Energy security and affordability present global challenges, but both are integral elements of a successful energy transition, alongside sustainability to mitigate climate change. The current energy crisis is driving inflation, slowing economic growth and contributing to social turmoil.

Some choices made by countries in response to the crisis, such as improving energy efficiency and scaling renewables, will be beneficial for the wider energy transition. But other actions – including increased production of electricity from coal and broad-based consumption subsidies – put longterm energy transition imperatives at risk, while leaving those countries more vulnerable to future crises and putting global climate goals out of reach.

The energy crisis highlights the impact of trends and structural challenges that have been years in the making. It is a consequence of factors that include underinvestment in the energy system and its transition over many years, as well as shocks induced by COVID-19. The global pandemic led to a historically sharp drop in energy demand and investment in 2020. While post-pandemic demand rebounded in 2021, global energy supply and investment were unable to keep up. Climate change-induced extreme weather events, such as wildfires, heatwaves and droughts further strained the conventional energy infrastructure.

Energy markets and systems were therefore already under pressure when Russia started its war in Ukraine. The war’s shock waves were felt throughout interconnected energy markets and led to a global energy crisis with severe economic consequences.

Short-term responses to the crisis have pushed global CO2 emissions to record highs1 as several countries have reverted to coal for power generation in a bid to save their natural gas for other uses.

Policies to mitigate the impacts of rising energy prices have stressed public finances and led to emergency energy curtailment. To pursue the energy transition at pace, short-term interventions should align with climate goals, protect market signals, target fiscal discipline and incentivize demand response.