representing 11%of global market capitalisation had employee representatives on their board of directors(Figure 2.31).Regional differences are significant:59%of market capitalisation in China,39%in Europe,and 9%in Latin America,compared with negligible levels in other regions.Relative to 2022,board-level employee representation has remained stable in Europe(10%)and Latin America(below 1%),but increased in China,rising from 26%to 28%.Corporate disclosure on employee turnover may serve as a useful proxy for assessing employee satisfaction and the extent to which companies may be willing to invest in company-specific human capital.In 2024,more than 8 400 companies representing 60%of global market capitalisation reported employee turnover data(Figure 2.33).This was complemented by disclosures from more than 7 350 companies,representing 57%of market capitalisation,on the average number of hours of employee training per year(Figure 2.34).The prevalence of these disclosures likely reflects the fact that 68%of global market capitalisation is concentrated in companies for which human capital risks are considered financially material(Figure 2.17).7.Disclosure of human rights information Disclosure of human rights information lags significantly behind overall disclosure of sustainability information.For instance,companies representing 26%of global market capitalisation report on salient human rights impacts identified in their operations and supply chains,much lower than the 91%that disclosed sustainability-related information in 2024.The most widely disclosed human rights-related information is the existence of corporate policies and commitments on human rights(81%of market capitalisation)and key human rights issues such as child and forced labour(approximately 85%of market capitalisation).The disclosure of human rights information is strongly and positively correlated with companies market capitalisation,as reflected in disclosure rates being about ten times higher when measured by market capitalisation compared to the number of companies across all indicators.Disclosure is also significantly higher in certain regions,including in Europe and the United States.The perception that human rights is not widely considered a financially material risk can in part explain such findings.As identified in Figure 2.18,human rights-related issues are considered material financial risks by companies representing 13%of market capitalisation and rank as a material topic in only 6 out of 77 industries(compared with 50%and 33 industries respectively for energy management).At the same time,the lack of quantitative indicators and frameworks to measure human rights performance can hinder companies ability to meaningfully report on their human rights practices.The comparatively lower level of financial materiality for human rights risks implies that legislation is an important driver of companies human rights practices.Reporting the existence of policies on forced and child labour,for instance,is highly prevalent in geographies that have adopted forced labour legislation.In the United States and Europe where such laws exist,between 89-95%of listed companies(by market capitalisation)report having a forced or child labour policy or commitment.18 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 8.The energy sectors climate-related disclosure The energy sector encompassing the oil,gas,coal and electric power industries is both a pivotal driver of clean energy deployment and the single largest source of greenhouse gas emissions,accounting for almost a third of total emissions disclosed by listed companies(Figure 3.1,Panel A).For capital markets to function efficiently,investors need a clear understanding of individual energy companies preparedness for alternative pathways towards a low-carbon economy.Significantly,the energy sector has the highest sustainability-related disclosure rate of any industry,with companies representing 94%of market capitalisation reporting sustainability information in 2024(Figure 2.2).Disclosure of scope 1 and 2 GHG emissions is relatively high in the energy sector,covering 90%of market capitalisation.However,scope 3 disclosure remains limited,particularly in Emerging Asia and the Middle East and Africa,where fewer than half of companies by market capitalisation report such data(Figure 3.2).Where scope 3 emissions are reported,disclosure is concentrated among large companies,which only rarely set reduction targets for this scope and,when they do,interim targets are often limited(Figure 3.6).This raises an important policy question for capital market regulators,environmental and energy authorities,and investors:should energy companies be further incentivised or required to disclose comprehensive scope 3 information and adopt targets covering these emissions?The issue is particularly relevant given that state-owned enterprises(SOEs)account for 32%of the sectors disclosed emissions,yet appear to underreport scope 3 emissions compared to other companies(Figure 3.4).Energy companies have greater control over their scope 1 and 2 emissions,which arise from direct operations and purchased energy.By contrast,setting targets for scope 3 emissions largely linked to the use of products sold has proven challenging.Such targets may have limited direct impact on demand or global emissions if only adopted by listed companies.This helps explain why many companies in the sector have placed greater emphasis on the disclosure of scope 1 and 2 emissions.Still,scope 3 emissions dwarf the operational footprint of energy companies and may therefore be too significant to be overlooked.9.The energy sectors impact One area where energy companies commitment to addressing GHG emissions can be tested is lobbying.Sub-principle VI.C.1 of the G20/OECD Principles of Corporate Governance recommends that“boards should ensure that companies lobbying activities are coherent with their sustainability-related goals and targets”.Globally,7%of listed energy companies disclose their climate policy positions and 15%report their business association memberships,with large companies disclosing average lobbying expenditures of USD 3.5 million(Figure 3.9).These figures reveal shareholders limited accessibility to relevant information to hold boards accountable for overseeing lobbying activities.However,regional practices vary widely:Europe and the United States lead among advanced economies,and Latin America among emerging markets,while other regions have more room for improvement.Disclosure of environmental R&D and CapEx remains limited.Globally,only 2.5%of listed energy companies report environmental R&D,with regional figures ranging from 7.3%in Latin America to just 1.3%in the Developed Asia-Pacific excl.US(Figure 3.11).Similarly,only 7%of energy companies disclose environmental CapEx(Figure 3.13).Where large companies do report,their allocation of 43%of CapEx to low-carbon assets may suggest expectations of a gradual transition to a low-carbon economy.However,these disclosures are not aligned with a harmonised classification system,such as a taxonomy for sustainable activities,but rely instead on company-specific definitions,limiting comparability.Another challenge lies in the capacity and willingness of energy companies to sustain CapEx and R&D green or otherwise given competing priorities.Between 2015 and 2024,the net cash flow of listed energy companies from operating activities increased by 32%,enabling them to triple dividend payments and share repurchases,while net cash used in investing activities grew by less than 5%(Figure 3.15).19 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Total R&D expenses quadrupled from 2015 to 2023,signalling efforts to innovate,but declined in 2024,falling by 14%compared to 2023.Findings from the analysis of 42 double materiality assessments undertaken by energy companies under the first reporting cycle of the EUs Corporate Sustainability Reporting Directive(CSRD)highlight consistent gaps between the assessment of material negative impacts and material financial risks across most sustainability topics.For instance,86%of companies identified material impacts related to biodiversity and ecosystems,while only 36%associated the topic with material financial risks to the company.Similar gaps were found for water,pollution and social issues associated with workers in the value chain.This may suggest that companies in the sector often lack financial incentives to mitigate some significant sustainability impacts,particularly for key environmental and social topics.Policymakers may consider market-based or policy approaches that effectively price and assess the cost of adverse impacts and thereby strengthen incentives for corporate action.Additional research across other sectors would be critical to assess whether similar patterns persist across sectors and geographies,and to design effective policy responses that account for any such differences.21 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 This chapter outlines key trends and market practices of listed companies concerning corporate sustainability.It covers the regional and sectoral distribution of sustainability-related disclosures,common reporting standards and GHG emissions disclosure.Additionally,it explores third-party assurance of listed companies sustainability related disclosure,their use of sustainability standards and their emission reduction targets.The chapter examines financially material sustainability risks,the investor landscape,ownership patterns of top emitting and environmentally innovative companies,and board responsibilities in managing sustainability issues.It also highlights the integration of stakeholder interests into corporate decision making,the disclosure of artificial intelligence ethics policy and of human rights-related information.2 Market practices 22 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 2.1.Sustainability-related disclosure Information on a companys sustainability-related risks and opportunities and how it manages them can be material for investors decisions to buy or sell securities,as well as to exercise their rights as shareholders and bondholders.Therefore,access to material sustainability information is crucial for market efficiency and for the protection of investors.Most regulators mandate or recommend the disclosure of sustainability matters(OECD,20251).However,even in jurisdictions where sustainability disclosure is not mandatory,a significant number of companies have been reporting on sustainability risks and opportunities,driven by the interest of investors in the impact of environmental and social matters on companies financial performance.Out of the 44 152 listed companies globally with a total market capitalisation of USD 125 trillion,almost 12 900 disclosed sustainability-related information in 2024 or 2025(Figure 2.1).For these figures,a company is considered as disclosing sustainability-related information when it discloses a sustainability report,an integrated annual report with sustainability data,a corporate social responsibility report with substantial data or a full or partial report of GHG emissions scope 1 and 2 or scope 3.The companies that disclosed sustainability-related information represent 91%of the global market capitalisation.In 2024,Europe(98%),Developed Asia-Pacific excl.the US(94%),and the United States(93%)had the highest overall levels of disclosure by market capitalisation.Among the 2 216 listed state-owned enterprises globally,63%(1 395 companies)disclosed sustainability-related information in 2024(these represented 95%of the market capitalisation of all state-owned enterprises).Between 2022 and 2024,sustainability-related disclosure expanded,particularly among the largest listed companies.In China,Developed Asia-Pacific excl.the US,Emerging and Developing Asia excl.China,and the Middle East and Africa,disclosure by market capitalisation rose by 7 percentage points.Figure 2.1.Disclosure of sustainability-related information by listed companies in 2024 91%of companies by market capitalisation disclose sustainability-related information globally.Source:OECD Corporate Sustainability dataset,LSEG,Bloomberg,MSCI.See Annex A for details.Across industries,the share of companies by market capitalisation disclosing sustainability information in 2024 ranged from 78%to 94%globally.The share is the largest for the energy,technology and financials 0 0%GlobalChinaDev.AP excl.USEm.Asia excl.ChinaEuropeLatin AmericaMiddle East andAfricaUnited StatesOthersBy number of companiesBy market capitalisation761364166157772574-4-1001020GlobalChinaDev.AP excl.USEm.Asia excl.ChinaEuropeLatin AmericaMiddle East andAfricaUnited StatesOthersChange with respect to 2022Percentage points 23 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 sectors,followed by consumer cyclicals(Figure 2.2).The share of sustainability-related disclosure by industry also varies between region.For instance,in China,companies representing 99%of the financial sectors market capitalisation disclose sustainability information,compared to 84%in the Middle East and Africa and 82%in Latin America.Figure 2.2.Share of companies disclosing sustainability information by industry in 2024 The energy industry discloses sustainability information extensively,but other high environmental-impact sectors such as real estate lag.Note:The energy sector is defined to include both energy and energy-related utilities industries and is based on the Reference data Business Classification(TRBC)from LSEG.Sectors with less than USD 100 billion of market capitalisation were excluded from the figure.Source:OECD Corporate Sustainability dataset,LSEG,Bloomberg,MSCI.See Annex A for details.Public awareness and regulatory actions around climate change have accelerated in several regions in recent years.This has contributed to increasing investors interest in companies GHG emissions.A reporting system coupled with efforts to assess emissions is an important first step in any effort to reduce GHG emissions.It requires an accurate measuring,reporting and tracking system of the emissions resulting directly from the activities carried out by the company(scope 1),indirect emissions related to energy consumption(scope 2),and emissions generated in the supply chain or by companies financed by financial institutions(scope 3).Globally,11 135 companies representing 88%of market capitalisation disclosed scope 1 and 2 GHG emissions in 2024,ranging from 46%of companies by market capitalisation in the regional category“Others”to 98%in Europe(Figure 2.3,Panel A).Commercial data providers also offer estimates of a companys GHG emissions based on its financial and non-financial disclosures,industry and location of operations.Estimated scope 1 and 2 GHG emissions reported by data providers are available for 16 000 companies,covering 95%of market capitalisation(Figure 2.3,Panel B).By market capitalisationIn per centGlobalChinaDev.AP excl.US Em.Asia excl.ChinaEuropeLatin AmericaMiddle East and AfricaUnited StatesOthersBasic Materials886593909987799866Consumer Cyclicals926292819988489565Consumer Non-Cyclicals848395909990817647Energy949393919991989532Financials949997929882849249Healthcare916885899992749241Industrials896593889789579545Real Estate78699082797550860Technology946596949894839653Water&Related Utilities8149897499947194024 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Figure 2.3.Disclosure of scope 1 and 2 GHG emissions by listed companies in 2024 Large companies widely disclose scope 1 and 2 emissions,while estimates help reduce disclosure gaps for smaller ones,especially in the United States.Source:OECD Corporate Sustainability dataset,LSEG,Bloomberg,MSCI.See Annex A for details.Globally,the technology,financials and energy industries have the highest share of companies disclosing scope 1 and 2 GHG emissions by market capitalisation,with higher shares in Europe and lower shares in Others.In the United States,the industry with the largest share of companies(97%by market capitalisation)disclosing scopes 1 and 2 by market capitalisation is basic materials,while in the consumer non-cyclicals industry,less than 80%of the industrys capitalisation reports this information(Figure 2.4).Figure 2.4.Share of companies disclosing scope 1 and 2 GHG emissions by industry in 2024 Technology,financials and energy companies lead in emissions disclosure by market capitalisation,while real estate lags with 74%disclosure.Source:OECD Corporate Sustainability dataset,LSEG,Bloomberg,MSCI.See Annex A for details.The disclosure of at least one category of scope 3 emissions(76%by market capitalisation)is 12 percentage points lower than the disclosure of scope 1 and 2 emissions globally.In 2024,7 712 companies(76%by market capitalisation)reported at least one category of scope 3 emissions,ranging from 2 279 companies(97%by market capitalisation)in Europe to 243 companies(29%of market capitalisation)in China(Figure 2.5,Panel A).In contrast,estimated scope 3 emissions amount to 94%of By number of companiesBy market capitalisation0 0%B.Estimated0 0%A.ReportedBy market capitalisationIn per centGlobalChinaDev.AP excl.US Em.Asia excl.ChinaEuropeLatin AmericaMiddle East and AfricaUnited StatesOthersBasic Materials845292889883739764Consumer Cyclicals895290799983399363Consumer Non-Cyclicals827693899984777546Energy908179919987989232Financials909795869781788749Healthcare875784889892728838Industrials855592859786529044Real Estate74538978797047800Technology925492939893819453Water&Related Utilities75398974999423930 25 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 market capitalisation across nearly 15 900 companies(Figure 2.5,Panel B)an almost equal number of companies for which scope 1 and 2 emissions are estimated.Figure 2.5.Disclosure of scope 3 GHG emissions by listed companies in 2024 Globally,76%of companies by market capitalisation disclose at least one category of scope 3 GHG emissions,with estimates helping to fill significant gaps in China,and the Middle East and Africa.Source:OECD Corporate Sustainability dataset,LSEG,Bloomberg,MSCI.See Annex A for details.Globally,the technology and consumer cyclicals industries have the largest share of companies by market capitalisation that disclose at least one category of scope 3 emissions data.In Europe,disclosure is consistent across most industries,reaching more than 95%of disclosure by market capitalisation,except for real estate(75%).In China,the financial industry has the largest share of companies by market capitalisation disclosing scope 3 GHG emissions(57%)(Figure 2.6).Figure 2.6.Share of companies disclosing scope 3 GHG emissions by industry in 2024 Scope 3 GHG disclosures vary across industries:technology and consumer cyclicals lead;energy and real estate lag.Source:OECD Corporate Sustainability dataset,LSEG,Bloomberg,MSCI.See Annex A for details.0 0%By number of companiesBy market capitalisation0 0%B.Estimated0 0%A.ReportedBy market capitalisationIn per centGlobalChinaDev.AP excl.US Em.Asia excl.ChinaEuropeLatin AmericaMiddle East and AfricaUnited StatesOthersBasic Materials671579659880418453Consumer Cyclicals802676489872248860Consumer Non-Cyclicals701875639857657246Energy55216547988212776Financials785791669780548049Healthcare751965559690667927Industrials701783539575317744Real Estate55276951756418730Technology883187809790599348Water&Related Utilities6523157498942393026 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Of the almost 12 900 companies that disclosed sustainability-related information in 2024,42%obtained assurance of the information by an external service provider.Latin America(62%of companies,86%of market capitalisation),Others(61%,89%)and Europe(56%,93%)show the highest levels of assurance of their sustainability-related information.Nevertheless,provision of assurance is meaningful even in jurisdictions where it is neither required nor recommended.As shown in Figure 2.7,there is a significant difference between the assurance of sustainability-related information by number of companies and by market capitalisation.For instance,in the Middle East and Africa,32%of companies obtain assurance,making up 73%of the regions market capitalisation.Figure 2.7.Share of companies with assurance of the sustainability-related information in 2024 Global consistency:companies seek assurance,regardless of the inexistence of regulatory requirements.Source:OECD Corporate Sustainability dataset,LSEG,Bloomberg.See Annex A for details.Based on the depth and scope of the verification,the International Standard on Sustainability Assurance(ISSA)5000 distinguishes between two levels of assurance.The first level,referred to as“reasonable”assurance requires a broad and detailed set of procedures and is designed to provide a high level of confidence that the information has no material misstatement.The second level,referred to as“limited”,provides a lower degree of confidence,as the assurer undertakes fewer tests and procedures,with the objective of identifying whether anything indicates a material misstatement(IAASB,20242).Globally,in 2024,of the 5 458 companies that subjected their sustainability-related information to an independent assurance,3 061 were partially or fully verified under limited assurance,while 918 were partially or fully verified under reasonable assurance.Among the assured sustainability-related information,most companies rely on limited assurance(56%),while only 17%disclose reasonable assurance of at least one data point or information(“reasonable”is the level required,as a rule,from the external auditing of financial reports).The United States(72%),Europe(62%),the Middle East and Africa(61%),and Latin America(61%)show the highest reliance on limited assurance,while China(28%)shows comparatively higher shares of reasonable assurance than other regions(Figure 2.8.Panel A).0 0%B.By market capitalisation0 0%A.By number of companiesExternal assuranceNo external assurance 27 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Figure 2.8.Levels of assurance of sustainability-related information in 2024 Reasonable assurance of sustainability-related information remains uncommon,with notable exceptions in Asia.Source:OECD Corporate Sustainability dataset,LSEG,Bloomberg.See Annex A for details.GHG emissions may be subject to a different level of assurance than the rest of the sustainability information.In all regions,GHG emissions are mainly verified with a limited level of assurance.Globally,out of the total GHG emissions verified by an independent assurance provider,limited assurance was performed on 40%of scope 1 and 2 emissions and 38%of scope 3.Only 14%of companies had a reasonable level of assurance for scope 1,13%for scope 2,and 6%for scope 3(Figure 2.9,Panel A).Globally,42%of verified scope 1 emissions and 41%of verified scope 2 emissions were assured with limited assurance while this number reached 70%for verified scope 3 emissions.In China 70%of verified scope 3 GHG emissions were assured with reasonable assurance(Figure 2.9,Panel B).0 0%B.By market capitalisation0 0%A.By number of companiesLimited assuranceReasonable assuranceNot available28 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Figure 2.9.Levels of assurance of GHG emissions in 2024 Just under 15%of companies obtain reasonable assurance for scope 1 and 2 GHG emissions,despite these being largely under their direct control.Source:OECD Corporate Sustainability dataset,LSEG,Bloomberg.See Annex A for details.Among the companies that disclose the name of the independent assurance provider,54%of the sustainability-related information with assurance was assured by an auditor(Figure 2.10,Panel A).Auditors assured an important share of sustainability-related information in Europe,Latin America and Others.In Latin America,this may reflect regulatory requirements in Brazil and Mexico that mandate statutory auditors as assurance providers(OECD,20251).By contrast,in Europe where France and Spain permit accredited non-audit providers to deliver assurance attestations 89%were still carried out by auditors.In China and the United States,23%and 27%of assurance attestations were developed by an auditor,and the remaining 77%and 73%by other assurance providers,respectively.0 0%Limited assuranceReasonable assuranceNot available0 0%Scope 1Scope 2Scope30 0%0 0%A.By number of companies0 0%Limited assuranceReasonable assuranceNot available0 0%Scope 1Scope 2Scope30 0%0 0%B.By assured GHG emissions 29 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Figure 2.10.Assurance of the sustainability-related information by auditors in 2024 Auditors dominate the assurance market in Europe and Latin America,while other assurance providers are widespread in Asia and the United States.Source:OECD Corporate Sustainability dataset,LSEG,Bloomberg.See Annex A for details.When looking at companies that disclose the name of the independent assurance provider,the share of companies that decide to engage the same auditor of the financial statement to verify their sustainability disclosure varies across regions.Globally,1 461 companies(40%)selected their financial auditors for the assurance of their sustainability-related information(Figure 2.11,Panel A).Figure 2.11.Assurance of the sustainability information by the auditor of the financial statement in 2024 Hiring the auditor of the financial statement to assure the sustainability report is a common practice only in Europe.Source:OECD Corporate Sustainability dataset,LSEG,Bloomberg.See Annex A for details.The comparability of sustainability-related information disclosed by companies in different jurisdictions enhances the efficiency of the capital market.In this regard,companies have been using different accounting standards and frameworks to disclose sustainability information.Globally,the Global Reporting Initiative(GRI)Standards are used by 6 548 companies,accounting for 61%of global market capitalisation.Task Force on Climate-Related Financial Disclosures(TCFD)recommendations are used 0 0%B.By market capitalisation0 0%A.By number of companiesAuditorsOther assurance providers0 0%B.By market capitalisation0 0%A.By number of companiesAuditor of the financial statementOther assurance providers30 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 by 4 857 companies representing 46%of market capitalisation,and SASB Standards are used by 3 497 companies representing 56%of market capitalisation.Some of these companies use more than one standard or framework when reporting sustainability information(Figure 2.12).In Developed Asia-Pacific excl.US and Europe,2 590 companies(73%of market capitalisation)and 922 companies(58%of market capitalisation),respectively,fully or partially followed TCFD recommendations.SASB Standards are mainly used in the United States,where 1 324 companies use them to disclose sustainability information.Almost all regions predominantly use the GRI Standards in their sustainability reporting:325 companies in Latin America(85%of market capitalisation),1 350 companies in Europe(77%of market capitalisation),1 878 companies in Developed Asia-Pacific excl.US(73%of market capitalisation),and 944 companies in Emerging and Developing Asia excl.China(60%of market capitalisation).Globally,582 companies use the International Sustainability Standards Board(ISSB)standards,either stating a partial alignment,or asserting compliance.These companies are mostly from the Developed Asia-Pacific excl.US or Emerging and Developing Asia excl.China regions(226 and 139 companies respectively).The use of the European Sustainability Reporting Standards(ESRS)remains nascent,reflecting their recent adoption in July 2023.Under the Corporate Sustainability Reporting Directive(CSRD),large,listed companies will apply the ESRS for the first time in 2025,while other companies will not be required to do so until 2028 or later(OECD,20251).At least 1 800 companies listed in the European Union are subject to the use of ESRS“Wave one”in 2025.Figure 2.12.Use of sustainability standards by listed companies in 2024 Larger companies tend to use global reporting standards,while smaller companies often use other frameworks.Note:ESRS“Wave one”contains companies listed in the European Union with total assets over EUR 25 million(USD 25.97 million)or total revenues over EUR 50 million(USD 51.95 million)and over 500 employees,which would be subject to ESRS“Wave one”for their 2024 sustainability-related information.Source:OECD Corporate Sustainability dataset,LSEG,Bloomberg,IFRS Foundation.See Annex A for details.A.By number of companies05001 0001 5002 0002 5003 0003 5004 0004 5005 0005 5006 0006 5007 000OthersISSBESRS Wave oneTCFDSASBGRIChinaDev.AP excl.USEm.Asia excl.ChinaEuropeLatin AmericaMiddle East and AfricaUnited StatesOthersNo.of companiesB.By market capitalisation01020304050607080OthersISSBESRS Wave oneTCFDSASBGRIUSD trillions 31 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Box 2.1.Interoperability of sustainability disclosure standards Prior to 2023,the global landscape for corporate sustainability disclosure became increasingly structured around three main frameworks:the GRI Standards,the TCFD recommendations,and the SASB Standards.In 2023,two new standards were established:the IFRS S1 and S2,and ESRS.As of June 2025,36 jurisdictions have adopted or otherwise used the IFRS S1 and S2 or are in the process of finalising steps towards introducing them into their regulatory frameworks(IFRS,20253).The increasing number of sustainability reporting standards with varying approaches have led to efforts to improve the interoperability of standards,as regulators and standard setters seek to streamline reporting obligations and enhance global comparability.The private sector has similarly underscored the need for greater harmonisation,as evidenced by a survey conducted by Business at OECD(BIAC)between December 2024 and February 2025(BIAC,20254).An example of interoperability efforts is the joint work by the ISSB and the EFRAG,supported by the European Commission.It resulted in the release of a comprehensive Interoperability Guidance in May 2024 to align IFRS S1 and S2 and the ESRS.The Guidance highlights areas of alignment and clarifies how companies can fulfil reporting requirements under both frameworks in a coherent manner,in particular in the areas of climate-related disclosure,while promoting digital tagging for parallel reporting.EFRAG and GRI also signed a joint statement of interoperability and launched a GRI-ESRS Interoperability Index.This resource helps EU companies reporting under ESRS to leverage existing GRI disclosures,especially for materiality assessment and impact reporting.In June 2025,GRI and the IFRS Foundation published a joint statement clarifying how GRI 102:Climate Change 2025 and IFRS S2 can be used together and considered equivalent.On GHG emissions,equivalence is deemed fulfilled when companies that report Scope 1,2,and 3 emissions under IFRS S2,in line with the Greenhouse Gas Protocol,use those same disclosures to satisfy the relevant GRI 102 requirements,provided appropriate cross-references are included.In nature-related reporting,the Taskforce on Nature-related Financial Disclosures(TNFD)and the GRI have jointly produced an interoperability mapping where GRI standards support TNFD recommendations and metrics,helping users to understand overlaps and identify any additional disclosures needed to meet TNFD expectations.Similarly,TNFD and EFRAG published the ESRS-TNFD Correspondence Mapping to demonstrate significant alignment across all 14 TNFD recommended disclosures and ESRS environmental standards(E2-E5).On social and human rights issues,the Australian,British and Canadian governments published a joint template to support businesses reporting under the UK Modern Slavery Act(2015),Australian Modern Slavery Act(2018)and Canadas Fighting Against Forced Labour and Child Labour in Supply Chains Act(2023).This optional template is designed to reduce the administrative burden for organisations subject to supply chain reporting requirements in all three jurisdictions,taking stock of distinct legal requirements such as reporting deadlines(Public Safety Canada,20255).Finally,interoperability efforts are also underway across various taxonomy frameworks.The ASEAN Taxonomy Board(ATB)released the second version of its Taxonomy for Sustainable Finance,providing a multi-tiered common framework that enables comparability across member states.Together,these efforts reflect a growing consensus around the need for coherence in sustainability reporting.As reporting requirements expand,enhanced interoperability will be essential to reduce reporting burdens,improve data quality,and ensure useful information for stakeholders globally.32 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Globally,76%of companies by market capitalisation disclose a target to reduce their GHG emissions over a specified time horizon.In Europe,the United States and Developed Asia-Pacific excl.US,the share is larger,at 92%,85%and 83%,respectively.China and Others stand below,at 32%and 21%respectively(Figure 2.13,Panel A).Targets related to energy use are targets aiming to reduce energy consumption or to increase the share of renewables in that consumption(thus reducing GHG emissions,although not explicitly tracking emissions).Globally,less companies disclose that type of target than GHG emission reduction targets,with only 50%of companies by market capitalisation doing so(Figure 2.13,Panel B).Figure 2.13.Disclosure of GHG emissions and energy-use targets by listed companies in 2024 Almost 80%of companies by market capitalisation disclose a GHG emission reduction target.Source:OECD Corporate Sustainability dataset,MSCI.See Annex A for details.Figure 2.14 presents the distribution of the earliest target years set by each listed company for GHG emission reduction targets(excluding targets associated with no specific year).Globally,only 44%of companies with a GHG emission reduction target have a concrete emission reduction goal before 2030(in terms of number of companies).Including the year 2030,that number rises to 88%,as many companies chose this milestone as their target year.There are,however,regional disparities as this number drops to 71%of companies with an emission reduction target in China,while it reaches 95%in Latin America.0 0%By number of companiesBy market capitalisation0 0%B.Targets related to energy use0 0%A.GHG emissionreductiontargets 33 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Figure 2.14.Target year of the earliest GHG emission reduction target in 2024 Globally,88%of companies set GHG emission reduction targets in or before 2030.Source:OECD Corporate Sustainability dataset,MSCI.See Annex A for details.Disclosure of a baseline year is necessary for investors to assess what the GHG emission reduction targets(both in relative and absolute terms)effectively mean for an individual company.Globally,among companies that have set specific years for their GHG emission reduction targets,there are still 20%of companies for which no associated baseline year is available(by number of companies,focusing on targets with the earliest target year for companies that have several targets).Latin America,the United States and Developed Asia-Pacific excl.US display larger shares of baseline year disclosure,at 87%,85%and 84%respectively,while Emerging and Developing Asia excl.China(60%),China(61%)and the Middle East and Africa(62%)are lower(Figure 2.15).Figure 2.15.Disclosure of a baseline year by listed companies with GHG emission targets in 2024 Baseline data is not always easily accessible for investors to assess GHG emission targets.Source:OECD Corporate Sustainability dataset,MSCI.See Annex A for details.When setting GHG emission reduction targets,companies can select different metrics to measure the progress of their reduction path.Notably,most companies calculate the reduction of their GHG emissions over the baseline year either as the GHG emission reduction in absolute terms or the reduction of 0 0%B.By market capitalisation0 0%A.By number of companiesBefore 20302030After 20300 0%B.By market capitalisation0 0%A.By number of companiesBaseline year availableBaseline year not available34 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 GHG emissions intensity(typically per unit of revenue or per unit of production).Globally,32%of companies that have a target commit to reducing their GHG emissions intensity and 88%set a reduction target in absolute terms(by market capitalisation,focusing on targets with the earliest target year for companies that have several targets)(Figure 2.16,Panel B).In China,GHG emission intensity metrics are used more often than in other regions,with 53%(by market capitalisation)of companies choosing them,while 55%(by market capitalisation)use absolute targets,far below the global average.Figure 2.16.Metrics of the GHG targets in 2024 Most companies with GHG emission targets set them in absolute terms.Source:OECD Corporate Sustainability dataset,MSCI.See Annex A for details.2.2.Investor landscape Equity markets play a pivotal role in fostering innovation and facilitating long-term investments,both of which are essential for sustainable economic growth.Therefore,understanding the interplay between corporations and sustainability within the framework of equity markets is crucial for a comprehensive view of global sustainable development.The G20/OECD Principles of Corporate Governance aim to provide a framework that incentivises companies and their investors to make decisions and manage their risks in a way that contributes to the sustainability and resilience of the corporation.An analysis of the sustainability risks that companies are considered to be facing according to the SASB Sustainable Industry Classification System Taxonomy(“SASB mapping”)shows that climate change is considered to be a financially material risk for listed companies that account for 65%of global market capitalisation(Figure 2.17).In particular,this risk is considered to be financially material for companies representing 76%of market capitalisation in the Middle East and Africa,71%in Latin America,and 69%in the United States.Human capital risks are currently the most important sustainability risk with companies representing 68cing such risks as financially material.In the United States,this share is even higher,where companies representing 76%of market capitalisation are considered to face human capital risks as financially material.There are differences globally in companies sensitivity to sustainability risks from ecological impacts and data security and customer privacy.Companies representing only 10%of total market capitalisation are considered to face ecological impacts as a financially material factor.This share is the smallest in the United States(6%)(Figure 2.17).Globally,companies representing 41%of total market capitalisation are considered to face data security and customer privacy as financially material factors(this is the third most 0 0%B.By market capitalisation0 0%A.By number of companiesReduction of GHG emissions intensity(emissions per unit of revenue or production)Reduction of total GHG emissions in absolute terms 35 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 important risk globally).In the United States,companies representing 49%of market capitalisation are considered to face data security and customer privacy as a financially material risk.Figure 2.17.The share of market capitalisation by selected sustainability risks in 2024 Human capital and climate change pose financially material risks for most companies by market capitalisation.Source:OECD Capital Market Series dataset,LSEG,FactSet,Bloomberg,SASB mapping.See Annex A for details.Product design and lifecycle management is considered to be a material risk for companies representing 56%of market capitalisation across 37 of 77 industries(Figure 2.18).Meanwhile,business ethics within the leadership and governance dimension is a risk considered to be faced by companies representing 33%of market capitalisation across 18 industries.0 %GlobalChinaDev.AP excl.USEm.Asia excl.ChinaEuropeLatin AmericaMiddle East andAfricaUnited StatesOthersHuman CapitalClimate ChangeData Security and Customer PrivacyWater&Wastewater ManagementWaste&Hazardous Materials ManagementSupply Chain ManagementAir QualityHuman Rights&Community RelationsEcological Impacts36 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Figure 2.18.Sustainability indicators where risks are considered to be financially material in 2024 Beyond climate and water-related risks,some social risks are considered to be financially material across industries.Note:The industry classification is according to SASB mapping.Source:OECD Capital Market Series dataset,LSEG,FactSet,Bloomberg,SASB mapping.See Annex A for details.Mapping of sustainability risks cannot be equated as the market value at risk,which would depend on an individual assessment of each companys financial exposure to these risks.However,the share of market capitalisation can serve as a reference for policymakers to assess the differences in economic sectors distribution among locally listed companies that may justify setting priorities when regulating and supervising their capital markets(OECD,20236).These findings are particularly relevant when considering the 100 listed companies with the highest disclosed GHG emissions,which collectively amount to a market capitalisation of approximately USD 7.1 trillion and emit a total of 33.8 Gt of carbon dioxide equivalent emissions considering all scopes.While there is double counting in this calculation since,for instance,scope 2 GHG emissions of one company may be the scope 3 GHG emissions of another,the 33.8 Gt emissions of these 100 companies are against the backdrop of 37.8 Gt emissions globally from energy combustion and industrial processes in 2024(IEA,20257).7(3%6%80V(C $A#%P%Management of the Legal&Regulatory EnvironmentCritical Incident Risk ManagementCompetitive BehaviourSystemic Risk ManagementBusiness EthicsPhysical Impacts of Climate ChangeBusiness Model ResilienceSupply Chain ManagementMaterials Sourcing&EfficiencyProduct Design&Lifecycle ManagementLabour PracticesEmployee Health&SafetyEmployee Engagement,Diversity&InclusionCustomer WelfareHuman Rights&Community RelationsSelling Practices&Product LabelingAccess&AffordabilityCustomer PrivacyProduct Quality&SafetyData SecurityEcological ImpactsAir QualityWaste&Hazardous Materials ManagementGHG EmissionsWater&Wastewater ManagementEnergy ManagementLeadership&GovernanceBusiness Model&InnovationHuman CapitalSocial CapitalEnvironment516117188719193712271214615862615141719252533A.Share of market capitalisation of industries where the risk is material(in total global market cap.)B.Number of industries where the risk is material(out of a total of 77)37 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Listed companies from Europe(32%),the United States(22%)and Japan(14%)represent the largest portion of companies with the highest disclosed GHG emissions(Figure 2.19,Panel A).Companies from the energy industry account for 35%of the companies with the highest disclosed GHG emissions,followed by industrials with 26%.Regional and sectoral distributions of GHG emissions are influenced by differences in disclosure rates.For example,as shown in Figure 2.3 and Figure 2.5,nearly all European companies by market capitalisation disclose scope 1 and 2(98%)and scope 3(97%),compared to only 67%and 29%of Chinese companies.Figure 2.19.100 listed companies with the highest disclosed GHG emissions in 2024 35%of the top 100 GHG emitters are energy companies.Note:The disclosed GHG emissions to rank the highest emitters include scope 1,scope 2,and scope 3 GHG emissions.The shares in this figure are calculated using the number of companies,not their market capitalisation.Source:OECD Corporate Sustainability dataset,OECD Capital Market Series dataset,LSEG,FactSet,Bloomberg.See Annex A for details.Figure 2.20 shows the ownership distribution for the top 100 highest emitting companies using the categories in Owners of the Worlds Listed Companies(De La Cruz,Medina and Tang,20198).Globally,institutional investors hold the largest share at 36%.In the United States,institutional investors hold a 72%share,in line with broader trends for institutional ownership in the US equity market.In China,the public sector plays a major role,with over half of equity holdings in these high-emitting companies.Japan demonstrates a more balanced ownership structure with corporate holdings at 15%and institutional investors at 37%.In Latin America,the public sector is important,with a 47%share,while Europe shows a more diversified investor base,including corporate and institutional investors with 14%and 33%,respectively.A.Regional distributionChina10v.AP excl.JP and US11%Em.Asia excl.China5%Europe32%Japan14%Latin America3%Middle East and Africa2%United States22%Others1%B.Sectoraldistribution35&%8%5%EnergyIndustrialsConsumer CyclicalsBasic MaterialsConsumer Non-CyclicalsOthers38 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Figure 2.20.Investor holdings of the 100 highest-emitting companies in 2024 Institutional investors hold the highest share of equity in top-emitting listed companies,followed by the public sector.Note:“Other free-float”refers to the holdings by shareholders that do not reach the threshold for mandatory disclosure of their ownership records.Source:OECD Capital Market Series dataset,OECD Corporate Sustainability dataset,LSEG,FactSet,Bloomberg.See Annex A for details.The degree of concentration and control by shareholders at the company level is important when considering investors engagement activities and effective change in the strategy of a company,for example about its climate-related goals.Figure 2.21 shows the distribution of ownership concentration among the 100 companies with the highest disclosed GHG emissions.Globally,the largest shareholder in each of these 100 companies owns on average 28%of the shares and the largest 20 shareholders own on average 55%of the shares.This means that in markets such as Emerging Asia,the Middle East and Africa most(if not all)high-emitting companies have a well-defined controlling shareholder and,therefore,any changes in their strategy will most likely depend on the decision of the controlling shareholder.In the United States,while several high-emitting companies do not seem to have a controlling shareholder(the top 3 shareholders own 27%of the shares),the 20 largest shareholders own 51%of the shares on average,which suggests that these investors may be able to alter the sustainability-related strategy of some high-emitting companies.Figure 2.21.Ownership concentration at the company level in the 100 highest-emitting companies in 2024 The 20 largest shareholders of the 100 highest-emitting companies would often be able to change their strategy.Source:OECD Capital Market Series dataset,OECD Corporate Sustainability dataset,LSEG,FactSet,Bloomberg.See Annex A for details.0 0%GlobalChinaDev.AP excl.JPand USEm.Asia excl.ChinaEuropeJapanLatin AmericaMiddle East andAfricaUnited StatesOthersInstitutional investorsPublic sectorCorporationsStrategic individualsOther free-float0 0%GlobalChinaDev.AP excl.JPand USEm.Asia excl.ChinaEuropeJapanLatin AmericaMiddle East andAfricaUnited StatesOthersTop 1Top 3Top 5Top 20Top 50 39 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 While the adoption of existing green technologies by high-emitting companies is essential for the transition to a low-carbon economy,the development of new technologies will also be necessary to guarantee the transition while enhancing energy security and maintaining high standards of living.Globally,out of the existing 3.7 million patents,308 000(8%)are classified as green patents.The classification of a patent as green is based on a classification jointly developed by international authorities,which identifies innovations that contribute to environmental objectives.Only patents whose primary purpose is to mitigate environmental harm,adapt to climate change or contribute to smarter grids are labelled as green patents within the data set.The largest number of patents is concentrated in Japan(1.55 million),with nearly 140 000 green patents,representing a 9%share.The United States follows with 914 446 patents,of which 6%are green.Developed