Are peak CO2 emissions in sight? 5 key takeaways from the IEA’s International Power Evaluation

The Worldwide Power Company’s (IEA) newest annual evaluate of the worldwide power panorama may scarcely have come at a extra fraught time, with the world having been thrust into one more fossil gas disaster by the battle within the Center East.

A fragile ceasefire was agreed earlier this month between the US and Iran, however tankers are nonetheless largely blocked from passing via the essential Strait of Hormuz, with the knock-on financial impacts on gas provides, meals costs, power prices, and inflation anticipated to final for months to come back, even when a peace deal is reached within the coming days. With out such an settlement analysts worry the nations will quickly face extreme gas shortages and the prospects of a world recession 

Towards this backdrop, many governments all over the world have already moved to strengthen power effectivity and clear know-how insurance policies, in a bid to catalyse investments that may cut back their reliance on fossil gas imports. If these governments and and rising numbers of shoppers and companies speed up their shift in the direction of clear applied sciences within the coming months, then it’s positive to supply an additional increase to the tendencies set out within the IEA’s report.

Certainly, even earlier than the US-Israel assaults on Iran, the report exhibits that electrification, clear applied sciences, and renewables additional ate into fossil gas demand progress final yr, leading to an solely marginal enhance in world energy-related CO2 emissions.

Right here, BusinessGreen rounds up the important thing takeaways from the report, which alerts that whereas world emissions should still be rising the clear power transition is accelerating.

1.Emissions are nonetheless rising, however now solely fractionally

Are world carbon emissions nearing their peak?

On the one hand, the info is undoubtedly worrying. The worldwide power system – together with electrical energy, heating and fuels – emitted 145 million tonnes extra carbon dioxide (CO2) in 2025 than it did throughout the earlier yr, to succeed in one more all-time excessive of 38.4 billion tonnes. That may be a full 5 per cent greater than in 2019, previous to the Covid-19 pandemic.

That enhance contributed to file atmospheric CO2 concentrations of about 427 parts-per-million (ppm), which had been roughly 2.4 ppm greater than in 2024 and round 50 per cent above pre-industrial ranges – all of which is contributing to world warming that’s already inflicting enormous societal and financial damages. 

Power demand can also be rising once more in lots of industrialised economies on the again of the AI and electrification increase, making the decarbonisation problem much more daunting.

However the IEA report additionally reveals some constructive tendencies that recommend the height in world emissions is nearing. Crucially, final yr’s enhance in world energy-related emissions was solely a fractional 0.4 per cent, which was round half the dimensions of the rise seen in 2024 of 0.8 per cent.

Furthermore, emissions progress remained under financial progress in 2025, with world GDP rising round 3.1 per cent final yr, which the IEA mentioned indicated “a continued decoupling between emissions and financial exercise”.

It additional provides to the development seen over the previous decade: considered one of slowing annual world emissions progress from the power system, pushed by widening electrification, clear know-how adoption, and enhancing power effectivity.

There are additionally fascinating differing geographical traits price noting. China should still be the world’s largest emitter, however the nation’s energy-related CO2 emissions really fell by round 0.5 per cent final yr because of its speedy rollout of renewables and electrical automobiles (EVs) in addition to slower energy demand progress. As well as, energy-related emissions in India, the world’s most populous nation, had been broadly flat final yr, thanks to wash applied sciences and a monsoon season that resulted in cooler climate and diminished energy demand for air-con.

Consequently, for the primary time for the reason that Nineties, energy-related emissions in growing and rising economies really grew at a slower price – 0.3 per cent – than they did in superior economies the place emissions rose 0.5 per cent, largely because of colder winter climate driving up demand for heating.

Wanting forward, there’s uncertainty over when emissions will peak, given the shortage of readability over the extent to which the speedy growth of power-hungry knowledge centres worldwide will offset the continued enhance in clear power era. There’s a huge danger that, even with renewable energy sources setting recent information rising energy demand for AI will lengthen the worldwide financial system’s reliance on carbon-intensive fossil fuels for longer than would have beforehand been hoped.

However the slowing price of emission progress seen in recent times however suggests a peak may and needs to be reached earlier than the top of the last decade because the clear tech increase continues to speed up – notably given the way in which the Iran Battle has triggered a recent wave of formidable clear power insurance policies.

