Confidence in the world’s ability to achieve net zero by 2050 looks to be eroding, according to Bain & Company’s fourth annual Energy & Natural Resource Executive Survey.
The energy consultancy’s report shows an increasing percentage of industry executives expect the world to reach net zero by 2060 or later, with 62% sharing this sentiment in 2024 versus 54% in 2023.
Bain & Company surveyed over 600 leaders across the globe to better understand their views on the energy transition, new technologies, investment opportunities and where they see the greatest challenges for decarbonisation.
“This year’s survey found that energy and natural resource companies have not dampened ambitions for their transition-oriented growth businesses,” said Joe Scalise, head of Bain & Company’s Energy and Natural Resource practice, based in San Francisco.
“However, customers’ willingness to pay is a growing issue, as is the ability to generate adequate return on investment (ROI) in energy transition-oriented projects. As a result, companies are focusing on projects with a viable ROI path.”
He added: “Clearly, the longer the executives are at the front lines of the energy transition, the more sober they are getting about the transition’s practical realities.”
The report highlighted other themes, finding most companies are maintaining or increasing investments in their transition-oriented growth businesses.
Executives in the Middle East (61%), Asia-Pacific (55%), and Latin America (51%) are feeling more optimistic about the prospects of their transition-oriented growth such as renewables, hydrogen, bio-based products, and lithium and other transition commodities that will contribute to their company’s valuation and profits by 2030, highlighted Bain & Company.
Hence, they are maintaining or increasing green investments. Only 4%, 12% and 10%, respectively, of respondents from the three regions expressed less optimism, while the remainder showed no significant change.
The survey revealed a more balanced picture in Europe where 30% of industry leaders revealed more optimism versus 27% who were less optimistic of their new energy growth business areas contributing to bottom-line.
Like last year, respondents say the greatest obstacle to scaling up their transition-oriented businesses is finding enough customers willing to pay higher prices (or having equivalent policy support) to create sufficient return on investment.
“The direct impact of higher interest rates on the cost of transition projects is one of the most important stories of 2023 and is likely shaping executives’ perspective on the challenges associated with customer willingness to pay,” said Grant Dougans, a leader of Bain & Company’s Energy and Natural Resource practice, based in Washington, DC.
“Higher rates put real upward pressure on the effective cost of low carbon projects.”
The report also highlighted North America is now viewed as the most attractive region for green investments with 79% of all executives viewing it as an attractive region for energy transition investments.
The next most desirable region is Europe at 65%.
The US Inflation Reduction Act (IRA) is a major factor in North America’s investment attractiveness, but factors such as the availability of relatively low-cost natural gas feedstock also influenced the result.
Around 70% of executives worldwide say reducing policy uncertainty would very significantly improve their ability to scale up transition-oriented businesses.