Asia-Pacific excl.Japan and US total almost 730 000 patents,out of which 58 000 are green.Europe displays 413 540 patents,with a green share of 10%.China contributes 109 752 patents overall,also with 10ing green(Figure 2.22).Figure 2.22.Green patents of listed companies in 2024 Green patents account for 8%of total patents globally.Note:Patents are attributed to regions and countries based on the companys country of exchange.Source:OECD Corporate Sustainability dataset,MSCI.See Annex A for details.Looking at the regional distribution of the 100 listed companies with the highest number of green patents,Japan has the highest share(51%)while the United States,Developed Asia-Pacific excl.Japan and US,and Europe represent approximately 15ch(Figure 1.23,Panel A).These companies collectively amount to a market capitalisation of approximately USD 8.8 trillion.Technology companies account for 30 of these 100 companies,followed by consumer cyclicals and industrials with over 20 each.A.By total number of patentsChina3v.AP excl.JP and US20%Europe11%Japan41%United States25%3.7 million of patentsB.By total number of green patentsChina4v.AP excl.JP and US19%Europe13%Japan45%United States1908 000 of green patents0%2%4%6%8%OthersUnited StatesMiddle East and AfricaLatin AmericaJapanEuropeEm.Asia excl.ChinaDev.AP excl.JP and USChinaGlobalC.Share of green patents per region40 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 Figure 2.23.The 100 listed companies with the highest number of green patents in 2024 Japan leads with 51 of the top 100 companies with high green innovation.Note:The shares in this figure are calculated using the number of companies,not their market capitalisation.Source:OECD Corporate Sustainability dataset,OECD Capital Market Series dataset,LSEG,FactSet,Bloomberg,MSCI.See Annex A for details.Globally,institutional investors own 37%of the top 100 companies by green patents,almost the same as what they own in the 100 high-emitting companies(Figure 2.24).In the United States,institutional investors own 67%of the equity in these companies.This is in line with the pattern of institutional ownership in US high-emitting companies of 72%(as seen in Figure 2.19).In contrast,ownership in companies with high green innovation in China differs significantly from ownership in high-emitting companies,with the public sector making up a smaller portion at 5%and a higher presence of institutional investors and other free-float investors(23%and 49%,respectively).Figure 2.24.Investor holdings of the top 100 companies by green patents in 2024 Institutional investors hold the largest share of the top 100 companies with high green innovation.Note:“Other free-float”refers to the holdings by shareholders that do not reach the threshold for mandatory disclosure of their ownership records.Source:OECD Capital Market Series dataset,OECD Corporate Sustainability dataset,LSEG,FactSet,Bloomberg,MSCI.See Annex A for details.Figure 2.25 shows the ownership concentration in the 100 companies with the highest stock green patents.Globally,the largest shareholder owns an average of 14%,contrasting with the 28%for high-emitting companies.For the top 20 shareholders,however,ownership concentration rises to more than 40%of the shares on average in all regions.Ownership concentration in the top 100 companies with high green A.Regional distributionChina2v.AP excl.JP and US16%Europe15%Japan51%United States16%B.Sectoraldistribution30%#%4%4%TechnologyConsumer CyclicalsIndustrialsBasic MaterialsConsumer Non-CyclicalsEnergy0 0%GlobalChinaDev.AP excl.JP and USEuropeJapanUnited StatesInstitutional investorsPublic sectorCorporationsStrategic individualsOther free-float 41 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 innovation is smaller than in high-emitting companies,which suggests greater potential for non-controlling shareholders to engage effectively with companies with high green innovation.Figure 2.25.Ownership concentration in the top 100 companies by green patents in 2024 Listed companies with high green innovation show moderately lower ownership concentration than high GHG emitters.Source:OECD Capital Market Series dataset,OECD Corporate Sustainability dataset,LSEG,FactSet,Bloomberg,MSCI.See Annex A for details.2.3.The board of directors Establishing a board committee responsible for sustainability is not the only way for a company to manage its sustainability risks and a committee,if not well structured,may even be ineffective in doing so.However,the existence of a sustainability board committee may be a proxy for the importance given by boards to sustainability risks.Companies representing two-thirds of the worlds market capitalisation have established a committee responsible for overseeing the management of sustainability risks and opportunities reporting directly to the board(Figure 2.26).In the United States,77%of companies by market capitalisation have a committee responsible for sustainability and in Emerging and Developing Asia excl.China and in Europe,more than 60%have such a committee.Figure 2.26.Board committees responsible for sustainability in 2024 13%of listed companies globally(two-thirds by market capitalisation)have board committees overseeing sustainability risks.Source:OECD Corporate Sustainability dataset,Bloomberg.See Annex A for details.0 0%GlobalChinaDev.AP excl.JP and USEuropeJapanUnited StatesTop 1Top 3Top 5Top 20Top 500 0%GlobalChinaDev.AP excl.USEm.Asia excl.ChinaEuropeLatin AmericaMiddle East andAfricaUnited StatesOthersBy number of companiesBy market capitalisation42 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 The board of directors may consider specifically sustainability-related issues when overseeing management,although not necessarily via the establishment of a dedicated board committee.Globally,6 215 companies representing 70%of global market capitalisation indicated their boards of directors oversee climate-related issues(Figure 2.27,Panel A).This is an increase from 53%in 2022(OECD,20249).In Developed Asia excl.China,Europe and the United States,more than 70%of companies by market capitalisation reported a board-level oversight of climate-related issues.Board-level oversight of health and safety is reported by almost 2 260 companies worldwide,representing 29%of market capitalisation(Figure 2.27,Panel B).In the Middle East and Africa,companies that account for 46%of the regions market capitalisation reported board oversight of health and safety,and in Europe,this share totals 40%.Oversight of human rights by the board is disclosed by around 1 400 companies that account for 38%of global market capitalisation.The United States and Europe display the most significant shares by market capitalisation,reporting board-level oversight of human rights by companies representing 50%and 49%of market capitalisation,respectively(Figure 2.27,Panel C).Figure 2.27.Board-level oversight of sustainability-related issues in 2024 While many boards prioritise climate issues,a few also oversee health,safety,and human rights.Source:OECD Corporate Sustainability dataset,LSEG,Bloomberg.See Annex A for details.To fulfil their key functions in assessing the companys risk profile and guiding its governance practices,boards can also take into consideration sustainability matters when establishing the compensation of key executives.Almost 70%of companies by market capitalisation that have executive compensation policies linked to performance measures include a variable component based on sustainability-related factors(Figure 2.28,Panel A).Executive compensation is linked to sustainability matters in 94%of companies by 0 0%By number of companiesBy market capitalisation0 0%B.Health and safety0 0%A.Climate0 0%C.Human rights 43 GLOBAL CORPORATE SUSTAINABILITY REPORT 2025 OECD 2025 market capitalisation in Europe,followed by the“Others”category(87%)and the Middle East and Africa(77%).In China and Emerging and Developing Asia excl.China,executive compensation is linked to sustainability matters in 54%and 32%of the companies by market capitalisation,respectively.Companies representing 32%of global market capitalisation incorporate climate change performance into the CEO and other executives remuneration(Figure 2.28,Panel B).Europe has the highest share with 8%of companies(59%of market capitalisation)using climate change KPIs.Figure 2.28.Executive compensation linked to sustainability matters in 2024 Sustainability-linked executive compensation has become common in large European listed companies.Source:OECD Corporate Sustainability dataset,LSEG,Bloomberg.See Annex A for details.2.4.The interests of stakeholders and engagement Since 2013,Delaware in the United States has allowed for-profit corporations to register as Public Benefit Corporations(PBCs),which represents a legal obligation for them to balance shareholder interests with the public benefits identified in their certificates of incorporation.PBCs must disclose their status in stock certificates and report biennially on their public benefit objectives,potentially with third-party verification.In France,companies can register as a socit mission since 2019 if they meet five key conditions:defining the companys raison dtre,which are the principles that the company has adopted and for which it intends to allocate resources;specifying social and environmental objectives in their articles of association;forming a monitoring committee;undergoing third-party verification of whether the company fulfilled its non-financial goals;and registering the socit mission in the companies register.Between 2021 and 2025,there was a notable increase in the number of private companies with public benefit objectives in Delaware and France(Figure 2.29),while the number of listed companies has seen a slower increase.In Delaware,th
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Chinese Academy of SciencesInternaonal Research Center of Big Data for Sustainable Development GoalsSeptember 2025一Special Report for a Decade of the SDGsthe Sustainable Development GoalsBig Earth Data in Support ofMap Content Approval Number:GS 京（2025）1724 号All the data,information and images contained in this report may be cited in any form for educational or non-profit services,provided that acknowledgement of the source is made and no citations,deletions or modifications are contrary to the original intention.The International Research Center of Big Data for Sustainable Development Goals would appreciate any publication that uses this report as a source.No use of this report may be made for any commercial purpose whatsoever without prior permission in writing from the International Research Center of Big Data for Sustainable Development Goals.Suggested CitationCBAS.2025.Big Earth Data in Support of the Sustainable Development GoalsSpecial Report for a Decade of the SDGs.Beijing,China.http:/doi.org/10.12237/casearth.CBAS2025P02PrefaceExecutive SummaryIntroductionSDG 2 Zero Hunger10 Ten-Year Progress Assessment of SDG 2 Globally and in China 10 Global Progress Assessment13 Chinas Progress Assessment14 Thematic Studies15 Double the Productivity and Incomes of Small-Scale Food Producers18 Sustainable Food Production and Resilient Agricultural Practices19 Conclusion and Recommendations20 Main ReferencesSDG 6 Clean Water and Sanitation22 Ten-Year Progress Assessment of SDG 6 Globally and in China22 Global Progress Assessment25 Chinas Progress Assessment25 Thematic Studies26 Improving Water Environment27 Increasing Water-Use Efficiency29 Protecting Aquatic Ecosystems31 Comprehensive Assessment of SDG 6 in Urban Areas31 Conclusion and Recommendations32 Main ReferencesSDG 7 Affordable and Clean Energy34 Ten-Year Progress Assessment of SDG 7 Globally and in China34 Global Progress Assessment34 Chinas Progress Assessment37 Thematic Studies38 Renewable Energy41 Energy Efficiency41 Conclusion and Recommendations42 Main ReferencesSDG 11 Sustainable Cities and Communities44 Ten-Year Progress Assessment of SDG 11 Globally and in China44 Global Progress Assessment47 Chinas Progress Assessment48 Thematic Studies48 Urban Housing49 Urbanization50 Heritage Conservation51 Disaster Response52 Urban Pollution52 Urban Public Open Space53 Thermal Environment and Health54 Conclusion and Recommendations55 Main References01020408332143CONTENTSIVBig Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs SDG 13 Climate Action58 Ten-Year Progress Assessment of SDG 13 Globally and in China58 Global Progress Assessment58 Chinas Progress Assessment61 Thematic Studies62 ImpactClimate-Related Disasters64 MitigationGreenhouse Gas Emissions65 AdaptationGlobal Polar Glacier Change and Sea-Level Rise67 Conclusion and Recommendations68 Main ReferencesSDG 14 Life Below Water70 Ten-Year Progress Assessment of SDG 14 Globally and in China70 Global Progress Assessment73 Chinas Progress Assessment74 Thematic Studies74 Marine Pollution76 Marine Ecosystems77 Ocean Acidification78 Marine Protected Areas79 Aquaculture80 Conclusion and Recommendations80 Main ReferencesSDG 15 Life on Land83 Ten-Year Progress Assessment of SDG 15 Globally and in China83 Global Progress Assessment84 Chinas Progress Assessment87 Thematic Studies87 Protection of Important Ecosystems89 Sustainable Forest Management90 Land Degradation Neutrality92 Biodiversity Conservation93 Conclusion and Recommendations94 Main ReferencesIntegrated Evaluations and Interactions among SDGs100 Conclusion and RecommendationsSummary and ProspectsAppendices103 Availability of Data and Methods103 Acronyms&Abbreviations105 List of Authors1011039569568201PrefaceThe year 2025 marks the tenth anniversary of the implementation of the United Nations 2030 Agenda for Sustainable Development.Over the past decade,the world has achieved progress in poverty reduction,clean energy development,and ecological and environmental protection.However,under the combined pressures of intensifying climate change,rising geopolitical tensions,frequent economic shocks,and increasing development vulnerabilities,the scale and pace of advancing the Sustainable Development Goals(SDGs)have fallen far short of expectations.Against this backdrop,taking urgent action to reverse worrisome trends and consolidate hard-won gains has become a global consensus.In 2024,the UN General Assembly adopted the Pact for the Future and,as its annex,released the Global Digital Compact,which identifies digital technology cooperation as a key guideline for advancing global governance transformation.Meanwhile,the UN World Data Forum adopted the Medelln Framework for Action on Data for Sustainable Development,providing an actionable roadmap for translating this global consensus into practice.Together,these initiatives are guiding the international community into a new“data-driven”stage of sustainable development governance.In February 2025,the United Nations Educational,Scientific and Cultural Organization(UNESCO)approved the Digital Sustainable Development Goals Programme(DSP).Through digital-intelligence innovation solutions,DSP aims to establish a new paradigm of digital sustainable development science,systematically analyze the scientific laws of humannature interactions in the digital era,and promote the high-quality implementation of the 2030 Agenda.At present,70%of SDG indicators have data covering only half of countries,and 50%lack comparable data since 2015.This“data poverty”has become a more hidden yet far-reaching barrier to development than material poverty.Big Earth Data offers an effective engine for transforming this digital commitment into sustainable development practices.Derived from an integrated“spaceairground”observation system that combines Earth observation,artificial intelligence,and the Internet of Things,Big Earth Data embodies a core principle of the Global Digital Compactto“close the digital divides within and between States and advance an equitable digital environment for all”and reflects the guiding vision of the Medelln Framework for Action.With this technological empowerment,developing countries with limited digital infrastructure can also access effective tools for SDG evaluation.Over the past decade,China has achieved dynamic monitoring of 233 SDG indicators(92.8%of the total),with 60.5%of indicators on track or achieved,thereby forming a synergistic model of“technologypolicygovernance.”The 2025 Annual Report evaluates ten-year global and Chinese progress on indicators for seven GoalsZero Hunger,Clean Water and Sanitation,Affordable and Clean Energy,Sustainable Cities and Communities,Climate Action,Life Below Water,and Life on Landalong with multi-indicator integrated evaluations and interactions.It provides public data products for the world,supporting implementation of the 2030 Agenda in all countries,especially developing countries.In addition,based on its own research,the report proposes recommendations to support science-based decision-making and accelerate sustainable development,providing scientific underpinning for the implementation of the 2030 Agenda.This report has been led by the International Research Center of Big Data for Sustainable Development Goals(CBAS)and jointly authored by more than 160 experts from over 40 research institutions.Data sources include multi-dimensional inputs from remote sensing monitoring,ground observations,statistical surveys,and reports from international organizations.The Chinese Academy of Sciences,relevant ministries,and international organizations have provided strong support.Looking ahead,Big Earth Data applications will continue to expand in cross-scale monitoring,scenario simulation,and policy optimization,offering more robust scientific and technological support for the SDGs and making greater contributions to science-based decision-making.PrefaceGuo HuadongDirector,International Research Center of Big Data for Sustainable Development GoalsFormer Member,the Group of 10 experts on the Technology Facilitation Mechanism of the United NationsMember,International Science Council Global Commission on Science Missions for Sustainability02Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs Executive SummaryLeveraging the strengths and features of Big Earth Data,this report focuses on seven Sustainable Development Goals(SDGs)Zero Hunger(SDG 2),Clean Water and Sanitation(SDG 6),Affordable and Clean Energy(SDG 7),Sustainable Cities and Communities(SDG 11),Climate Action(SDG 13),Life Below Water(SDG 14),and Life on Land(SDG 15)as well as integrated evaluations and interactions among SDGs.It summarizes global and Chinas progress over the past decade and highlights the outcomes of the latest studies supported by Big Earth Data.Globally,the 7 SDGs have gone seriously off track.Among the 59 indicators assessed,only 10(16.9%)are on track;27 have progressed slowly,5 have stalled,and 17 have regressed.By contrast,China has made significant progress.Of the 233 indicators assessed,141(60.5%)were achieved or close as of 2024.For SDG 2(Zero Hunger),global progress is broadly lagging.Only a few indicatorsdeveloping sustainable agriculture,maintaining genetic diversity in food production,increasing agricultural investment,and eliminating export subsidiesare on track,while the rest remain slow,stalled,or regressed.In China,targets for ending malnutrition have consistently been achieved.Agricultural labor productivity has risen significantly,and the efficiency of resource use in sustainable agriculture continues to improve,reflecting strong overall progress toward Zero Hunger.Nevertheless,challenges remain in reducing anemia among women.New findings highlight that the global rice cultivation area has increased by 6.6%,with Africa emerging as a new growth driver.In China,agricultural labor productivity has already achieved the doubling target;sustainable agricultural management has advanced significantly;soil organic carbon density in farmland is steadily increasing;and Earth observation technologies have greatly strengthened agricultural monitoring.For SDG 6(Clean Water and Sanitation),global coverage of safe drinking water and sanitation has improved but remains far below the 2030 targets.China has made notable progress in providing safe drinking water,expanding sanitation services,and improving water environments,with most indicators close to target,though challenges remain in addressing water stress and protecting aquatic ecosystems.New findings show that the proportion of good-quality water bodies in Chinas large lakes and reservoirs has stabilized at about 90%;globally,water-use efficiency in terrestrial vegetation ecosystems has slightly decreased,while in China,water stress and the population in water-scarce regions all declined;global reservoir storage has increased;and Chinas surface water area and shallow lake ecosystems have remained generally stable.For SDG 7(Affordable and Clean Energy),global progress on renewable energy,access to electricity,access to clean fuels and technologies for cooking,and energy efficiency remains seriously off track,and international financial flows for clean energy have even declined.China has achieved universal access to electricity,is on track to achieve 2030 targets for access to clean fuels and technologies for cooking and renewable electricity,and has made progress in energy efficiency at a faster pace than the global average.New findings show that the number of installed wind turbines worldwide grew 1.6 times but remains below the IEAs Net Zero Roadmap requirements;the share of economically affordable land for photovoltaic power increased from 60.06%to 75.13%;and Chinas conventional hydropower capacity grew at an average annual rate of 2.69%,placing the 2030 target within reach.For SDG 11(Sustainable Cities and Communities),global urban land use efficiency has improved,pointing to more balanced humanland development and suggesting the target can be met by 2030.However,other indicators remain slow,with pronounced regional disparities.China has largely achieved targets for urban public transport,World Heritage protection,and disaster response.New findings show that per capita building footprint in China has grown rapidly,while both disaster-affected populations and direct economic losses have declined;41%of World Heritage sites globally are threatened by natural hazards,whereas China has achieved notable protection outcomes;and cities across the Global South face rising heat-related mortality,with Southeast Asia particularly affected by heat stress.03Executive SummaryFor SDG 15(Life on Land),globally only the proportion of important mountain biodiversity sites under protection is improving,while other indicators show slow progress or regression,including forest cover,land degradation,and the Red List Index.In China,most indicators are progressing well:forest cover has surpassed 25%,and land degradation neutrality has been achieved ahead of schedule.New findings show that globally,the coverage of threatened tree species expanded by 28%within Biosphere Reserves;afforestation areas saw a 46.15%increase in leaf area index recovery rate;but 36%of arid regions experienced declining vegetation productivity,13%were identified as high-risk areas for land productivity degradation,and the effectiveness of Ramsar sites protection remains low and declining.In China,mountain land restoration trends are generally positive.For integrated evaluations and interactions among SDGs,Chinas SDG progress shows strong spatial imbalances,with per capita arable land and per capita Carbon Dioxide(CO2)emissions exhibiting the greatest disparities.Synergies among SDGs outweigh trade-offs,with trade-off hotspots scattered mainly in central China.Under environment-friendly scenarios,Chinas SDG progress becomes more balanced,effectively enhancing synergies.Optimal pathways differ by region,with SDG 13 and SDG 15 in most areas best achieved through the synergistic combination of environment-friendly,food security,and energy decarbonization scenarios.For SDG 13(Climate Action),globally,disaster-related deaths per year have decreased by 6.55%,but economic losses have risen by 71.30%,leaving a large gap with the Sendai Framework for Disaster Risk Reduction 2015 2030 targets.Greenhouse gas emissions overall continue to rise,far from the 2 C pathway.In China,annual numbers of disaster-affected people,deaths and missing persons,and direct economic losses as a share of Gross Domestic Product(GDP)have all declined significantly compared with pre-Sendai levels.In 2020,Chinas carbon emission intensity decreased by 48.4%compared to 2005.New findings show that globally,the number of people affected by heatwaves has risen sharply;methane emissions per unit of raw coal production in China have decreased by 17%,while direct nitrous oxide emissions from cropland have dropped by 17%;and global sea levels are rising by about 3.2 mm/a,with ice sheets in the Arctic and Antarctic and glaciers on the Qinghai-Xizang Plateau together contributing about one-third,posing severe risks to Small Island Developing States(SIDS).For SDG 14(Life Below Water),only ending subsidies contributing to overfishing and supporting small scale fishers are on track globally,while other indicators remain slow or regressing,calling for urgent reversal of adverse trends.In China,significant progress has been made overall,except for ocean acidification and the share of GDP from sustainable fisheries,which have stalled or declined.Indicators such as reducing marine pollution and conserving coastal and marine areas still require further acceleration.New findings show that global coastal eutrophication has expanded,coral reef degradation remains severe,and core coastline conservation is lagging;while in China,large-scale seaweed aquaculture has shifted from rapid expansion to a focus on quality,efficiency,and ecological disaster prevention.04Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs Since 2015,the 2030 Agenda for Sustainable Development(hereinafter referred to as the 2030 Agenda)has been under implementation for ten years.However,according to the United Nations Sustainable Development Goals Report 2025,global progress has slowed and gone seriously off track:only 18%of the targets are on track,while 18%have regressed.Accurate and timely data are essential for measuring progress on the 17 Sustainable Development Goals(SDGs)and 169 targets.Data help identify challenges,design solutions,track implementation,and inform necessary policy adjustments.Without high-quality data,it is impossible to fully understand progress and gaps in implementing the SDGs.Yet,with only five years left until 2030,data gaps remain a major challenge.As of 2025,only 70%of indicators cover more than half of countries worldwide,and only about half of the indicators have time-series data comparable since 2015.The most severe data gaps are found in developing countries and least developed countriesprecisely those that most need data to support their transition and development.Digital technologies represented by Big Earth Data and artificial intelligence are providing strong support for filling these data gaps and optimizing future development pathways.The acquisition and analytical capacity of Big Earth Data have continued to improve,offering new data and insights for SDG assessment.By integrating multi-source data from satellite remote sensing,positioning,the Internet,meteorology,and fundamental geography,Big Earth Data converts natural observations into indicator status data and uses continuous monitoring to analyze indicator progress and trends.With the incorporation of deep learning and other AI algorithms,the accuracy and coverage of Big Earth Data monitoring have both improved.All monitored indicator data undergo cross-validation using ground measurements,sample analyses,and other methods to ensure accuracy and reliability.Drawing on spatiotemporal observation data together with statistics from UN agencies and international organizations,this report assesses global progress from 2015 to 2024 on seven SDGs and Chinas progress on nearly all indicators.It analyzes the overall indicator status and trends and offers a panoramic view of sustainable development trends worldwide and in China across 233 indicators.At the same time,by leveraging high spatiotemporal-resolution Big Earth Data and AI algorithms,the report explores spatial differences in indicators and provides deeper insights into their underlying dynamics and knowledge.Introduced in 2014,the concept of Big Earth Data has since evolved into a powerful tool.Since 2019,it has been applied by the research team to SDG progress assessment.Its capacity to support the SDGs has grown steadily,advancing toward broader coverage,faster processing,and smarter applications.The scope of SDG monitoring and assessment has expanded from regional to national and global scales.The volume of data products has grown from the terabyte to the petabyte level.Processing methods have evolved from stand-alone computing to cloud computing and integration with artificial intelligence.The range of indicators covered now includes nearly all indicators in China and 59 indicators globally.Using Big Earth Data,the research team evaluates global progress on 59 indicators under seven SDGsZero Hunger(SDG 2),Clean Water and Sanitation(SDG 6),Affordable and Clean Energy(SDG 7),Sustainable Cities and Communities(SDG 11),Climate Action(SDG 13),Life Below Water(SDG 14),and Life on Land(SDG 15)accounting for 74.7%of the indicators under these Goals.Results show that global progress is seriously off track.Of the 59 indicators assessed,only 10(16.9%)are on track,27 have slowed,five have stalled,and 17 have regressed.Meanwhile,using Big Earth Data,the status and trends of 233 indicators in China were assessed,covering 92.8%of all SDG indicators(251 in total as of early 2025)and reflecting further improvements in data acquisition capacity.The quantitative findings on Chinas SDG progress presented in this report are exploratory in nature,derived from the application of key technologies and innovative methods in Big Earth Data processing and analysis.Between 2015 and 2024,China made substantial Introduction Countdown to 2030:A Decade of Sustainable Development through the Lens of Big Earth Data05Introductionprogress on sustainable development,with notable overall improvements in indicator status.By 2024,141 indicators(60.5%)were close to target or achieved.Four GoalsNo Poverty(SDG 1,fully achieved),Quality Education(SDG 4),Partnerships for the Goals(SDG 17),and Industry,Innovation and Infrastructure(SDG 9)each had over 70%of indicators close to target or achieved.The share of indicators facing major challenges declined from 7.3%in 2015 to 2.6%in 2024,concentrated mainly in ecological protection and material footprint.At the current pace,about 81%of indicators are projected to be achieved by 2030,though the actual proportion may be lower given the complex,long-term challenges associated with the remainder.In the environmental domain,the report assesses 92 indicators.By 2024,53.3%of these had achieved their 2030 targets.Compared to the previous year,SDG 6.3.2 improved significantly,with the proportion of surface water bodies of good quality rising to 90.4%,surpassing the 90%threshold and shifting from“challenges remain”to“on track.”Nevertheless,progress on environmental indicators as a whole still lags behind that of all indicators.nvironmental improvement is a long-term process that demands sustained effort and investment.Chinas rapid progress on the SDGs has also contributed significantly to global progress.Since 2015,about 100 million people in China have been lifted out of poverty;hunger has been largely eradicated;installed renewable energy capacity increased from 480 GW to 1,890 GW;PM2.5 concentrations fell from 43.3 g/m3 to 30.2 g/m3;the share of surface water bodies of good quality rose from 64.5%to 90.4%;and forest cover expanded from 21.7%to 25.0%.Given the deep interconnections between food,energy,and the environment globally,Chinas progress in these areas has become a critical driver of global sustainable development.Building on the achievements of the past six years,this report develops a research framework for monitoring and evaluating the SDGs using Big Earth Data.Across eight chapters,it systematically presents the latest findings on global and Chinas ten-year progress,thematic studies,and conclusions and recommendations.Detailed data sources,technical methods,analytical procedures,and accuracy verification are provided separately in the appendices.The data that is not directly attributed in the report is unofficial statistical data calculated by researchers based on Big Earth Data.06Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs 07Introduction Figure 1-1 Figure 1-1 Status and Trends of 233 SDG Indicators in China(2010-2024)08SDG 2 Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs 09SDG 2 SDG 2 Zero HungerSDG 2Zero HungerSDG 2Ten-Year Progress Assessment of SDG 2 Globally and in China 10Thematic Studies 14Conclusion and Recommendations 19Main References 2010SDG 2 Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs This report evaluates ten-year progress on SDG 2 indicators globally and in China,with reference to the 2030 targets set by the FAO 1,drawing on the database established and maintained by five major institutionsthe Food and Agriculture Organization of the United Nations(FAO),the United Nations Childrens Fund(UNICEF),the World Health Organization(WHO),the United Nations Environment Programme(UNEP),and the World Bankalong with data from the reports Big Earth Data in Support of the Sustainable Development Goals(20192024)published by the International Research Center of Big Data for Sustainable Development Goals.Case studies are also conducted on two thematic areasdouble the productivity and incomes of small-scale food producers,sustainable food production and resilient agricultural practicesfocusing on crop spatial distribution,productivity levels,outcomes in sustainable agriculture,and technological progress in sustainable agriculture.Among the 15 indicators under SDG 2,nine have clearly defined quantitative targets,five are directional targets,and one new indicator added in 2025 is still under review for data availability and lacks a specific target.At the global level,12 indicators have available data for assessment.Of these,four indicatorssuch as SDG 2.4.1(proportion of agricultural area under productive and sustainable agriculture)are on track to be met,while the rest are off track,reflecting the slow global progress on SDG 2.In China,excluding the newly added indicator in 2025 and two indicators(SDG 2.a.2 and SDG 2.b.1)for which monitoring data are unavailable,the remaining 12 indicators have been assessed.With the exception of the prevalence of anemia among women of reproductive age(SDG 2.2.3),all other indicators are either on track or already achieved,demonstrating stronger progress on SDG 2 in China than the global average.I.Global Progress Assessment1.1 SDG 2.1 Universal access to safe and nutritious food The prevalence of undernourishment rose from 7.7%in 2015 to 9.1%in 2023 2,leaving a gap of 6.6 percentage points to the 2030 target of no more than 2.5%.At the current rate,10.9%of the global population is projected to be undernourished by 2030,making the target unachievable.The prevalence of moderate or severe food insecurity increased from 21.5%in 2015 to 28.9%in 2023 2,a rise of 7.4 percentage points.At the current average annual growth rate of 1.1 percentage points,this figure will reach 36.4%by 2030far from the target of reducing it to below 5%.1.2 SDG 2.2 End all forms of malnutritionBetween 2012 and 2022,the stunting rate among children under five declined from 26.3%to 22.3%2.The 2030 target is 13.2%,or a 50%reduction from the 2012 baseline 3.At the current rate,the prevalence is expected to drop to 19.5%by 2030still far from meeting the target.The annual rate of decline needs to accelerate to 1.1 percentage points to achieve the 2030 target.The wasting rate fell from 7.5%to 6.8%2,with a projected value of 6.2%by 2030.The overweight rate rose slightly from 5.5%to 5.6%2,projected to reach 5.7%by 2030.Both are far from the 2030 target of no more than 3%3 if the current rates continue.The prevalence of anemia among women of reproductive age rose from 28.5%in 2012 to 29.9%in 2019 2,increasing by 0.21 percentage points annually.It is projected to reach 32.2%by 2030,whereas the target is a 50%reduction from 2012,i.e.,14.3%1,4.The current trend is in the opposite direction of the target and will be extremely difficult to reverse in time.1.3 SDG 2.3 Double the productivity and incomes of small-scale food producers This report finds that labor productivity for four major cereal crops rose from 3100 t in 2015 to 3350 t in 2022 5,increasing by 35.71 t annually.At this rate,productivity would reach 3635.68 t by 2030,which falls 2564.32 t short of the doubling target.The annual growth rate would need to increase by 8.98 times to meet the target.Due to data limitations,global assessment of small-scale producer income is not available,but their income is approximately half that of large-scale producers,and women farmers earn significantly less than men.According to World Bank statistics,agricultural value added per worker rose from USD 1,959.14(constant)in 2010 to USD 2,053.35 in 2016 6.Although increasing,the current growth rate(USD 15.70/a)remains insufficient to achieve the doubling target by 2030.Ten-Year Progress Assessment of SDG 2 Globally and in China11SDG 2 SDG 2 Zero Hunger12SDG 2 Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs 13SDG 2 SDG 2 Zero Hunger1.4 SDG 2.4 Sustainable food production and resilient agricultural practicesThere is currently limited data on the proportion of agricultural area under productive and sustainable agriculture.The UN Statistical Commission has approved the use of a proxy indicator to monitor progress 1.This proxy consists of seven key sub-indicators covering 3 dimensions:economic(value of production per hectare,diversification index of production,and smallholder income),environmental(nitrogen use efficiency,water stress,and agricultural Greenhouse Gas(GHG)emission intensity),and social(informal employment in agriculture)dimensions.Based on the proxy indicator,the sustainable agriculture index rose from 3.43 in 2015 to 3.99 in 2023 2,showing a positive trend aligned with the 2030 target and is on track to be met.Looking ahead,promoting rapid and accurate evaluation of the proxy indicator should be a major priority 1.1.5 SDG 2.5 Maintain the genetic diversity in food productionThe number of cultivated plant genetic resources rose from 5.5 million in 2016 to 5.94 million in 2022 2.Local and transboundary farmed and domesticated animal genetic resources rose from 7,285 and 1,099 in 2020 to 7,657 and 1,126 in 2023 2,respectively.All show increasing trends aligned with the target and are on track to be met.However,data on the proportion of breeds classified as being at risk of extinction remain insufficient for a comprehensive assessmentcovering only 35.32%of countries and regions globally between 2015 and 2024 2.1.6 SDG 2.a Invest in rural infrastructure,agricultural research,technology and gene banksThe agriculture orientation index for government expenditures declined from 0.50 in 2015 to 0.43 in 2023 2,indicating a reduction in agricultures priority within government spendingdiverging from the 2030 target of increasing the index.Without policy adjustment,this target is unlikely to be achieved.Meanwhile,official development assistance for agriculture rose from USD 163 million(constant)in 2015 to USD 241 million in 2023 2,showing growth in absolute terms aligned with the target and is likely to be met.1.7 SDG 2.b Prevent agricultural trade restrictions,market distortions and export subsidiesAs of 1 January 2024,only the least developed countries and net food-importing developing countries are allowed to use certain forms of export subsidies 7.Global agricultural export subsidies dropped from USD 247 million in 2015 to USD 25 million in 2023 8.At the current rate,the target of eliminating agricultural export subsidies by 2030 is on track.1.8 SDG 2.c Ensure stable food commodity markets and timely access to informationGlobal food prices have been heavily affected by regional conflicts and supply chain disruptions.The proportion of countries with abnormally high food prices rose from 22.9%in 2015 to 51.2%in 2022 2,growing by approximately 5.14 percentage points per year.If the trend continues,the figure will rise even further by 2030unable to achieve the 2030 target.2.Chinas Progress Assessment2.1 SDG 2.1 Universal access to safe and nutritious food The prevalence of undernourishment in China was already below 2.5%in 2015 2,indicating that hunger had been largely eliminated and the 2030 target had been met.This status was maintained through 2023.The prevalence of undernourishment and moderate/severe food insecurity are interrelated and complementary 1;since the hunger target has been met,food insecurity has also been essentially resolved,and China has achieved the target.2.2 SDG 2.2 End all forms of malnutritionThe stunting rate among children under five declined from 7.6%in 2012 to 4.6%in 2022 2,a 39.5%reductionnearing the 2025 target of a 40%reduction from the 2012 level 3.If the current annual decline of 0.28 percentage points continues,the rate will fall to 2.36%by 2030,putting the 50%reduction within reach.According to existing data,the prevalence of wasting had already dropped to 1.9%by 2013 2 and remained at that level in 2017 2,indicating achievement of the indicator.According to data from the Chinese Center for Disease Control and Prevention,the prevalence of anemia among pregnant women,an indicator linked to maternal and intergenerational health,declined from 17.2%in 2013 to 14.5%in 2022.At the current rate of decline,it is expected to fall to 12.1%by 2030,still short of the target of a 50%reduction.2.3 SDG 2.3 Double the productivity and incomes of small-scale food producers This report finds that labor productivity measured at constant prices increased from CNY 36,400 per person in 2015 to CNY 103,600 per person in 2023,reaching 284.62%of the 2015 level and surpassing the 2030 target of doubling.Regarding smallholder incomes,per capita disposable income measured at constant prices of rural residents rose from CNY 11,422 in 2015 to CNY 18,390 in 2023,growing by CNY 871 per year.If this trend continues,the income will reach CNY 24,487 by 20302.14 times the 14SDG 2 Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs The 15 indicators under the eight targets of SDG 2 assess progress toward Zero Hunger from three dimensions:meeting food needs,securing food production,and national-level policy actions.As of April 2025,four indicators under SDG 2 remain classified as Tier IIconceptually clear with internationally agreed methodologies,but without regular data production at the country level.These include:SDG 2.3.1(Volume of production per labor unit by classes of farming/pastoral/forestry enterprise size)SDG 2.3.2(Average income of small-scale food producers,by sex and indigenous status)SDG 2.4.1(Proportion of agricultural area under productive and sustainable agriculture)SDG 2.5.2(Proportion of local and transboundary breeds classified as being at risk of extinction)Big Earth Data,with its advantages in macro-scale coverage,high-frequency updates,and fine spatial granularity,has become a vital tool for bridging data gaps and supporting indicator assessment.Over the past six years,Big Earth Data has focused on the two indicators with the most significant data gapsSDG 2.3.1 and SDG 2.4.1conducting research at both global and national(China)scales to develop supporting data and assess spatiotemporal progress.1.In terms of data development for indicator assessment,global remote sensing models were developed to monitor the spatiotemporal dynamics of cropland area,cropland use intensity,and the distribution of major crops.These efforts produced global monitoring data products that offer scientific support for improving global agricultural productivity.2.In terms of spatiotemporal indicator assessment,integrated evaluation methods were developed for SDG 2.4.1 sub-indicators(land productivity,water-use efficiency,and fertilizer application risk)by combining multivariate data and interdisciplinary models.This resulted in a spatiotemporal dataset for assessing sustainable agriculture in China,providing evidence-based recommendations for national food production planning.Looking ahead,further efforts will be made to explore the potential of Big Earth Data in spatiotemporal monitoring of indicator progress.This includes evaluating Tier II indicators(with methods but no data)and refining the spatiotemporal analysis of Tier I indicators(with both methods and data).2015 levelplacing the target within reach.2.4 SDG 2.4 Sustainable food production and resilient agricultural practicesContinuous monitoring of land productivity,water use efficiency,and fertilizer-related pollution risks shows that China has achieved simultaneous improvements in yield and environmental sustainability.Yield per unit area rose from 14.56 Mkcal/ha in 2015 to 17.00 Mkcal/ha in 2023an increase of 16.76%.Meanwhile,the environmental impact per unit yield declined significantly:nitrogen overuse dropped from 5.48 kg/Mkcal to 3.51 kg/Mkcal(-35.95%);phosphorus overuse fell from 1.54 kg/Mkcal to 0.86 kg/Mkcal(-44.16%)9-11;irrigation water use per mu decreased from 402 m3 in 2014 to 342 m3 in 2024(-14.93%).These results highlight the success of the synergistic pathway of enhancing output efficiency while reducing environmental pressure,putting the 2030 target on track.2.5 SDG 2.5 Maintain the genetic diversity in food productionWhile data on plant genetic resources are unavailable,the numbers of both local and transboundary animal genetic resources have remained at 651 and 76,respectively,since 2015 2,thereby meeting the indicator requirement of no decline in quantity and remaining on track.The proportion of breeds classified as at risk of extinction declined from 24%in 2015 to 15%in 2024 2,aligning with the indicators goal of preventing increases in extinction risk and is also on track.2.6 SDG 2.a Invest in rural infrastructure,agricultural research,technology and gene banksThe agriculture orientation index for government expenditure declined from 0.99 in 2015 to 0.87 in 2023 2.However,due to Gross Domestic Product(GDP)growth,absolute agricultural investment did not decrease,and the indicator is on track.2.7 SDG 2.c Ensure stable food commodity markets and timely access to informationFood price anomalies at the national level are assessed using the Indicator of Food Price Anomalies(IFPA).Chinas IFPA value rose slightly from-0.68 in 2015 to-0.63 in 2023 2.At the current trend,it will reach-0.40 by 2030,which falls within the normal fluctuation range(-0.5 IFPA 100%)accounted for 6.7%of the national territory,mainly located in parts of North China,Northwest China,and East China.Specifically,Shanghai,Jiangsu,Ningxia,Xinjiang,Tianjin,Hubei,and Henan were classified as critical water stress regions(Figure 3-4a).The population living in water-stressed areas accounted for 48.8%of the national total,with Guangdong,Jiangsu,and Henan each having more than 50 million residents in water-stressed areas(Figure 3-4b).Between 2015 and 2024,Chinas overall water stress level declined from 73.3%to 61.7%,the proportion of land area under critical water stress fell from 9.1%to 6.7%,and the share of the population living in water-stressed areas dropped from 68.1%to 48.8%,representing a net reduction of 250 million people.This decrease was mainly driven by the reduction in the extent of water-stressed areas.The Between 2015 and 2024,Chinas water stress level fell from 73.3%to 61.7%,while the share of population in water-stressed areas declined from 68.1%to 48.8%Target:SDG 6.4 Figure 3-3 Interannual variations of GPP,ET,and WUE,and spatial distribution of WUE trends in global terrestrial vegetation ecosystems(20152024)29SDG 6 SDG 6 Clean Water and Sanitation Figure 3-5 Interannual variations of global and continental reservoir storage(19842024).Here,S represents the annual growth rate of RWS(km3/a),and the numbers in parentheses following the global and continental labels indicate the number of reservoirsProtecting Aquatic EcosystemsFrom 1984 to 2024,global Reservoir Water Storage(RWS)showed a significant upward trend,with an annual increase of 50.27 5.14 km3/a(p1 million)were affected by the Urban Pollution Island(UPI)effect;the average UPI intensity declined from 6.09 g/m3 to 3.52 g/m3,while the affected area expanded to 204.59 km2From 2015 to 2024,the ratio of grey to green space in the built-up areas of Chinas 34 provincial capitals moved steadily toward balance.The proportion of green space increased by 14.21%,and the share of the population served by green space rose by 19.19%Target:SDG 11.6Target:SDG 11.7and affected area,with average PM2.5 concentrations still exceeding 30 g/m3.Overall,spatiotemporal patterns of UPIs underscore the pronounced heterogeneity of air pollution,calling for region-specific governance strategies and stronger urbanrural collaborative efforts to cut emissions.Urban PollutionUrban Public Open Space53SDG 11 SDG 11 Sustainable Cities and CommunitiesFrom 2015 to 2024,heat-related mortality in Global South cities trended upward overall,with marked spatial disparities(Figure 5-7).Climate change led to longer periods of heat stress,with the average number of heat-risk days rising from 92.4 in 2015 to 105.9 in 2024.This rise heightened the exposure of populations to heat-related health risks,particularly in central and northern China and across Southeast Asia,where the number of heat-risk days increased by up to 40 days.Southeast Asia has been particularly affected by heat stress.In 2023,heatwaves impacted 73.6%of the regions land area(Figure 5-7c),exposing 269 million people.Of these,127 million and 165 million were affected during winter and spring,respectively,while 113 million and 162 million were affected during summer and autumn.The continued intensification of heat stress has driven up mortality,with the average heat-related mortality in Global South cities increasing from 0.29%in 2015 to 0.36%in 2024.The rise between 2020 and 2024(0.05%)was about 2.5 times the increase between 2015 and 2020(0.02%).Tropical cities consistently recorded the highest heat-related mortality0.40%in 2015,0.43%in 2020,and 0.49%in 2024(Figure 5-7b)and also saw the steepest increases(averaging 0.02%0.08%),followed by arid cities.These findings underscore the urgent need to prioritize mitigation in tropical and arid cities,where heat-related risks are most severe.By 2024,the average heat-related mortality in major cities of the Global South had risen to 0.36%,continuing a decade-long upward trend with significant regional variation.Observations from the SDGSAT-1 satellite show that Southeast Asia was especially severely affected by heat stressTarget:SDG 11.bThermal Environment and Healthgrey to green space in provincial capitals trended toward balance,and service capacity improved significantly.In the latter half of the decade,however,a mismatch emerged between the expansion of urban green space and population distribution,as rising greygreen allocation ratios were accompanied by a decline in the proportion of residents served.Looking ahead,regionally adapted strategies are needed to coordinate greygreen space allocation,share governance experience,and enhance the service capacity of urban open spaces.Figure 5-6 Trends in greygreen space allocation and changes in the proportion of population served in Chinas provincial capital cities.