Bain & Co: Are Corporate Clean Energy Targets Realistic?

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Bain & Company's 2024 Energy and Natural Resource Executive Pulse survey points to a growing cynicism from executives regarding the achievability of net zero
Bain & Co research shows energy execs are growing sceptical about achieving net zero by 2050, with many citing financial, political and consumer issues

Bain & Co examined the growing scepticism among energy sector executives towards net zero targets at COP29 in Baku, Azerbaijan.

It surveyed more than 600 executives during and after the event to capture their views on the industry’s decarbonisation potential.

The survey reveals a significant scepticism, with 62% of the executives believing that achieving net zero carbon emissions worldwide by 2050 is unlikely, expecting it no earlier than 2060.

This figure has risen from 54% in 2023, indicating increasing pessimism despite the industry’s ongoing efforts towards decarbonisation.

“The energy transition looks slower as it becomes even more difficult to ensure adequate investment returns and progress diverges across a fragmenting world,” Bain notes in its survey analysis.

The intricacies of net zero goals

Why such negativity about the future of sustainable practices in the industry?

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Bain & Co identifies several contributing factors including high interest rates, inconsistent policy frameworks and lukewarm consumer reactions to green energy initiatives.

A primary concern voiced by executives is the financial sustainability of energy transition projects, with 70% indicating that customer reluctance to pay higher prices is a major hurdle (up 14% from 2023).

The study also indicates a significant rise in the cost of capital — by 500 basis points — potentially increasing the revenue required for financing decarbonisation projects by up to 50%.

Many of the executives surveyed believe that consumers would be unwilling to stomach higher costs in exchange for lower emissions

These financial challenges are pushing executives to focus more on projects with clear investment returns, which are not always present in decarbonisation efforts.

"The pace of the energy transition looks to be slowing as it becomes even more difficult to ensure adequate investment returns and progress diverges across a fragmenting world," says Michael Short, Partner at Bain & Company in Energy and Natural Resources.

Michael Short, Partner at Bain & Company in Energy and Natural Resources | Credit: Bain & Company

Differences across regions

The report not only examines general industry apprehension, but also explores geographical variations in the industry’s enthusiasm for clean energy investments.

Data reveals that North America is currently seen as the most promising region for energy transition investments, with 79% of executives favouring it over Europe (65%).

Contributing to this perception are policies like the US Inflation Reduction Act, which is also benefitting US-based airlines in developing sustainable aviation fuel.

However, clarity on IRA subsidies remains a concern for 42% of US executives, who find the regulations complex.

Renewable energy initiatives are viewed as transition-oriented growth projects, meaning investors can expect some return on investment

Yet, the outlook is somewhat brighter in other regions with businesses in the Middle East, Asia-Pacific and Latin America feeling optimistic about the potential for profit from renewals, hydrogen and lithium investments.

The role of technological innovation

Technology, especially generative AI, is seen as pivotal in enhancing operational efficiency.

According to Bain & Co's analysis, 65% of executives anticipate GenAI will significantly impact their operations by 2030.

Nonetheless, there exists scepticism about AI's direct role in emission reduction.

Bain & Co's study finds that executives have confidence in the ability of AI to deliver net zero

“The energy transition is first and foremost about constructing massive amounts of physical infrastructure,” the report states, reflecting the limited potential of AI to directly address decarbonisation challenges.

While leveraging AI for maintenance and supply chain improvements is becoming more common, many companies are prioritising technologies with quicker returns on investment.

“Over time, we expect ENR companies to pursue more advanced and potentially higher-value use cases,” Bain predicts.


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