Fossil fuel generation peaking, but corporate backtracking threatens climate goals

But even with power sector emissions expected to decline as fossil fuels wane, the oil and gas sector remains a significant challenge, with several major companies rolling back their climate commitments as markets continue to reward them for prioritizing extraction.

Fossil Fuel Use to Peak, Then Decline

“The latest renewables trends mean the world is nearing a turning point—at least in the power sector—where fossil demand starts to decline,” writes Dave Jones, Global Insights Program Director at Ember.

The London, UK-based think tank attributes declining fossil fuel use amid rising power demand to added solar and wind, which reduced fossil generation by an estimated 22 per cent from what it would have otherwise been. In 2023, solar capacity additions rose 74 per cent from 2022 levels, while wind rose 47 per cent, gaining ground in the clean energy transition.

Ember looks to China’s rising renewable capacity as a sign of a global energy shift, as China installed about two-thirds of all the solar panels and wind turbines in 2023, with coal on the decline.

Ember predicted fossil fuel use would peak in 2023, with emissions declining in 2024. However, emissions rose in 2024, which Jones attributes to lower-than-expected global hydropower capacity due to drought.

Renewables Grow, Corporate Climate Commitments Shrink

Despite the growth in renewables, emissions from fossil fuels reached record highs in 2024, reports Carbon Brief. That was largely due to continuing demand for oil and gas, combined with a lack of corporate regulation from countries within the Organisation for Economic Co-operation and Development (OECD).

Top oil and gas companies, including BP, pivoted towards renewables after prices plunged during the pandemic, but rebounding oil and gas prices in 2024 changed their tune, reports the New York Times. BP pledged in 2020 to reduce oil and gas production, but backtracked three years later—after reporting record profits.

“If you look at the relative shareholder returns, the market’s been sending a very clear signal that it wants energy companies to focus on their core competencies,” Mark Viviano, a managing partner at Kimmeridge, an energy investment firm based in Denver and New York, told the Times. “That doesn’t mean abandoning the energy transition, but it just means being more pragmatic about it.”

Policy and Global Response

Canadian businesses across industries are also backsliding in their climate commitments, found a survey by the Montreal-based Business Development Bank of Canada (BDC). Sustainable Biz reports that carbon offsetting, third-party carbon tracking, and corporate policies to reduce air travel all marginally declined from 2022 to 2023.

But even when they’re sustained, those nominal commitments aren’t making an impact, according to a new monitoring tool from Oxford University’s Climate Policy Monitor. Companies worldwide have seen a 23 per cent increase in net-zero pledges, but global emissions continue to rise amid an implementation gap.

The findings suggest that voluntary pledges don’t work, states a Climate Policy Monitor media release. “Following a groundswell of voluntary net-zero targets by companies, regulators are increasingly introducing mandatory rules underpinned by widely endorsed standards,” co-lead Dr. Thom Wetzer said. “Globally operating businesses will have to navigate that reality, even as the Trump administration may attempt to reverse United States climate policy.”

The growth in renewable energy and energy storage that Ember and others have been documenting is part of the picture, but “government policy needs to extend beyond just renewables, else the transition away from fossil fuels could be very slow indeed,” writes Jones.