(a)Allocation changes,20152024;(b)Trends in greygreen space area,allocation ratio,per capita greygreen space,and the proportion of population served by open green space;(c)Changes in share of grey and green space,2015202454SDG 11 Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs Figure 5-7 Distribution of heat-related risks in major Global South cities.(a)Heat-related mortality in 2024;(b)Average heat-related mortality by climate zone in three representative years;(c)Spatial distribution of heatwaves in Southeast Asia(left)and high-temperature risk analysis in representative cities(right,where 1 4 represent Mandalay,Chiang Mai,Bangkok,and Ho Chi Minh City)Using Big Earth Data analytics,this chapter assessed the decade-long progress of SDG 11 at both global and Chinese scales.Overall,global urban land-use efficiency is on track to meet the 2030 target.However,progress on other indicators has been relatively slow and uneven across regions.China has basically met targets in areas such as urban public transport,World Natural Heritage protection,and urban disaster response.Yet,World Natural Heritage sites remain threatened by natural disasters,while urban air pollution and heat stress continue to pose major challenges.To accelerate progress on SDG 11,the following recommendations are proposed:1.Government agencies should align social policies and public awareness campaigns with cutting-edge technologies such as satellite observation and AI.Achieving progress on SDG 11 will require closer collaboration among sustainable development research institutions,stronger cross-sector coordination,and the development of universally applicable evaluation models and monitoring methods.These measures would overcome current bottlenecks in progress assessment,improve emergency response systems,and enable informed spatial decision-making.2.International cooperation should be strengthened to support developing countries in optimizing urban layouts and building climate-resilient infrastructure.Promoting sustainable urban transitions requires stricter regulation of major pollution sources and wider adoption of emission reduction technologies.Urban environmental quality Conclusion and Recommendations55SDG 11 SDG 11 Sustainable Cities and Communitiesmanagement should be enhanced by prioritizing pollution control zones,strengthening key sources management,advancing precise emission reduction in high-density areas,and developing differentiated and refined pollution control systems to effectively address the challenges of regional heterogeneity.3.With natural disasters becoming more extreme,destructive,and unpredictable under climate change,megacities should adopt comprehensive strategies for prevention,mitigation,and relief,ensuring coordinated mitigation and adaptation.Efficient emergency systems must be established for extreme events.In the Global South cities especially,interventions should target economically and ecologically vulnerable areas,prioritize regions experiencing sharp increases in risk,and address the spatial spillover effects of urban expansion.1 Wang Q R.Actively sharing Chinas urban development experiences and solutions with the worldJ.Sustainable Development Economic Herald,2024,(12):34-37.2 Saif M A,Zefreh M M,Torok A.Public transport accessibility:a literature reviewJ.Periodica Polytechnica Transportation Engineering,2019,47(1):36-43.3 Wang X,Zhou L,Lpez-Carr D,et al.Urban grey-green scales:A new perspective for assessing dynamic spatial trade-offsJ.International Journal of Applied Earth Observation and Geoinformation,2025,142:104708.DOI:10.1016/j.jag.2025.104708.4 Guo H,Chen F,Tang Y,et al.Progress toward the sustainable development of world cultural heritage sites facing land-cover changesJ.The Innovation,2023,4:100496.Main References56SDG 13 Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs 57SDG 13 SDG 13 Climate ActionSDG 13Climate ActionSDG 13Ten-Year Progress Assessment of SDG 13 Globally and in China 58Thematic Studies 61Conclusion and Recommendations 67Main References 6858SDG 13 Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs This chapter evaluates ten-year trends in the eight SDG 13 indicatorsspanning climate change impacts,mitigation,and adaptationat both the global and China scales.The analysis draws on the reports Big Earth Data in Support of the Sustainable Development Goals(20222025)and UN progress reports,covering indicators such as disaster-risk reduction policies,populations affected by disasters,greenhouse-gas emissions,and adaptation in vulnerable regions.Of the eight indicators,seven have global assessment data.Submit Nationally Determined Contributions(NDCs)and long-term strategies to the Secretariat of the United Nations Framework Convention on Climate Change(UNFCCC)(SDG 13.2.1)is on track,while people affected by disasters(SDG 13.1.1),National Disaster Risk Reduction(DRR)strategies(SDG 13.1.2),climate-change education(SDG 13.3.1),climate finance(SDG 13.a.1),and adaptation in Least Developed Countries(LDCs)and SIDS(SDG 13.b.1)are progressing slowly.Greenhouse Gas(GHG)emissions(SDG 13.2.2)continue to rise and is seriously off track.China reports data for all eight indicators.People affected by disasters(SDG 13.1.1),national DRR strategy (SDG 13.1.2),local DRR strategies(SDG 13.1.3),and climate action strategy (SDG 13.2.1)have been achieved ahead of schedule.Climate-change education(SDG 13.3.1)is steadily improving.GHG emissions(SDG 13.2.2)remain under considerable pressure.In SDG 13.b.1,we analyzed the glacier change and the risk of inundation for SIDS.1.Global Progress Assessment 1.1 SDG 13.1 Strengthen resilience and adaptive capacity to disasters This report finds that from 20152024,the frequency of climate-related disasters increased by 5.72%compared with 20052014;disaster-related deaths fell by 6.55%;and economic losses rose by 71.30%.Although disaster-related deaths have declined,the sharp rise in economic losses underscores the difficulty of achieving the Sendai Frameworks goal of substantially reducing disaster impacts by 2030.As of 2024,131 countries reported adopting and implementing national DRR strategies,up from 57 in 2015 1.Roughly one-third of countries still lacked such strategies;data on local-government implementation remained insufficient.1.2 SDG 13.2 Integrate Climate Change Measures into Policies and Planning As of August 2025,according to the UNFCCC webpage,98.5%of Parties had provided the information needed to enhance the clarity,transparency,and understanding of their NDCs.At present,22 Parties have filed updated NDCs 3.0.Global GHG emissions continue to rise overall,jeopardizing the achievement of the 1.5 C temperature target.A considerable gap also remains with respect to the 2 C target 2.1.3 SDG 13.3 Building Knowledge and Capacity to Meet Climate ChangeThe UNs 0100 index for“green education”shows a 2024 global average of 40:environment/sustainability scores are higher(55),while climate-change scores are lower(21).Only one-quarter of countries meet the recommended benchmark of 50 3.1.4 SDG 13.a Implement the UN Framework Convention on Climate ChangeAnnual global climate-finance flows averaged USD 1.3 trillion in 20212022,up 63%from 20192020,driven primarily by increased investment in key emission reduction sectors.Tracked adaptation finance rose 28%to USD 63 billion per year,mainly via commitments from development-finance institutions 1.1.5 SDG 13.b Promote Mechanisms to Raise Capacity for Climate Planning and ManagementAs of 2023,19 of 45 LDCs and 11 of 39 Small Island Developing States(SIDS)had submitted new or updated NDCs 4.2.Chinas Progress Assessment2.1 SDG 13.1 Strengthen resilience and adaptive capacity to disastersBased on the findings of this report,from 2015 to 2024,Chinas annual disaster impacts per 100,000 people declined markedly compared with pre-Sendai levels:the Ten-Year Progress Assessment of SDG 13 Globally and in China59SDG 13 SDG 13 Climate Action60SDG 13 Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs 61SDG 13 SDG 13 Climate ActionSDG 13 comprises five targets and eight indicators,structured around three themes:mitigation,response,and adaptation.As of April 2025,while three indicators are Tier I(methodology and data available),five remain Tier II(methodology established but data lacking):Local governments that implement DRR strategies(SDG 13.1.3)Submit NDCs and long-term strategies to UNFCCC secretariat(SDG13.2.1)Climate-change education(SDG 13.3.1)Climate finance (SDG 13.a.1)Adaptation in LDCs and SIDS (SDG 13.b.1)Over the past six years,leveraging the spatiotemporal advantages of Big Earth Data,work on the three themes has advanced in two main directions:1.Filling indicator data gaps.Validated multi-source Big Earth Data,including remote sensing and official statistics,et al.,has been used to analyze the global spatial-temporal status and trends of climate-related disasters and GHG budgets.Earth-observation methods have been applied to assess Chinas DRR and climate-adaptation policies,while web-mining has been used to evaluate climate-change education in China.Together,these methods help close data gaps for multiple indicators.2.Revealing change mechanisms and proposing sustainable development strategies.Analyses of different disaster types reveal the extent and trends of their impacts,as well as the dominant factors shaping the distribution of specific greenhouse gases.These insights provide an evidence base for enhancing resilience,reducing disaster losses,and curbing emissions.The 2025 report uses Big Earth Data to integrate monitoring,analysis,and decision support for SDG 13 across mitigation,response,and adaptation.Key areas of focus include:the cascading effects of global heatwaves on ecosystems,agriculture,and human health;number of affected people fell by 50.3%,disaster-related deaths and missing persons by 14.3%,and direct economic losses as a share of GDP by 23.1%.Between 2016 and 2020,China accelerated implementation of the Sendai Framework compared with the previous five years.A comprehensive suite of policy measures marked a strategic shift:from post-disaster relief to pre-disaster prevention,from single-hazard response to multi-hazard risk reduction,and from loss reduction to risk mitigation 5.By 2022,all provincial-level governments had formulated and implemented DRR strategies aligned with both the Sendai Framework and the national strategy 5.2.2 SDG 13.2 Integrate Climate Change Measures into Policies and PlanningIn 2015,China submitted Enhanced Actions on Climate Change:Chinas Intended Nationally Determined Contributions to the UNFCCC Secretariat.In 2021,it submitted Report on Chinas Achievements,New Goals and New Measures for NDC Implementation and Chinas Mid-Century Long-Term Low GHG Emission Development Strategy.In 2022,17 ministries jointly issued the National Climate-Change Adaptation Strategy 2035 6.From 2015 to 2023,Chinas Carbon Dioxide(CO2)emission intensity continued to decline,while the growth rate of total emissions slowed.In 2020,Chinas carbon emission intensity decreased by 48.4%compared to 2005.The total carbon emission increases at a slower pace 7.2.3 SDG 13.3 Building Knowledge and Capacity to Meet Climate ChangeSentiment analysis of climate-related posts on Chinese social media reveals broad public confidence in achieving the carbon-peaking and carbon-neutrality goals,with a generally positive stance toward climate-mitigation efforts.Among sampled Weibo posts,72.98%conveyed positive sentiment and 24.43%negative,framing climate change as both a threat and an opportunity for economic transformation 6.2.4 SDG 13.a Implement the UN Framework Convention on Climate ChangeIn 2023,China mobilized USD 2.346 billion in external public climate finance,ranking 11th among 206 countries and territories 8.2.5 SDG 13.b Promote Mechanisms to Raise Capacity for Climate Planning and Management This report applies Big Earth Data analytics to assess global sea-level rise and the inundation risks faced by SIDS.Thematic Studies62SDG 13 Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs ImpactClimate-Related DisastersStorms showed a particularly notable upward trend,increasing at an average rate of 3.68 events per year over the past decade.Compared with the 20052014 period,the annual frequency of climate-related disasters increased by 5.72%.Disaster-related casualties fell from 168 million to 157 million,a 6.55%reduction,while average annual economic losses surged from USD 99.592 billion to USD 170.597 billion,a 71.30%increase(Figure 6-1).Floods and storms remain the most frequent disaster types,and their frequency continues to rise.Yet,the number of people affected by floods and storms declined at annual rates of approximately 658,200 and 1,111,500,respectively.Of particular concern are extreme-temperature events:though they accounted for only 5.48%of all climate-related disasters,From 2015 to 2024,the world experienced an average of over 300 climate-related disasters per year,with floods and storms accounting for over 80%of the total.There was an increasing trend of sudden shifts from drought to floodTarget:SDG 13.1 Figure 6-1 Climate-related disasters,19902024.(a)Frequency;(b)Economic losses;(c)Disaster-related deaths;(d)Number of people affected monitoring Methane(CH4)and Nitrous Oxide(N2O)emissions and identifying feasible reduction pathways;the influence of polar-ice dynamics on sea-level rise and the security of SIDS.This work aims to reveal the latest climate-related challenges to sustainable development and provide fine-grained assessments of risks and countermeasures for both China and the world.63SDG 13 SDG 13 Climate ActionUsing land-surface temperature and soil moisture as indicators,statistics show that the global land area experienced an additional 0.1 days per year of compound heatwavedrought events from 2005 to 2024(p 0.001),reaching 6.5 days in 2024.Both the frequency of such compound events and the number of people affected increased significantly(p 0.001).The regions most at risk include East Asia,western North America,eastern Europe,and eastern Australia(Figure 6-3).Between 2005 and 2024,the global average human heat stress(The net thermal load borne by the human body under certain environmental conditions.It characterizes human thermal sensation,heat strain,and comfort level.)showed an overall fluctuating upward trend,with the Universal Thermal Climate Index(UTCI)on the land surface increasing by about 0.86C over the past 20 years,and record highs in 2023 and 2024.Population exposure to extreme,very strong,and strong heat stress increased by nearly 50%,climbing from 8.54 trillion person-hours in 2005 to 12.70 trillion person-hours in 2024.From 2015 to 2024,each 1-unit increase in the global heatwave intensity index was associated with a 0.08-percentage-point drop in global GDP growth(p 0.01).The negative impacts of heatwaves on GDP were much greater in the Global South(low-and middle-income,tropical/subtropical developing countries),averaging 2.5 times the impact observed in the Global North(high-income,temperate developed countries)(Figure 6-4).In 2024,the indirect GDP impacts of heatwaves accounted for 62%of total impacts,mainly through damage to ecosystem provisioning services(e.g.,raw materials,water supply,35%)and regulating services(e.g.,climate and hydrological regulation,27%).These indirect effects,transmitted via supply chains and resource prices,outweighed the 38%share of direct thermal shocks.The number of people affected by heatwaves increased sharply worldwide from 2005 to 2024,while overall human heat stress exhibited a fluctuating yet upward trend.The negative impact of heatwaves on GDP was significantly greater in Global South countries than in those of the Global NorthTarget:SDG 13.1 Figure 6-2 Intensity of global droughtflood abrupt alternation events,19812024(map:spatial distribution;lower left:interannual variations)they were responsible for 58.14%of disaster-related deaths.The global climate system is becoming both more unstable and more extreme.From 2015 to 2024,droughtflood abrupt alternation events increased significantly compared with 30 years ago.The intensity of such events has risen by 1.84%per decade,showing a clear upward trend.These events are concentrated in eastern and northern North America,much of Europe,and eastern,northern,and southern Asia(Figure 6-2).64SDG 13 Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs Figure 6-3 Joint return period of compound heatwavedrought events,20162024(The bottom left curves show annual average days)Figure 6-4 Spatial distribution of the negative impact intensity of heatwaves on global GDP,2024MitigationGreenhouse Gas EmissionsDuring this period,CH4 emissions from coal mines in major global coal-producing regions followed a fluctuating upward trend,with notable regional variations.In 2015,total CH4 emissions stood at 31 6 Mt.CH4 emissions per unit of raw coal production varied significantly:Africa(5,480 t/Mt),Oceania(4,611 t/Mt),Asia(4,131 t/Mt),and Europe(3,453 t/Mt)(Figure 6-5).These differences reflect both geological gas content and regional mitigation practices.The total CH4 emissions from major coal-producing regions around the world had risen to From 2015 to 2024,total CH4 emissions from coal mines in the worlds major coal-producing regions increased by about 6%,while CH4 emissions per unit of raw coal production in China declined by 17%Target:SDG 13.2 Figure 6-5 CH4 emissions from coal mines in coal-producing regions worldwide(The bottom-left panel shows CH4-emission trends in coal-mining regions across continents from 2015 to 2024)65SDG 13 SDG 13 Climate ActionAdaptationGlobal Polar Glacier Change and Sea-Level RiseFrom 1996 to 2021,affected by global warming,the glaciers in the North and South Poles and the Qinghai-Xizang Plateau generally showed an accelerated trend of mass loss.The Greenland Ice Sheet(GrIS)experienced the most severe mass loss,averaging 237 Gt/a.Between 2002 and 2021,it lost a cumulative 4,741 Gt,contributing about 13.1 mm to In 2022,Chinas direct N2O emissions from croplands totaled 215.3 Gg N/a,showing marked spatial heterogeneity with hotspots in the Northeast Plain,North China Plain,and Sichuan Basin.Rice,corn,and wheat together accounted for 40.3%of emissions,while vegetables,fruit,and tea contributed 28.8%,13%,and 11.6%,respectively.Emissions were at relatively high levels observed during the past 43 years(19802022)(Figure 6-6).From 1980 to 2015,N2O emissions rose steadily,peaking at 259.9 Gg N/a in 2015,due to increasing nitrogen-fertilizer use driven by food demand.In 2015,Chinas Ministry of Agriculture introduced the Action Plan for Zero Growth of Fertilizer Use by 2020,targeting zero growth in fertilizer use for major crops.The plan established a new framework for sustainable agricultural nitrogen management through three measures:controlling total fertilizer use,improving nitrogen-use efficiency,and promoting the substitution of organic fertilizers for chemical fertilizers,thereby significantly reducing nitrogen inputs per unit of cropland.As a result,N2O emissions declined for seven consecutive years after 2015,reaching 215.3 Gg N/a in 2022,a reduction of 44.6 Gg N/a or about 17%from the 2015 peak.From 1996 to 2021,ice mass loss across the Arctic,the Antarctic,and the Qinghai-Xizang Plateau exceeded 370 gigatons(Gt)per year,with steadily growing contributions to global sea-level riseFrom 2015 to 2022,direct Nitrous Oxide emissions from Chinese croplands declined by 17%,reflecting the significant effectiveness of fertilizer reduction policiesTarget:SDG 13.bTarget:SDG 13.2approximately 33 5 Mt/a in 2024,an increase of 6%from 2015.In Asia,CH4 emissions per unit of raw coal declined,led by Chinas 17%reduction between 2015 and 2024,thanks to the adoption of coalbed CH4 recovery and gas extraction/utilization technologies.Figure 6-6 N2O emissions from Chinas croplands,1980202266SDG 13 Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs global sea-level rise.The Antarctic Ice Sheet(AIS)ranked second,losing 3,183 Gt from 1996 to 2021,concentrated in West Antarctica and the Antarctic Peninsula,contributing 8.8 mm.The Qinghai-Xizang Plateau glaciers lost a smaller amount330 Gt from 2000 to 2021implying a weaker direct contribution(Figure 6-7).AIS mass loss accelerated sharply after 2006,with average annual loss rates rising from 88 Gt/a to 157 Gt/a.While East Antarctica gained a modest 33 Gt/a,this could not offset losses from West Antarctica(138 Gt/a)and the Antarctic Peninsula(17 Gt/a).All seven GrIS basins showed net mass loss,led by the northwest basin at 53 Gt/a.On the Qinghai-Xizang Plateau,glaciers have been melting more rapidly since 2005,with losses averaging 15 Gt/a,a trend especially pronounced in the past five years.Overall,from 1996 to 2021,global sea levels rose at about 3.2 mm/a,with the AIS,GrIS,and Qinghai-Xizang Plateau glaciers together contributing 33%.Annual contributions were approximately 0.34 mm from Antarctica,0.66 mm from Greenland,and 0.042 mm from the Qinghai-Xizang Plateau.Though relatively small,the accelerating Qinghai-Xizang Plateau contribution warrants close monitoring.Land subsidence has heightened the risk of coastal inundation under future sea-level rise scenarios.In low-lying coastal regions along the northeastern Caribbean Plate island arc,localized hotspots of intense subsidence exceed 100 mm,with highly clustered spatial distributions.A boxplot analysis of ground-subsidence rates across three coastal distance bands shows that points within 00.5 km of the shoreline subsided at significantly higher rates than Figure 6-7 Cumulative mass balance of the Antarctic Ice Sheet(a),Greenland Ice Sheet(b),and Qinghai-Xizang Plateau(c)19962021.Panel(d)shows their spatial locationsFrom 2017 to 2024,coastal areas of SIDS experienced land subsidence of more than 100 mm.The area will be threatened by both rising sea levels and land subsidenceTarget:SDG 13.b67SDG 13 SDG 13 Climate Actioninland areas.The combined effect of land subsidence and climate-driven sea-level rise leads to non-linear amplification of coastal hazards,disproportionately affecting infrastructure,housing,and ecosystems in narrow coastal belts.Due to their low elevation and limited land resources,low-lying and offshore islands face particularly severe inundation threats(Figure 6-8).Figure 6-8 Projected coastal inundation zones in typical Small Island Developing States by 2100 under combined sea-level rise and land-subsidence scenariosOverall,progress on SDG 13 remains well short of the 2030 targets.Global GHG emissions are still rising;disaster-related deaths have declined but remain far from the Sendai Framework goals;and SIDS face existential risks.China has achieved major advances in disaster-risk reduction and successfully curbed N2O emissions,though total GHG levels remain high.Leveraging Big Earth Data,this chapter has also identified emerging challengesincluding droughtflood abrupt alternation,the impacts of heatwaves on agriculture,economies,and health,methane emissions from mining,Chinas agricultural N2O emissions,and accelerating global glacier loss.Based on the observational data and analytical findings,the following recommendations are proposed to accelerate progress toward SDG 13:1.Scale up methane capture and fertilizer reduction policies globally.In November 2025,the 30th UN Conference of the Parties(COP30)on Climate Change will be held in Brazil,where new emission reduction targets and action plans will be formulated.Chinas experience with coal-mine methane extraction/utilization and the Action Plan for Zero Growth in Fertilizer Use has demonstrably reduced methane emissions in coal regions and N2O emissions in agriculture.Global adoption of such measurescontrolling total fertilizer use,improving nitrogen-use efficiency,and expanding organic substitutionwould help reduce GHG emissions at scale.2.Strengthen global mechanisms to address heatwaves and disaster inequality.The global increase in disaster frequency and the growing occurrence of heatwave events are exerting negative impacts on social,economic,and ecological systems worldwide,with especially disproportionate effects on low-income countries.Heatwaves and the droughts they trigger may further exacerbate existing social and Conclusion and Recommendations68SDG 13 Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs economic inequalities.In line with Target 13.a,developed countries must honor their UNFCCC finance commitments and mobilize resources from diverse channels to meet the needs of developing countries,thereby strengthening the adaptive capacity of low-income nations to climate risks and mitigating the socio-economic impacts of extreme climate events.3.The impact of cryosphere changes on global sustainable development cannot be ignored9-10.It is suggested to add SDG indicators related to cryosphere and sea level change Incorporate globally consistent,high-resolution observations of glacier/ice-sheet change,sea-level rise,and small-island subsidence into regional coastal-inundation risk assessments and policy frameworks.This will enhance the emergency response capacity and long-term resilience of SIDS under multiple hazard pressures.The combined effects of land subsidence and climate-driven sea-level rise are expected to produce a non-linear amplification of coastal hazards,disproportionately impacting narrow coastal zones,critical infrastructure,housing,and ecosystems in these nations.1 General Assembly Economic and Social Council.Progress towards the Sustainable Development GoalsR.Report of the Secretary-General,2025.2 UNEP.Emissions Gap Report 2024R.https:/www.unep.org/resources/emissions-gap-report-2024,2024.3 UN.The Sustainable Development Goals Report 2025R.https:/unstats.un.org/sdgs/report/2025/The-Sustainable-Development-Goals-Report-2025.pdf,2025.4 UNFCCC.Nationally determined contributions under the Paris AgreementR.Synthesis report by the secretariat.https:/unfccc.int/process-and-meetings/the-paris-agreement/nationally-determined-contributions-ndcs/2024-ndc-synthesis-report,2024.5 CBAS.Big Earth Data in support of Sustainable Development Goals(2022)R.http:/ CBAS.Big Earth Data in support of Sustainable Development Goals(2023)R.http:/ CBAS.Big Earth Data in support of Sustainable Development Goals(2024)R.http:/ European Investment Bank(EIB).2023 Joint Report on Multilateral Development Banks Climate FinanceR.https:/publications.iadb.org/en/2023-joint-report-multilateral-development-banks-climate-finance,2024.9 Li X,Duan A,Shangguan D,et al.The Three Poles of the Earth:Challenges to Sustainable Development in Fragile Environments M.Beijing:Science Press.DOI:10.1007/978-981-97-7721-1,2025.10 Li X,Guo H,Cheng G,et al.Polar regions are critical in achieving global sustainable development goals J.Nature Communications,2025,16(1),3879.Main References69SDG 13 SDG 13 Climate ActionSDG 14Life Below WaterSDG 14Ten-Year Progress Assessment of SDG 14 Globally and in China 70Thematic Studies 74Conclusion and Recommendations 80Main References 80Thermal-Infrared Remote-Sensing Image of the Sundarbans Mangrove Forest(SDGSAT-1,Jan 26,2023)70SDG 14Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs This chapter presents a ten-year progress assessment of SDG 14 at both the global and Chinese scales,based on data from recent studies and progress reports on SDG 14 from the world as well as Chinasuch as the United Nations Statistics Divisions SDG Database,Big Earth Data in Support of the Sustainable Development Goals reports,China Marine Ecological and Environmental Status Bulletin,Chinas White Paper on Marine Ecological and Environmental Protection,and China Marine Economy Statistical Bulletin.It focuses on five themesmarine pollution,marine ecosystems,ocean acidification,marine protected areas,and aquacultureintroducing the latest progress in monitoring and evaluating relevant indicators supported by Big Earth Data.Ten indicators under SDG 14 have explicit 2030 targets.The assessment finds that global progress on SDG 14 is generally lagging,with only two indicatorsSDG 14.6.1(end fisheries subsidies that lead to overfishing)and SDG 14.b.1(support small-scale fisheries)on track,while the others are either progressing slowly or regressing.This calls for urgent acceleration to reverse the unfavorable trends.In China,overall progress on SDG 14 has been significant,except for SDG 14.3.1(reduce ocean acidification),which has stagnated.Indicators such as reducing marine pollution and increasing the proportion of marine areas under protection still require further acceleration.1.Global Progress Assessment 1.1 SDG 14.1 Reduce marine pollutionIn 2022,global coastal eutrophication levels remained above the 20002004 baseline 1.Between 2000 and 2023,chlorophyll-a concentrations and total suspended matter levels varied significantly across different sea regions,while the frequency and spatial extent of algal blooms increased year by year 2.From 2015 to 2024,this target achieved only marginal progress,and substantial acceleration will be needed to reach the 2030 goal 3.1.2 SDG 14.2 Protect and restore ecosystemsBy 2024,126 countries and regions had implemented ecosystem-based marine spatial planning initiatives,a 20%increase from 2023.However,only 45 countries and regions had formally approved marine spatial plans 4.From 2015 to 2024,progress on this target was marginal,requiring significant acceleration to meet the 2030 goal 3.1.3 SDG 14.3 Reduce ocean acidificationDriven by increased CO2 emissions,global average surface ocean Potential of Hydrogen(pH)has declined,worsening acidification 4.From 1985 to 2023,the global average ocean pH dropped from 8.10 to 8.04 3.This represents regression from the baseline,putting the 2030 target off track 3.1.4 SDG 14.4 Sustainable fishingAccording to a FAO analysis of 445 marine fish stocks,the proportion of fish stocks within biological sustainability level fell from 66.9%in 2015 to 62.3%in 2021.Although the rate of decline showed signs of slowing,the overall situation continued to deteriorate 5.This indicator has regressed relative to the baseline and is therefore off track 3.1.5 SDG 14.5 Conserve coastal and marine areasOver the past decade,global Marine Protected Areas(MPAs)and Other Effective Area-Based Conservation Measures(OECMs)expanded significantly.By 2024,the proportion of coastal waters covered by MPAs or OECMs increased from 4.0%in 2015 to 8.4%6.However,this remains far below the 30%target for 2030,and only 46.0%of marine Key Biodiversity Areas(KBAs)were protected 5.1.6 SDG 14.6 End subsidies contributing to overfishingAs of July 2025,84 parties(70%of coastal states)had joined the Agreement on Port State Measures to Prevent,Deter and Eliminate Illegal,Unreported and Unregulated Fishing.By July 2025,the World Trade Organizations Agreement on Fisheries Subsidies had been ratified by 108 membersjust three short of the number required for entry into force.1.7 SDG 14.7 Increase the economic benefits from sustainable use of marine resourcesFrom 2015 to 2024,the global area of marine raft aquaculture increased steadily 2.However,the proportion of GDP derived from sustainable fisheries declined overall in SIDS,least developed countries,and all countries combined 2.Regional disparities in the distribution of economic benefits also persist,making the 2030 target difficult to achieve 3.Ten-Year Progress Assessment of SDG 14 Globally and in China71SDG 14SDG 14 Life Below Water72SDG 14Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs 73SDG 14SDG 14 Life Below Water1.8 SDG 14.a Increase scientific knowledge,research and technology for ocean healthGlobally,investment in scientific knowledge and research capacity to support sustainable ocean management remains insufficient.In 2021,on average,only 1.1%of national research budgets were allocated to marine science and technology 5.At current trajectories,this target is unlikely to be achieved by 2030 3.1.9 SDG 14.b Support small scale fishers2024 marked the tenth anniversary of the Voluntary Guidelines for Securing Sustainable Small-Scale Fisheries in the Context of Food Security and Poverty Eradication,which have seen increasing adoption worldwide 4.Since 2018,overall trend has been positive,and since 2020,more countries have submitted reports 4.1.10 SDG 14.c Implement and enforce international sea lawAs of now,there are 170 parties to the United Nations Convention on the Law of the Sea(UNCLOS),153 parties to the Part XI Agreement,and 94 parties to the Fish Stocks Agreement 7.While implementation of international instruments for protecting and responsibly using marine resources has advanced,progress differs across instruments and remains uneven across countries.2.Chinas Progress Assessment2.1 SDG 14.1 Reduce marine pollutionFrom 2015 to 2024,the proportion of Chinas coastal waters meeting Seawater Quality Standard Clas I and II increased by 15.3%.Meanwhile,the share of waters inferior to Class IV quality fell from 13.0%in 2015 to 8.6%in 2024.Overall,the extent of jurisdictional waters affected by eutrophication showed a declining trend 8.2.2 SDG 14.2 Protect and restore ecosystemsFrom 2015 to 2023,the distribution area of coastal salt marsh vegetation generally increased 2.In 2024,key monitored ecosystemsincluding estuaries,bays,coral reefs,mangroves and seagrass bedsremained“basically stable”,mainly assessed as“healthy”or“sub-healthy”.The“unhealthy”state has not been observed since 2021 9.By 2023,China had designated approximately 150,000 km2 of marine areas under ecological protection red lines,bringing nearly 30%of its coastal waters and 37%of its continental coastline under regulatory control 10-11.2.3 SDG 14.3 Reduce ocean acidificationIn the summer of 2024,surface seawater pH in Chinas coastal waters ranged from 6.86 to 8.90,with an average of 8.10,broadly consistent with the past decades average;urban coastal and estuarine areas recorded relatively lower pH values 12.Since 2018,China has continuously published the Blue Book on Marine Climate Change in China,systematically documenting updated monitoring data and assessing long-term trends in marine climate change.2.4 SDG 14.4 Sustainable fishingChinas total offshore and distant-water fishery catch has shown an overall downward trend.Since 2017,offshore fishing hotspots have become less concentrated and their total area has shrunk significantly 2.Between 2018 and 2023,offshore catches stabilized at around 9.5 million tons,while in 2024,output was more than 27%lower than in 2015 13.In 2025,China formally acceded to the Agreement on Port State Measures to Prevent,Deter and Eliminate Illegal,Unreported and Unregulated Fishing.2.5 SDG 14.5 Conserve coastal and marine areasBy 2023,China had established 352 marine protected areas,covering about 93,300 km2 of waters 8.Between 2016 and 2023,efforts to restore important coastal ecosystems resulted in the rehabilitation of 1,500 km of coastline and 30,000 hectares of coastal wetlands 10,Nationwide,the retention rate of natural coastlines was maintained at no less than 35%.2.6 SDG 14.6 End subsidies contributing to overfishingThe Chinese government has consistently attached importance to combating illegal,unreported and unregulated fishing.It revised the Provisions on the Administration of Fishery Licensing in 2018,2020,and 2022.China also promoted the World Trade Organization conclusion of the Agreement on Fisheries Subsidies and accepted the Agreement in 2023 10.2.7 SDG 14.7 Increase the economic benefits from sustainable use of marine resourcesThe share of marine fishery value added in GDP declined from 0.64%in 2015 to 0.36%in 2024.Despite this downward trend,marine products continued to contribute more than 50%of per capita aquatic product availability.Fishermens per capita net income rose steadily,exceeding RMB 27,000 in 202473.97%higher than in 2015.Coastal tourism maintained rapid growth,with its added value accounting for 1.2%of GDP 14-15.2.8 SDG 14.a Increase scientific knowledge,research and technology for ocean healthChina has enhanced the sharing of marine scientific knowledge through SouthSouth cooperation and trilateral collaboration,training about 500 professionals annually 16.By June 2025,China had led nine scientific programmes for sustainable development under the United Nations Ocean Decade 17,ranking among the worlds top ten countries 74SDG 14Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs in both lead institutions and individual participation.Marine Research and Experimental Development(R&D)expenditure increased from RMB 16.7 billion in 2015 to RMB 32.9 billion in 2021,with its share in total R&D spending showing an overall upward trend 18-19.2.9 SDG 14.b Support small scale fishersChina is amending the Fisheries Law of the Peoples Republic of China to further safeguard the lawful rights and interests of fishery workers,strengthen vocational training,implement mutual fishery and aquaculture insurance,and expand market access for individual fishers.2.10 SDG 14.c Implement and enforce international sea lawChina has taken active steps to implement international ocean-related legal instruments.Since 2012,it has submitted more than 120 individual or joint proposals to polar-related organizations and over 700 proposals to the International Maritime Organization and other bodies 16.China also played an active role in the adoption of,and was among the first to sign,the Agreement under the United Nations Convention on the Law of the Sea on the Conservation and Sustainable Use of Marine Biological Diversity of Areas Beyond National Jurisdiction in 2023.Marine ecosystems are characterized by their large spatial scale and high complexity.As of April 2025,five of the ten SDG 14 targets remain classified as Tier II,with persistent data gaps for SDG 14.1,SDG 14.2,SDG 14.3,SDG 14.a,and SDG 14.c.The lack of globally comprehensive monitoring data remains one of the main bottlenecks hindering objective assessment of marine sustainable development goals and evidence-based policy-making.With its advantages of wide coverage,ability to capture dynamic changes,and reliable objectivity,Big Earth Data can effectively fill gaps in foundational datasets and broaden approaches to indicator assessment and analysis.Between 2019 and 2024,the application of Big Earth Data and related technologies generated valuable experience in monitoring and advancing progress on SDG 14 indicators for China and the broader region.1.Indicator monitoring:A series of datasets have been developed to fill gaps in existing statistics.For instance,using multi-source satellite remote sensing,global high-resolution datasets on floating marine debris and algal bloom distribution in typical coastal zones were produced,along with long-term time series products monitoring mangroves,coastal salt marshes,and nearshore wetlands in China.These efforts helped to address the challenge of large-scale data gaps for monitoring indicators under SDG 14.1 and SDG 14.2.2.Indicator implementation:Big Earth Data,combined with AI and digital twin technologies,has been effectively applied to supporting policy-making in marine disaster prevention and ecosystem health assessment.For example,the intelligent extraction method for floating algae based on the Big Earth Data Cloud Platform was integrated with a four-dimensional variational assimilation forecasting model,enabling real-time prediction of large algal bloom drift trajectories.This provided timely support for early warning and response policies in coastal cities,significantly advancing the implementation of relevant indicators.This year,focusing on five themes,this chapter presents a series of newly developed global monitoring products,along with refined monitoring results and implementation experiences from China,based on Big Earth Data and AI technologies.Thematic StudiesMarine PollutionIn 2024,the area of eutrophic coastal waters(60S60N)worldwide was(7.360 0.689)105 km2,primarily distributed in bays,large estuaries,and adjacent seas.Globally,eutrophic waters exhibited significant intra-annual seasonal variation,with maximum seasonal amplitude reaching 10%.From 2015 to 2024,the total eutrophic From 2015 to 2024,the aggregate area of eutrophic coastal waters worldwide showed an overall upward trendTarget:SDG 14.175SDG 14SDG 14 Life Below WaterSince 2015,marine debris across different nearshore environmental dimensions has fluctuated interannually,but overall mitigation efforts have yielded significant results.Pollution was found on beaches,the sea surface,and seabed,with plastics accounting for 64.0.5%.The abundance of floating debris on the sea surface ranged from 2,234 to 5,363 items/km2,with mass abundance between 2.8 and 65 kg/km2.Beach debris ranged from 46,311 to 280,043 items/km2 and 387 to 2,506 kg/km2.Submerged debris ranged from 1,031 to 7,348 items/km2 and 5.2 to 671 kg/km2 9,20-22.Abundance varied significantly by environment,with beaches showing the highest levels,especially near bays and estuaries.Weak currents and convergence zones contributed to debris accumulation.Monitoring results show that,compared with similar international surveys,the density of marine debris in Chinas nearshore waters is generally at a medium-to-low level.Chinas marine debris control program has been comprehensive and goal-oriented 23-25,leading to marked decline in marine debris mass abundance during the monitoring period(Figure 7-2).Based on five-year assessments,average mass abundance of floating debris,beach debris,and submerged debris in 20202024 decreased by 71.13%,14.86%,and 82.88%respectively compared with 20152019.Through an integrated“monitoringlegislationmitigation”framework,China has achieved notable success in comprehensive marine debris control.From 2015 to 2024,marine debris pollution in Chinas coastal environment showed a declining trendTarget:SDG 14.1 Figure 7-1 Global distribution of the Comprehensive Pollution Index,2024area showed an overall upward trend,increasing at 6.3 103 km2/a.While Asia and Europe saw decreasing trends,at 5.4 102 km2/a and 1.8 102 km2/a respectively,other continents recorded growth,with South America experiencing the fastest expansion at 4.2 103 km2/a.During the same period,the average eutrophic area in China s jurisdictional waters generally showed a decreasing trend,and its share of the global total also decreased reflecting the effectiveness of Chinas ecosystem management measures in helping mitigate global eutrophication growth.The distribution of global comprehensive pollution index is shown in Figure 7-1.76SDG 14Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs Figure 7-2 Spatial distribution of floating debris in nearshore waters and interannual variation of multi-dimensional debrisMarine EcosystemsBetween 2015 and 2020,live coral coverage fell sharply.Although localized recovery occurred between 2020 and 2024,the gains were limited,restoration remained fragile,and overall reef health remained concerning.In the western and eastern Great Barrier Reef,the central Pacific,and the Indian Ocean,live coral coverage dropped from 27.66%,24.76%,and 19.31%in 2015 to 19.87%,19.39%,and 7.15%in 2020,decreases of 7.79,5.37,and 12.16 percentage points,respectively.By 2024,these values fluctuated slightly to 21.59%,18.57%,and 11.37%,with changes of only 1.72,0.82,and 4.22 percentage points,respectively,reflecting localized recovery that remained far weaker than the degree of degradation.It should also be noted that,apart from high-latitude areas and a few protected seas,competitive macroalgae continued to exert growing pressure on live corals.From 2015 to 2024,the ratio of competitive macroalgae to live coral area increased across the three regions(Figure 7-3),rising from 0.04,0.26,and 0.12 to 0.45,0.55,and 0.60,respectively.This trend indicates that,alongside ongoing degradation,global coral reefs are also under intensifying macroalgal competition,leaving reef systems facing severe challenges worldwide.From 2015 to 2024,global coral reef health showed an overall declining trendTarget:SDG 14.2 Figure 7-3 Changes in area and spatial distribution of live corals and competitive macroalgae in the Indian Ocean,northwestern Great Barrier Reef,and central Pacific77SDG 14SDG 14 Life Below WaterOcean AcidificationDuring this period,average surface ocean pH declined by 0.023 units per decade(Figure 7-5a),compared with 0.017 units per decade from 2005 to 2014(Figure 7-5b).This acceleration is closely linked to the continued rise in atmospheric CO2.From 2015 to 2022,atmospheric CO2 concentration increased by 24.3 ppm per decade,compared with 20.2 ppm per decade during 20052014.This situation poses a serious challenge to achieving the 2030 target of“minimizing and addressing the impacts of ocean acidification.”Satellite-based estimates of annual mean biomass indicate a general decrease since 2015,although several years still recorded elevated biomass,with 2019 reaching the highest on record(Figure 7-4)26-27.In the Yellow Sea of China,human activities are mainly concentrated within 20 km of the shore.An analysis of the spatiotemporal variation of annual average green tide biomass in this zone shows that the coastal trend is broadly consistent with the overall trend.However,within the 20 km range,years with high average biomass were rare during 20152024,likely due to the combined effects of natural and human factors.With ongoing global warming,continued seawater eutrophication,and the influence of human activities,the challenge of controlling green tides in the Yellow Sea of China remains severe 26-27.Between 2015 and 2022,global ocean acidification intensifiedFrom 2015 to 2024,the overall scale of green tide outbreaks in Chinas Yellow Sea showed a declining trend,with fluctuations in certain yearsTarget:SDG 14.3Target:SDG 14.2 Figure 7-4 Spatiotemporal distribution and statistical histogram of annual average green tide biomass in the Yellow Sea,20152024.(a)Spatiotemporal distribution of annual average green tide biomass in the Yellow Sea,20152024;(b)Statistical histogram of annual average green tide biomass in the Yellow Sea,20152024 Figure 7-5 Global surface ocean average pH and atmospheric CO2 concentrations,20152022,with rates of change in pH and atmospheric CO2 concentrations,20052014.(a)pH;(b)Atmospheric CO2 concentration78SDG 14Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs Marine Protected AreasAlthough coverage has grown steadily,core coastline protection has lagged,ecological representativeness is lacking,and high-risk areas remain insufficiently covered.These issues have yet to be fundamentally addressed,leaving progress well short of the quality and outcomes required under SDG 14.5.Between 2000 and 2024,the share of protected coastlines rose from 9.24%to 29.92%,with 4.18%of that increase occurring after 2015,reflecting notable progress since the start of SDG implementation.However,improvements in protection quality have lagged.Between 2015 and 2024,the proportion of Category Ia areas(strict nature reserves)rose only marginally,from 2.34%to 2.56%.Coverage of protected areas with explicit IUCN categorization increased by just 2.43 percentage points from 14.35%to 16.78%,underscoring inadequacy in standardization and management.The proportion of strictly protected key ecosystems such as estuaries and biologically rich coastlines remains very low.Overall,while progress since 2015 has expanded the“quantity”of coastline protection,improvements in“quality”have been slow.Over the next five years,it will be essential to increase the share of strictly protected areas in high-risk zones and critical ecosystems,shifting the focus of coastline protection from area expansion to enhancing ecological functions.From 2015 to 2024,the global coverage of protected coastline increased,yet the shift from increasing quantity to ensuring quality still needs to accelerateTarget:SDG 14.5 Figure 7-6 Global status of coastline protection.(a)Global coverage of protected coastlines,20002024,with the right sub-panel showing protection coverage by latitude and the lower sub-panel showing protection coverage by longitude;(b)Coverage by protection level;(c)Coverage by natural coastline category79SDG 14SDG 14 Life Below WaterAquacultureOver the past decade,this industry has entered a mature stage of high-quality development,with cultivation area stabilizing at around 150,000 hectares and annual growth slowing to 0.8%.The spatial distribution has also become more balanced:once concentrated mainly in Jiangsu and Fujian,production is now spread across Fujian(29.9%),Jiangsu(24.6%),Shandong(19.5%),and Liaoning(18.7%).Farming areas have successfully expanded beyond the nearshore zone.In the 1980s,more than 77%of aquaculture was located within 2.5 km of the coast,whereas today operations extend as far as 40 km offshore,significantly easing ecological pressures in nearshore waters(Figure 7-7).Since 2015,Chinas macroalgae aquaculture industry has shifted from rapid expansion to high-quality,efficiency-oriented developmentTarget:SDG 14.7 Figure 7-7 Spatiotemporal changes in macroalgae aquaculture areas in China,1980s2020s.(a)Changes in spatiotemporal distribution;(b)Total aquaculture area;(c)Proportion of aquaculture area by distance from coastline80SDG 14Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs Over the past decade,global progress on SDG 14 has been slow,largely deviating from the 2030 trajectory,with wide disparities across targets and regions.Chinas progress has been steady overall,yet pressures on nearshore ecosystems remain high.Emerging environmental issues and the impacts of global change are intensifying,requiring accelerated action and breakthroughs.To advance the implementation of SDG 14 globally,the following recommendations are proposed:1.Reform international governance and financing.The United Nations and relevant international organizations should shift from unilateral management to joint governance.Financing needs to move away from subsidy dependence toward performance-based mechanisms.The marine economy and blue industries should be integrated through innovation.These reforms are critical to reversing current trends within the next five years.Strengthening global and regional cooperation,information sharing,cross-sector coordination,and joint action is vital to engage stakeholders from across society in advancing marine environmental protection and ecosystem conservation.Innovative,results-based financing instruments for ocean health should be developed to mobilize greater capital for conservation,combining risk-sharing with multi-stakeholder incentives.Unlocking the ecological and economic value of blue carbon ecosystemssuch as seagrass,mangroves,and salt marshescan foster integrated marine economic models and accelerate the transition to a sustainable blue economy.2.Advance pollution control,ecological restoration,and green transitions.Strengthening regional and holistic coordination in marine pollution control and ecological conservation and restoration,while accelerating the green transformation,is key to enhancing ocean resilience and advancing the marine-related SDGs.Greater focus should be placed on tackling critical hotspots,with a systematic approach to marine pollution prevention,plastic waste management,and ecological restoration.Accelerating the transformation of coastal and marine industries is essential to addressing the root causes that hinder sustained improvements in marine ecosystems.Coordinated action should also be taken to address climate change in coastal zones and comprehensively enhance their capacity to withstand marine disasters.3.Leverage technology and knowledge sharing to accelerate progress.It is important to build integrated marine observation systems,scale up Big Earth Data and AI applications,and enhance global scientific and regulatory capacity.Expanding networks of satellites,drones,buoys,and underwater robotics will improve precision monitoring of marine environments and ecosystems.Applying Big Earth Data and digital twin technologies will strengthen ecosystem health assessments and policy evaluation.Sharing best practices and broadening access to scientific datasets will help countries rapidly build marine science capacity and regulatory effectiveness.Conclusion and Recommendations1 United Nations General Assembly Economic and Social Council.Progress towards the Sustainable Development GoalsR.https:/unstats.un.org/sdgs/files/report/2023/secretary-general-sdg-report-2023-EN.pdf,2023.2 CBAS.Big Earth Data in Support of the Sustainable Development GoalsR.http:/ United Nations.The Sustainable Development Goals Report 2025R.https:/unstats.un.org/sdgs/report/2025/,2025.4 United Nations General Assembly Economic and Social Council.Progress towards the Sustainable Development GoalsR.https:/unstats.un.org/sdgs/files/report/2025/secretary-general-sdg-report-2025-EN.pdf,2025.5 United Nations Statistics Division.SDG Indicators DatabaseDB/OL.(2025-04-01)2025-04-01.https:/unstats.un.org/sdgs/dataportal/database.6 United Nations Environment Programme World Conservation Monitoring Centre(UNEP-WCMC).Protected Planet Report 2024R.https:/digitalreport.Main References81SDG 14SDG 14 Life Below W United Nations Treaty Collection.Status of Treaties EB/OL.(2025-07-01)2025-07-01.https:/treaties.un.org/.8 The State Council Information Office of the PRC.Chinas White Paper on Marine Ecological and Environmental ProtectionR.https:/ Ministry of Ecology and Environment of the PRC.Bulletin on the State of Chinas Ecological EnvironmentR.http:/ Center for International Knowledge on Development.Report on Chinas Implementation of the 2030 Agenda for Sustainable Development(2023)R.https:/www.cikd.org/ms/file/getimage/1726875869667008513,2023.11 Ministry of Natural Resources of the PRC.Bulletin on Marine Ecological Early Warning and Monitoring of ChinaR.https:/ Ministry of Natural Resources of the PRC.Bulletin on Marine Ecological Early Warning and Monitoring of ChinaR.https:/ Ministry of Agriculture and Rural Affairs of the PRC.China Fisheries Economic Statistics BulletinR.http:/ National Bureau of Statistics of the PRC.National Data Gross Domestic ProductEB/OL.(2025-04-01)2025-04-01.https:/.15 Ministry of Natural Resources of the PRC.China Marine Economy Statistical BulletinR.https:/ State Council Information Office of the PRC.White Paper on Chinas Marine Ecological Environment ProtectionR.https:/ Intergovernmental Oceanographic Commission of UNESCO(UNESCO-IOC).Ocean Decade ActionsEB/OL.(2025-06-01)2025-06-01.https:/oceandecade.org/.18 Ministry of Natural Resources of the PRC.China Marine Economy Statistical YearbookM.Beijing:Ocean Press,20162022.19 National Bureau of Statistics,Ministry of Science and Technology of China,Ministry of Finance of the PRC.China Statistical Bulletin on Science and Technology ExpenditureR.https:/ Zhou C,Liu X,Wang Z,et al.Assessment of marine debris in beaches or seawaters around the China Seas and coastal provincesJ.Waste Management,2016,48:652-660.DOI:10.1016/j.wasman.2015.11.010.21 Kang B,Lin L,Li Y,et al.Facing marine debris in ChinaJ.Marine Pollution Bulletin,2022,184:114158.DOI:10.1016/j.marpolbul.2022.114158.22 Ministry of Ecology and Environment of the PRC.Bulletin on the State of Chinas Marine Ecological EnvironmentR.https:/ Cavalcante R M,Pinheiro L S,Teixeira C E P,et al.Marine debris on a tropical coastline:Abundance,predominant sources and fate in a region with multiple activitiesJ.Waste Management,2020,108:13-20.DOI:10.1016/j.wasman.2020.04.026.24 Wang B Y,Yang R G,Fang Q H,et al.Marine plastic management policy agenda-setting in China:The Multi-stage Streams FrameworkJ.Ocean and Coastal Management,2023,243:106761.DOI:10.1016/j.ocecoaman.2023.106761.25 National Development and Reform Commission,Ministry of Ecology and Environment of the PRC.Notice on Issuing the Action Plan for Plastic Pollution Control during the 14th Five-Year PlanEB/OL.(2021-09-08)2025-07-29.https:/ Hu L,Zeng K,Hu C,et al.On the remote estimation of Ulva prolifera areal coverage and biomassJ.Remote Sensing of Environment,2019,223:194-207.DOI:10.1016/j.rse.2019.01.014.27 Qi L,Hu C M,Barnes B,et al.Climate and anthropogenic controls of seaweed expansions in the East China Sea and Yellow SeaJ.Geophysical Research Letters,2022,49.DOI:10.1029/2022GL098185.82SDG 15Big Earth Data in Support of the Sustainable Development Goals Special Report for a Decade of the SDGs SDG 15Life on LandSDG 15Ten-Year Progress Assessment of SDG 15 Globally and in China 83Thematic Studies 87Conclusion and Recommendations 93Main R
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BUILDINGS&CLIMATE:DECARBONIZATION&RESILIENCE BUREAU VERITAS NORTH AMERICA2BUILDINGS&CLIMATE:DECARBONIZATION&RESILIENCEBUREAU VERITAS NORTH AMERICAThe built environment is a major contributor to global environmental challenges,accounting for nearly 40%of total energy-related carbon emissions worldwide.Multiple sources charge the building sector with accounting for over one-third of global energy demand and related CO2 emissions.Moreover,demand for construction materials is expected to balloon as urbanization reaches new heights more than half the global population already lives in urban areas and the figure is rising.Construction,demolition and renovation projects generate billions of tons of waste annually,a significant proportion of which ends up in landfill.Climate change poses grave threats to the resilience and long-term viability of the built environment worldwide.Buildings are exposed to climate related hazards(heatwaves,rising sea level,strong winds,heavy rains,etc.)to a greater extent than any other asset class.And these hazards are set to become more intense as a result of climate change.A buildings sustainability therefore increasingly affects its regulatory compliance,financing,cost of construction and operations,value and insurance premiums.Beyond regulatory requirements,operational cost reductions and improved asset value,operating sustainability is the right thing to do.INTRODUCTION A GLOBAL CHALLENGE CONTENTSP 02 Introduction-A global challengeP 04 Global context,local challengeP 06 A comprehensive approach towards sustainability:The US decarbonization tacticP 08 How our clients move forwardP 11 What Bureau Veritas can do for youP 12 Example of an energy audit projectP 13 From energy to carbon:HPB assessmentsP 14 Upgrading your assetsP 15 Bureau Veritas North America holistic sustainability servicesBUILDINGS&CLIMATE:DECARBONIZATION&RESILIENCEBUREAU VERITAS NORTH AMERICA23BUILDINGS&CLIMATE:DECARBONIZATION&RESILIENCEBUREAU VERITAS NORTH AMERICA56%of the worlds population currently lives in urban areas and this figure is projected to rise to 68%by 2050.By 2060,the global footprint of buildings is set to double,with more than 230 billion square meters in new construction.According to the International Energy Agency(IEA),if the sector fails to take significant steps to improve sustainability by 2050 CO2 emissions from buildings could increase by 50%.82.2%of North Americas population currently lives in urban areas 3At Bureau Veritas,we believe that mutual trust within the industry will be a key ingredient in successful climate change transition and adaptation.This paper presents what we have learned with our clients,our vision of the way forward and the role we intend to play within the industry.BUILDINGS&CLIMATE:DECARBONIZATION&RESILIENCEBUREAU VERITAS NORTH AMERICASources cited:Northern America Demographics 2024(Population,Age,Sex,Trends)-Worldometer4BUILDINGS&CLIMATE:DECARBONIZATION&RESILIENCEBUREAU VERITAS NORTH AMERICAThe Vital Role of Californias Building Energy Efficiency StandardsEnergy efficiency is a critical component of Californias energy future,as it reduces energy costs,increases the reliability and availability of electricity,enhances building occupant comfort,and mitigates environmental impacts,making the Energy Code an essential and necessary policy for the state.Unlocking the Power of Energy SavingsReducing energy consumption benefits everyone in California.Additionally,the reduced energy demand helps maintain the stability and reliability of the states electrical system,preventing costly and disruptive blackouts like those experienced during the California electricity crisis and the East Coast blackout in 2003.The 2022 Energy Code,which covers both residential and nonresidential buildings,is expected to significantly curb the growth in electricity and natural gas usage,providing widespread benefits.Addressing the Fragility of the Electrical GridBuildings are a major driver of electricity demand in California,and the states experience during the 20002001 electricity crisis and the 2003 East NAVIGATING CALIFORNIAS LANDSCAPECoast blackout has highlighted the fragility of the electric distribution network.When excessive demand from buildings overloads the system,it can create unstable conditions that ultimately lead to blackouts,which can seriously disrupt businesses and cost the economy billions of dollars.In response to these events,the California Energy Commission(CEC)has placed increasing emphasis on demand reduction strategies,with the Energy Code playing a crucial role in this effort.Enhancing Occupant Comfort and Well-beingComfort is a significant benefit of energy-efficient homes.Well-insulated,airtight homes with high-performance windows and effective shading are less drafty and better able to maintain comfortable temperatures,even with smaller heating and cooling systems.In contrast,poorly designed building envelopes result in less comfortable homes,regardless of the size of the HVAC equipment.By improving the thermal performance of the building shell,the Energy Code helps ensure that occupants can enjoy a comfortable living environment without relying on oversized and energy-intensive heating and cooling systems.GLOBAL CONTEXT,LOCAL CHALLENGE4BUILDINGS&CLIMATE:DECARBONIZATION&RESILIENCEBUREAU VERITAS NORTH AMERICASources cited:Energy Code Ace-Why California needs Building Energy Efficiency Standards5BUILDINGS&CLIMATE:DECARBONIZATION&RESILIENCEBUREAU VERITAS NORTH AMERICAUnlocking Economic AdvantagesFinancial institutions,such as banks and mortgage lenders,recognize the benefits of energy efficiency through energy-efficient mortgages,which consider the total cost of owning a home,including utility bills.If utility bills are lower due to energy-efficient features,lenders can qualify borrowers for larger loans,making homeownership more accessible.From a broader economic perspective,reducing Californias reliance on finite fossil fuels,such as natural gas,coal,and oil,helps strengthen and stabilize the states economy in the face of energy price fluctuations.Investing in cost-effective energy efficiency measures is often far more economical than building new power plants,ultimately benefiting all Californians.Preserving the Natural EnvironmentEnergy use has led to various environmental issues,including oil spills,acid rain,and smog,which can damage the natural beauty and ecosystems that Californians cherish.The states appliance standards,building standards,and utility programs that promote energy efficiency and conservation play a crucial role in maintaining environmental quality.These measures help reduce the destruction of natural habitats,protecting the diverse array of animals,plants,and natural systems that are integral to Californias rich biodiversity.Addressing the Threat of Global WarmingThe burning of fossil fuels is a significant contributor to global warming,as it adds carbon dioxide and other greenhouse gases to the atmosphere,creating an insulating layer that leads to climate change.CEC research has shown that most sectors of the California economy,including water resources,agriculture,forests,and natural habitats,face significant risks from the impacts of climate change.Scientists have recommended that actions be taken to reduce emissions of carbon dioxide and other greenhouse gases.While technological solutions like scrubbers and catalytic converters can address other types of emissions,they do not limit the carbon dioxide released into the atmosphere.Energy efficiency,on the other hand,is a far-reaching strategy that can make a substantial contribution to reducing greenhouse gas emissions.The National Academy of Sciences has recognized Californias leadership in this area,urging the United States to follow the states example and adopt nationwide energy-efficient building codes as the primary element in energy and global warming policy.By increasing comfort levels,saving homeowners money,and playing a vital role in creating a healthy environment,energy conservation measures like the Energy Code are essential for addressing the global climate crisis.Spearheading Building DecarbonizationWith nearly 14 million homes and 7.5 million square feet of commercial buildings,Californias buildings account for a quarter of the states greenhouse gas(GHG)emissions,making them a significant factor in climate change.Reducing these emissions,a process known as building decarbonization,is a key part of Californias comprehensive climate strategy.In August 2021,the CEC adopted the 2022 Energy Code for newly constructed and renovated buildings,which marks a significant milestone in the states efforts to decarbonize the building sector aggressively,feasibly,and cost effectively.This updated code encourages the use of efficient electric heat pumps,establishes electric-ready requirements for new homes,and strengthens ventilation standards.Over the next 30 years,this groundbreaking code is estimated to provide the state with$1.5 billion in environmental benefits,equivalent to taking nearly 2.2 million cars off the road for a year.The development of this code was a multiyear effort led by the CEC through a robust public process and with support from an expansive network of key market partners,including Californias largest utilities,the building community,and environmental advocates.Sources cited:Energy Code Ace-Why California needs Building Energy Efficiency Standards6BUILDINGS&CLIMATE:DECARBONIZATION&RESILIENCEBUREAU VERITAS NORTH AMERICAThe U.S.Department of Energy has developed a Blueprint outlining a national strategy to drastically reduce greenhouse gas emissions from buildings by 2050,while promoting equity,affordability,and resilience for communities.This strategy underscores the pivotal role buildings play in achieving economy-wide climate goals,as well as delivering cost savings,healthier environments,and quality jobs for Americans.Coordination among federal agencies and support for state and local actions are crucial to accelerate the transition to low-carbon buildings.The Blueprint aims to cut greenhouse gas emissions from U.S.buildings by 65%by 2035 and 90%by 2050,compared to 2005 levels,while prioritizing equity and community benefits.Its overachieving goals are equity,affordability,and resilience,with strategic objectives including increasing building energy efficiency,accelerating on-site emissions reductions,transforming the grid edge,and minimizing embodied life cycle emissions.Deeply decarbonizing buildings is critical for reaching net-zero emissions across the economy.Buildings account for over a third of total U.S.greenhouse gas emissions.Decarbonizing this sector offers additional advantages,such as cost savings,improved quality of homes and businesses,reduced need for new power grid infrastructure,and enabling distributed energy resources like solar panels,battery storage,and EV charging.A COMPREHENSIVE APPROACH TOWARDS SUSTAINABILITY:THE US DECARBONIZATION TACTIC6Sources cited:Department of Energy:Building Innovation7BUILDINGS&CLIMATE:DECARBONIZATION&RESILIENCEBUREAU VERITAS NORTH AMERICA BLUEPRINT FOR DECARBONIZING U.S.BUILDINGS BY 2050:KEY FIGURES 65%reduction in greenhouse gas emissions from buildings by 2035ACHIEVING THE OBJECTIVES OUTLINED IN THE BLUEPRINT WOULD HAVE WIDE-RANGING IMPACTS.The Blueprints vision aims to bring building greenhouse gas emissions close to net-zero while simultaneously decreasing building energy consumption by one third.This would unlock billions of dollars in savings related to energy costs and health expenses.Additionally,it would necessitate investments that could support the creation of new jobs in the clean energy sector.Specifically,the Blueprint seeks to avoid 7 quads of annual energy use by transitioning many building loads to clean electricity sources.It also aims to save consumers over$100 billion annually through efficiency enhancements.Furthermore,it intends to prevent$17 billion in annual health costs.7reduction in greenhouse gas emissions from buildings by 2050 (vs.2005 levels)IMPACTS OF BLUEPRINT GOALS Reduce building energy use by one third Avoid 7 quads or 1,204 million barrels of oil equivalent of annual energy use Save consumers$100 billion annually in energy costs Avoid$17 billion annually in health costs$1 trillion investment in high-quality jobsSources cited:Department of Energy:Building Innovation8BUILDINGS&CLIMATE:DECARBONIZATION&RESILIENCEBUREAU VERITAS NORTH AMERICAHOW OUR CLIENTS MOVE FORWARD PROOF OF RESILIENCE ADDED TO INSURERS CHECKLISTSClimate scenario data is available worldwide giving companies insight into risks their assets could face at different life cycle stages.Although the quality of the data varies,the main challenges are interpreting it effectively alongside the assets technical features to develop effective adaptation roadmaps.This is where an on-site vulnerability audit by a competent professional can be useful,identifying vulnerabilities and setting out how to address them.BIODIVERSITY:NOT TO BE OVERLOOKEDBiodiversity protection is a rising concern.Green building standards have introduced biodiversity criteria for buildings,requiring developers to take into account their influence on surrounding ecosystems.In many countries,regulations now protect habitats,imposing restoration measures where appropriate.New reporting requirements on biodiversity impacts are also in the pipeline,with the taskforce on nature-related financial disclosures recommendations and guidance,designed to encourage and enable business and finance to assess,report and act on their nature-related dependencies,impacts,risks and opportunities.8BUILDINGS&CLIMATE:DECARBONIZATION&RESILIENCEBUREAU VERITAS NORTH AMERICA9BUILDINGS&CLIMATE:DECARBONIZATION&RESILIENCEBUREAU VERITAS NORTH AMERICAEnergy management is key to optimizing energy consumption.Many countries now require real-time monitoring and the installation of building management systems.Building Management Systems(BMS)can significantly contribute to achieving operational efficiency.These systems,sometimes called Building Automation and Control Systems(BACS),are comprised of a network of hardware and software that monitor and control a buildings mechanical and electrical equipment.The operational efficiency gains they offer can not only reduce the environmental impact of buildings but also significantly optimize costs throughout their lifecycle.From reducing energy bills to decreasing maintenance costs,each efficient measure translates into a direct improvement in profitability over the buildings lifecycle.Taking a proactive approach to managing critical systems is essential.Monitoring the performance of HVAC,lighting and other services makes it possible to identify and address potential issues before they impact operational efficiency.GROWING DEMAND FOR LABELS&STANDARDSMultiple standards have been developed to help the construction sector benchmark and implement best practices.Among the various green building standards,LEED,BREEAM and EDGE Buildings are increasingly a must-have for investors and analysts,helping them assess the value of assets and make investment decisions.Such standards provide a framework to address the key challenges of sustainability:energy,water,waste,mobility,land use,etc.Green building standards can also cover building operations“in-use”particularly useful given that a buildings operational phase accounts for a significant share of its full lifecycle impact.MANAGING ENERGY,WASTE&WATERBureau Veritas is an EDGE Buildings global certifier.EDGE Buildings must demonstrate at least 20%savings in water and materials,and adopt one of three targets for energy savings,ranging from 20%to 100%(zero carbon with 100%renewables on-site or off-site,or purchased carbon offsets to top off at 100%).EDGE Buildings was developed by the International Finance Corporation.At Bureau Veritas,we believe that the overall value of EDGE outweighs the extra costs involved in design and certification,making a clear case for profitability.BUILDINGS&CLIMATE:DECARBONIZATION&RESILIENCEBUREAU VERITAS NORTH AMERICAHOW OUR CLIENTS MOVE FORWARD 10BUILDINGS&CLIMATE:DECARBONIZATION&RESILIENCEBUREAU VERITAS NORTH AMERICAA COMBINED APPROACH TO ENERGY&CARBON REQUIREMENTSA net-zero strategy can only work if it takes into account both energy and carbon requirements.Companies need a precise overview of the energy and carbon performance of their real estate portfolios,but this does not have to mean performing painstaking asset-by-asset audits.A quick summary mapping of all assets,categorizing them according to energy consumption and carbon emissions,is a cost-effective option.The crucial point is to combine energy mapping with carbon mapping.Instead of conducting systematic audit campaigns on all buildings,companies typically focus their audits on their poorest-performing assets.The requests we receive for such energy audits increasingly include requests for assistance in drafting energy and carbon roadmaps.Energy and carbon performance aspects have also become a key feature of the technical due diligence(TDD)performed during the acquisition process.Conducting an energy and carbon audit allows prospective investors to determine the CAPEX needed to achieve compliance with a net-zero trajectory.CLARIFY TARGETS&TIMELINES:DIFFERENTIATING REGULATORY REQUIREMENTS FROM NON-REGULATORY COMMITMENTSCompanies do not always approach the various regulatory and non-regulatory measures applicable to them in a logical,complementary manner.This can get particularly confusing when multi-state portfolios are involved.REPURPUSE,RENOVATE,UPGRADEBuilding retrofits and refurbishments are necessary to improve the energy efficiency of buildings.A range of upgrades will impact energy consumption:Improving insulation Upgrading HVAC systems,lighting,and other building systems Addressing structural issues i.e.problems with the 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at Bureau Veritas,we are subject matter experts in working with climate change scenarios to identify asset exposure to physical climate risks(e.g.,extreme weather,sea-level risks).We have a strong focus on supporting clients in addressing climate-related risks and building resilience.Our key climate resilience services include:Identify and evaluate physical climate risks(e.g.,extreme weather,sea-level rise)and transition risks(e.g.,policy,technology,market changes)for clients assets.Vulnerability Assessments and develop mitigation strategies.Help clients develop comprehensive adaptation plans to enhance the resilience of their assets.Provide guidance on implementing resilience measures,such as strengthening building design,improving flood protection and diversifying supply chains.Technical assistance on the climate resilience and sustainability performance of assets.Verify the compliance of clients climate-related claims,targets and commitments construction requirements and industry 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October 2025 OIES Paper:NG 202 The Global Outlook for Gas Demand in a$6 World Mike Fulwood(Ed),Anouk Honore,Michal Meidan,Parul Bakshi,Graeme Bethune,Ieda Gomes,Mostefa Ouki The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.i The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its members.Copyright 2025 Oxford Institute for Energy Studies(Registered Charity,No.286084)This publication may be reproduced in part for educational or non-profit purposes without special permission from the copyright holder,provided acknowledgement of the source is made.No use of this publication may be made for resale or for any other commercial purpose whatsoever without prior permission in writing from the Oxford Institute for Energy Studies.ISBN-978-1-78467-283-6 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.ii Acknowledgements As the editor of this paper,I would first like to thank my colleagues and fellow authors Anouk Honore,Michal Meidan,Parul Bakshi,Graeme Bethune,Ieda Gomes,and Mostefa Ouki for their excellent contributions to this paper.As editor,however,I remain responsible for any errors and omissions.I would also like to thank Bill Farren-Price for his support and reading through the paper,and Liz Henderson for editing and Kate Teasdale and Olesia Astakhova for preparing the paper for publication.Mike Fulwood Senior Research Fellow The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.iii Executive Summary The long-expected wave of LNG supply is now almost upon us and is increasingly expected to outstrip the likely rise in demand for LNG at the global level.Spot prices in European and Asian markets may well respond to the overhang of LNG supply by moving to more short-run pricing as was seen in 2019 and 2020 and,as a result,prices could be closer to$6 per MMBTU rather than$8 per MMBTU,reflecting more long-run pricing.If prices were to fall to the$6 level,what might the demand response be?Our focus is on the existing and potential major importing regions Europe,China,India,Japan/Korea/Taiwan,Emerging Asia,Africa,and Latin America.North America,the Middle East,and Russia were not considered as they are low-price markets,with prices already well below$6 per MMBTU.The potential demand response is considered both for the short run and the long run.The short run assesses how much demand is switchable with an immediate response to changing gas prices relative to competing fuels.This is typically in the power sector where,in many markets,there is a choice between burning coal and gas(and even oil in some markets).The long run considers the situation where the gas price level is sustained at$6 per MMBTU for a number of years,and how much additional gas demand might therefore be added on a permanent basis,either by displacing coal and oil in the power sector or by potentially slowing the roll out of renewables.The approach taken in the analysis and assessment for each country/region is more a subjective assessment on the likely demand response to lower gas prices,rather than the result of any econometric or statistical analyses of price elasticity of demand,which generally have a poor track record of assessing elasticity.In any case,price elasticity is not linear over a wide range;the demand response to a 25 per cent fall in prices from$8 to$6 will be very different to a 25 per cent fall in prices from,say,$20 to$15.For the regions and countries under consideration,the short-run demand response,in respect of the impact on LNG imports,is estimated at between 26.5 bcm and 94 bcm,with a midpoint of 60.5 bcm.This is equivalent to between 3.5 per cent and 12 per cent of projected global LNG imports in 2030.The long-term response is higher,ranging from 62.5 bcm to 177.5 bcm,with a midpoint of 120 bcm.This is equivalent to between 7.5 per cent and 21 per cent of projected global LNG imports by 2035,where more time is available for longer run switching.Broadly half the short-run and long-run response is in the power sector,with the increase in JKT and Emerging Asia almost wholly in power.The response in the buildings and transport sectors is focused in China and India and shows an increase over time with the opportunity to invest in more gas-fired equipment.There is also a significant response in industry in China,India,and C&S America.Europe The role of gas in Europe is changing more towards use as a backup for intermittent renewables.While gas demand may be supported a little as coal-fired power is phased out,switching between coal and gas is declining,as coal plants are closed.Buildings demand is not price sensitive,at the price levels being assessed here,and industrial sector demand has shown limited recovery from the demand destruction in 2022.A short-run uplift to demand with$6 gas is modest at between 5 to 9 bcm.In the long run,the coal-to-gas switching response declines further,but there is the potential for a slowdown in the roll out of offshore wind,which could add some 10 to 16 bcm of demand.The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.iv China Gas has a relatively limited role in the power generation sector,but it is significant in industry and becoming increasingly important in buildings.Gas demand is expected to continue growing and low prices,especially if sustained,could boost demand.A short-run response in the 16 to 70 bcm range is possible by 2030,with half of this being in industry.The long-run response range for total gas demand in China is between 25 and 115 bcm in 2035,but given the Chinese authorities apparent desire to maintain domestic production at between 50 per cent and 60 per cent of total demand,maybe only half of this would feed through to LNG imports.India Gas demand growth is picking up in India and is expected to accelerate over the next ten years,with the rate likely to be boosted by lower gas prices.The response in power is expected to be minimal in the short-run but there is some potential in the long-run with better economics for stranded plants and a greater peaking role.The industry response is bigger in the short-run but in the long-run the largest response would be in the CGD buildings and transport sectors,including the possibility of LNG trucking.The short-run response range is between 4.6 and 11 bcm and in the long-run between 17 and 35 bcm with most of the significant potential uplift coming from the expansion of gas demand in city gas distribution and transport.Japan,Korea and Taiwan The traditional LNG-importing countries are going through different phases of gas demand.Taiwan is phasing out coal and nuclear and will become increasingly dependent on gas-fired power.Korea has shown some growth over the past few years,but Japanese gas demand has been in decline as its nuclear plants restart.Given the number of oil-fired as well as coal-fired plants in Japan and coal-fired plants in Korea,the potential for coal and oil to gas switching is strong,even without a meaningful carbon price.A short-run response range is between 3 and 14 bcm,with the long-run calculated at between 3 and 32 bcm.This is all coming from the power sector,with much of the response in Japan.Emerging Asia The Emerging Asia markets have some of the highest potential to absorb the wave of LNG supply,with rapidly rising demand and stagnant or declining production.There is widespread use of coal for power in the region,but no additional coal-fired power capacity is expected beyond 2030.Gas-fired power growth is benefiting from the rapid growth in electricity demand in the region,but the potential additional demand response from lower prices may be limited,given the strong growth already anticipated.The short-run response range of 6 to 16 bcm is all in the power sector and would arise with slightly higher load factors for gas-fired power at the expense of coal.The long-run response range of 6 to 20 bcm might be boosted through a slower roll-out of expensive offshore wind in those countries where there is potential.The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.v Africa Very little LNG is currently imported into the African continent,with supplies mainly going to Egypt to alleviate gas shortages.There are,however,a number of countries,including South Africa,which have plans to import LNG in the future.Much of the growth in gas demand in Sub-Saharan Africa has come from the switch from oil-fired power to gas-fired power,as has recently happened in Ghana.However,the management and mitigation of project risks remains more important to investors than gas prices where the development of commercially viable gas projects in Africa is concerned.No short-run or long-run demand response is anticipated in Africa,at least as far as any move from$8 to$6 gas prices is concerned.Prices at$8 or even slightly above are low enough to generate oil to gas switching in Africa.Central and South America The region covers a wide range of very small to much larger gas markets.The potential demand response is concentrated,at least in the short term,in the larger gas markets of Argentina,Brazil,Chile,Colombia,and the Dominican Republic.The short-run response could be up to 9 bcm with much of this coming from industry,largely in Brazil,with a switch away from fuel oil,while there is less of a shift in the power sector.The long-run response is between 14 and 17 bcm,with the potential for more in power,as well as industry,particularly in some of the new LNG-importing Caribbean countries,as well as the larger gas markets.In both the short and long run,the demand response to lower imported LNG prices may be limited by the relatively high marketing and transportation charges in some countries.The short-run response is projected to run through to 2030 after which the market will have had time to adjust to potentially lower prices and begin a long-run response.Figure 1 illustrates the range of the short-run and long-run response in comparison to the Base Case(shown by a continuous red line)for LNG imports,relative to LNG export capacity.The midpoint of the range is the red dashed line which is plotted as the average of the low and high response short-run up to 2030 and long-run for 2035.This is not a forecast,but instead provides an illustration of the impact of the price shift,given the high levels of uncertainty.The 2030 midpoint for additional demand is around 60 bcm and the 2035 midpoint for additional demand is around 120 bcm.Figure 1 indicates that the upper end of the range is at the LNG export capacity level in 2030 and well above it by 2035.These levels would clearly not be either achievable or indeed sustainable at a$6 gas price.The percentages in Figure 1 indicate the utilization rates of available LNG export capacity.In the Base Case,the utilization rate is some 85.5 per cent in 2030 and 86.5 per cent in 2035.However,this is not an equilibrium solution,as in an over-supplied market,prices would fall,generating an increase in demand.This rebalancing of the market would result in utilization rates of 92 per cent in 2030 and 99 per cent in 2035,if we use the midpoints of the ranges.While a 92 per cent utilization rate might be broadly consistent with$6 gas in 2030,a 99 per cent utilization rate by 2035 is inconsistent with$6 gas,since it is close to the high utilization levels seen in the last few years.Capping LNG demand at some 900 bcm from 2032 onwards,which results in 95 per cent utilization in 2035,would seem to be more consistent with a$6 price.The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.vi Figure 1:The response range to$6 Gas Source:IEA,NexantECA World Gas Model The 2030 response outcome represents a 60 bcm increase in demand compared to the Base Case.This outcome,where rising supply exceeds the rise in demand,is broadly comparable to 2019,where there was around a 75 bcm increase in available LNG export capacity(a rise of some 16 per cent),with LNG imports rising less and a utilization rate of LNG export capacity of some 92 per cent.In 2019,TTF prices averaged just over$6 per MMBTU,falling from around$9.30 in 2018(real 2024 prices).The price and short-run response by 2030,therefore,looks similar to what happened in that year.The 2035 long-run response is based on a sustained period of prices at$6,but there is no real comparison of a similar sustained period of low prices at the global level.1 The analysis in this paper represents an initial assessment by OIES research fellows of the potential short-run and long-run price responsiveness of gas demand to a 25 per cent lower spot gas price by 2030 and beyond into the next decade.As prices start to decline in the next few years assuming the growth in LNG supply outpaces the underlying level of demand as we anticipate then more evidence of the price responsiveness may become apparent,possibly altering our conclusions.Finally,it should be noted that the projected fall in spot prices from$8 to$6 is predicated on the OIES bottom-up assessment of the underlying level of demand in the selected countries and regions.The large excess supply this leads to,puts downward pressure on prices,eliciting a demand response to rebalance the market with broadly 900 bcm of global LNG imports in the early 2030s,but at$6 spot gas prices in Europe and Asia.Clearly,the OIES view of the underlying level of demand could be too pessimistic,and the underlying demand for LNG could be higher and reach 900 bcm without the assistance of prices as low as$6 per MMBTU.The real question,therefore,may not be what the LNG import level will be in the early 2030s,but at what price does the market balance and clear?Is it at$6 per MMBTU,because lower prices are needed to generate more demand,or at$8 per MMBTU or even a different price,because the level of underlying demand is much stronger than we think?1 The closest comparison may be the impact of the shale revolution in the US which led to sustained low Henry Hub prices and a dramatic squeeze on coal in the power sector.4005006007008009001,0002020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035BCMLNG ImportsLNG Export Capacity97.5.5%ResponseRange95%vii The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Preface The history of commodity markets is one of regular cyclicality,with the timescales within which supply adjusts to meet expected demand often diverging.Global LNG has already been through a couple of identifiable surges in supply,pushing benchmark prices down until the utilization of liquefaction capacity can come back as demand for LNG rises.This report,led by OIES Senior Research Fellow Mike Fulwood with other OIES Gas Programme research fellows,covers the key regions and demand sectors.It sets out to explore the market impact of the impending new wave,which will between 2024 and 2030 add some 370 bcm of LNG supply if all projects planned and underway are delivered in a timely manner.All other things equal,this major leap in supply will reduce prices,prompting higher demand in existing LNG markets as well as help draw new buyers for the fuel.The extent to which LNG demand existing and incremental-is sensitive to price is at the heart of the investigation in this paper.This will depend upon pricing for competing fuels;energy regulation and governments net zero commitments;as well as broader energy transition planning.Some regions will be looking to boost gas-led industrial production and some may put more emphasis on security of supply,both elements of the longstanding energy trilemma which frames the prism through which most energy and gas policy is still judged.To provide the background for this paper,a Base Case,giving a range of gas prices,was generated in line with the Declared Policies Scenario we use in our medium-term modelling.The objective was to establish the nature of demand responsiveness to price,within a range,rather than conducting an elaborate statistical analysis,which has a poor track record in estimating the price elasticity of demand.The results of the modelling show that China and other Emerging Asia remain big growth targets amid lower gas prices,with industrialized economies in Europe and North Asia somewhat less responsive.Beyond the high-level analysis,it is the region and sector-specific analysis that offers the most useful insight here,helping explain the variable response to lower prices.Please contact the authors for any follow-up on this paper or for more details about the OIES Gas Programme,please contact me on the details below.Bill Farren-Price Head of Gas Research,OIES viii The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Contents Acknowledgements.ii Executive Summary.iii Preface.vii Contents.viii Figures.viii Tables.ix 1.Introduction.1 2.Base Case Outlook.3 3.Europe.13 4.China.29 5.India.40 6.Japan,Korea,Taiwan.59 7.Emerging Asia.69 8.Africa.76 9.Central and South America.85 10.Conclusions.95 Figures Figure 1:The response range to$6 Gas.vi Figure 2:Wholesale price heat map 2024.2 Figure 3:Global gas demand.3 Figure 4:LNG export capacity growth.5 Figure 5:LNG import growth.5 Figure 6:LNG capacity utilization.6 Figure 7:European and Asian spot prices.7 Figure 8:Supply-Demand schematic.9 Figure 9:Gas-on-Gas competition in selected countries and regions.10 Figure 10:Energy supply mix by sector in Europe,shares in 2022(per cent).13 Figure 11:Natural gas prices on the TTF,month 1,$per MMBTU.14 Figure 12:Natural gas demand by sector in Europe,2019-2023(bcm).15 Figure 13:Gas demand by sector in the nine major European gas markets in 2023(bcm).16 Figure 14:Power sector generation by fuels in Europe,2019-2024(TWh).17 Figure 15:Electricity generation by fuels in the nine major European gas markets in 2024(TWh).18 Figure 16:Industrial gas demand by sector in Europe,2019-2024(bcm).19 Figure 17:European Gross domestic product(constant prices),year-on-year change(per cent).21 Figure 18:Production in industry,EU27,index:2021=100.22 Figure 19:Potential heat pump stock growth scenario in Europe(millions).27 Figure 20:Europe natural gas demand,scenarios to 2040(bcm).28 Figure 21:China gas demand(bcm).29 Figure 22:China gas demand by sector(bcm).31 Figure 23:China gas demand by industry sector(bcm).33 Figure 24:Population with access to gas(million people),y/y change(RHS,per cent).35 Figure 25:Natural gas consumption in India by sector.41 Figure 26:Natural gas pricing in India.42 Figure 27:Indias installed capacity and generation mix.43 ix The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Figure 28:India CGD consumption by source.44 Figure 29:India natural gas demand projections.46 Figure 30:India industry energy demand STEPS.47 Figure 31:India projected gas consumption by supply source.48 Figure 32:India natural gas demand in the city gas distribution sector projection.51 Figure 33:India natural gas consumption petrochemicals and refineries.52 Figure 34:Historical gas demand,Japan,Korea,and Taiwan(Bcm).59 Figure 35:Average wholesale gas prices Japan,Korea,and Taiwan.59 Figure 36:Japan power generation by fuel(GWH and percentage).60 Figure 37:Japan power generation capacity and utilization.61 Figure 38:Japan demand and gas-use in power generation.62 Figure 39:Japan industrial demand by fuel 2022(PJ).64 Figure 40:Korea power generation by fuel 2022(GWh).65 Figure 41:Korea industrial demand by fuel 2022(PJ).65 Figure 42:Korea LNG imports and gas-use for power generation(bcm).66 Figure 43:Taiwan power generation by fuel(GWh).67 Figure 44:Taiwan LNG imports and gas-use for power generation.68 Figure 45:Emerging Asia average wholesale gas prices 2005 to 2024.71 Figure 46:Emerging Asia gas demand growth.72 Figure 47:ASEAN power generation capacity.72 Figure 48:ASEAN power utilization rates.73 Figure 49:ASEAN industry energy demand.74 Figure 50:Africa natural gas production,consumption,exports and imports(bcm)2024.76 Figure 51:Africa energy or fuel shares in electricity generation 2022.77 Figure 52:Africa energy or fuel shares in industry(final consumption)2022.77 Figure 53:Gas pricing mechanisms in Africa 2024.79 Figure 54:Africa average wholesale gas prices.79 Figure 55:Africa power generation capacity.81 Figure 56:North African gas demand by sector:2024 2035(bcm).81 Figure 57:Sub Saharan African gas demand by sector:2024 2035(bcm).82 Figure 58:Ghana-fuel shares in electricity generation:2012 2022.83 Figure 59:Average wholesale gas prices in C&SA.88 Figure 60:City-Gate natural gas prices in Brazil.89 Figure 61:C&S America power generation capacity.91 Figure 62:C&S America Base Case demand scenario.92 Figure 63:C&S America lower gas price scenario.92 Figure 64:Comparative demand outlook:selected C&SA countries.93 Figure 65:The response range to$6 Gas.99 Tables Table 1:Observed gas demand in Europe,2019-2024(bcm and per cent).16 Table 2:Short and long run China price response(bcm).39 Table 3:Short-term switchability analysis.49 Table 4:India short-term switchable potential.54 Table 5:India sectoral natural gas demand projections OIES(BCM).55 Table 6:India long-term switchable potential.58 x The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Table 7:Emerging Asia power generation by fuel 2022.69 Table 8:Emerging Asia industry by fuel 2022.70 Table 9:Emerging Asia non-energy use by fuel 2022.70 Table 10:C&S America power generation by fuel 2022.86 Table 11:C&S America industry by fuel 2022.87 Table 12:C&S America non-energy use by fuel 2022.87 Table 13:Short-run response summary.97 Table 14:Long-run response summary.98 Table 15:Implied elasticities.100 Table 16:Midpoint response by sector.101 1 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.1.Introduction The upcoming wave of new LNG capacity is set to have a transformational impact on the global gas market.However,the rise in supply over the period to 2030 looks likely to exceed the rise in demand for LNG,especially in Asian markets.As a result,this could lead to significantly lower spot and hub prices than in a more balanced gas market.If gas prices do respond to the supply overhang,then a key question relates to what impact this might have on gas demand in different countries and regions,i.e.how price sensitive is gas demand?The hypothesis,as outlined in Section 2,is that spot prices,in European and Asian markets,will respond to the overhang of LNG supply by moving to more short-run pricing as was seen in 2019 and 2020 and,as a result,prices could be closer to$6 per MMBTU rather than$8 per MMBTU,which would reflect more long-run pricing.The question of price sensitivity has two dimensions.Firstly,how much demand is switchable in the short term,with an immediate response to changing gas prices relative to competing fuels.This is typically prevalent in the power sector where,in many markets,there is a choice between burning coal and gas and even oil in some markets.This can also be true in the industry sector.The switchability,in this case,reflects the existing stock of fuel burning infrastructure.Secondly,if the gas price level is sustained at relatively low levels,such as$6,for a number of years,and this is expected to continue,how much additional gas demand might be added on a permanent basis,either by displacing coal and oil in the power sector or by potentially slowing the roll-out of renewables.The approach taken in this paper to assess the price sensitivity of gas demand avoids the use of statistical techniques.(In the conclusions,there are estimates of implied elasticities of demand,but these are only in the case of the change in prices discussed in Section 2 of this paper.)Rather we use a much more subjective analysis and assessment,drawing on the knowledge and expertise of the author of each section.This paper considers both these questions.The focus is largely on the period from now until 2035,although the longer-term impacts could be sustained beyond 2035.The focus will be on the main importing,or potentially importing,countries and regions.North America,the Middle East and Russia and the FSU countries are not,therefore,considered.Apart from North America,where there has been demonstrable price sensitivity in the past in the power sector,the Middle East and the FSU are mainly regulated pricing markets,with little or no sensitivity to global price changes.In addition,as Figure 2 shows,the latest IGU Wholesale Price Survey2 recorded wholesale price levels predominantly below$3 per MMBTU in North America,the Middle East and the Former Soviet Union,suggesting an analysis of the demand response to a$6 gas price is not relevant.Section 2 of the paper sets the outlook for the Base Case including the possible price range for spot prices in Europe,Asia,and other impacted regions.Subsequent sections will address the question of short and long-term price sensitivity for the following regions or countries:Europe drafted by Anouk Honore;China drafted by Michal Meidan;India drafted by Parul Bakshi;Japan,Korea and Taiwan drafted by Graeme Bethune;Emerging Asia drafted by Mike Fulwood;Africa drafted by Mostefa Ouki;and Latin America drafted by Ieda Gomes.2 https:/www.igu.org/igu-reports/wholesale-gas-price-survey-2025-edition 2 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Figure 2:Wholesale price heat map 2024 Source:International Gas Union Wholesale Gas Price Survey 2025 A final section will draw together the conclusions for each country/region,together with an overall assessment.The Conclusions and Section 2 on the Base Case Outlook have been drafted by Mike Fulwood.In assessing the short and long-term price sensitivity for the different countries and regions,the approach taken in each section will differ,depending on the availability of data,prior analysis,and any published plans and reports.3 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.2.Base Case Outlook This Base Case Outlook is a brief summary of the OIES reference case scenario known as our Declared Policies Scenario(DPS).This represents an expected outlook to 2035,based broadly on countries stated policies regarding the energy transition,as per the IEA Stated Policies Scenario(STEPS),but adjusted if it is believed that other policies might also impact the outlook to 2035.This is not designed as a scenario on a path to net zero by 2050 or one which will limit the global temperature rise to 1.5 degrees C.The baseline assumption is that Russian pipe imports into Europe post-2024 are only through Turkish Stream and that the EUs proposed ban is either not implemented or is unenforceable.The projected global demand by region will be discussed and the general trend in demand for the key regions and countries will be analysed.This will be followed by a review of the growth in LNG export capacity and LNG trade to 2035 and then a projection of spot prices in the DPS based on the NexantECA World Gas Model.There will be further sub-sections discussing the different gas price mechanisms in the focus regions and countries,and the short-and longer-term economics of gas versus other fuels.a)Global and Regional Demand Global gas demand is projected to grow by some 613 bcm( 15 per cent)between 2024 and 2035,of which 45 per cent is in the Middle East and China.Growth in demand over the period is concentrated in the power generation( 335 Bcm)and industrial( 155 Bcm)sectors,which will account for 80 per cent of growth between 2024 and 2035.In contrast,there is virtually no growth in gas demand for residential and commercial(buildings)at a global level.Growth in buildings demand in China is offset by declines in Europe and North America.Figure 3:Global gas demand Source:NexantECA World Gas Model,IEA 4,230 4,710 4,833 05001,0001,5002,0002,5003,0003,5004,0004,5005,000World Gas Consumption by Region(Bcma)LNG Bunker FuelOther EuropeSub Saharan AfricaNorth AfricaMiddle EastOceaniaASEANJapan,Korea,TaiwanSouth AsiaChinaCaspianRussiaCentral&South AmericaEU UK CH BalkansNorth AmericaTotal 4 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.These overall projections are somewhat less important than assessing the potential price responsiveness,using these projections as a Base Case.In order to set the scene,however,for the rest of the paper,the projected demand for the countries and regions being assessed are:Europe3-demand is marginally higher at some 467 bcm in 2035,compared to 461 bcm in 2024.Higher demand in power generation,as coal is phased out,offsets lower demand in buildings.China demand grows by some 120 bcm from 426 bcm in 2024 to 548 bcm in 2035.Growth is across the board in all sectors.Over 100 bcm of the growth is in the period to 2030 with a slowdown thereafter.India demand grows by 40 bcm from 75 bcm in 2024 to 115 bcm in 2035.Power and industry account for most of the growth but transport also strong.Japan,Korea,and Taiwan Demand in Japan falls by some 10 bcm,from 89 bcm in 2024 to 79 bcm in 2035,Korean demand rises from 60 bcm in 2024 to 65 bcm in 2035,and Taiwan grows by some 10 bcm from 31 bcm in 2024 to 41 bcm in 2035.Changes in the power sector are largely responsible for the differential growth.Emerging Asia ASEAN demand growth is up some 60 bcm from 157 bcm in 2024 to 217 bcm in 2035.Vietnam,Indonesia,and Malaysia lead the way.Strong growth comes from industry as well as power.In the South Asia market,there is no growth in Pakistan gas demand,but Bangladesh gas demand rises from 32 bcm in 2024 to 43 bcm in 2035,with growth coming from power and industry.Africa North African demand grows strongly from 121 bcm in 2024 to 155 bcm in 2035,dominated by Algeria and Egypt.There is a near-doubling of demand in Sub Saharan Africa from 43 bcm in 2024 to 98 bcm in 2035,led by Nigeria,South Africa,and Mozambique.In both sub-regions the power sector leads the way.Latin America Demand in Central and South America is up by 33 bcm from 162 bcm in 2024 to 195 bcm in 2035.Argentina,Brazil,Chile,and Colombia are the key growth hubs.Power accounts for almost all the growth.Power generation demand for gas is generally the main driver for gas demand growth but industry is also important in China and Emerging Asia.b)LNG Export Capacity and Trade The LNG wave is now upon us and OIES is projecting cumulative growth in LNG export capacity of some 400 bcm between 2024 and 2035.Some three-quarters of this growth has taken FID and is under construction,with more FIDs imminent in the next 12-18 months.Half of this growth is in North America and another quarter in Qatar,followed by some 15 per cent from Sub Saharan Africa.Total LNG import growth between 2024 and 2035 is around 273 bcm,of which 27 bcm is growth in LNG as bunker fuel.ASEAN has the most significant increase(89 bcm)as production declines and demand grows.Chinas growth peaks around 2030 at 137 bcm,declining to 127 bcm by 2035(29 bcm growth in 2024-35).Europe sees a growth of 48 bcm as production and pipe imports decline.South Asia shows strong growth as prices stimulate demand.3 Europe is defined as the EU27 plus UK,Norway,Switzerland,the non-EU Balkans,and Turkey.5 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Figure 4:LNG export capacity growth Source:NexantECA World Gas Model,OIES assumptions Figure 5:LNG import growth Source:NexantECA World Gas Model,OIES assumptions 204 99 64-100-50-50 100 150 200 250 300 350 400 450202420252026202720282029203020312032203320342035BSCMCumulative Change in LNG Export Capacity 2024-2035Other EuropeSub Saharan AfricaNorth AfricaMiddle EastOceaniaASEANRussiaCentral&South AmericaNorth America-1 48 6 29 52 6 89 2 2 13 1 27 (20)-20 40 60 80 100BSCM ChangeChange in LNG Imports-2024 to 2035LNG Bunker FuelSub Saharan AfricaNorth AfricaMiddle EastOceaniaASEANJapan,Korea,TaiwanSouth AsiaChinaCentral&South AmericaEuropeNorth America 6 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.c)Spot Prices The growth in LNG export capacity is expected to outstrip the growth in LNG imports.Figure 6:LNG capacity utilization Source:NexantECA World Gas Model,OIES assumptions LNG utilization,defined as imports divided by available LNG export capacity,4 is currently at very high levels(98 per cent,effectively full capacity)following the Russian invasion of Ukraine.Utilization is not expected to begin declining until 2026 when the anticipated surge in LNG supply starts to materialise.The growth in available supply then outstrips the growth in demand for LNG imports,and utilization,based on the projected demand and available supply,falls to 86 per cent by 2030,84 per cent in 2031 before rising marginally back to 86 per cent by 2035.By comparison,in 2009(after the 2008 financial crisis)and in 2020(COVID),utilization was 89 per cent.Based on these projections,utilization could fall to even lower levels,with downward pressure on prices.Between 2030 to 2035 inclusive the average utilization is predicted to be around 85 per cent with the volume of unused LNG export capacity being some 140 bcm a year.Utilization of 100 per cent is not possible since the LNG export capacity has to provide for boil off gas and any losses.If 98 per cent is taken as the maximum capacity utilization,then the difference between 85 per cent average utilization and 98 per cent average utilization is some 120 bcm per year which represents just under 10 bcm for every 1 percentage point of capacity utilization.The level of LNG imports in the OIES Base Case is around 800 bcm in 2030 and 822 bcm in 2035.This compares with the IEA STEPS figures of 690 bcm in 2030 and 725 bcm in 2035,both of which are significantly lower than our Base Case.However,the Shell 2025 LNG Outlook5 has 782 bcm in 2030 4 Available LNG export capacity is nameplate capacity adjusted for scheduled and unscheduled maintenance,technical issues,feedgas issues and the ability of some plants to produce more than nameplate.Total nameplate capacity is currently around 10 per cent higher than calculated available capacity.5 Shell LNG Outlook.56493495280.0.0.0.0.0.0.0.0.0.00.0002003004005006007008009001,0001,1002005200620072008200920102011201220132014201520162017201820192020202120222023202420252026202720282029203020312032203320342035Utilisation(%)BSCMLNG UtilisationLNG ImportsLNG Export CapacityUtilisation 7 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.and 857 bcm in 2035,while its Archipelagos6 scenario has 758 bcm in 2030 and 853 bcm in 2035.The recently published BP Energy Outlook7(Current Trajectory)has 800 bcm in 2030 and 850 bcm in 2035.Thus,it would seem that the IEA STEPS may be a bit outdated now(and will be updated in the next WEO),so the OIES level of 800 bcm in 2030 looks a reasonable consensus,while our 822 bcm in 2035 is some 30 bcm lower than the BP and Shell figures.An extra 30 bcm in 2035 would raise the utilization by 3 percentage points but would still leave utilization at below 90 per cent,meaning the market remains oversupplied.Figure 7 shows the spot price projections for TTF and Japan spot prices,from the NexantECA World Gas Model.The projections are arrived at by running the model in long-run marginal cost(LRMC)mode and then in short-run marginal cost(SRMC)mode,by removing all the fixed costs.With the global market becoming oversupplied,as the LNG wave exceeds the growth in LNG import demand,the utilization of LNG export plants begins to decline to below 90 per cent by the end of this decade.The last time utilization was at these levels was in 2019 and 2020 and European and Asian spot prices were$5 per MMBTU or less.Figure 7:European and Asian spot prices Source:NexantECA World Gas Model,Argus Media 6 https:/ 7 BP 8.21 8.35 5.55 5.36 6.22 6.66 0510152025303540452017201820192020202120222023202420252026202720282029203020312032203320342035Real 2024$/MMBtuSpot Prices TTFTTF LRMCTTF SRMCTTF HistoryTTF Forecast8.75 8.59 5.07 5.09 6.22 6.14 05101520253035402017201820192020202120222023202420252026202720282029203020312032203320342035Real 2024$/MMBtuSpot Prices JapanJapan LRMCJapan SRMCJapan HistoryJapan Forecast 8 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Under LRMC,spot prices in Europe and Asia are around$8 from the late 2020s through 2035.Under SRMC prices drop below$6.The dotted red lines are the outcome for spot prices when the LRMC and SRMC projections are blended,depending on how tight the global gas market is.In a supply-long market,prices will tend towards the SRMC projected price,whereas,in a tighter market,prices will tend towards the LRMC projected price.With an oversupplied market expected,the blended price which could be interpreted as the forecast is closer to the SRMC price curve at some$6 or so.As a comparison,the TTF forward curve for 2029 is just under$9 per MMBTU,in nominal prices,which equates to around$8 per MMBTU in real 2024 prices.The JKM forward curve is some 20-30 cents higher.These forward curves8 are broadly comparable,therefore,to the green line LRMC projections.The prospect of$6 per MMBTU prices(or less)is very real and the implications of this projection for gas demand are considered in subsequent sections.However,the decline to$6 or less is for spot prices and spot prices are not necessarily the relevant pricing mechanism in all the markets under consideration.OIES has been commenting on and writing about the size and impact of the LNG wave for a number of years now and,looking back,our views have been very consistent.In 2023,OIES published a post-Russia invasion of Ukraine paper entitled A New Global Gas Order,9 which assessed the outlook to 2030.This incorporated the LNG wave,but at a slightly lower rate,and also with slightly lower demand.The outcome for spot prices,by 2030,was in the$5 to$8 per MMBTU range,on a SRMC and LRMC basis.It should be recognized though that,while the OIES view along with others such as BP and Shell,suggest an oversupplied market by 2030 and beyond,it is possible that underlying demand could be higher,and the$6 gas price is not reached.The simple supply-demand schematic in Figure 8 below illustrates how different assumptions can lead to different outcomes.The intersection of demand curve D1 and supply curve S1 gives a price volume intersection of P1V1.This can be considered as the initial Base Case partial equilibrium,with the gas price at$8.However,this can only be the final equilibrium if some supply is withheld from the market,supporting the$8 price.If all the available supply is put on to the market,then the supply curve is S2 and the price volume intersection is P2V2,with P2 being$6 and V2 being higher demand.The purpose of this paper is to estimate what this additional demand might be.However,the level of demand(and supply)at V2 could also be achieved if underlying demand is higher,largely eliminating the projected oversupply.This is shown as demand curve D2,with the price volume intersection being P3V2,with P3 being a bit higher than,say,$8.It remains the OIES view that the oversupply will lead to lower prices and stimulate demand,but alternative outcomes are possible.It should be noted that this schematic is simplified and shows linear demand and supply curves,whereas the supply and demand for gas is not linear as was discussed in the OIES paper What drives international gas prices in competitive markets?published in 2024.10 8 Forward curves from Argus and CME as at October 8 2025.9 A New Global Gas Order?(Part 1):The Outlook to 2030 after the Energy Crisis.Mike Fulwood,July 2023.OIES NG 184 10 https:/www.oxfordenergy.org/wpcms/wp-content/uploads/2024/10/NG-195-What-Drives-International-Gas-Prices-in-Competitive-Markets.pdf 9 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Figure 8:Supply-Demand schematic Source:OIES d)Price Formation Mechanisms To understand the relevance of spot prices in the various markets,we can draw on the International Gas Unions Wholesale Gas Price Survey,the latest edition of which was published in June 2025.11 In respect of markets where spot prices are a key element,these would be included in the category called gas-on-gas competition(GOG).Figure 9 shows the percentage of GOG in both total demand and LNG imports for 2024.While there is some GOG at the total demand level in nearly all countries and regions,outside Europe,it is not the majority pricing mechanism.In Europe,GOG dominates and to the extent there is any price response in demand,then prices at$6 or less might be expected to have some impact.However,the price response is a response at the margin,and in most countries,LNG tends to be the marginal fuel,so lower prices might be expected to lead to a demand response.The larger LNG importers in Asia China,India,and JKT all have significant shares of GOG,largely in price-responsive spot LNG cargoes.In the ASEAN region,GOG in LNG imports has grown significantly in the last few years,as LNG imports have grown,although volumes remain small.In the other emerging Asia countries of Pakistan and Bangladesh,GOG only really appears in Bangladesh,with Pakistan using almost all oil-indexed contracts.Latin America has widespread GOG in the domestic gas markets in Argentina,Chile,and Colombia,as well as in almost all LNG imports over the whole continent.The LNG volumes are not large but at the margin they are important in terms of additional demand.The bar for African LNG imports shown in Figure 9 for 2024 is slightly misleading as it refers entirely to Egyptian imports while the GOG in total demand is largely in Nigeria.11 https:/www.igu.org/igu-reports/wholesale-gas-price-survey-2025-edition PriceVolumeS1S2D1D2P1P2P3V1V2 10 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Figure 9:Gas-on-Gas competition in selected countries and regions Source:International Gas Union Wholesale Gas Price Survey 2025 In conclusion,the importance of GOG pricing in LNG imports,especially in Asian markets,suggests that lower prices have the potential to stimulate demand.This is true of Europe,clearly,and also Latin America.Africa at this stage is somewhat different,as the possibility of LNG,at the margin,might displace imported oil in power generation in a number of countries.e)Short and Longer-Term Economics of Gas The short-and longer-term price response of countries will depend on the economics of gas relative to other fuels,principally in the power sector but also in the industrial sector in some countries.The short-term economics are in respect of the variable cost of,for example,gas-fired generation compared to coal-fired generation in effect the fuel cost,including,if applicable,any carbon price or tax.The long-term economics are dependent on investing in new capacity so the key will be the levelized cost of gas-fired generation against,for example,renewables and coal.On a variable cost basis,assuming 33 per cent efficiency for a coal-fired plant and 50 per cent efficiency for a CCGT,then gas is some 50 per cent more efficient than coal in generating electricity.12 With an assumed coal price of$100 per tonne,this converts to$4.22 per MMBTU,13 and converting to an equivalent competing price against gas of some$6.33 per MMBTU,a 50 per cent uplift for efficiency.This is without a carbon price or tax,which currently seems a reasonable assumption for Asian markets.With a carbon price,the equivalent coal price increases significantly.For every$1 per tonne of a carbon price,the additional carbon cost of coal is some 4.22 cents per MMBTU,so at a carbon price of$80 per tonne(70 euros per tonne),the additional cost of coal is some$3.38 per MMBTU,increasing the base coal cost to$7.60 per MMBTU.Once uplifted for efficiency,the equivalent competing price against gas of some$11.40 per MMBTU.A$6 per MMBTU gas price,therefore,is very competitive against coal in a market like Europe which has a significant carbon price.In an Asian market,where there is no carbon price or tax,the economics 12 Average efficiencies from US EIA.13 25 GJ/Tonne and 947.82 TJ per MMBTU 0 0Pp0%EuropeChinaIndiaJKTASEANPK/BDAfricaLatinAmericaGOG Shares 2024DemandLNG Imports 11 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.are more marginal,but gas could become seriously competitive against coal.Clearly the economics depend on assumptions about coal prices and relative plant efficiencies.It also assumes little or no difference between the wholesale coal and gas prices and the prices actually paid by generators for the fuels,a reasonable assumption in European and US markets where power generators can buy efficiently on the wholesale market,with minimal transportation costs.It may be less true in other markets.Looking at the longer-term economics,the all-in or levelized cost of gas versus renewables is likely to be the key,but also possibly coal costs,especially where there is a carbon price.Calculations of the levelized cost can produce a wide range of answers depending on assumptions made on capital costs,operating costs,fuel costs,discount rates,asset lives,operating utilization rates,etc.The IEA published a report in 2020 on Projected Costs of Generating Electricity,14 with all the costs in real 2018 prices which included a wide range of OECD countries plus a few non-OECD countries.For CCGTs and renewables the economics are summarised here:CCGTs Mean overnight(capital)costs were$823 per KWe,fixed O&M was$50 per KW,and the mean capacity was 762 MW.This would give a total capital cost of$627 million and total annual O&M of$38 million.At 57 per cent operating efficiency and an 85 per cent load factor as base load,this gave a total levelized cost excluding fuel costs of some$19.32 per MWH,at a 7 per cent discount rate and 30-year operating life.Fuel costs,at an average of around$7.70 per MMBTU($22.62 per MWH),came in at$39.56 per MWH,taking into account operating efficiency,giving a total of$58.88 per MWH.At real 2024 prices this would be around$71.83 per MWH in total an uplift of some 22 per cent-with the net capital and O&M levelized cost at some$23.57 per MWH.At a 50 per cent load factor this adds some$24.88 per MWH to the levelized cost in real 2018 prices,to give a total of some$83.76 per MWH,or in real 2024 prices,$102.19 per MWH,of which fuel costs would be some$48.26 per MWH,leaving a net capital and O&M levelized cost of$53.93 per MWH.A$6 per MMBTU gas price($17.58 per MWH),at a 57 per cent operating efficiency,gives a fuel cost of$30.85 per MWH.With an 85 per cent load factor the total is$54.42 per MWH and at a 50 per cent load factor the total is$84.78 per MWH(all in real 2024 prices).Offshore Wind Mean overnight(capital)costs were$2,876 per KWe and fixed O&M was$100 per KW.At a 7 per cent discount rate and a 40 per cent load factor the average levelized cost was some$85 per MWH at real 2018 prices.Uplifting by 22 per cent to real 2024 prices,gives a levelized cost of$103.70 per MWH,although this does not take into account any real technological efficiencies.Onshore Wind(over 1MW)Mean overnight(capital)costs were$1,391 per KWe and fixed O&M was$40 per KW.At a 7 per cent discount rate and a 35 per cent load factor the average levelized cost was some$62 per MWH at real 2018 prices.Uplifting by 22 per cent to real 2024 prices,gives a levelized cost of$75.60 per MWH,although this also does not take into account any real technological efficiencies.14 Projected Costs of Generating Electricity,IEA/NEA.2020 12 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Solar(Utility Scale)Mean overnight(capital)costs were$995 per KWe and fixed O&M was$20 per KW.At a 7 per cent discount rate and a 20 per cent load factor the average levelized cost was some$52 per MWH at real 2018 prices.Uplifting by 22 per cent to real 2024 prices,gives a levelized cost of$63.45 per MWH,again not taking into account any real technological efficiencies.Other evidence is also available on wind costs from Wind Europe.15 The IEA report summarizes the 2024 auctions in Europe.The UK CfD Allocation Round 6 had prices ranging between EUR 92-99 per MWH.They were as low as EUR 76 per MWH in Germany and Italy for onshore wind,but mostly in the EUR 90 per MWH plus range for offshore wind.In$per MWH this is equivalent to$105 per MWH.This is a similar level to the IEA broad levelized cost for offshore wind.The strike prices set by the UK government in the latest auction round 7,16 were set at 113 per MWH($145)for offshore wind,92 per MWH($120)for onshore wind and 75 per MWH for solar($98),all at real 2024 prices.These are the strike prices though and the bids are likely to come in lower.These calculations do not include any carbon price or tax on gas-fired power,which would raise the overall levelized cost for gas.On the basis of this very broad analysis,gas at$6 per MMBTU looks very competitive with offshore wind,even at 50 per cent load factor for CCGTs.However,gas is less competitive against onshore wind and utility-scale solar.The assumed load factors for gas-fired power and renewables are an important assumption in determining the levelized cost.Compared to historically achieved load factors,the assumed load factors from the IEA report for gas,offshore wind,onshore wind,and solar all seem high,which reduces the levelized cost across the board,but does not necessarily alter the relative economics.Adding a carbon tax to the gas prices,as there is in Europe,results in higher effective prices in the longer term,to compete with renewables.Assuming 50kg of CO2 emissions per MMBTU of gas gives an additional 5 cents per MMBTU of cost per$1 per tonne of CO2 price or tax.At the broad current price of 75 euros per tonne for the EU ETS price some$85 per tonne this is an additional cost of$4.25 per MMBTU,raising the effective cost of gas to just over$10 per MMBTU from$6.This equates to some$29.31 per MWH,which,at an operating efficiency of 57 per cent,is a fuel cost of$51.41 per MWH around$21 per MWH higher than with no carbon price.At current carbon prices,therefore,this would make gas-fired power broadly comparable with the levelized cost of offshore wind at just over$100 per MWH.In respect of the levelized cost economics of coal versus gas,gas at$6 is likely to be very competitive against coal where there is a carbon price and also without a carbon price,since the capital costs of coal-fired plants are generally higher per MW than for gas.However,with coal being phased out in many countries,including in Asia,there are few new coal plants being built.The long-run prospects of gas versus coal,therefore,are likely more a continuation of the short-run variable cost comparison,where a carbon price improves the economics of gas.The very broad comparative economics,discussed above,provide an overview and individual projects in different countries may have different relative economics.However,the overall conclusion,that in most markets,gas-fired power at a$6 price for gas is economic versus offshore wind,even with a carbon price,but more expensive than onshore wind and utility scale solar.15 Wind Energy Europe,2024 Statistics and the outlook for 2025-30.Wind Europe.2025 16 https:/assets.publishing.service.gov.uk/media/6880ff3f9fab8e2e86160f7a/ar7-contract-allocation-framework.pdf 13 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.3.Europe a)Introduction For the purposes of this analysis,the European region covers 37 countries,encompassing the 27 members of the EU,17 the UK,Norway,Switzerland,non-EU Balkans,18 and Turkey.In 2024,natural gas accounted for 23 per cent of total primary energy supply in the region and has seen its share relatively stable since the early 2000s.19 Gas had a key role in the residential sector(36 per cent of energy used in 2022),followed by the industrial sector(30 per cent),the commercial sector(25 per cent),and the power sector(20 per cent)as illustrated in Figure 10.Figure 10:Energy supply mix by sector in Europe,shares in 2022(per cent)Source:Data from International Energy Agency.Chart by the author The European energy market has been on a roller coaster ride over the past five years,from the COVID-19 pandemic in 2020 and impacts of lockdowns on countries economies to the subsequent recovery in 2021,and then the Russian invasion of Ukraine in early 2022,which triggered a seismic shift in natural gas flows.The severe disruption in Russian gas supplies and the need to attract LNG cargoes to Europe pushed gas prices up to record levels in mid-2022,as illustrated in Figure 11,with cascading effects on electricity prices,energy-intensive industrial production,commercial activities,and residential consumers.The overall impact was disastrous for the region as a whole,and the natural gas market in particular.20 The average benchmark month-ahead TTF gas price was still around$13 per MMBTU in the first eight months of 2025,21 much higher than pre-crisis levels(2019-2020)when average prices were$6 per MMBTU or less.17 Austria,Belgium,Bulgaria,Croatia,Republic of Cyprus,Czechia,Denmark,Estonia,Finland,France,Germany,Greece,Hungary,Ireland,Italy,Latvia,Lithuania,Luxembourg,Malta,Netherlands,Poland,Portugal,Romania,Slovakia,Slovenia,Spain and Sweden 18 Albania,Bosnia and Herzegovina,Kosovo,Montenegro,North Macedonia,Serbia 19 The share of gas in TPES ranged between roughly 23 per cent and 26 per cent between 2000 and 2024.Calculated using data from IEA Energy Balances.20 See our Quarterly Gas Market Review series for more information,or publications from Anouk Honore on our website:www.oxfordenergy.org 21 Argus data.14 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.The region struggles with the impossible conundrum of the need to secure energy and gas supplies by investing in gas import infrastructure and attracting LNG cargoes,while at the same time following its net-zero ambitions by reducing fossil fuel energy demand,including natural gas,and rolling out renewables.The EU in particular has set itself ambitious mid-term targets for 2030 and is in discussion for 2040 targets.Figure 11:Natural gas prices on the TTF,month 1,$per MMBTU Source:Data from Argus.Chart by the author The following section takes a closer look at the current situation and trends in European gas demand before turning to future gas consumption and the possible impacts of a gas price drop to around$6 per MMBTU in the late 2020s,compared to the Base Case scenario,which was detailed in Section 2 of this paper,and works on the assumption of a gas price of$8 per MMBTU.b)Three years on,gas demand remains well below pre-crisis levels Overview of gas demand in Europe Despite a decline in gas prices,gas demand in Europe remains well below pre-crisis levels.It reached 460 bcm in 2024,roughly 108 bcm lower than in 2021(a drop of 19 per cent).However,2021 saw some recovery after the impact of the COVID-19 pandemic and it was also a particularly cold year,boosting the use of gas for heating across Europe,so is not a good comparator.A better comparison would be to use the level of gas demand in 2019(around 550 bcm),the last normal year before the massive market disruptions detailed above.Gas prices in 2019 were also around or below the$6 per MMBTU mark,the main gas price assumption used in this paper to analyse the potential impact on gas demand in the short-and mid-term horizon.In 2024,gas demand in Europe was still 89 bcm below 2019 levels(-16 per cent).The steep decline in gas burn in the power sector has been the main driver of this fall,accounting for 34 per cent of the decline in 2019-2023,with the rest coming from the residential sector(21 per cent)and the industrial sector(17 per cent),as shown in Figure 12.22 22 In Europe,gas use is highly concentrated in four sectors:the power sector(30 per cent in 2023),in the residential sector(27 per cent),in the industrial sector(22 per cent),and finally in the commercial sector(11 per cent).15 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.There are many moving parts in the gas demand puzzle,and a complex range of factors influence the dynamics in the European natural gas market,especially considering the wide diversity of the 37 markets that comprise the European region in this paper.Figure 12:Natural gas demand by sector in Europe,2019-2023(bcm)Note:The IEA classifies refineries in the transformation sector,not as part of the industrial sector in its energy consumption data definitions.In this chart,refineries are therefore included in the own use category.Source:Data from International Energy Agency.Chart by the author Nine markets alone accounted for over 83 per cent of gas usage in 2024:Germany(17 per cent),Italy(13 per cent),the United Kingdom(13 per cent),Turkey(12 per cent),the Netherlands(7 per cent),France(7 per cent),Spain(6 per cent),Poland(5 per cent)and Belgium(3 per cent).The other 28 countries represented less than 17 per cent of total gas demand(and consumed less than 10 bcm each).23 The big nine have all registered a decline in gas demand since 2021,but only seven of them had a lower gas use in 2024 relative to 2019.The notable exceptions were Poland( 7 per cent since 2019 driven by the power sector as gas replaces decommissioned coal plants,and also the residential sector)and Turkey( 18 per cent driven by the power sector to cover electricity demand growth,the residential,and the commercial sectors)as illustrated Table 1.Even within the big nine,there are important differences in economic structure,energy mix,and the share of gas in primary and final energy,transition targets,and pathways,and of course,the split in sectoral gas demand,as illustrated in Figure 13 and the electricity generation mix(Figure 14).All of these influence the level and variations of gas demand,including its price sensitivity.For instance,gas used in the residential sector is essentially used for heating in winter and fluctuations primarily follow the changes in temperatures,while gas consumed in the industrial sector and for electricity generation tends to be more influenced by gas prices,although other factors may limit their impact,including hedging of price risks by large industrials at times when gas prices are low or,even more importantly,the availability of switching options in the power sector.23 Data from IEA.16 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Table 1:Observed gas demand in Europe,2019-2024(bcm and per cent)Source:Data from International Energy Agency.Table by the author Figure 13:Gas demand by sector in the nine major European gas markets in 2023(bcm)Note:The IEA classifies refineries in the transformation sector,not as part of the industrial sector in its energy consumption data definitions.In this chart,refineries are therefore included in the own use category.Source:Data from International Energy Agency.Chart by the author The power sector:rapid transformation of the electricity mix and the use of gas plants The continued build-out of wind and solar capacity is galvanising structural changes in the power sector,with renewables covering about 50 per cent of electricity generation in 2024.Wind and solar generation alone rose by 60 per cent between 2019 and 2024.Their combined shares grew from 16 per cent to 26 per cent of the electricity mix over the same period,displacing fossil fuels,including coal(which fell from 16 per cent to 12 per cent)and gas power plants(20 per cent to 16 per cent)as illustrated in Figure 14.24 24 Calculated from data from the International Energy Agency 2019(bcm)2020(bcm)2021(bcm)2022(bcm)2023(bcm)2024(bcm)Change 2019-2024(%)Change 2021-2024(%)Germany969399878078-18-21Italy747176696262-16-19United Kingdom797478726462-21-20Turkey45486052505318-11Netherlands454442333132-29-24France423941383331-25-24Spain353234332928-21-18Poland2121232020227-3Belgium191818161514-23-23Others(28 countries)939397827677-17-21TOTAL548533568501460460-16-19 17 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Figure 14:Power sector generation by fuels in Europe,2019-2024(TWh)Source:Data from International Energy Agency.Chart by the author However,dispatchable generation capacity remains essential to integrate such a large share of intermittent renewables and gas plants in particular still play a major role in balancing power grids as other options such as demand side response and/or batteries have not yet been developed at scale.It is a slow process,which has not kept pace with the development of intermittent renewable generation.At the regional level(national pictures are more varied),the daily generation mix clearly shows a correlation between renewables(wind in particular)and gas generation:when wind availability is good,the use of gas plants is low,and conversely,when wind is limited,gas plants ramp up to make up for the shortfall.25 There are some important consequences from this ongoing structural transformation of the power sector,which is being driven by the energy transition,rather than a consequence of the recent crises and/or high gas prices:1.Weather-related patterns have become the main driver for gas(and coal)demand in the power sector,not prices.Fluctuations in short-term gas demand are more uncertain than ever,especially during the winter when the combination of cold temperatures and days with low wind availability inevitably drive short-term spikes in gas use for which size and duration are hard to predict(as witnessed in winter 2024-2025).26 2.The impact of gas prices on the level of gas demand in the power sector is fading rather quickly.With nuclear plants used for baseload and the rapid addition of renewables,the share of gas and coal in electricity generation is decreasing quickly,down from 46 per cent in 2010 to 28 per cent in 2024 at a regional level,and even less in some major countries as seen in Figure 15.3.Coal/gas competition now occurs within a shrinking share of the energy mix and this is not what it was in the 2010s.Limiting factors include coal plants closures(for economic reasons or due to political decisions to phase-out coal)and the use of coal/gas plants to back-up intermittent renewables rather than baseload or even mid-merit generation plants.In other words,at times of low renewables availability,a tight market will call on most available plants,limiting the extent of coal-gas competition;while at times of high renewables availability,competition between coal 25 At lesser levels,similar trends can also be observed between renewables(wind in particular)and coal plants.In other words,coal plants also provide some back-up for the intermittency of renewables.26 For more information,see https:/www.oxfordenergy.org/publications/dunkelflaute-driving-europe-gas-demand-volatility/18 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.and gas plants might be fierce but the amount of electricity needed from them is small(and therefore the impact on gas demand limited).Finally,the length of the periods with high/low renewables availability may influence which plants are being called on(after batteries and other demand response measures have been exhausted),with gas plants generally more flexible than coal plants,as they have a faster ramp up time.Figure 15:Electricity generation by fuels in the nine major European gas markets in 2024(TWh)Source:Data from International Energy Agency.Chart by the author Industrial sector:the most price-responsive sectoral demand in 2022 Industrial gas demand in Europe is concentrated in a handful of sectors:chemical and petrochemical production(22 per cent of gas used in 2023);food and tobacco(18 per cent),non-metallic minerals,which include glass and cement manufacturers(17 per cent);and iron and steel production(10 per cent).27 Other significant gas-consuming sectors include paper and pulp manufacturing(7 per cent)and machinery(7 per cent).Gas used in refineries,which is under the own use section in IEA data,consumed the equivalent of about 8 per cent of industrial gas demand(Figure 16).The industrial gas sector,which uses gas either for power and heat generation or as feedstock,was the most responsive sector to high prices in 2022,benefiting from options which included switching to other fuels(for instance,LPG in refineries,coal in electricity and heat generation or even renewables when possible),improved operational efficiency and/or curtailing production.However,this sometimes involved increased production outside Europe and imports to the region,seen with nitrogen-based fertilizer production).Price-responsive demand reductions in the industrial sectors which compete globally emerged in 2022,despite gas prices rising from mid-2021,as large industrials are likely to have hedged their price risk before the rise when prices were lower,which kept them afloat for a few months before being fully exposed to higher gas prices.All in all,industrial gas demand decline was largely limited to 2022,but lower gas prices from 2023 onward have not led to a noticeable recovery.When compared with pre-crisis levels,gas use in the industrial sector remained 13 per cent lower in 2023(the last available data from the IEA with sectoral split at the time of writing28)than in 2019.27 Data from IEA 28 September 2025 19 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.The decline would be 16 per cent lower if we included refineries in the industrial sector.In this extended definition,the loss of just over 20 bcm between 2019 and 2023 came primarily from refineries(27 per cent),chemical and petrochemical(22 per cent),non-metallic minerals(11 per cent),machinery(8 per cent),and iron and steel(7 per cent).With the exception of food and tobacco,which is less exposed to international competition,all the major gas-intensive industrial sectors have registered a significant decline in gas demand since 2019 and have not displayed any major recovery despite lower prices.Signs of a small rebound were visible from mid-2023 until the end 202429 but it was essentially driven by just two sectors:refineries(switching back to gas)and fertilizer production(a sub-category of the chemical sector,where several producers have the ability to switch production between regions depending on international cost competitiveness).Industrial gas use in other gas-intensive sectors remained weak,raising concerns of permanent industrial demand destruction(i.e.plant closures or a shift in production outside Europe,due to lost competitiveness from high energy costs)rather than simple temporary reduction due to the crisis.Figure 16:Industrial gas demand by sector in Europe,2019-2024(bcm)Note:Refineries have been added to the industrial sector by the author Source:Data from International Energy Agency.Chart by the author Resilient demand in the residential and commercial sector Natural gas is the single largest source of heat in buildings in Europe.30 The impact of winter temperatures on European gas demand is therefore important,particularly in the residential and commercial sector where three quarters of annual gas use occurs between October and March(the first quarter alone typically covers 40-45 per cent),and gas use for heating remains the most important driver of seasonal(and even annual)fluctuations.The rollout of alternative heating systems(such as heat pump installations)and renovations across Europe has been slow with only a marginal impact on winter demand of a few bcm,much less than 29 Data calculated by the author for EU27 the UK.See our Quarterly Gas Market Review for more information:https:/www.oxfordenergy.org/publication-topic/quarterly-gas-review/30 See Eurostat data for more details 20 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.changes in temperatures would create:a normal winter(as opposed to the two mild winters of 2022/23 and 2023/24)can boost total gas demand by at least 8-10 bcm and a cold one by at least 20-25 bcm.Gas demand in the residential sector is not usually the most price-responsive,but it was surprisingly-a key determinant in the first winter of the crisis(2022/23)and accounted for a reduction of at least 10 to 15 bcm year-on-year.The combination of higher gas prices that progressively fed through to retail prices,strong energy-saving campaigns to moderate heating,and particularly mild temperatures helped reduce gas demand for heating over that winter.Over the next two subsequent winters,demand response seems to have eroded in parallel with the decline in gas prices.The commercial sector displays a relatively price-sensitive gas demand,which is similar to that seen in the industrial sector,albeit without the time lag,with fluctuations typically loosely mirroring fluctuations in gas prices.31 c)Would a$6 per MMBtu gas price from the late 2020s trigger additional gas demand in Europe?The next couple of years:limited upside for gas demand in Europe in the short term The gas market has evolved over the past two to three years in Europe,with a deterioration in demand flexibility,while changes in demand seem rather limited in the short term.This certainly applies to any demand reduction(most of the low hanging fruit of energy savings in all sectors have probably been harvested after three years of low gas demand),and any rebound in demand as well.As of September 2025,there were no strong signals for any robust recovery in gas demand for the rest of the year or even 2026,but instead lots of uncertainties.Lower gas prices alone(compared to last winter)are unlikely to trigger more than a small rebound in gas demand,a few bcm in the commercial sector and possibly also in the industrial sector.Growing renewables and good availability of nuclear limit the need for gas In the power sector,the growth of renewables and good availability of nuclear energy in France 32 limit the role of gas most of the time,both in winter and in the summer when demand for air conditioning boosts electricity use.Gas plants are moving further away from providing baseload power and increasingly towards a role as back-up providers,whose utilization is determined by the availability of other power sources.In addition,a gloomy economic outlook for the rest of 2025,and potentially into 2026(Figure 17),33 will temper any strong recovery in electricity demand,limiting the requirement for gas(and coal)power plants essentially to back-up and/or balance the system.Gas demand in the power sector has therefore become more volatile,somewhat less predictable and,importantly,less responsive to higher prices.This trend is also supported by the progressive phase-out of hard coal and lignite-fired generation capacity around Europe,which leaves little room for coal/gas switching in either direction,and constrains any short-term impacts of lower gas prices(and/or change in competitiveness between coal,gas,and carbon prices).31 Data calculated by the author for EU27 the UK.See our Quarterly Gas Market Review for more information:https:/www.oxfordenergy.org/publication-topic/quarterly-gas-review/.32 In 2022,the French utility EDF faced a wave of repairs on pipes affected by stress corrosion and delays to its scheduled 10-year maintenance due to the COVID pandemic(as well as strikes in France in October),which forced a record number of reactors offline for most of the year.As a result,French nuclear generation was down by 23 per cent in 2022,lifting thermal power generation in the country and in neighbouring markets.French nuclear generation has been back to(or above)pre-crisis level since early 2024.See our Quarterly Gas Market Review for more information:https:/www.oxfordenergy.org/publication-topic/quarterly-gas-review/.33 https:/www.imf.org/en/Publications/WEO/Issues/2025/07/29/world-economic-outlook-update-july-2025 21 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Figure 17:European Gross domestic product(constant prices),year-on-year change(per cent)Source:Data from International Monetary Fund,World Economic Outlook Database,April 2025.Chart by the author Industrial gas demand to remain muted amid global tariffs and policy uncertainty A progressive recovery for European industry was anticipated for the remainder of 2025,but is now likely to be delayed to 2026,at best,with similar consequences for gas demand,as a result of three main drivers.First,after three years of industrial crisis,EU manufacturing output in most energy intensive sectors(including the large gas consumers,such as chemicals and chemical products,non-metallic minerals,and iron and steel)remains well below pre-2021 levels as shown in Figure 18(EU27 example).34 Secondly,US tariffs and geopolitical uncertainties are likely to limit economic growth.This could also affect supply chains and consumer spending in Europe despite lower inflation and interest rates,which are nonetheless also still higher than pre-crisis levels.A decline in exports will hurt investment decisions in those sectors most reliant on exports to the US.35 Lower production in these sectors would also have a knock-on effect on other sectors in Europe that supply them.In other words,the current macroeconomic and geopolitical situation will impact overall GDP growth in Europe.Lastly,US tariffs on imported goods from China could have a similar impact on the Chinese economy and resulting weaker national demand may translate into more exports of manufactured goods from China,competing with more expensive European products.European industries,including most energy-intensive sectors,face a double whammy with demand for end-products limited by low consumer spending and risks to supply chains.All in all,geopolitical tensions,trade frictions,and a worsening of the economic outlook are likely to continue to limit prospects of a rebound in European industrial gas demand in the coming months,even in the case of lower gas prices,except via fuel switching in the refining sector and/or increased ammonia production.The commercial sector,on the other hand,is more price responsive,and a rebound is likely,as was seen in 2023-24.34 The food sector,which is less exposed to international competition,remains the exception.Data calculated from Eurostat.35 In 2024,the most exported manufactured goods from the EU were“machinery&vehicles”,followed by“chemicals”and“other manufactured goods”.The three largest exporters to the US were Germany,Ireland and Italy.Based on Eurostat data 22 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Figure 18:Production in industry,EU27,index:2021=100 Source:Data from Eurostat.Chart by the author Mid-term demand(2028-2030):closure of coal plants and electrification to support gas for power demand Towards the late 2020s,it is projected that gas prices will decline toward the$6 per MMBTU mark,an important drop within a relatively short time frame.Continued growth in renewable capacity around Europe36 implies structurally weaker gas demand in the power sector in the future.However,the closure of coal-fired power plants and anticipated higher electricity demand could sustain the use of gas-fired power plants in the mix(at least)in the 2020s.By 2030,coal plants will remain in only eleven countries(compared to twenty-one in 2024),with just three countries responsible for 76 per cent of installed capacity:Germany,Poland,and Turkey.Of the roughly 126 GW of coal-fired capacity in mid-2025,37 about 37 GW is expected to be decommissioned by 2030,and a further 26 GW by 2035.To put this in perspective,coal represented around 10 per cent of electricity generation in the first half of 2025,and about two thirds of this production came from plants that will close by 2030.38 This estimate reflects the situation as of September 2025,but the timetable and prospects for coal plant closures may change in the future.For instance,policies and regulation affecting the energy sector,including the electricity mix,are under review in Germany and Poland following elections earlier this year.39 In September,Chancellor Friedrich Merz announced that Germany may delay the closure of its remaining coal-fired power plants until new gas-fired units are ready to replace them,and 36 In the EU27,the revised Renewable Energy Directive,adopted in 2023,raises the EUs binding renewable energy target for 2030 to a minimum of 42.5 per cent of energy consumption,and the REPowerEU plan(May 2022)aims for 69 per cent of electricity to come from renewables by 2030.37 Data on coal plant capacity in Europe vary between sources depending on definitions,especially for dual fuels power plants This is this authors estimate.38 Authors calculations 39 Federal elections were held in Germany in February 2025,and presidential elections were held in Poland in June 2025.23 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Bnetza(the grid regulator)has not ordered any statutory reductions of coal plants for 2028,the second year in a row that this has happened.40 Germany is set to phase out coal-fired power generation by 2038(at the latest).41 In Poland,high-emission coal power plants42 should not have been given any support under the capacity market or other similar mechanism since July 1,2025,due to EU regulations.Poland has however already secured support until the end of 2028,deferring the first major wave of coal closures until the end of the 2020s.Poland is the only country in the EU which has not set a date for its coal phase-out.In Turkey,the long-term climate strategy focuses on increasing energy from renewables and efficiency,43 but does not include a commitment to a coal phase-out(despite a net-zero target of 2053),and no major change in coal capacity is expected by 2030.The introduction of a carbon price from 202644 could change coal/gas competitiveness,but it is still uncertain whether the carbon price will be high enough to trigger coal-gas switching within the timeframe of our analysis.In 2019,a TTF price at about$6 per MMBTU did not trigger any increase in gas generation vs coal,and there was in fact a strong decline in gas generation during that year(down 38 per cent year-on-year),due to good hydro availability,while coal generation remained the same.In 2021,despite higher TTF prices,gas generation rose by 57 per cent to make up for low hydro production,while coal generation remained flat.These two examples highlight the limited impact TTF prices have had so far on gas used for power generation in the country.Despite important differences and challenges at a national level,the anticipated combination of relatively low gas prices projected to reach$6 per MMBTU by 2030-and higher carbon prices,particularly from 2026 onward in the EU,is expected to accelerate the phase-out of coal-fired power plants potentially ahead of schedule at the regional level.This will also happen in the context of energy transition,leading to further electrification of the economy.The IEA World Energy Outlook 202445 anticipates a rise in electricity demand of 21 per cent between 2023 and 2030 in its STEPS scenario and 29 per cent in its APS scenario for OECD Europe,46 although the speed and extent of electrification remain uncertain.The EU Clean Industrial Deal,passed in February 2025,set a target of 32 per cent in 2030 but electrification within the EU as a whole has been stagnating at around 20-25 per cent for the past fifteen years.47 Nonetheless,lower coal plant capacity,higher electricity demand,and the forecast lower gas prices of$6 per MMBTU will contribute to sustaining gas demand in the power generation sector in the coming years,even alongside the rapid growth of renewables.The Base Case scenario in this paper uses the following assumptions for 2030:TTF gas prices of$8 per MMBTU,a carbon price in the EU and in the UK of$85/t,electricity demand at 4719 TWh48(21 per cent higher than in 2023)with coal and gas accounting for a share of 22 per cent and renewables at 62 per cent.In this scenario,gas demand in 2030 amounts to 160 bcm.Assuming a gas price of$6 per MMBTU,with the same assumptions as above,coal power plants subjected to carbon pricing become largely uncompetitive compared to gas-fired alternatives.In countries where coal capacity persists-excluding combined heat and power(CHP)plants-this leads 40 https:/ 41 https:/www.bundesregierung.de/breg-en/service/archive/kohleausstiegsgesetz-1717014 42 Plants emitting more than 550 kg of CO per megawatt-hour(MWh)43 2022 National Energy Plan(20242035);2024 National Energy Efficiency Action Plan(2024-2030)44 https:/ 45 https:/www.iea.org/reports/world-energy-outlook-2024 46 There is no details at the national level,but OECD Europe is a good proxy for the 37 countries included in the European region in this paper.47 https:/www.europarl.europa.eu/RegData/etudes/BRIE/2025/772851/EPRS_BRI(2025)772851_EN.pdf 48 This is taken from the STEPS scenario in the IEA WEO 2024 for OECD Europe.24 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.to additional switching from electricity plants using hard coal in EU countries(and some using brown coal),which results in gas demand rising to 163-167bcm an increase of between 3 and 7 bcm in the power sector compared to the Base Case scenario.$6 per MMBTU gas prices likely to slow down the decline in gas demand in the 2030s,at least in the first half of the decade Looking toward the 2035/2040 horizon,a prolonged$6 per MMBTU environment would help keep gas in the energy mix for longer,but a return to organic demand growth is unlikely in the context of the energy transition.The EU has set itself targets to progressively reduce its GHG emissions and be the first net-zero continent by 2050,with intermediary targets for 2030 and proposals for 2040,all of which are expected to contribute to a swift fall in natural gas demand.49 The UK is expected to follow a similar path while Turkeys net zero ambitions do not include a clear pathway toward reducing gas consumption,while its ambition to become a gas hub goes some way to indicating the contrary.Slow down of investments in low-carbon alternatives?Lower gas prices toward the end of this decade will reduce the economic incentive to switch rapidly to cleaner,alternative energy sources or technologies,such as hydrogen,biomethane,and offshore wind farms,adding to existing political and economic challenges and fueling uncertainty on planned investments.In the power sector,Europe is aiming for 300 GW of installed offshore wind capacity by 2050,with specific targets for the North Sea region(Belgium,Denmark,Germany,France,Ireland,the Netherlands,Norway,and the UK)set at 120 GW by 2030.50 Germany has a national target of 30 GW by 2030,representing a quarter of this overall North Sea region expansion.However,the Energy Transition Monitoring report,51 which was commissioned by the German government and published in September 2025,will likely result in lowering the countrys ambitions for the rollout of renewables in order to cut costs.The government has also abandoned the requirement that new gas power plants need to be hydrogen-ready from the outset,52 further indicating a likely deceleration in energy transition investments in the coming years.Delays in European offshore wind projects are also being noted in other countries53(Netherlands France,Italy,the UK,etc.),for a variety of reasons,including regulatory uncertainty,slow and complex permitting processes,grid connection bottlenecks,insufficient grid infrastructure,and of course,deteriorating market conditions,which are impacting project costs and profitability.These will only worsen in a$6 per MMBTU gas world.In the IEA scenarios published at the end of 2024(STEPS and APS respectively),the share of renewables accounts for 66 per cent and 70 per cent of the electricity mix in OECD Europe in 2030,and 76 per cent and 81 per cent by 2035.49 The Fit for 55 legislative package and the REPowerEU plan aim to significantly reduce gas demand by 2030 through increased energy efficiency,deployment of renewables,electrification,and renewable hydrogen:-.116 bcm between 2019 and 2030 in Fit for 55 and-310 bcm in REPowerEU according to the European Commission.https:/eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52022SC0230 The EU Impact Assessment for the 2040 targets proposals expects gaseous fuels to decrease by between 54 per cent and 68 per cent between 2020 and 2040;and even more to 2050.https:/eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52024SC0063 50 https:/assets.publishing.service.gov.uk/media/65ae7a62fd784b0010e0c65d/ostend-energy-ministers-declaration-north-sea-as-green-power-plant.pdf 51 https:/www.bundeswirtschaftsministerium.de/Redaktion/DE/Publikationen/Energie/energiewende-effizient-machen.pdf?_blob=publicationFile&v=20 52 https:/www.cleanenergywire.org/news/merz-signals-germany-may-scale-back-plans-renewable-rollout-cut-costs 53 https:/www.windtech- 25 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.However,it is likely that these targets will not be reached on time.This assumption seems to be confirmed by the recent Renewables 2025 report from the IEA,54 which expects offshore wind capacity to grow 57 GW in the EU by 2030,9 GW lower than expected in last years Renewables 2024.According to the report,the“reduction reflects an increasingly challenging business case for planned projects and extended project timelines.Rising costs,supply chain constraints and uncertainty around future electricity prices have raised concerns about project viability,impacting over 5 GW of the forecast”.55 Consequently the share of renewables has been revised down in this paper:For 2030,the share of renewables in power generation stands at 62 per cent for both the Base Case scenario and the$6 per MMBTU gas scenario.For 2035,the share of renewables rises to 72 per cent in the Base Case scenario.In the$6 MMBTU scenario,the share of renewables reaches only 69 per cent of the mix,reflecting the offshore wind capacity update for 2030 reported in the IEA Renewables 2025 mentioned above.The impact was extended to 2035 and works on the assumption that lower gas prices may further delay projects that have not yet started or secured support.Although the marginal cost of renewables(the wholesale price)is cheaper than for gas plants(even at$6 per MMBTU),the full cost of developing renewables remains high if the cost of subsidies,grid balancing,backup from the capacity market,and the extension of the grid to connect remote wind(especially offshore wind)and solar farms are added.Overall electricity demand remains the same as provided by the IEA scenarios(STEPS),therefore the electricity generated by renewables will continue to grow,but the share covered by renewables will not grow as fast as anticipated,with gas power plants essentially filling the gap.Forecasts predicting the share of renewables to account for 66-70 per cent of the electricity mix in 2030(IEA scenarios,STEPS and APS)and 76-81 per cent in 2035,may,therefore,be out by a few years.The Base Case scenario for 2035 uses the following assumptions:TTF gas prices of$8 per MMBTU,a carbon price(in the EU and in the UK)of$90/t,electricity demand 5508 TWh56(42 per cent higher than in 2023)with the share covered by coal and gas of 14 per cent and renewables of 72 per cent.In this scenario,gas demand reaches 155 bcm.Using the same assumptions regarding carbon prices and electricity demand,but with a gas price of$6 per MMBTU,and with coal and gas share at 16 per cent and renewables at 69 per cent,then gas demand could climb to 165-171 bcm.This is an increase of about 10-16 bcm compared to the Base Case scenario,coming from lower renewables use and additional switching from remaining electricity plants using both hard coal and brown coal.The bulk of this additional switching is expected in Germany in the low case scenario and both in Germany and in Turkey in the high case scenario.In Turkey,coal-to-gas switching could be facilitated by the introduction of a carbon price envisaged to be introduced in the late 2020s.There is only limited coal-to-gas switching in countries not affected by a CO2 price.An important outcome of this scenario is the significant impact of renewable availability on gas demand:should the share covered by renewables change by only 1 per cent compared to our assumption for 2035,then the additional impact on gas demand could be plus or minus 8-10 bcm compared to our Base Case results.Industry remains at a disadvantage compared to other regions The effect of lower gas prices would ripple through various parts of the economy(the opposite of the 2022 price rise)and would favourably impact end-user demand and boost production in energy-intensive 54 https:/www.iea.org/reports/renewables-2025,published in October 2025 55 IEA,Renewables 2025,Analysis and forecasts to 2030,p.30,https:/www.iea.org/reports/renewables-2025 56 This is taken from the STEPS scenario in the IEA WEO 2024 for OECD Europe.26 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.industries across the region and thus increase gas demand.However,after the last five difficult years(since 2019),and based on historical trends,any strong recovery is unlikely,but a rebound is possible.Even in a$6 environment,the main concern is Europes competitiveness as it remains at a disadvantage compared to other regions due to higher energy-related input costs(carbon prices for instance)and more stringent environmental regulations.The cost of emitting CO2 through the EU ETS(or UK ETS)is expected to increase as the cap on emissions decreases to support the 2030 emissions targets.57 In addition,the phasing out of free allowances to regulated industries in the EU means that more businesses will need to purchase carbon allowances,although from late 2025,a carbon border price mechanism(CBAM)will apply a carbon price to imports of certain goods(iron and steel,cement,fertilizers,aluminum,hydrogen production,electricity will be covered in the first phase)to help prevent carbon leakage and ensure that imported goods face similar carbon costs as those produced within the EU.In the context of energy transition and moving toward net zero targets,industries will progressively turn toward low carbon sources wherever technically(and economically)possible,driven by regulation,high carbon prices and/or governments support,58 which will supersede the attraction of low(unabated)gas prices,although the speed and extent to which this happens will differ between countries.Reducing gas demand in the building sector:a long and complex process One sector not yet mentioned is the building sector.Natural gas is the largest single fuel source for heat in buildings in Europe.59 A number of options to decarbonize are already widely available,such as heat pumps,district heating,or extensive renovations to improve energy efficiency.Achieving the proposed 2040 targets for emission reductions in the EU relies on a fast and extensive transformation of the building sector and the decarbonization of heat(with a focus on heat pumps and renovations).60 However,the task is enormous and current implementation efforts are progressing too slowly.Despite strong growth in recent years,heat pump sales are still falling short of the 3 million a year needed to meet the EUs target to have nearly 60 million heat pumps installed by 2030.Sales slowed in 2024 for the second year running,dropping 22 per cent compared to 2023 with just 2.31 million heat pumps installed.61 High upfront costs,persistent elevated interest rates,policy uncertainty(and even a downward revision of support in various markets),and inflation are the main reasons behind the fall.Lower gas prices would certainly present another challenge to the process.In other words,although lower gas prices at$6 are unlikely to trigger additional gas demand in buildings via new connections and additional sales of gas boilers in most countries(especially in the EU),it is probable that low gas prices will maintain the status quo and the role of gas in buildings for longer,at least until the replacement of a broken gas boiler is made impossible with a ban on the installation of new gas boilers,which is already in place in several countries,62 or until the impacts of the EU ETS2 which sets a carbon price for the building sector(and other smaller installations and commercial activities)and starts in 2027,makes gas too expensive again despite low wholesale prices.63 57 https:/climate.ec.europa.eu/eu-action/carbon-markets/eu-emissions-trading-system-eu-ets/about-eu-ets_en 58 Like the multi-billion euros German State aid schemes in 2024 and 2025 to help industries decarbonize.https:/ec.europa.eu/commission/presscorner/detail/ga/ip_24_1889 and https:/ec.europa.eu/commission/presscorner/api/files/document/print/es/ip_25_846/IP_25_846_EN.pdf 59 For more information,see https:/www.oxfordenergy.org/wpcms/wp-content/uploads/2023/02/OEF-135.pdf 60 https:/climate.ec.europa.eu/eu-action/climate-strategies-targets/2040-climate-target_en 61 https:/www.ehpa.org/news-and-resources/news/towards-2030-and-beyond-how-to-boost-the-european-heat-pump-market/62 A number of European countries are phasing out fossil fuel and gas boilers to improve energy security and achieve climate goals.Countries such as Denmark,Norway,and the Netherlands have already banned new installations,while France,Ireland,and Germany,have set bans for new builds and are phasing out new fossil fuel heating systems in existing buildings as well.63 The EU ETS2 will become fully operational in 2027 and cover GHG emissions from the combustion of fuels in buildings and road transport,impacting gas demand by increasing the cost of fossil fuels for heating through a similar cap-and-trade system applied upstream to fuel suppliers.https:/climate.ec.europa.eu/eu-action/carbon-markets/ets2-buildings-road-transport-and-additional-sectors_en.27 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.In some countries,such as Turkey,the expansion of the national distribution network64 will support natural gas demand growth in this sector for the foreseeable future.Figure 19:Potential heat pump stock growth scenario in Europe(millions)Note:based on 2015-2021 actuals Source:https:/www.ehpa.org/news-and-resources/news/towards-2030-and-beyond-how-to-boost-the-european-heat-pump-market/d)Conclusions Over the next couple of years,gas demand in Europe still faces tremendous challenges,with no clear argument towards a strong recovery.On the contrary,it could even be lower than the base-case scenario presented earlier,as illustrated in Figure 17.Lower gas prices from 2028 onward would lessen the rate of decline and keep gas in the energy mix during the first half of the 2030s.Gas demand in the three main sectors(power,industrial,and residential)would surpass the Base Case scenario until the end of the 2030s,with most price-driven changes occurring in the power sector with additional coal switching up to 2035 and delayed renewables in the early 2030s.The impact of lower prices in the commercial sector would be limited by the introduction of the EU ETS2 in the EU and the imposition of carbon prices from 2027 onward.In the Base Case scenario detailed in Section 2,gas demand in Europe rises to 488 bcm in 2030 and then falls to 467 bcm in 2035.Using the same assumptions except for a gas price of$6 per MMBTU from 2028 onward,gas demand reaches 493-497 bcm in 2030(in other words,there is additional price demand response of 5-9 bcm compared to the Base Case).With potential delays in the construction of offshore wind capacity and additional coal-to-gas switching,gas demand reaches 477-483 bcm in 2035(10-16 bcm higher compared to the Base Case scenario).Robust electricity demand to support decarbonization in the economy coupled with new gas uses could disrupt these scenarios and drive gas consumption even higher,especially in a$6 per MMBTU world.64 The Turkish grid grew to provide access to 1.1mn new u
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1 The Economist Intelligence Unit Limited 2025Sustainability outlook Climate risks and regulatory developmentsOctober 2025Climate risks and regulatory developmentsSustainability outlook 2 The Economist Intelligence Unit Limited 2025Sustainability outlook Climate risks and regulatory developmentsOctober 2025Contents3 Overview3 Introduction3 Energy transition outlook4 National emissions trajectories5 Notable regulations7 Regulation of key sectors8 Physical climate impacts9 Political and social risks10 Meet the EIU team11 EIU3 The Economist Intelligence Unit Limited 2025Sustainability outlook Climate risks and regulatory developmentsOctober 2025OverviewIntroductionEnergy transition outlookGlobal action against climate change is facing increasing headwinds.The US president,Donald Trump,has repealed much of US climate policy.Europe has slowed its pace of new climate policies as national governments prioritise security and competitiveness over decarbonisation.China,the worlds largest emitter,was responsible for nearly half of new solar installations and two-thirds of new wind installations globally in 2024,but has also stepped up its approval of new coal power plants.The most ambitious goal of the Paris Agreementthe international agreement to limit global warmingof keeping global temperatures within 1.5 C of pre-industrial levels looks unattainable.Although global policy is currently not aligned with the Paris Agreements 2C target,this goal remains attainable if emission reductions are accelerated beyond current plans.Within this short report we have summarised the main developments around key national trajectories,notable regulations,physical climate impacts,political and social risk,and the energy transition outlook.Over 75%of global CO2 emissions stem from energy and fuel use.Despite clear evidence of greenhouse gases harming our climate,policymakers are divided on the urgency and necessity of transitioning to a cleaner energy system.Western democracies are seeing a shift in power to parties promising to cut costly decarbonisation incentives,after energy price spikes in 2021-22,ironically due to fossil-fuel supply concerns.Meanwhile,environmentalists stress the urgency of the climate crisis and energy transition.This debate has been exacerbated by mounting geopolitical risks.Russias invasion of Ukraine in 2022 demonstrated the economic importance of reliable energy supplies,and the subsequent spike in energy prices highlighted the risks for households and businesses.The return of Mr Trump to the US presidency in 2024 sent shockwaves through global trade,with tariff threats disrupting supply chains and destabilising financial markets.In Europe and the US,an increased focus on energy security and affordability may come at the expense of the energy transition.In parts of Asia,by contrast,concerns about energy security could accelerate the transition to renewables.China,in particular,is consolidating its position as the leading developer and exporter of clean energy technologies.Across the divide,nuclear energy is increasingly seen as a middle ground,enabling a low-carbon approach to energy security.4 The Economist Intelligence Unit Limited 2025Sustainability outlook Climate risks and regulatory developmentsOctober 2025National emissions trajectoriesWe forecast that total emissions from energy across the 67 countries covered by our energy transition forecasts(representing more than 95%of global emissions from energy)will slow in the coming years and largely plateau over the next decade.Emissions in most advanced economies are already declining,but are being offset by increases in fast-growing economies such as India,Saudi Arabia and Indonesia.We expect emission from China,the worlds largest emitter,to plateau,as most of its new energy demand is met by renewables,but a structural decline is unlikely before the 2030s.Similarly,the trajectory of US emissions will remain largely flat in the 2020s but will decline more rapidly in the 2030s.EIU Country Analysis subscribers,with access to EIUs sustainability insights,can read the full Sustainability report to see when we expect Chinas emissions to peak and which are the countries where emissions will increase the most in absolute terms between 2023 and 2034,and by contrast,the countries where we expect the largest declines over the same period.20232024202520262027202820292030203120322033203401,0002,0003,0004,0005,0006,0007,0008,0009,000EUIndiaChinaRussiaUSJapanOther advanced economiesOther developing economiesEmissions from developing countries are rising as developed economies begin to decarboniseForecast total emission from energy(EIU industry subset);MtCO2eSources:International Carbon Action Partnership;EIU.Copyright The Economist Intelligence Unit 2024.All rights reserved.5 The Economist Intelligence Unit Limited 2025Sustainability outlook Climate risks and regulatory developmentsOctober 2025Overview of global cap and trade systemsPrices in US$/tCO2eSources:International Carbon Action Partnership;EIU.Copyright The Economist Intelligence Unit 2024.All rights reserved.China national ETS2021Power40012.57EU ETS2005Energy,industry,domestic aviation,maritime3824.561.3Korea ETS2015Maritime,waste,domestic aviation,transport,Buildings,industry,power8923.456.3Western Climate Initiative(California/Quebec)2012Power,industries,transport,buildings8015.7738.59Kazakhstan ETS2013Industry,power4701.05UK ETS2021Energy-intensive industries,power generation,aviation25045.06RGGI(Northeast US)2008Power144.9417.64New Zealand ETS2008Forestry,stationary energy,industrial processing,liquid fossil fuels,waste and synthetic4817.5335.1NameYearSectors covered as at June 2024%ofjurisdictionsemissionscoveredPrices(2019-24)012.5724.561.323.456.315.7738.5901.05045.064.9417.6417.5335.1A wave of green industrial subsidies was instigated by the 2022 US Inflation Reduction Act(IRA).The repeal of most of these provisions by the Trump administration,and tight fiscal constraints in Europe and globally have led governments to change tactics.The most effective regulatory tools remain national or regional carbon pricing systems,such as emissions trading systems(ETSs)or carbon taxes,to regulate emissions.The EU and China ETSs have the largest carbon pricing regimes,which typically cover electricity generation but can also include transport,construction,heavy industry,aviation and residential sectors.The rollout of these systems is often controversial because it can raise prices,particularly in periods of high inflation.Canadas carbon tax is being partially rolled back owing to cost-of-living concerns,and the EU ETS expansion may offer exemptions or lower prices for some sectors for similar concerns.Additionally,to avoid harming domestic firms competitiveness,many ETSs exempt incumbent polluters from paying for emissions allowances,limiting their effectiveness.Notable regulations6 The Economist Intelligence Unit Limited 2025Sustainability outlook Climate risks and regulatory developmentsOctober 2025To address competitiveness and effectiveness concerns,the EUs ETS is being supplemented by a Carbon Border Adjustment Mechanism(CBAM).Effective from 2026 with transitional reporting since October 2023,this will impose tariffs on imported energy-intensive goods,matching EU ETS carbon costs.The extraterritorial nature of this tax has led to other countries attempting to increase the quality of their reporting standards for embedded carbon emissions in products.This has coincided with discussions in countries including Brazil,Mexico and elsewhere about more robust ETS systems in order to provide an equivalent level of regulation and avoid EU tariffs.However,it is also likely to lead to significant import substitution by exporters of energy-intensive goods to jurisdictions without such a tax.7 The Economist Intelligence Unit Limited 2025Sustainability outlook Climate risks and regulatory developmentsOctober 2025Regulation of key sectorsTechnological advances will make decarbonisation more feasible in certain sectors.Most policy efforts have been focused on decarbonising the largest source of emissions.Electricity generation:Phasing out coal is a crucial first step for emission reduction,as it is significantly more polluting per unit of energy than any other energy source.Tripling renewable power generation by 2030,a key COP28 pledge,highlights the diplomatic focus on wider renewable energy adoption.Ground transport:More than 60 countries have committed to phasing out internal combustion engines,promoting electric vehicles(EVs)through emissions standards and subsidies,although these are decreasing as EV adoption rises.Industry:makes up 10-12%of total greenhouse gases.Pilot projects have been unveiled in several jurisdictions,but diplomatic progress will be slow until scalable technological solutions are found.Aviation and shipping:The EU includes these sectors in its ETS,taxing half the emissions from international EU-originating flights and shipments.The International Maritime Organisation(IMO)aims to cut shipping emissions by 20%by 2030 and reach net zero by 2050.However,its global maritime emissions levy,effective from 2028,is projected to meet only 8%of the 2030 target.The International Air Travel Association(IATA)aims for net-zero emissions by 2050,promoting sustainable biofuel.Their CORSIA scheme offers a robust voluntary carbon offset standard but faces common market issues like double-counting and efficacy measurement.Agriculture and land use:Agricultural emissions are the largest non-energy GHG contributor;European regulations to curb these have caused farmer protests.Land use changes,especially converting forests to farmland or vice versa,can significantly alter emissions.Advanced economies like the EU and Canada are increasing carbon sinks through rewilding.Countries with rainforests(Colombia,Brazil,Indonesia)face pressure to curb deforestation,a major emissions source.The EU Deforestation Regulation(EUDR)mandates strict reporting for imported land-intensive products(for example palm oil and beef)to prevent sales from deforested land.Road,aviation and shipping dominate transport emissionsCO2 from fuel;gigatonnesSource:International Energy Agency(IEA);EIU.Copyright The Economist Intelligence Unit 2025.All rights reserved.Road5.87Shipping0.89Aviation0.78RoadShippingAviationPipeline transportRail8 The Economist Intelligence Unit Limited 2025Sustainability outlook Climate risks and regulatory developmentsOctober 2025Physical climate impactsAs global temperatures rise,certain natural disasters,including heatwaves,droughts,fires,severe storms,and coastal and river flooding will become more common.Climate impacts like water scarcity and extreme weather disruptions will have significant impacts on operational and financial risk if they cause sudden breakdowns in systems and supply chains.The physical impacts of climate change exacerbate existing political risks.Food security risk in particular is likely to increase political instability in poorer countries.Even in countries with greater state capacity,the impacts of climate change will be felt politically.As drought and flooding become more common,this is likely to increase political instability in poorer countries.Overall levels of migration are likely to increase as poorer countries face greater stresses.Extreme heat has become increasingly common%increase in extreme heating days(days above 32 C)since 1990 Five-year moving averageSource:International Energy Agency;EIU.Copyright The Economist Intelligence Unit 2024.All rights reserved.100150 300 5009 The Economist Intelligence Unit Limited 2025Sustainability outlook Climate risks and regulatory developmentsOctober 2025Political and social risksThe impacts will depend on the underlying vulnerability of the country to increased natural disasters,as well as the societal resilience in these countries.Infrastructure will come under strain and some business sectors will struggle to adapt.Insurers may be forced to retreat from some parts of the market,rendering some assets worthless.Adaptation financing for poor countries will be a topic of discussion at the COP30 climate conference in Brazil.Wealthier countries also face rising adaptation costs,requiring significant investment into flood defences,heat controls and natural disaster warning systems.These efforts will strain budgets and insurance markets,which will in turn force businesses and households to avoid high-risk areas.Government effectiveness risk:Societal vulnerability to natural disastersScores 0-4(very high=4)Source:International Energy Agency;EIU.Copyright The Economist Intelligence Unit 2024.All rights reserved.01234Risk level keyVery high=4EIU Country Analysis subscribers,with access to EIUs sustainability insights,can read how the US policy reversal is slowing the energy transition,how Chinas energy transition is a path to security,and how Indias energy policy aims to bolster growth and affordability in the full Sustainability report.Visit to see how the EIUs sustainability insights help you comprehensively monitor risk exposure,build resilience and align sustainability with organisational performance.10 The Economist Intelligence Unit Limited 2025Sustainability outlook Climate risks and regulatory developmentsOctober 2025Swarup leads EIUs coverage of the financial services industry,looking at the role and development of banking,insurance and financial systems worldwide.He has particular expertise on fintech,digital currencies and sustainable finance,and is responsible for EIUs sovereign ESG service.Swarup has a deep understanding of capital markets,especially in the US and Asia.Matthew has covered sustainability issues at EIU since 2021 and has been lead analyst for climate and sustainability since February 2024.Matthew joined EIU in 2019 as the lead analyst for the UK.Prior to joining,he worked for four years as a researcher at Chatham House,focusing on global economic governance and geoeconomic and political trends.With acknowledgement to Nicolas Daher,lead energy analyst;Arushi Kotecha,automotive analyst;and Rohan Abraham,energy research analyst.Meet the EIU teamSwarup GuptaLead analyst,financial servicesMatthew OxenfordLead analyst,climate and sustainabilitySpecialist subjects Financial markets,banking,insurance,fintech,digital payments and platform strategyLanguages English,Bengali,Hindi and UrduLocation Gurugram,IndiaSpecialist subjects Climate change,climate politics,energy transitionLanguages EnglishLocation LondonAna oversees EIUs industry subscription services in London,managing websites,reports,data and forecasts across six industry sectors and acting as lead analyst for our healthcare and automotive analysis.Ana also works closely with clients in those two sectors,particularly on projects related to value-based health and healthcare policymaking.Ana NichollsDirector,industry analysisSpecialist subjects Automotive,business environment,healthcareLanguages English,FrenchLocation LondonOur solutionsCountry AnalysisUnderstand the political,policy and economic outlook.Our Country Analysis service looks at the global dynamics that affect your organisation,enabling you to operate effectively and plan for the future.Financial RiskGain unparalleled insights into the global financial landscape.Combining EIUs market-leading data and country expertise,our rigorous risk-modelling framework enables you to accurately identify risks to fiscal sustainability,currency and the banking sector.Operational RiskPlan effectively with EIUs expert analysis and data.From detailed country risk assessments to customisable risk matrices,our service provides you with the tools needed to confidently anticipate and mitigate risks to your operations.Speaker BureauStrengthen your strategy and executive knowledge.Book EIUs experts for virtual or in-person events,training sessions,or 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Economist Intelligence 9th Floor Infinity Tower A DLF Cyber City Gurugram 122002 Haryana IndiaTel: 91 124 6409486 E-mail:Dubai Economist Intelligence PO Box No-450056 Office No-1301A Aurora Tower Dubai Media City Dubai United Arab EmiratesTel: 971 4 4463 147 E-mail:The full analysis in this report is available through our Country Analysis service.To arrange a demonstration or discuss the content and features,please contact us or visit .13 The Economist Intelligence Unit Limited 202513Visit or scan the QR codeNavigate an ever-changing global marketEIUs Country Analysis service assesses the political,policy and economic outlook.Our insights make sense of the global trends affecting your organisation.Connect to request a bespoke demonstration of our forward-looking intelligence.Copyright 2025 The Economist Intelligence Unit Limited.All rights reserved.Neither this publication nor any part of it may be reproduced,stored in a retrieval system,or transmitted in any form or by any means,electronic,mechanical,photocopying,recording or otherwise,without the prior permission of The Economist Intelligence Unit Limited.While every effort has been taken to verify the accuracy of this information,The Economist Intelligence Unit Ltd.cannot accept any responsibility or liability for reliance by any person on this report or any of the information,opinions or conclusions set out in this report.15 The Economist Intelligence Unit Limited 2025Sustainability outlook Climate risks and regulatory developmentsOctober 2025
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Gas 2025Analysis and forecasts to 2030The IEA examines the full spectrum of energy issues including oil,gas and coal supply and demand,renewable energy technologies,electricity markets,energy efficiency,access to energy,demand side management and much more.Through its work,the IEA advocates policies that will enhance the reliability,affordability and sustainability of energy in its 32 Member Countries,13 Association countries and beyond.This publication and any map included herein are without prejudice to the status of or sovereignty over any territory,to the delimitation of international frontiers and boundaries and to the name of any territory,city or area.Source:IEA.International Energy Agency Website:www.iea.org IEA Member countries:Australia Austria Belgium Canada Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Japan Korea LatviaLithuaniaLuxembourg Mexico Netherlands New Zealand Norway Poland Portugal Slovak Republic INTERNATIONAL ENERGY AGENCY Spain Sweden Switzerland Republic of TrkiyeUnited Kingdom United States The European Commission also participates in the work of the IEAIEA Association countries:ArgentinaBrazilChinaEgyptIndiaIndonesiaKenyaMoroccoSenegalSingaporeSouth AfricaThailandUkraineGas 2025 Analysis and forecasts to 2030 PAGE|3 Abstract AbstractGlobal gas markets are set to undergo major changes by the end of the decade,with the coming wave of liquefied natural gas(LNG)production capacity set to profoundly transform market dynamics.The unprecedented scaling up of LNG supply is expected to improve gas supply security and make natural gas more affordable including in emerging,price-sensitive import markets.However,to account for these shifts,LNG producers and suppliers may need to adapt their medium-term strategies.The Gas 2025 medium-term report from the International Energy Agency(IEA)examines this coming transformation and its consequences,offering a comprehensive overview of potential supply,demand and trade trends in global natural gas markets for the coming years.It provides a thorough review of recent market developments ahead of the 2025-26 winter season in the Northern Hemisphere and includes forecasts for how supply and demand could evolve to 2030.The report also includes the IEAs detailed annual assessment of gas supply security,including the implications of LNG contracting trends,and features a special spotlight on the potential to deploy carbon capture technologies along LNG value chains to reduce the emissions intensity of supply.Additionally,as part of the IEAs Low-Emission Gases Work Programme,it includes a section on the medium-term outlook for biomethane,low-emissions hydrogen and e-methane.IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|4 Table of contents Table of contents Executive summary.5 Gas market update.15 Medium-term market outlook.37 LNG contracting and flexibility update.81 CCUS applications along LNG value chains.100 Medium-term outlook for low-emissions gases.107 Annex.117 IEA.CC BY 4.0.Gas Market Report,Q4-2025 PAGE|5 Executive summary Executive summary IEA.CC BY 4.0.Gas Market Report,Q4-2025 PAGE|6 Executive summary The coming LNG wave is set to profoundly transform the global gas marketFollowing the supply shock of 2022/23,natural gas markets moved towards a gradual rebalancing in 2024 and 2025.During this period,supply fundamentals remained tight and prices stayed well above their historic levels.This limited demand growth,especially in price-sensitive Asian markets.Around 300 billion cubic metres per year of new liquefied natural gas(LNG)export capacity is expected to be added worldwide by 2030,primarily supported by liquefaction capacity expansions in the United States and Qatar.This wave of new LNG production capacity is set to profoundly transform global gas market dynamics.The scaling up of LNG supply will play a key role in enhancing supply security and improving the affordability of natural gas including in price-sensitive emerging import markets.The analytical framework underpinning the medium-term outlook in this report is structured around a base case,which is complemented by a high case that explores the potential for greater demand response to possible price changes.The base case reflects current project plans,policy settings and economic growth projections,as well as prices informed by the current forward curve.The high case assumes that LNG import prices move closer towards the short-run marginal cost of US LNG supply and unlock additional gas demand,especially in price-sensitive Asian markets.However,a 1 Asia Pacific,Central and South America,Eurasia,Europe and North America.weaker macroeconomic environment,together with a slower build-out of natural gas infrastructure and contractual rigidities,might limit the scope of the price-adjusted demand response.A prolonged period of lower LNG prices could reduce the incentive for project developers to invest in LNG liquefaction projects and in upstream and midstream infrastructure.This,in turn,could lead to a potential tightening of global gas markets post-2030,especially if demand growth follows a higher trajectory.Global gas demand growth slowed in 2025 amid macroeconomic uncertainty and tight supply fundamentals Following a relatively strong increase in 2024,natural gas demand growth slowed significantly in the first nine months of 2025.Preliminary data indicate that natural gas consumption increased by just around 0.5%year-on-year during this period in major markets1.This growth was almost entirely driven by Europe and North America,while demand remained subdued in Asia and declined in Eurasia.Tighter market fundamentals have contributed to higher gas prices in key import markets,weighing on natural gas consumption,especially in price-sensitive Asian markets.While IEA.CC BY 4.0.Gas Market Report,Q4-2025 PAGE|7 Executive summary global LNG supply increased by more than 5%year-on-year in the first nine months of 2025,this growth was partially offset by lower piped gas supplies to Europe from Russia and Norway.Stronger storage injection needs in Europe further tightened markets.For the full year of 2025,global gas demand growth is forecast to slow from 2.8%in 2024 to below 1%in 2025.Demand in the Asia Pacific region is expected to expand by less than 1%from 2024,the weakest growth since 2022.Final investment decisions in US LNG projects reached an all-time high in the first nine months of 2025 Despite macroeconomic uncertainty,2025 has seen the second highest amount of LNG liquefaction capacity reaching final investment decision(FID)in a single year.More than 90 billion cubic metres per year(bcm/yr)of additional capacity has been sanctioned so far in 2025.Over 80 bcm/yr of liquefaction capacity has been approved year-to-date in the United States,an all-time high for the US LNG sector.The projects include Louisiana LNG,Corpus Christi Train 8&9,CP2 phase 1,Rio Grande LNG Train 4&5 and Port Arthur phase 2.The amount of LNG projects reaching FID highlights the industrys confidence that demand for LNG will continue to expand strongly,reflecting the supportive policy environment in the United States for natural gas projects.This new wave of LNG projects is set to further solidify the United States position as the worlds largest LNG exporter.By the end of the decade,the United States could provide around one-third of global LNG supply,up from around 20%in 2024.The coming LNG wave is set to enhance energy supply security and could spur additional demand in some markets The United States and Qatar together account for 70%of the roughly 300 bcm/yr of new LNG liquefaction capacity that is expected to come online globally by 2030.This is based on the official timelines of projects that have reached FID or are under construction.The scaling up of LNG supply is playing a key role in rebalancing global gas markets,enhancing supply security and making natural gas more affordable for importing countries.The unprecedented expansion in LNG capacity could translate into a net increase of 250 bcm in global LNG supply by 2030.This takes into account declining LNG output from certain legacy producers,as well as the ramp-up rates and utilisation factors of new liquefaction plants.To put this number into perspective,this increase in LNG supply is equivalent to around 7%of Asias thermal coal demand.In contrast,long-distance piped gas trade is expected to decline by almost 55 bcm between 2024 and 2030,primarily due to lower piped gas deliveries to Europe.When considering price trajectories informed by current forward curves,global LNG demand growth is not expected to absorb all incremental LNG supply over the 2024-30 period in the base case.This could result in around 65 bcm of surplus supply.If European hub IEA.CC BY 4.0.Gas Market Report,Q4-2025 PAGE|8 Executive summary and Asian spot LNG prices start to gradually move closer to the short-run marginal cost of US LNG supply between 2027 and 2030,this could spur additional gas demand,especially in price-sensitive Asian markets.This could absorb additional LNG supply and limit the risk of production shut-ins at liquefaction plants.However,a weaker macroeconomic environment together with a slower build-out of natural gas infrastructure in South and Southeast Asia and contractual rigidities might limit the scope of the price-adjusted demand response.If existing infrastructure in Southeast Asia and other emerging LNG-importing regions is not expanded,about one-quarter of the demand response may be at risk of not materializing.Global gas demand grows by around 9%by 2030 in our base case,largely driven by Asia and the Middle East Our base case expects global natural gas demand(excluding bunkers)to increase at an average annual rate of nearly 1.5tween 2024 and 2030.This translates into an increase of 380 bcm by 2030.Global gas demand grows at a somewhat faster rate,around 1.7%per year,and expands by more than 10%by 2030 in our price-driven high case.This would translate into an additional increase of over 65 bcm compared with the base case.The Asia Pacific region accounts for almost 80%of this additional demand.In the base case,the Asia Pacific region is expected to be the primary driver of global gas demand growth,representing around half of the increase through 2030.China alone is projected to account for a quarter of global demand growth due to abundant supply,lower spot LNG prices and expanding import infrastructure.The Middle East,Eurasia and North America are also expected to see meaningful demand growth during this period.Demand is expected to rise more modestly in Africa and Latin America.This increase is expected to be more than offset by an 8cline in European gas demand over the forecast period.In terms of sectors,industry and energy(including refining)together account for about 45%of expected global gas demand growth between 2024 and 2030 in the base case.The power sector is the second largest contributor to global demand growth over the forecast period,accounting for over a third of the net increase.The Asia Pacific region accounts for more than half of power sector demand growth.Rising electricity demand in the Middle East also plays a significant role,adding more than 50 bcm/yr of demand between 2024 and 2030,primarily due to large-scale oil-to-gas switching initiatives,led by Saudi Arabia.Natural gas demand in the residential and commercial sector is expected to increase by close to 50 bcm/yr by 2030,driven by Asia,Eurasia and the Middle East.Gas demand from the transport sector is expected to grow more modestly than other sectors,rising by almost 35 bcm/yr.This growth is largely driven by road transport in China,with a smaller contribution from India.In addition to inland consumption,LNG use in the marine transport sector,which includes both LNG carriers and commercial vessels powered by LNG,is expected to increase by 15 bcm/yr to 2030.This is driven by fleet expansion,the build-out of LNG bunkering infrastructure and favourable economics compared with other alternative fuels.IEA.CC BY 4.0.Gas Market Report,Q4-2025 PAGE|9 Executive summary The global LNG market is poised to see greater liquidity and pricing diversity The role of long-term LNG contracts remains crucial as an effective risk-sharing mechanism between sellers and buyers.Long-term agreements,or those with a duration of ten years or more,accounted for 75%of the volumes contracted since 2022,reflecting sellers and buyers preference for demand and supply security,respectively.The IEAs database of LNG contracts indicates that they are evolving towards greater flexibility and pricing diversity.The share of destination-free contracts is expected to account for just over half of total LNG volumes contracted by 2030.Meanwhile,pricing terms are becoming more diverse,with hub indexation and hybrid pricing formulae gaining traction at the expense of oil indexation.Based on existing active contracts,the share of oil-indexed LNG contracts is expected to fall to around half of contracted volumes by 2030.The role of portfolio players in LNG trade is growing,providing greater optionality to end-buyers.The growing flexibility and liquidity of the LNG market is becoming increasingly important in responding to gas supply and demand shocks,helping to ensure supply security.Carbon capture,utilisation and storage(CCUS)can reduce the emissions intensity of LNG supply LNG supply operations have a sizeable greenhouse gas footprint.This comes primarily from associated carbon dioxide(CO2)emissions,but also from methane leaks,with Scope 1 and 2 emissions distributed across upstream operations,gas processing and transmission,and liquefaction.By capturing and storing CO2 in both upstream and liquefaction operations,LNG producers could reduce part of their emissions while maintaining energy security and flexibility.Momentum behind CCUS is building among major producers.In Australia,the Gorgon LNG project started CO2 reinjection in 2019.In Qatar,a major CO recovery and sequestration facility at Ras Laffan was commissioned in 2019 and is currently being expanded.In Southeast Asia,both Indonesia and Malaysia are developing CCUS projects,which could reduce the emissions intensity of their LNG exports.In the United States,several LNG project developers announced plans to integrate CCUS-based solutions into existing or future LNG liquefaction plants.CCUS is shifting from demonstration to deployment in the LNG sector.The projects now underway suggest that by 2030,CCUS could become an increasingly important feature of new LNG supply,influencing access to finance and long-term contracts in markets where carbon intensity is scrutinised.IEA.CC BY 4.0.Gas Market Report,Q4-2025 PAGE|10 Executive summary Low-emissions gases are set for a rapid expansion to 2030,driven by biomethane and hydrogen The deployment of low-emissions gases is expected to continue at a strong pace over the medium term.In our outlook,the supply of low-emissions gases is expected to increase by two-and-half times by 2030.This translates to a rise of over 20 billion cubic meters-equivalent(bcm-eq).Despite this growth,the impact of low-emissions gases on the global gas balance is set to remain limited through 2030.They are expected to account for less than 1%of global gaseous fuels supply at the end of this decade.Biomethane production is expected to more than double between 2024 and 2030,contributing over 50%of the total increase in low-emissions gases during this period.Low-emissions hydrogen is projected to grow at an average rate of 33%per year between 2024 and 2030 from a very low base.In contrast,e-methane struggles to take off over the forecast period,requiring a concentrated effort between emerging producers and consumers to establish viable supply chains,effective support mechanisms and cost efficiency.IEA.CC BY 4.0.Gas Market Report,Q4-2025 PAGE|11 Executive summary Final investment decisions in US LNG reached an all-time high in 2025 IEA.CC BY 4.0.0 10 20 30 40 50 60 70 8020122013201420152019202220232025bcm/yrSabine Pass T1-2GoldenPassCalcasieu PassCorpus Christi LNGElba IslandSabine Pass T3-4Corpus Christi Stage 3Port Arthurphase 1Port Arthur phase 2Lousiana LNGCP2 phase 1Plaquemines phase 2Rio GrandeT1-3Rio Grande T4-5Corpus Christi debottleneckingPlaquemines phase 1Cameron LNGCove PointFreeport T1-2Freeport T3Sabine Pass T5Sabine Pass T6Final investment decisions in the United States by project,2014-2025 IEA.CC BY 4.0.Gas Market Report,Q4-2025 PAGE|12 Executive summary The coming LNG production wave is set to enhance energy supply security and affordability IEA.CC BY 4.0.-100-80-60-40-200 20 40 60 80 10020202021202220232024202520262027202820292030Y-o-y change in bcmRussian piped gas to EuropeOther pipeline imports to EuropeRussian piped gas to ChinaCentral Asia to ChinaGlobal LNG supplyTotal y-o-y changeCovid-yearpost-Covid recovery Gas supply shockThe next LNG waveGradual rebalancingYear-on-year change in key piped natural gas trade and potential global LNG supply,2020-2030 IEA.CC BY 4.0.Gas Market Report,Q4-2025 PAGE|13 Executive summary Improved LNG availability could stimulate additional gas demand IEA.CC BY 4.0.Global gas demand growth by case and regions,2024-2030 4 0004 1004 2004 3004 4004 5004 6004 7002024Growth marketsEurope2030Base caseAdditionalprice-drivendemand response2030High casebcmOthersAsia PacificAsia PacificMiddle EastNorth AmericaEurasiaAfricaCentral and South AmericaEuropeIEA.CC BY 4.0.Gas Market Report,Q4-2025 PAGE|14 Executive summary The supply of low-emissions gases is expected to double by 2030 IEA.CC BY 4.0.0 5 10 15 20 25 30 352024BiomethaneLow-emissionshydrogenE-methane2030bcmBiomethaneLow-emissions hydrogenE-methaneExpected increase in production of low-emissions gases,2024-2030 IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|15 Gas market update Gas market update IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|16 Gas market update Natural gas demand growth has slowed significantly in 2025 Following a relatively strong increase in 2024,global gas demand growth slowed markedly in Q1-Q3 2025.Higher natural gas prices together with heightened macroeconomic uncertainty and tight supply fundamentals weighed on natural gas consumption.In contrast with previous years,demand growth was largely concentrated in Europe,while in Asia natural gas consumption remained broadly flat compared with the same period in 2024.Preliminary data suggest that natural gas demand increased by just 0.5%(or around 10 bcm)y-o-y in Q1-Q3 2025 in the markets covered by this market update,2 primarily driven by Europe and North America.Supply fundamentals remained tight.While global LNG supply increased by around 5%(or nearly 20 bcm)y-o-y in Q1-Q3 2025,this was partially offset by lower Russian and Norwegian piped gas deliveries to Europe.Strong storage injections in the European Union further tightened market fundamentals.For the full year of 2025,global gas demand growth is expected to increase by less than 1%assuming average weather conditions in Q4.Natural gas demand in the Asia Pacific region is expected to expand by less than 1%compared with 2024,its weakest growth since 2022.Following a cold Q1,the years natural gas demand in North America is projected to increase by around 0.5%compared with 2024 and remain broadly flat in Central and South America.In Europe natural gas demand is expected to increase by 3%.Eurasian gas demand is projected to decline by 1.5%.Combined gas demand in Africa and the Middle East is forecast to increase by 2%amid higher demand in industry and the power sectors.Global gas consumption is expected to reach a new all-time high in 2026,with demand growth accelerating to 2%.Global LNG supply is forecast to increase by a strong 7%(or 40 bcm),primarily driven by the United States,Canada and Qatar.Improving supply fundamentals are expected to support stronger demand,especially in fast-growing and price-sensitive Asian markets.Natural gas demand in the Asia Pacific region is expected to increase by nearly 5%in 2026,accounting for around half of global gas demand growth.In North America,natural gas demand is projected to increase by around 0.5%in 2026 primarily driven by the power sector.In contrast,natural gas use is projected to decline by almost 1.5%in Central and South America amid higher renewables output.In Europe,the continued expansion of renewables is expected to reduce gas demand by 2%.In Eurasia,gas consumption is forecast to increase by more than 3%assuming a return to average weather conditions.Combined demand in Africa and the Middle East is projected to increase by 3%amid higher gas use in industry and the power sector.2 Asia Pacific,Central and South America,Eurasia,Europe and North America.IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|17 Gas market update Global gas demand growth is expected to accelerate in 2026 amid improving LNG supply IEA.CC BY 4.0.-5%-4%-3%-2%-1%0%1%2%3%4%5%-200-160-120-80-400 40 80 120 160 2002020202120222023202420252026Y-o-y change in%Y-o-y change in bcmEuropeAsia PacificNorth AmericaEurasiaMiddle EastAfricaCentral and South AmericaY-o-y changeYear-on-year change in natural gas demand in key regions,2020-2026 IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|18 Gas market update Higher natural gas prices weigh on gas-fired power generation in the United States Natural gas consumption in North America increased by an estimated 0.5%(or less than 5 bcm)y-o-y in Q1-Q3 2025.This growth was primarily concentrated in Q1,when colder temperatures increased space heating requirements across Canada and the United States.In contrast,natural gas consumption declined in both Q2 and Q3 as higher natural gas prices weighed on gas-fired power generation.Natural gas use in industry increased marginally compared with 2024 levels.In the United States,natural gas consumption increased by less than 0.5%(or around 3 bcm)y-o-y during Q1-Q3 2025.This growth was largely supported by colder winter and spring temperatures,which increased space heating requirements across the residential and commercial sectors.Heating degree days were up by 10%y-o-y in the first five months of 2025,which drove up natural gas use in the buildings sector by around 10%y-o-y during the same period.Demand growth in the buildings sector continued throughout the summer months,largely driven by commercial entities.In contrast,gas-to-power demand in the United States declined by an estimated 4%(or 14 bcm)y-o-y in Q1-Q3 2025 amid stronger renewable power output and price-driven gas-to-coal switching.Tighter market fundamentals drove up natural gas prices,with Henry Hub prices averaging almost 65ove 2024 levels in Q1-Q3 2025.This strong increase in natural gas prices eroded the cost-competitiveness of gas-fired power generation vis-vis coal-fired power plants,which increased their output by around 11%y-o-y.Consequently,the share of natural gas in power generation declined from 42%in Q1-Q3 2024 to below 40%in Q1-Q3 2025.Natural gas demand in industry and the energy sector increased by an estimated 1%(or almost 2 bcm)y-o-y,partly supported by stronger gas use by the countrys growing LNG liquefaction fleet.In Canada,natural gas demand rose by 4.5%(or 3.3 bcm)y-o-y in the first seven months of 2025.Colder weather conditions prompted higher gas use in the residential and commercial sectors,which increased by more than 10%y-o-y in the first five months of 2025.Combined gas demand in the industrial and power sectors rose by 2.5%y-o-y in the first seven months of 2025,largely supported by stronger gas-fired power generation.In Mexico,natural gas consumption declined by an estimated 2.5%(or 2 bcm)y-o-y in Q1-Q3 2025,primarily driven by lower gas-fired power generation.Natural gas demand in North America is forecast to increase by around 0.5%in 2025.Gas use in the residential and commercial sectors is expected to increase,assuming average weather conditions for the rest of the year.This growth is expected to be largely offset by lower gas burn in the power sector amid stronger renewable power output and gas-to-coal switching dynamics.This forecast anticipates natural gas demand in North America increasing by 0.5%in 2026 amid stronger gas use in the power,industrial and energy sectors.IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|19 Gas market update driving down gas demand during Q2-Q3 2025 Estimated year-on-year change in quarterly natural gas demand by sector in the United States,2023-2025 IEA.CC BY 4.0.Sources:IEA analysis based on EIA(2024),Natural Gas Consumption;Natural Gas Weekly Update.-5%-4%-3%-2%-1%0%1%2%3%4%5%-15-10-50 5 10 152023Q12023Q22023Q32023Q42024Q12024Q22024Q32024Q42025Q12025Q22025Q3Y-o-y change in%Y-o-y change in bcmResidential and commercialPowerIndustryOthersY-o-y changeIEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|20 Gas market update Gas demand in Central and South America increased marginally in Q1-Q3 2025Following a relatively strong increase in 2024,natural gas consumption in Central and South America increased by an estimated 1%y-o-y in Q1-Q3 2025.Incremental demand was largely met by higher domestic production,while the regions LNG imports declined by 8%y-o-y in Q1-Q3 2025.Argentinas natural gas demand decreased by a modest 0.5%y-o-y in the first seven months of 2025.The declines in the residential and commercial sectors(down 2.5%)and industrial sector(down 2%)were almost fully compensated by increases in gas-to-power demand(up 5%).On the production side,the Vaca Muerta formation continues to show strong performance.Argentinas shale gas production grew by an impressive 5%(or 0.9 bcm)y-o-y in the first eight months of 2025,largely offsetting the declines recorded in tight gas output(down by 3%or 0.7 bcm y-o-y).In Brazil,primary gas supply grew by more than 10%y-o-y in Q1-Q3 2025.This strong growth was largely supported by the countrys rapidly expanding domestic gas production,which increased by almost 20%y-o-y in the first eight months of 2025.This upward trend is partly supported by the Rota 3 pipeline(6.5 bcm/yr),which began operations in September 2024 to allow greater takeaway from the offshore Santos Basin.Lower hydropower output(down by 5.5%y-o-y)supported stronger gas burn in the power sector,rising by around 10%y-o-y in Q1-Q3 2025.Venezuela reported a moderate decrease of 3.5%y-o-y in natural gas use in the first seven months of 2025.In Trinidad and Tobago,natural gas consumption declined by 1%y-o-y in the first half of 2025.Gas-to-power demand fell by 0.6%,while gas use in industry and the energy sector declined by around 1%.In Columbia,gas consumption plummeted by 15%y-o-y in the first eight months of 2025.This steep decline was largely driven by the power sector,where gas burn fell by over 40%y-o-y amid the recovery in hydropower generation.Chile saw a robust 8%y-o-y demand increase in the first seven months of 2025,partly supported by stronger gas use in industry and the power sector.In Peru,natural gas consumption declined by 2.5%y-o-y in Q1-Q3 2025.Bolivian gas consumption grew by almost 2.5%y-o-y in the first seven months of 2025,supported by stronger gas use in the residential and commercial sectors(up by 6%y-o-y),as well as higher gas demand in industry(up by 2%y-o-y).Natural gas demand continued to expand in Central America and the Caribbean markets,where combined LNG imports increased by 7%y-o-y in Q1-Q3 2025.For 2025 as a whole,Central and South Americas natural gas demand is projected to remain close to last years levels.In 2026,a modest decline in natural gas consumption is expected despite continued industrial growth as renewable output accelerates the displacement of natural gas use in electricity generation.IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|21 Gas market update with demand growth largely concentrated in Q3 2025 Estimated year-on-year change in quarterly natural gas demand in Central and South America,2023-2025 IEA.CC BY 4.0.Sources:IEA analysis based on ANP(2025),Boletim Mensal da Produo de Petrleo e Gs Natural;BMC(2025),Informes Mensuales;Central Bank of Trinidad and Tobago(2025),Statistics;MEEI(2025),Monthly bulletins;CNE(2025),Generacin bruta SEN;ENARGAS(2025),Datos Abiertos;ICIS(2025),ICIS LNG Edge;IEA(2025),Monthly Gas Data Service;JODI(2025),Gas Database;OSINERG(2024),Reporte diario de la operacin de los sistemas de transporte de gas natural.-6%-4%-2%0%2%4%6%-2-10 1 22023Q12023Q22023Q32023Q42024Q12024Q22024Q32024Q42025Q12025Q22025Q3Y-o-y change in%Y-o-y change in bcmArgentinaBrazilColombiaOthersTotalY-o-y changeIEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|22 Gas market update Asias natural gas demand growth remained subdued during Q1-Q3 2025Following strong growth of 5.5%in 2024,natural gas demand growth in Asia declined by an estimated 0.5%in Q1-Q3 2025.This decline was largely concentrated in the first half of the year and was driven by weaker macroeconomic conditions,relatively high spot LNG prices,mild weather conditions in northeast China,as well as lower gas use in the power sector.For 2025 as a whole,Asias gas demand is expected to expand by less than 1%,largely supported by a modest recovery in power sector gas use during the remainder of the year.In 2026,total consumption in Asia is projected to grow significantly more rapidly,by more than 4%,driven by rebounding industrial demand due to improved LNG availability and to a lesser extent by modest increases in demand from the power,residential and commercial sectors.Chinas natural gas demand remained broadly flat y-o-y in Q1-Q3 2025.The countrys natural gas consumption declined by almost 1%y-o-y the first half of the year,primarily due to lower gas use in industry and below-average heating demand in Q1.Preliminary data suggest that Chinas natural gas demand grew by around 3%y-o-y in Q3 2025,largely offsetting the declines recorded in H1 2025.Stronger gas use in industry and the power sector supported this recovery.Chinas relatively weak demand coincided with a strong growth in domestic production(up by 6%y-o-y in the first eight months of 2025)and the continued ramp-up of Russias piped gas deliveries via the Power of Siberia pipeline system(up by an estimated 25%y-o-y in Q1-Q3 2025).This led to a steep decline in Chinas LNG import requirements,plummeting by 17%y-o-y in Q1-Q3 2025.Full-year demand for 2025 is expected to increase by around 1%from 2024 levels.In 2026,Chinese demand growth is expected to recover from the 2025 slowdown,reaching close to 6%as easing economic headwinds drive industrial activity and accelerating global LNG liquefaction capacity additions provide supply-side support to Chinese buyers.Japans natural gas consumption decreased by 1.7%y-o-y in H1 2025,mainly due to stronger gas use in the industrial and residential and commercial sectors.The demand for LNG-fired power did not increase because of the restart of Onagawa nuclear power plant last year and increased renewable power generation(up by an estimated 20%y-o-y).Total gas consumption in 2025 is expected to decrease by 1.1%,driven by reduced gas use for power generation amid improving nuclear availability and higher renewable output.In 2026,Japans gas demand is expected to decline by close to 2.5%,mainly driven by lower gas use in power generation amid nuclear restarts and robust renewable generation growth.Koreas natural gas demand increased by 1.5%y-o-y in H1 2025,supported by strong demand in the power generation sector,as well as in industry and energy sector own use.In 2025,total gas demand is expected to rise by 1.3%y-o-y,mainly driven by the power sector,IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|23 Gas market update along with more modest increases in the residential and commercial sectors and in industry.Despite the addition of new nuclear capacity,gas demand in 2026 is projected to remain flat,as declining coal use in the power generation sector and modest increases in industrial,residential and commercial consumption of gas fully offset the headwinds from nuclear.Indias total gas consumption fell by 6%y-o-y in the first eight months of 2025,based on preliminary data.This decline was mainly driven by the power generation and oil refining sectors(both down 20%y-o-y),as well as lower gas use in fertiliser production.In contrast,city gas distribution demand increased by almost 9%y-o-y amid the continued expansion of the gas network to new commercial and residential buildings.Indias natural gas production fell by 3%y-o-y in the first eight months of the year.As demand declined more steeply than domestic gas output,the countrys LNG imports declined by almost 10%y-o-y in the first eight months of 2025.For the full year of 2025,Indias natural gas demand is expected to decline by 3%,a notable shift from the 10%growth seen in 2024.In 2026 Indias gas consumption growth is forecast to reach 7%,driven by the ongoing expansion of Indias city gas distribution and CNG filling station networks,expanding industrial gas use and rising electricity needs.Emerging Asias gas consumption remained close to last years levels in Q1-Q3 2025.The regions net LNG imports grew by around 1%y-o-y in Q1-Q3 2025,partially offsetting the production declines recorded in some of the regions producers.Thailands natural gas consumption fell by 5%y-o-y in the first eight months of 2025,primarily driven by steep declines in power sector gas use(down 10%).Indonesias total consumption rose by 2%y-o-y in the first seven months of 2025,supported by industry and the power sector.Malaysias gas demand remained close to the previous years levels in Q1-Q3 2025.Pakistans total consumption is estimated to have declined by around 5%y-o-y in Q1-Q3 2025 amid weaker gas use in the power sector.LNG imports were similarly subdued(down 7%)in Q1-Q3 2025.Bangladeshs natural gas demand rose by an estimated 6%y-o-y in Q1-Q3 2025,primarily supported by industry.The countrys LNG imports increased by 40%y-o-y in Q1-Q3 2025,amid stronger demand and a continued decline in domestic natural gas output,which fell by 7.5%y-o-y in the first half of 2025.For 2025 as a whole,gas demand growth in Emerging Asia is projected to slow from around 5%in 2024 to approximately 1%in 2025,as relatively high LNG prices and macroeconomic headwinds weigh on natural gas use.In 2026,Emerging Asias gas consumption growth is expected to accelerate to around 6%,driven by recovering gas use in both the power and industrial sectors amid rising overall energy needs,moderating prices and improving macroeconomic conditions.IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|24 Gas market update Natural gas demand in Asia is expected to return to stronger growth in 2026 Year-on-year change in natural gas demand in Asia Pacific,2020-2026 IEA.CC BY 4.0.Note:Emerging Asia comprises Bangladesh,Indonesia,Malaysia,Myanmar,Pakistan,the Philippines,Singapore,Thailand and Viet Nam.-2%0%2%4%6%8%-200 20 40 60 802020202120222023202420252026Y-o-y change inmChinaIndiaJapanKoreaEmerging AsiaOtherY-o-y changeForecastHistoricalIEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|25 Gas market update European natural gas consumption grew by nearly 5%in Q1-Q3 2025 Natural gas consumption in OECD Europe rose by almost 5%(or 15 bcm)y-o-y in Q1-Q3 2025.Growth was primarily concentrated in Q1,when cold weather and lower renewable power output drove up natural gas demand by 9%y-o-y.Demand growth continued during Q2-Q3,albeit slowing to just below 1%y-o-y.The power sector was the most important driver behind higher gas use and alone accounted for around 80%of the incremental gas demand in Q1-Q3 2025 amid lower wind and hydro power output.In contrast,higher natural gas prices weighed on natural gas use in industry during the first three quarters of the year.Distribution network-related demand rose by an estimated 4%(or 4.5 bcm)y-o-y in Q1-Q3 2025,with growth entirely concentrated in Q1.Heating degree days increased by more than 10%y-o-y in Q1,which naturally drove up space heating requirements across households and commercial entities.First data suggest that natural gas consumption via the distribution network fell by 3%y-o-y during Q2-Q3 2025,partially due to warmer temperatures in April and potentially reflecting efficiency improvements in commercial entities.Gas-to-power demand rose by 15%(or 12 bcm)y-o-y in Q1-Q3 2025.This steep increase was primarily supported by lower renewable power generation(down by an estimated 3%y-o-y)and stronger electricity consumption.While solar power generation rose by almost 20%y-o-y,this was more than offset by lower wind and hydro generation.Wind power output recorded a 5%y-o-y decline amid slower wind speeds across Northwestern Europe,while hydropower generation fell by 12%,primarily due to lower hydro availability in Southern Europe.Natural gas consumption in industry declined by an estimated 2%y-o-y in Q1-Q3 2025 amid higher natural gas prices.This decline was primarily concentrated in H1 2025,while first data suggest that gas use in industry remained close to the previous years level in Q3 2025.In Q1-Q3 2025,industrial gas consumption decreased by an estimated 2.5%y-o-y in Belgium,by 7%in France,by more than 10%in the Netherlands and by 6%in Spain.First data suggest that this decline was primarily driven by the refining and fertiliser sectors.For the full year of 2025,this forecast expects natural gas demand in OECD Europe to increase by nearly 3%.Gas-to-power demand is projected to increase by almost 10%as the recovery and continued expansion of renewables are expected to partially offset the strong gains recorded in Q1-Q3 2025.Natural gas demand in the buildings sector is expected to increase,assuming average winter weather conditions in Q4.Gas use in industry is forecast to decline by 1.5%in 2025 amid the higher gas price environment.This forecast expects Europes natural gas demand to decline by 2%in 2026,as the continued expansion of renewables weighs on gas burn in the power sector.IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|26 Gas market update The power sector emerged as the strongest driver of Europes gas demand in Q1-Q3 2025 Estimated year-on-year change in semi-annual natural gas demand in OECD Europe,2023-2025 IEA.CC BY 4.0.Sources:IEA analysis based on Enagas(2025),Natural Gas Demand;ENTSOG(2025),Transparency Platform;EPIAS(2025),Transparency Platform;Trading Hub Europe(2025),Aggregated consumption.-12%-9%-6%-3%0%3%6%9%-25-15-5 5 15 252023Q12023Q22023Q32023Q42024Q12024Q22024Q32024Q42025Q12025Q22025Q3Y-o-y change in%Y-o-y change in bcmResidential and commercialPowerIndustryY-o-y changeIEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|27 Gas market update LNG supply growth continues to accelerate despite underperformance at certain legacy plants Global LNG trade grew by about 4.7%y-o-y(or 19 bcm)in the first nine months of 2025,with supply progressively accelerating into the third quarter.The ramp-up of new liquefaction projects(notably in North America)was key to this growth,but European gas market dynamics also drove a strong demand-side pull,absorbing the equivalent of more than total supply growth.Following lacklustre growth in 2023 and 2024,more incremental LNG supply is set to reach the market in 2025 than in any single year since 2019.The United States provided the largest LNG export upside(up nearly 21 bcm)over the first three quarters of the year.This came from both the ramp-up of new projects(Plaquemines LNG and Corpus Christi Stage 3 expansion)and the effects of debottlenecking and a return to normal operations at Freeport LNG(after two years of sub-par output).Qatar was the second-largest growth contributor,squeezing out more cargoes from its existing liquefaction trains.Mexico and Canada also drove the upside,although at a much smaller scale.However,a number of legacy producers put downside pressure on the market over this period,most notably Russia,Norway,Algeria and Australia.Russian exports fell by 11%y-o-y(or 3.5 bcm)in this period as two sanctions-hit plants remained offline.Arctic LNG 2,also under sanctions,still managed to export 6 cargoes to China from June to September,but these totalled less than 1 bcm.Planned maintenance and a delayed restart at Norways Hammerfest LNG lowered output by 44%y-o-y in the Q1-Q3 period.Algerian exports,which have trended below prior-year levels since the second quarter of 2024,were down by 22%y-o-y.In Australia,exports were down 3%y-o-y,impacted notably by ongoing decline at the North West Shelf Australia LNG project and a month-long maintenance shut-in at Ichthys LNG.In all,production declines from these projects and others totalled over 13 bcm.As a result of tightening pipeline supply dynamics,Europes LNG imports grew by 28%y-o-y(or 27 bcm),outpacing global net incremental LNG supply since the start of 2025.Simultaneously,imports into Asia fell by nearly 5%y-o-y(13 bcm),notably as Chinese LNG buying significantly trailed the previous years levels in most months.Cumulative Chinese LNG imports remained down 17%y-o-y(or nearly 14 bcm)by September.Outside Europe and Asia,Egypt also drove shifting trade flows.The addition of an extra floating storage and regasification unit allowed Egyptian LNG imports to skyrocket in Q3 2025.Total imports in the first nine months of the year were up 350%y-o-y(or 6 bcm).Thanks to the continuing ramp-up of new liquefaction projects,we expect LNG trade to grow by over 5%y-o-y,or 29 bcm,in 2025.In 2026,growth is expected to continue accelerating to about 7%y-o-y,or 40 bcm,notably allowing Asia as a whole to return to import growth.IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|28 Gas market update North America leads LNG supply growth in 2025 and 2026 Year-on-year change in LNG imports and exports by region,2025 and 2026 IEA.CC BY 4.0.Source:IEA analysis based on ICIS(2025),LNGEdge.-20-100 10 20 30 40 50ImportsExportsImportsExportsbcmNorth AmericaMiddle EastEuropeEurasiaCentral andSouth AmericaAsia PacificAfricaTotal2025 2026 IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|29 Gas market update US gas production growth continues to follow incremental LNG export requirements US dry natural gas production is estimated to have grown by 3.3%y-o-y in the first nine months of 2025.Despite an easing of the growth dynamics from the second to the third quarter,Q3 production was still up 4.6%y-o-y.This growth is underpinned by rising LNG feedgas requirements and a stronger gas price environment than in 2024,compensating for relatively subdued domestic oil market dynamics and broader economic uncertainty.In the midst of weak US oil market fundamentals and a declining rig count,average Permian Basin associated gas production growth in Q1-Q3 2025(9.2%y-o-y)stood about 4 percentage points lower than in full-year 2024.Nevertheless,improved well productivity and increasing gas-to-oil ratios for both existing and new plays helped prop up third-quarter production growth at 7.7%y-o-y,maintaining the Permian Region as the primary contributor to US output growth this year.These trends are set to extend into 2026 as weak oil market fundamentals persist.Improving gas price dynamics continue to support a recovery in non-associated Haynesville shale.Despite a downward trajectory since the start of the year,Henry Hub prices averaged USD 3.11/MBtu in second and third quarters of 2025,about 50ove the same period in 2024.This helped reverse a year-long period of production decline in the higher-cost Haynesville Basin by the start of Q2 2025,with production growth accelerating through the summer months.While we expect Haynesville production to continue recovering into 2026,output is likely to remain sensitive to the domestic gas price environment.Appalachian gas production had switched back to sustained growth by March 2025 as drilling activity(particularly in the Utica play)has risen through much of 2025.By Q2 and Q3 2025,monthly Appalachian output had recovered to(and even surpassed)pre-2024 levels,supported in part by in-basin demand dynamics and by additional takeaway capacity from the Mountain Valley Pipeline,which came into service in mid-2024.Despite abundant low-cost natural gas reserves in the region,takeaway pipeline capacity constraints are expected to act as a limit on production growth in the short term.US domestic consumption is set to remain largely flat during 2026.However,feedgas demand from new liquefaction projects is set to drive production growth.Feedgas requirements for LNG exports already added over 20 bcm of incremental pull to the US market in Q1-Q3 2025 and are set to continue growing in 2026.Much of this growth is set to be driven by Plaquemines LNG and the Corpus Christi Stage 3 expansion(which started ramping up in 2025),with Golden Pass LNG expected to add further demand in 2026.Despite the scale of liquefaction capacity additions,the US market is expected to remain well supplied,with dry gas production growing by 3%in 2025 and about 2%in 2026,reaching new record highs in both years.IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|30 Gas market update Rising LNG exports drive natural gas production growth through Q3 Year-on-year change in monthly dry natural gas production in the United States,2024-2025 IEA.CC BY 4.0.Note:August and September include estimated data.Source:Energy Information Administration(2025),Natural Gas.-6-4-20 2 4 6 8bcmOther dry gasproductionOther shaleproductionHaynesville ShalePermian BasinAppalachian BasinTotal dry gasproductionIEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|31 Gas market update Europes LNG imports rose to an all-time high in Q1-Q3 2025 OECD Europes primary natural gas supply increased by an estimated 6.5%(or 19 bcm)y-o-y in Q1-Q3 2025.The strong increase in LNG imports,together with higher non-Norwegian gas production,offset the declines recorded in piped gas imports.Europes LNG imports rose by 28%(or almost 28 bcm)y-o-y and reached an all-time high of 127 bcm in Q1-Q3 2025.Stronger domestic demand,together with lower piped gas imports and higher storage injections since April,kept European LNG netback prices at a premium compared with key Asian markets.This in turn incentivised flexible LNG cargoes to flow towards Europe.Consequently,the share of LNG in Europes primary natural gas supply rose from 35%in Q1-Q3 2024 to 42%in Q1-Q3 2025.The United States increased its LNG deliveries to Europe by 60%y-o-y in Q1-Q3 2025 and alone accounted for almost all incremental LNG supply to Europe during this period.This reinforced the United States position as Europes largest LNG supplier,accounting for almost 60%of Europes LNG imports in Q1-Q3 2025.Russian LNG inflows fell by 10%(or 1.8 bcm)y-o-y,although Russia remained Europes second-largest LNG supplier.Belgium,France and Spain accounted for over 85%of Europes total LNG imports from Russia in Q1-Q3 2025.Norways piped gas deliveries to the rest of Europe declined by 2.8%(or almost 2.5 bcm)y-o-y in Q1-Q3 2025 amid unplanned outages and higher maintenance works.Deliveries to the United Kingdom dropped by 9%(or 1.7 bcm)and declined by 1%(or 0.7 bcm)to the rest of Europe.Non-Norwegian domestic production grew by 4%(or 0.7 bcm)y-o-y in the first seven months of 2025.This increase was primarily supported by the strong production growth recorded in Denmark,Italy and Trkiye.In Denmark,domestic production grew by 80%(or 0.7 bcm)y-o-y on the back of the redeveloped Tyra field.In Trkiye,natural gas output grew by 60%(or 0.7 bcm)y-o-y,with growth driven by the Sakarya field.Russias piped gas supplies to the European Union fell by 45%(or 10 bcm)y-o-y in Q1-Q3 2025 amid the halt of gas transit via Ukraine.Exports to Trkiye rose by more than 20%(or almost 2.5 bcm)y-o-y in the first seven months of 2025.The share of Russian piped gas in Europes gas demand is estimated at below 10%in Q1-Q3 2025.Piped gas supplies from North Africa remained broadly flat,while Azeri flows via the TAP fell by 2%(or 0.2 bcm)in Q1-Q3 2025.Lower Russian and Norwegian piped gas supplies,together with higher gas consumption and stronger storage injection requirements,are expected to increase Europes LNG imports by more than 20%in 2025 to reach a new record.We expect Europes LNG imports to decline by almost 5%in 2026 amid lower demand and higher piped gas deliveries from Norway.IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|32 Gas market update Strong US LNG supply is offsetting the decline in piped gas deliveries to Europe Year-on-year change in quarterly European natural gas imports and deliveries from Norway,Q1 2023-Q3 2025 IEA.CC BY 4.0.Sources:IEA analysis based on Enagas(2025),Natural Gas Demand;ENTSOG(2025),Transparency Platform;EPIAS(2025),Transparency Platform;Trading Hub Europe(2025),Aggregated consumption.-25-15-5 5 15 252023Q12023Q22023Q32023Q42024Q12024Q22024Q32024Q42025Q12025Q22025Q3Y-o-y change in bcmLNGOthers-pipeline flowsNorway-pipeline flowsRussia-pipeline flowsTotal change in gas imports and pipeline deliveries from NorwayIEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|33 Gas market update Asian and European gas prices moderated to below last years levels in Q3 2025 Natural gas prices moderated across all key markets in Q3 2025 compared with the previous quarter and fell below their 2024 levels in Asia and Europe.In contrast,tighter market fundamentals in the United States kept Henry Hub prices well above their 2024 levels.In Europe,TTF spot prices fell by 4%compared with Q2 to an average of USD 11.3/MBtu in Q3 2025,standing 1low Q3 2024 levels.The strong inflow of LNG(up by more than 30%y-o-y),together with improving renewable power output,provided downward pressure on European hub prices.Short-term price variability softened as well.The volatility on TTF month-ahead declined from 50%in Q2 to 28%in Q3 its lowest quarterly average since Q3 2018.Improved global LNG supply availability and the absence of unforeseen supply and demand patterns limited short-term price variability on the European market.In Asia,Platts JKM prices followed a similar trajectory and declined by 4%on the quarter to an average of USD 11.7/MBtu in Q3 2025 standing 10low last years Q3 levels.Weak regional demand,together with improving LNG supply availability and the ramp-up of Russian piped gas deliveries to China,weighed on regional price levels.In China,the nationwide ex-factory LNG price declined by 7%on the quarter to an average of RMB 4 360/tonne(around USD 10/MBtu).Oil-indexed LNG prices traded in an estimated range of USD 11-12/MBtu,incentivising Asian buyers to reduce their spot LNG procurements and nominate higher volumes through long-term contracts.In the United States,Henry Hub prices fell by 5%on the quarter to an average of USD 3/MBtu in Q3 2025,albeit trading 40ove Q3 2024 levels.Relatively low storage levels following the 2024/25 winter and higher injection needs provided upward pressure on Henry Hub prices.Forward curves as of the end of September suggest that TTF prices could increase by 12%in 2025 compared with 2024 and average at just over USD 12/MBtu.Higher storage injections through the summer,together with lower piped gas imports and continued competition for flexible LNG cargoes,support higher gas prices.Forward curves indicate that JKM prices could increase by 4%in 2025 to an average of nearly USD 12.5/MBtu.A tight TTF-JKM spread is expected to continue to incentivise healthy LNG flows towards Europe in Q4.Based on forward curves,Henry Hub prices in the United States are expected to increase by over 55%to average USD 3.4/MBtu amid tighter market fundamentals.Forward curves suggest that Asian and European gas prices could soften in 2026.Both TTF and JKM prices could decline by around 10%to an annual average of just below USD 11/MBtu,amid improving LNG availability.Forward curves suggest that Henry Hub prices could increase by more than 10%to an average near USD 4/MBtu,supported by tighter market fundamentals in the United States.IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|34 Gas market update Improving LNG supply is expected to weigh on Asian and European spot prices in 2026 Main spot and forward natural gas prices,2022-2026 IEA.CC BY 4.0.Note:Future prices are based on forward curves as of the end of September and do not represent a price forecast.Sources:IEA analysis based on CME Group(2025),Henry Hub Natural Gas Futures Quotes,Dutch TTF Natural Gas Month Futures Settlements,LNG Japan/Korea Marker(Platts)Futures Settlements;EIA(2025),Henry Hub Natural Gas Spot Price;Powernext(2025),Spot Market Data;S&P Global(2025),Platts Connect.0 20 40 60Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q420222023202420252026USD/MBtuTTFHenry HubPlatts JKMIEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|35 Gas market update Strong summer recovery in EU and US inventories provides optimism for winter 2025/26 EU and US underground gas storage inventories ended winter 2024/25 in a relatively weak position.However,above-average summer injections have set storage dynamics back on track to help balance the global market through the winter.EU underground gas storage fill followed a steady recovery over the second and third quarters of 2025,largely compensating for below-average inventories at the start of the filling season.However,despite this trajectory,EU storage levels are likely to fall short of the 90%fill target before the start of winter 2025/26.EU storage levels ended the 2024/25 winter at a 42%(or 26 bcm)deficit to the previous years levels following an above-average seasonal drawdown.However,the switch to net injections occurred in line with the early-April norm and injection rates remained broadly above the five-year average for much of the filling season.As a result,the year-on-year storage deficit had fallen to just 13%(or 13 bcm)by the start of October.Reaching the European Unions 90%fill target from the levels in store in early October(83%)would require injections of about 8 bcm more than double the five-year average in October injections and about 15%more than the volume injected over the same month in 2022.EU-level political agreement to extend the target deadline to 1 December instead of 1 November grants flexibility around the storage obligation,but continued net injections through November would require a clear market signal to boost injection rates from their early October levels.As such,EU underground gas storage fill is likely to remain below the 90%target ahead of winter 2025/26.In Ukraine,storage injection rates in the 2025 filling season were significantly stronger than in 2024,with approximately 50%more gas injected into storage to the end of September than in the same period last year.This helped storage levels recover to 2024-equivalent levels by mid-September(up from an 80ficit at the end of the 2024/25 winter)and stretch 5%ahead of 2024 levels by the start of October.Nevertheless,this remains 28low levels on the same date in 2023.An earlier than average start to the filling season and faster than average injections helped US storage levels recover from a year-on-year deficit of 27%(or 18 bcm)in early March and end September about 1%(or 1 bcm)above 2024 levels.Despite the backdrop of growing LNG feedgas demand,the US gas market remained well supplied throughout the second and third quarters of 2025,freeing up gas for greater injections than in recent years.Strong weather-linked power sector gas burn in Korea contributed to a widening deficit against the five-year average in LNG inventories in the first half of 2025.By June,stocks were rising,but July levels remained 31low their 2024 levels.Despite similar demand dynamics in Japan,LNG stocks broadly tracked 2024 levels over the same period.Their combined inventories trended slightly above the five-year average in the first half of 2025.IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|36 Gas market update US pre-winter inventories are above the five-year average,European levels remain below US underground storage inventories EU underground storage inventories Japan and Korea LNG inventories IEA.CC BY 4.0.Source:IEA analysis based on EIA(2025),Weekly Working Gas in Underground Storage;GIE(2025),AGSI Database;JODI(2025),World Gas Database.0 20 40 60 80 100 120JanFebMarAprMayJunJulAugSepOctNovDecbcm5-year range5-year average20250 20 40 60 80 100 120JanFebMarAprMayJunJulAugSepOctNovDecbcm0 2 4 6 8 10 12 14JanFebMarAprMayJunJulAugSepOctNovDecbcmIEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|37 Medium-term market outlook Medium-term market outlook IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|38 Medium-term market outlook Key assumptions behind the medium-term forecastNatural gas markets are becoming increasingly complex and difficult to predict in a rapidly changing geopolitical context and trade environment.This section provides an overview of the key assumptions behind the medium-term gas market forecast.Macroeconomic outlook:Towards slower growth Global GDP growth is expected to average 3%per year during the forecast period(2024-2030),less than the pre-pandemic historical average of 3.7%.Following an increase of 3.3%in 2024,global GDP growth is forecast to slow to 3%in 2025 and to 2.9%in 2026 its lowest annual rate since the 2007-2008 global financial crisis,with the exception of the 2020 pandemic period.Global GDP growth is expected to continue to average around 3%during 2027-2030.A more complex trade environment is weighing on economic performance,while tariff policies remain a key uncertainty for the current forecast.Asian markets are expected to account for almost 60%of global GDP growth during the forecast period,followed by North America(12%)and the European Union(7%).Global LNG supply:The next LNG wave The outlook for global LNG supply is driven by the official timelines of LNG projects that have reached final investment decision(FID)and/or are under construction.Assumptions on ramp-up rates and utilisation factors are applied based on historic profiles of LNG export plants.This forecast expects global LNG liquefaction capacity to expand by around 300 bcm/yr by 2030 compared with 2024.This unprecedented growth is largely driven by Qatar and the United States,with the two countries accounting for more than 70%of the liquefaction capacity additions during the outlook period.This strong increase in LNG liquefaction capacity is partially offset by the continued feedgas supply issues at certain legacy LNG producers amid declining upstream deliverability and/or a strong increase in domestic demand.We assume that feedgas supply issues could reduce LNG production by nearly 20 bcm/yr by 2030.Together with the assumed ramp-up rates and utilisation factors,this forecast expects global LNG supply to increase by around 250 bcm/yr by 2030.Russias Arctic LNG 2 project remains under international sanctions and hence is not considered as a source of firm supply in the outlook.Sporadic LNG exports from the two-train plant cannot be excluded,which adds further upside potential to the global LNG supply during the forecast period.Russian natural gas exports This forecast assumes that Russias LNG deliveries to the European Union will halt by 1 January 2027,while piped gas supplies will be phased out by 1 January 2028 in line with the European Commissions proposed regulation.This would reduce Russian IEA.CC BY 4.0.PAGE|39 Medium-term market outlook Gas 2025 Analysis and forecasts to 2030 piped gas deliveries to the European Union by around 12 bcm compared with 2025(and by nearly 30 bcm compared with 2024).Notably,these volumes cannot be redirected to other markets and hence would result in a loss to the overall global gas supply.Russias LNG exports to the European Union stood at around 21 bcm in 2024 and are expected to be gradually redirected to other markets(primarily Asia)in 2026.Russias piped gas exports to China are assumed to continue to increase via the Power of Siberia pipeline system,from 30 bcm/yr in 2024 to 44 bcm/yr by 2030.In addition,Russias Far East Pipeline is assumed to start operations in 2027 and ramp up to a range of 10-12 bcm/yr by 2030.These assumptions reflect the latest agreements signed between Gazprom and CNPC on the potential to increase Russian piped gas deliveries to China.Natural gas prices in Europe and Asia could converge to the range of short-run marginal cost of US LNG This forecast partially relies on external energy price assumptions,informed by forward curves observed at the end of September 2025.In the United States,Henry Hub prices collapsed to USD 2.2/MBtu in 2024 their lowest level since 1998,with the exception of the 2020 pandemic period.Prices recovered to USD 3.5/MBtu in Q1-Q3 2025.Forward curves indicate that Henry Hub prices in the United States are expected to average USD 3.7/MBtu during 2025-2030,almost 15ove the levels experienced between 2019 and 2024.In Europe,natural gas prices on TTF moderated from their 2022-2023 highs and averaged just below USD 11/MBtu in 2024.TTF prices rose to an average of USD 12.5/MBtu in Q1-Q3 2025 amid tighter market fundamentals.In Asia,Platts JKM prices followed a similar trajectory.Following the easing in 2024,JKM prices rose to an average of USD 12.7/MBtu in Q1-Q3 2025.Considering the strong increase in LNG supply,both European hub and Asian spot LNG prices could start to gradually converge towards the short-run marginal cost of US LNG between 2027 and 2030.Under these assumptions,European hub and Asian spot LNG prices are expected to average USD 8/MBtu and USD 8.5/MBtu in the 2025-2030 period,respectively,around 40low the levels experienced between 2019 and 2024.Natural gas prices trending below their historic averages are expected to unlock additional demand,especially in the price-sensitive Asian markets.Based on current forward curves,oil-indexed LNG prices are assumed to average USD 10/MBtu between 2025 and 2030,almost 10low their levels between 2019 and 2024.Power sector and weather-related assumptions Natural gas consumption is particularly sensitive to the weather.This forecast is based on the assumption of average winter conditions for the forthcoming heating seasons(using a five-year rolling average).Renewable power generation capacity additions are based on the IEA Renewables 2025 report.This forecast assumes average hydro availability and average wind speeds.Assumptions on nuclear power capacity are detailed through the relevant sections of the report.IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|40 Medium-term market outlook Asia alone is expected to account for almost 60%of global GDP growth in the medium term IEA.CC BY 4.0.Source:IEA analysis based on Oxford Economics.0 4 8 12 16 20 24 28AsiaNorth AmericaEuropeAfricaSouth AmericaMiddle EastEurasiaTotalUSD trillionForecast GDP growth across key regions,2024-2030 IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|41 Medium-term market outlook Finding a balance:How will the global gas market absorb the next LNG wave?Global LNG supply is expected to expand by almost 50%by 2030.This unprecedented growth in LNG supply is set to profoundly transform the global gas market,unlock additional natural gas demand and drive new marketing strategies.The upcoming LNG wave will play a crucial role in ensuring gas supply security and affordability over the medium term Global LNG liquefaction capacity is set to increase by 300 bcm/yr by 2030 compared with 2024,based on the official timelines of projects that have reached FID and/or are under construction.More than 230 bcm/yr of LNG liquefaction capacity was sanctioned and/or started construction after Russias full-scale invasion of Ukraine.Russias piped gas supplies to Europe fell by 120 bcm during 2022-2023,equating to around one-fifth of global LNG trade at the time.The scale-up of LNG supply is playing a key role in rebalancing the global gas market,enhancing supply security and improving the affordability of natural gas,including in emerging,price-sensitive import markets.The United States and Qatar are leading the next LNG wave,together accounting for more than 70%of the incremental liquefaction capacity expected to come online by 2030.This strong increase in LNG liquefaction capacity coincides with mounting feedgas supply issues at certain legacy LNG producers,which often face the double challenge of declining upstream deliverability and growing domestic natural gas demand.Feedgas supply issues at legacy producers could reduce LNG production by nearly 20 bcm/yr by 2030.This includes lower LNG export capability at legacy plants in Africa and Southeast Asia.Taking this into account together with assumed ramp-up rates and utilisation factors,this forecast expects global LNG supply to increase by around 250 bcm/yr by 2030 equating to nearly half of the current global LNG trade.This strong increase is comparable to around 7%of Asias thermal coal demand.Domestic production is expected to display varying patterns across key LNG import markets Domestic gas production is expected to increase by more than 55 bcm/yr across key LNG importing countries.This growth is largely concentrated in China,where domestic gas output is forecast to expand by over 20%(or about 55 bcm/yr)by 2030.However,other key LNG import markets in Asia are expected to face declining production rates,including Bangladesh and Pakistan.In Europe,non-Norwegian domestic natural gas production is expected to increase marginally over the forecast period,as production declines in Northwestern Europe are more than offset by the ramp-up of the Sakarya field in Trkiye and the start-up of the Neptun Deep field in Romania.The deteriorating upstream deliverability of ageing North Sea fields in the UK Continental Shelf IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|42 Medium-term market outlook is a key driver behind this trend.In Central and South America,the ramp-up of Vaca Muerta production in Argentina and the development of pre-salt fields in Brazil are set to have an easing effect on the regions LNG import needs over the medium term.Piped gas trade is expected to decline in the medium term Europes piped gas imports(including from Norway)are expected to decline by more than 25%(or 60 bcm)between 2024 and 2030.This forecast assumes that Russias piped gas to the European Union will halt by 1 January 2028,in line with the European Commissions proposal.This would reduce Russian piped gas deliveries to the European Union by nearly 30 bcm compared with 2024.Notably,these volumes cannot be redirected to other markets and hence would result in a loss for overall global gas supply.In addition,Europes piped gas imports from North Africa are expected to decline amid lower piped gas export availability in the region(due to a strong increase in domestic demand)and the expiry of key long-term contracts.This forecast expects lower piped gas deliveries from Norway amid lower gas production in the country(in line with the projections of the Norwegian Offshore Directorate).In contrast,Chinas piped gas imports from Russia are expected to expand by 75%(or almost 25 bcm)through the forecast period.This is largely driven by the ramp-up of deliveries via the Power of Siberia pipeline system and the start-up of the Far East Pipeline in 2027.This forecast also includes a 6 bcm upside potential in line with the latest agreements concluded between Gazprom and CNPC.The continued increase in Russias piped gas deliveries to China is partially offset by lower exports from Central Asia amid the mounting upstream deliverability issues in Uzbekistan.Piped gas supplies between Iran and Iraq are assumed to come to a halt over the medium term amid tightening sanctions,necessitating the scale-up of LNG importing capabilities in Iraq(potentially through the lease of a floating storage and regasification unit).In contrast,piped gas exports from Israel to Egypt are expected to continue to expand during the forecast period(including through the 6 bcm/yr Nitzana pipeline).In South America,piped gas exports from Bolivia to Brazil are expected to come to a halt amid the expiry of the supply contract and declining production rates in Bolivia.Asian markets are expected to drive LNG import growth Natural gas demand across key LNG import markets is expected to expand by almost 11%(or 175 bcm)up to 2030.This demand trajectory reflects current price forward curves for Asian spot LNG and European hub prices(averaging at USD 10/MBtu for 2025-2030 as of end September 2025).Taking into account domestic production and piped gas trade trends,their combined LNG import requirements would increase by around 170 bcm by 2030 compared with 2024.This increase is largely concentrated in Asia,with the regions net LNG import requirements rising by close to 140 bcm by 2030.China and India together account for about 40%of this growth.In contrast,IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|43 Medium-term market outlook Europes LNG import requirements are expected to remain broadly flat over the forecast period comared with the elevated levels expected in 2025,as lower piped gas imports are largely offset by the continued decline in natural gas demand.Central and South America is projected to transition from a small net LNG importer to a small net exporter over the forecast period amid rising domestic production in Argentina and Brazil.LNG use as a marine fuel is projected to expand by 15 bcm between 2024 and 2030.This is driven partly by the rapid expansion of the LNG carrier fleet,which is expected to increase by more than 40%in terms of capacity by 2030 and uses boil-off gas as propulsion fuel.In addition,the number of LNG-fuelled vessels could more than double by 2030 amid tightening emissions regulations.The next LNG wave is expected to unlock additional demand When considering price trajectories informed by current forward curves,LNG demand growth in importing markets would not absorb all the incremental LNG supply over the medium term,leaving around 65 bcm of LNG surplus by 2030.Considering the strong increase in LNG supply,both European hub and Asian spot LNG prices could start to gradually converge towards the range of the short-run marginal cost of US LNG starting from 2027.This would translate into an average USD 8/MBtu and USD 8.5/MBtu in the 2025-2030 period,respectively.These lower price levels would unlock additional demand,especially in the price-sensitive Asian markets,helping absorb LNG supply and limiting the risk of production shut-ins at liquefaction plants.Price-elastic demand across the power sector,gas-intensive industry and the transport sector together with storage operations could absorb an additional 65 bcm of LNG by 2030.This will require the continued expansion of natural gas infrastructure,especially in South and Southeast Asia.Marketing strategies will need to evolve LNG producers and suppliers will need to adapt their marketing strategies over the medium term to ensure that the LNG wave has long-lasting benefits to the development of the global gas market.Pricing terms in long-term supply contracts are already moving towards a better reflection of underlying market fundamentals:by 2030,the share of hub-indexed LNG contracts is set to increase to around half of overall LNG volumes contracted.Hub-based pricing ensures a better demand response across price-sensitive end-use sectors and could play a key role in unlocking additional demand.LNG suppliers will also need to actively develop their short-term trading capabilities to meet the more volatile gas demand patterns emerging in import markets(and partly driven by the growing variability in gas-fired power generation).In addition,greater downstream integration and investment by LNG suppliers in natural gas infrastructure in key emerging markets could unlock and scale up additional LNG demand over the medium term.IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|44 Medium-term market outlook The next LNG wave is expected to unlock additional demand in price-sensitive markets IEA.CC BY 4.0.*TTF and Platts JKM forward curves as of the end of September 2025.*SRMC=short-run marginal cost.For additional details,please refer to the main assumptions section of this report.*Including storage operations.0 50 100 150 200 250 300Incremental LNGliquefaction capacityDerating factorsDomestic production in LNG importmarketsPiped gas tradeDemand growthin LNG import marketsLNG as amarine fuelAdditionalprice-drivendemand response*bcmFeedgas issues atRamp-up factors&utilisation ratesLargely drivenby Chinalower piped gas deliveries to EuropeDemand growthat current forwardDemand growthat prices prices*converging withSRMC*LNG carriersLNG-fuelled vesselsof US LNGlegacy producersEuropeDriven byForecast global LNG balance including price-driven high case,2030 vs 2024 Base case High case IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|45 Medium-term market outlook Global LNG growth by 2030 equates to around 7%of Asias thermal coal demand IEA.CC BY 4.0.Asias thermal coal demand in 20246 200 MTNew LNG supply 250 bcm(136 EJ)(9.5 EJ)Forecast global LNG demand growth in 2024-2030 vs Asias thermal coal consumption in 2024 IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|46 Medium-term market outlook The United States and Qatar are set to lead the next wave of LNG supply Between 2024 and 2030,a total of around 300 bcm/yr of new LNG export capacity is expected to come online from projects that have already reached FID and/or are under construction.This represents the largest liquefaction capacity wave in any comparable period in the history of LNG markets.While the LNG market is set to tip into a phase of accelerated growth thanks to the burgeoning liquefaction wave,feedgas issues at existing projects and growing domestic gas demand are increasingly likely to emerge as constraining factors on some legacy LNG exporters,particularly in the Pacific Basin.Nonetheless,potential LNG supply is expected to grow by around 250 bcm by 2030 compared with 2024 levels.This equates to almost half of the current global LNG trade.On the demand side,while mature markets such as Europe,Japan and Korea are set to remain important pillars of the global LNG trade,their share of the market is set to continue to decrease as import growth increasingly comes from newer markets,particularly in Asia.3 For a closer look at liquefaction project FIDs and capacity additions,please see the IEAs Global LNG Capacity Tracker.LNG supply growth supported by record FID streak Between 2019 and October 2025,about 390 bcm/yr of LNG export capacity reached FID.3 This is more than double the liquefaction capacity sanctioned during the 2014-2018 period.With a traditional construction period of four to five years,the majority of these projects are set to come online in the second half of this decade,driving a new wave of LNG supply growth.While projects have already started coming online in 2025 and additions are set to accelerate in 2026,the peak in capacity additions this decade is expected to occur in 2027 and 2028.Over 70%of liquefaction capacity additions to 2030 are set to come from the United States and Qatar,further concentrating global supply in todays top two exporting markets.Canada is set to account for a further 9%of capacity growth on its own due to its first two liquefaction projects coming online.African projects led by Nigeria LNG train 7 are expected to cover about 6%of global capacity growth to 2030.However,not all projects having reached FID over this period are expected to contribute to global LNG supply upside this decade:Mozambique LNG(18 bcm/yr)and Russias Arctic LNG 2 project IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|47 Medium-term market outlook(27 bcm/yr),both of which reached FID in 2019,are not included in our liquefaction capacity outlook.Construction was halted in 2021 at the former following a declaration of force majeure in relation to security concerns in the country.At the latter project,the first two trains were reported operational in December 2023 and May 2025,but,being under international sanctions,the project is not considered as a source of firm supply in this outlook.However,while Arctic LNG 2 did not export cargoes until June 2025,from June 2025 to September 2025,it loaded eight cargoes from train 1 that were exported to one regasification terminal in China.Hence,sporadic LNG exports from the two-train plant cannot be excluded,which adds further upside potential to the global LNG supply during the forecast period.Ageing upstream resources and domestic gas demand growth raise headwinds for some legacy exporters While new liquefaction projects drive global LNG trade to new highs out to 2030,exports from existing projects across certain markets notably in the Pacific Basin are expected to face growing headwinds as a result of declining feedgas availability and growing domestic gas demand.The Asia Pacific region accounted for as much as about 40%of global LNG supply in the 2016-2018 period as a result of the rapid expansion of Australian liquefaction projects,production kicking off in Papua New Guinea and relatively stable output from legacy producers Indonesia and Brunei.However,with few new projects or FIDs in the region since 2019 and ageing resource basins tied to historical liquefaction projects,medium-term production dynamics face a degree of uncertainty.Australia,the regions largest LNG producer and the worlds third largest,saw only one recent FID for a new liquefaction project(Pluto LNG train 2;6.8 bcm/yr),taken in 2021.While industry players have been developing long-term backfill plans for existing projects whose legacy production fields have entered declining phases notably for the Darwin LNG,North West Shelf Australia LNG,Gorgon LNG and Prelude FLNG projects timing around the delivery of some of these new upstream assets and the growth in domestic gas demand could dampen Australian LNG export growth potential through to 2030.Indonesia is another market where both upstream dynamics and domestic demand are set to affect the availability of LNG for export to the global market.Indonesian LNG loadings trended downward from 2010 to 2021 as legacy gas fields have progressively been depleted and limited new developments have come online to backfill liquefaction projects.While Tangguh LNGs three trains successively came online from 2009 to late 2023,only two of the original eight trains from the countrys legacy Bontang LNG project remain online today due to declining feedgas availability.Indonesian LNG loadings have started to recover since 2022 and upstream discoveries and investments have been announced in recent years.However,domestic gas demand has also absorbed a growing share of these loadings,rising from an average of 17%in 2016-2020 to about one-third in the first nine months of 2025.The IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|48 Medium-term market outlook speed at which new upstream assets can be unlocked will therefore be key to servicing both domestic demand growth and contractual export obligations in the medium term.Ongoing upstream investments in Malaysia are set to keep the countrys medium-term exports broadly in line with recent years loadings,although the varying quality of new gas finds could slow backfill efforts.Domestic demand is also expected to grow,but is not expected to significantly affect the availability of Malaysian LNG on the global market.Overall,we expect exports from countries in the Asia Pacific region to slowly trend downward to 2030,with the risk that delays to backfill projects(in both FIDs and project execution)lead to steeper declines in the latter part of the outlook.LNG demand growth hinging on developing markets While todays largest LNG exporters are set to increase their share of supply in the coming years,the LNG import landscape is set to evolve more significantly,with an increasing share of the demand being driven by newer markets,particularly in Asia.The worlds more mature LNG importers are set to remain important pillars of global LNG trade through to 2030,but they are not expected to act as key drivers of demand growth.The share of markets like Europe,Japan and Korea as a proportion of global imports has fallen over the past decade and is set to remain on this trajectory to 2030.In Europe,LNG imports are set to increase significantly in 2025 as a gas market balancing lever amid declining pipeline imports from Russia.However,the medium-term trend is for only marginal incremental imports from that point as demand continues to soften and pipeline imports stabilise.Continued nuclear restarts in Japan are set to limit the potential upside in the countrys LNG imports through to 2030.In Korea,however,LNG imports are set to grow more strongly during the outlook period as alternative electricity generation capacity makes less of a dent in power sector gas burn dynamics amid rising electricity demand.Despite remaining upside potential in mature LNG importing markets,most LNG demand growth is set to be driven by newer LNG markets,notably in Asia.As the worlds largest LNG importer in 2024,China is first among these.Although LNG is set to continue acting as a balancing lever for the Chinese gas market complementing domestic production growth and growing pipeline imports from Russia in the latter part of the outlook it remains a key pillar of supply for in the country.Despite a significant drop in LNG imports expected in 2025(in contrast to the increase in Europe),Chinas LNG imports could grow by more than 20%in the base case and nearly 50%in the high case from 2024 levels by 2030.Smaller,more price-sensitive markets with less long-term contract coverage are also expected to grow their LNG imports through to 2030.The next wave of LNG supply is expected to soften the cross-basin competition for LNG cargoes that has intensified in recent years.As such,Asian importers that have intermittently been priced IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|49 Medium-term market outlook out of the market by high spot LNG prices are expected to import more LNG.By 2030,gross LNG imports into these other Asian markets could grow by nearly 150%in the high case(or by more than 125%in the base case)compared with 2024 levels.4 However,LNG import growth in South and Southeast Asia will hinge on important gas infrastructure and network developments as well as on continued policy support.Governments assessment of the affordability and accessibility of LNG in ensuring energy security will be key in accelerating its uptake,particularly following the drastic LNG market and price movements experienced in recent years.While incremental global LNG supply is set to underpin emerging market LNG import growth,a highly interconnected and flexible LNG market remains a key balancing lever in the face of potential shocks both demand-or supply-driven,regional or global.As illustrated in the 2022/23 energy crisis,LNG flows remain susceptible to drastic reshuffling in response to market shocks.A period of low prices could undermine LNG investments While the global gas market is expected to be preoccupied with absorbing the next wave of LNG supply in the medium term,a prolonged period of lower LNG prices could reduce the incentive for project developers to invest in LNG liquefaction projects and in upstream and midstream infrastructure.Considering the long lead times of LNG liquefaction projects,this could lead to a potential tightening of global gas markets post-2030,especially if demand growth follows a higher trajectory.4 Including Bangladesh,Indonesia,Malaysia,Pakistan,the Philippines,Thailand and Viet Nam.IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|50 Medium-term market outlook Annual liquefaction capacity additions accelerate midway through the outlook period IEA.CC BY 4.0.Note:Outlook includes post-FID projects as of 24 October 2025.0 50 100 150 200 250 300 350202520262027202820292030Nameplate capacity(bcm/yr)Central andSouth AmericaAsia PacificAfricaMiddle EastNorth AmericaCumulative liquefaction capacity additions from post-FID projects by region,2025-2030 IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|51 Medium-term market outlook Global LNG carrier capacity is set to grow by around 40%by 2030 As of early 2025,the global LNG carrier fleet comprised over 830 vessels in total.This figure includes large-scale carriers as well as 52 floating storage and regasification units(FSRUs)and 79 small-scale and bunkering vessels.Together,these vessels provide an aggregate operational transport capacity of over 120 million cubic metres of LNG.By 2030,the fleet is expected to approach 1 100 units,representing an increase of about 30%.Meanwhile,the overall LNG shipping capacity is projected to expand by nearly 40%(assuming that the average rate of LNG vessel retirements observed in recent years continues),driven by the shift towards larger and more efficient carriers.More than 350 additional vessels are on order for delivery by the end of the decade,driven by long-term supply contracts.While the global LNG fleet is set to expand strongly over the medium term,the rapid growth in global LNG trade could lead to a tighter shipping market post-2028.The current outlook for global LNG trade suggests that further expansion of the order book for the new LNG carriers would need to expand further to avoid logistical bottlenecks and allow for smooth global LNG flows.This expansion is not solely a function of volume.New vessels are increasingly being designed to enhance efficiency and environmental compliance.The latest generation of LNG carriers integrates air lubrication systems,high-efficiency cargo containment with reduced boil-off rates,hybrid shaft generator systems,and advanced dual-fuel engines designed to minimise methane slip.These features are essential for alignment with international decarbonisation objectives and regulatory frameworks,including those established by the International Maritime Organization(IMO),helping reduce the lifecycle GHG emissions of LNG shipping.Smaller-scale and modular carriers are opening new markets but add complexity to shipping logistics Asia remains the dominant market for LNG imports,with China and increasingly India driving growth.These rising import needs are prompting a parallel expansion of LNG shipping fleets,both in size and range.While utilities historically invested directly in vessels,most have shifted to long-term charters over the past two decades.However,several Asian utilities and trading houses continue to invest directly to secure capacity and reduce market exposure,similar to practices in LNG-exporting countries in the Middle East.Europes pivot to LNG following disruption to pipeline gas deliveries from Russia has also increased near-term demand for spot cargoes and FSRUs,reinforcing the need for flexibility in LNG shipping.Although spot charter rates have remained low throughout much of 2024 and 2025 due to fleet overcapacity and seasonal demand patterns,structural shifts in trade flows and voyage distances continue to test the responsiveness of the global LNG carrier fleet.This transition underscores the importance of an agile and adaptable LNG shipping sector,capable of supporting both long-haul and regional deliveries.IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|52 Medium-term market outlook In emerging markets across Southeast Asia,Africa and Latin America,smaller-scale LNG carriers and modular shipping solutions are being considered to service remote or distributed import terminals.In Indonesia,for example,a USD 1.5 billion small-scale LNG project led by PLN EPI5 aims to replace diesel power plants across six regional clusters,using a hub-based supply chain with feeder vessels that deliver LNG to satellite or remote terminals.The diversification of vessel sizes and functions is expected to accelerate through to 2030,driven by design standardisation,evolving market needs and improved deployment flexibility,even as rising material and construction costs place upward pressure on overall capital expenditure.Shipyard constraints and decarbonisation targets are testing the pace of fleet renewal Despite favourable demand trends,several headwinds could constrain the development of LNG carrier capacity.Supply chain bottlenecks,particularly in specialised shipyards in South Korea and China,have led to cost escalation and delivery delays.At the same time,the industry faces rising uncertainty regarding the long-term role of gas in a decarbonising the global energy system.This uncertainty may limit investment in shipping assets with lifespans extending beyond 2040.5 A subsidiary of the state-owned electricity company Perusahaan Listrik Negara(PLN),specialising in energy infrastructure development.From a regulatory standpoint,compliance with the IMOs Carbon Intensity Indicator(CII)and Energy Efficiency Existing Ship Index(EEXI)is already influencing operational and investment decisions,including speed reduction6 and fleet retrofitting,while also driving the adoption of new technologies to reduce GHG emissions.As emissions benchmarks tighten beyond 2030,regulatory pressures are expected to drive accelerated fleet renewal,with investments shifting toward more efficient,compliant vessels.Balancing energy security with climate goals The global LNG carrier fleet is expanding steadily to support new liquefaction projects and flexible trade patterns.However,new orders could peak by the late 2020s as decarbonisation efforts accelerate and low-emissions alternatives gain market traction.A resilient LNG carrier market through to 2030 will require not only adequate shipbuilding capacity,but also coordinated planning between producers,importers and shipowners.Strategic investments in digital vessel optimisation,energy efficiency technologies and low-emissions propulsion,including LNG dual-fuel engines and potentially designs adaptable to hydrogen and its derivative fuels,will be essential to align operational performance with evolving climate objectives.The LNG shipping sector stands at a pivotal juncture:critical for supporting energy security,yet increasingly under pressure to adapt its fleet to reduce emissions amid tightening regulatory frameworks.6 Speed reduction helps lower emissions because fuel consumption and therefore CO output increases exponentially with ship speed.IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|53 Medium-term market outlook Following strong deliveries in 2024,2025 is expected to set a new record for LNG vessel additions Growth of the global LNG fleet and annual vessel additions,2009-2030 IEA.CC BY 4.0.Notes:Net vessel additions represent the number of new LNG vessels added to the global fleet each year,minus those that are retired or scrapped.Data are based on the LNG carrier order book as of September 2025;vessels ordered after this date are not included,which may cause net additions to appear lower after 2025.Sources:GIIGNL(2025),GIIGNL;GTT(2025),Order book;ICIS(2025),LNG Edge.IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|54 Medium-term market outlook US gas production poised for rapid growth,driven by growing demand and LNG exportsAfter a brief slowdown in 2024,US natural gas production is set to return to steady growth,supported by surging LNG exports,growing consumption,upstream productivity gains and expanded pipeline takeaway capacity in key shale-producing basins.Between 2024 and 2030,US gas production could grow by up to 20%(210 bcm/yr)in our high case,reaching 1 280 bcm/yr by the end of the decade and cementing the United States position as the worlds largest gas producer.This corresponds to an annual growth rate of 3%,slower than the nearly 4%average growth during the decade to 2024,but in line with the pace observed in the past three years.Virtually all production growth comes from shale and tight oil plays,while conventional producing areas register moderate declines.The Appalachian Basin is expected to see the largest increase,adding around 80 bcm/yr of supply between 2024 and 2030.This growth is supported by pipeline takeaway capacity additions such as the recently completed Mountain Valley Pipeline(21 bcm/yr),and several expansion projects along the Transco pipeline system.Rising demand in the eastern part of the United States,coupled with declining pipeline gas imports from Canada,further supports the basins expansion.The Permian Basin also remains a key driver of production growth,mainly through associated gas from oil-directed wells.With forward oil prices supportive of sustained upstream activity,Permian gas output is expected to increase by nearly 70 bcm/yr over the forecast period.Several major pipeline projects are expected to relieve bottlenecks by adding takeaway capacity from the Permian to the US Gulf Coast,including Apex(21 bcm/yr),Blackcomb(26 bcm/yr),Saguaro Connector(29 bcm/yr)and Eiger Express(26 bcm/yr).Haynesville,a higher-cost dry gas play with close proximity and abundant pipeline connections to Gulf Coast LNG terminals,is also expected to contribute significantly,adding nearly 50 bcm/yr by 2030.This increase is driven by robust consumption and LNG export growth,which are expected to keep domestic gas prices at sufficient levels to support expanded Haynesville production.Other shale plays collectively add more than 25 bcm/yr over the projection period.Marginal technological improvements,such as simultaneous fracking,and increasing oil-to-gas ratios in associated gas plays are also expected to support the robust rise in US gas production.If supply-and demand-side adjustments in price-sensitive markets around the world fail to materialise due to infrastructure constraints,policy obstacles or market distortions,US natural gas production could turn out to be lower in our base case compared to the high case.IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|55 Medium-term market outlook US production could grow by up to 210 bcm with support from price-responsive LNG demand IEA.CC BY 4.0.Note:Production levels shown on the graph are associated with the high case.0 200 400 600 8001 0001 2001 4002024202520262027202820292030bcmAppalachianPermianHaynesvilleOther shaleOther dry gas productionNatural gas production in the United States,2024-2030 IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|56 Medium-term market outlook Middle Eastern natural gas production is expected to expand by more than 20%by 2030Natural gas production in the Middle East increased by 20%(or almost 125 bcm)between 2018 and 2024.This strong growth was largely supported by upstream developments in Iran,Israel,Qatar and Saudi Arabia.Higher production was primarily driven by the regions growing gas demand,while extra-regional exports contributed just 13%to the overall production growth.This forecast expects Middle Eastern gas production to expand by more than 20%(or 165 bcm)between 2024 and 2030.Qatar alone is expected to account for almost 45%of this growth.In contrast with the 2018-2024 period,natural gas exports(both LNG and piped)are expected to contribute around 40%of the overall production growth in the forecast,largely supported by price-responsive LNG demand.Qatar:Strong LNG export growth is set to drive upstream developments over the medium term Qatars natural gas production grew by 2tween 2018 and 2024,mainly to support stronger domestic demand,while the countrys LNG exports and piped gas supplies to Oman and the United Arab Emirates remained broadly flat.Qatars natural gas production is forecast to increase by nearly 45%(or almost 75 bcm)between 2024 and 2030,primarily driven by the expansion of the countrys LNG exports,which are expected to increase by more than 55%(or over 60 bcm/yr)by 2030 and solidify Qatars position as the worlds second-largest LNG exporter.Natural gas deliveries via the Dolphin pipeline system to Oman and the United Arab Emirates are expected to remain flat at around 20 bcm/yr in the forecast period.Domestic demand including natural gas used for LNG production is forecast to increase by 25%(or nearly 15 bcm)between 2024 and 2030.This strong supply growth will be almost entirely underpinned by the expansion projects at the giant North Field.The drilling campaign for the North Field East expansion project started in March 2020 and consists of eight wellhead platforms and 80 development wells.The feedgas will supply four new LNG trains with a combined capacity of almost 45 bcm.The upstream part of North Field South project consists of five platforms and 50 development wells.The feedgas will supply two liquefaction trains with a combined capacity of around 22 bcm.Saudi Arabia:Continued production growth is set to support the growing role of natural gas in power generation Saudi Arabias natural gas production increased by more than 10%(or 11 bcm)between 2018 and 2024.This growth was largely supported by associated natural gas and the countrys rapidly expanding gas processing capabilities,rising from just 2 bcf/d(20 bcm/yr)in 2000 to over 19.1 bcf/d(195 bcm/yr)by the end of IEA.CC BY 4.0.Gas 2025 Analysis and forecasts to 2030 PAGE|57 Medium-term market outlook 2024.Incremental gas supplies primarily serve the countrys rapidly rising natural gas demand in the industrial and power sectors.Saudi Arabia has no LNG or piped gas export capacity.Saudi Aramco has an ambitious natural gas development strategy.The company aims to increase its gas production by more than 50%compared with its 2021 production levels by 2030.This forecast expects Saudi Arabias natural gas output to expand by almost 40 bcm between 2024 and 2030.This strong growth will be partly supported by the Jafurah and South Gawar unconventional gas fields.Jafurahs production is anticipated to ramp up and deliver around 2 bcf/d(or 20 bcm/yr)of sales gas by 2030.South Gawar started operations in 2023 and the fields output is expected to ramp up from around 3 bcm/yr to 7.6 bcm/yr in the forecast period.Incremental domestic gas production is expected to drive Saudi Arabias oil-to-gas switching strategy in the power sector and support the countrys expanding industrial activity.Gas-to-power demand is forecast to increase by more than 40%by 2030.Irans natural gas demand growth is set to slow Irans natural gas production grew by an impressive 30%(or almost 70 bcm)between 2018 and 2024,solidifying the countrys position as the Middle Easts largest gas producer.This strong growth was primarily driven by the continued development of the South Pars field and supported both oil-to-gas switching in the power sector and the expansion of gas-intensive industries(including fertilisers and chemicals).Following this strong increase,Irans gas demand growth is expected to slow to an average rate of just 1%per year between 2024 and 2030.This would translate into an increase of less than 15 bcm/yr by 2030 and would primarily serve the countrys domestic market.Growth will be primarily supported by South Pars phase 11,which was inaugurated in 2023,and production is expected to ramp up to over 18 bcm/yr in the forecast period.Israels role as a key regional piped gas supplier is set to further strengthen over the medium term Israel has significantly expanded its natural gas production during the past decade to become a key regional piped gas supplier,including to Egypt and Jordan.The countrys natural gas output has risen more than tenfold since 2009 to reach around 27 bcm in 2024.This strong growth was primarily driven by the developme
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