2. The ‘Age of Electrical energy’ has very a lot arrived

One other clear development that stands out within the IEA’s newest report is that of electrification, with the worldwide power system more and more shifting away from flamable fuels in the direction of applied sciences that require electrical energy, whereas on the similar time demand for energy is rising quickly to feed the surging investor and shopper curiosity in digital and synthetic intelligence (AI) applied sciences.

Towards a difficult financial and geopolitical backdrop final yr, and thanks partly to the speedy uptake of extra environment friendly applied sciences, world power demand progress slowed fractionally to 1.3 per cent final yr.

But when electrical energy alone, world demand for energy grew three per cent, which is nicely over twice as quick as the expansion price for all types of power demand, pushed by a number of sectors throughout buildings and business, and boosted by speedy demand from EVs and knowledge centres.

Electrical energy demand progress was really slower final yr than it was in 2024, when it grew 4.4 per cent, however it nonetheless stays above the annual common noticed over the last decade prior, which stood at 2.8 per cent, underscoring how electrical energy demand is on the rise.

Attributable to rising use of air-con and warmth pumps, the constructing sector was once more the most important single contributor to electrical energy consumption – accounting for practically 45 per cent of the whole annual enhance – adopted by the commercial sector.

In the meantime, transport contributed over 10 per cent of world electrical energy demand progress in 2025, up from a median of solely 4 per cent over the earlier decade, as EV adoption continued to speed up worldwide. Demand from knowledge centres additionally continued to develop strongly, with their electrical energy consumption rising by a considerable 17 per cent, in response to the IEA.

It underlines how what the IEA has beforehand described because the “age of electrical energy” is already underway, with electrical energy consumption projected to develop six instances quicker than total power demand over the subsequent decade.

“International power demand continued to extend in 2025 towards a fancy financial and geopolitical backdrop, with one development unmistakeable: the increasing electrification of economies,” mentioned IEA government director Fatih Birol.

3. Renewables progress is unstoppable

In the interim at the very least, quickly increasing renewable and clear energy era helps to satisfy a big chunk of the world’s rising urge for food for electrical energy.

Certainly, renewable electrical energy era has been on its inexorable march for over twenty years now and exhibits little signal of relenting. In 2025, world annual renewable capability additions elevated 16 per cent, reaching 800GW of latest capability regardless of challenges linked to provide chain constraints, grid connection delays, monetary pressures, and coverage shifts. 

General, renewable sources alongside nuclear met virtually 60 per cent of the whole progress in world power demand final yr, whereas energy era from these sources exceeded the whole progress in electrical energy demand, in response to the report.

All main fuels and applied sciences expanded to satisfy rising demand, however photo voltaic alone accounted for greater than 1 / 4 of the rise, making it the one largest contributor to world power provide progress for the primary time, simply forward of fossil fuel at 17 per cent.

The extra 600TWh of photo voltaic era added final yr worldwide “marked the most important structural enhance ever recorded in a single yr for any electrical energy era know-how”, which in flip contributed “to a decline in coal-fired electrical energy era globally”, the IEA mentioned.

Photo voltaic PV capability additions in 2025 rose by round 12 per cent, surpassing 600GW for the primary time, pushing cumulative capability to round 2,800TW, and making photo voltaic the know-how with the most important put in capability globally. Some 30 nations put in over 1GW of photo voltaic in a single yr in 2025, virtually twice as many as in 2020, the report reveals.

In the meantime, following secure progress in 2024, annual wind capability additions elevated practically 40 per cent globally, setting a brand new file at round 160GW, regardless of ongoing provide chain challenges.

Battery storage additionally added 110GW of capability final yr, which is greater than the most important ever annual addition in fossil fuel capability, whereas building additionally started on new nuclear energy capability totalling 12GW worldwide final yr, the IEA mentioned.

And now, with the Iran Battle having brought on enormous disruption to fossil gas power provides, many governments all over the world have moved to strengthen power effectivity and clear know-how insurance policies, in a bid to catalyse additional funding within the clear applied sciences that may cut back their reliance on fossil gas imports.

In a deeply unsure world, few issues are a safer guess than the continued and speedy growth of renewables worldwide.

4. A combined image for the broader clear tech sector

It is not simply renewables which are having fun with speedy progress that may very well be additional accelerated by the disaster within the Center East. EVs are additionally being adopted at rising charges in most markets and geographies all over the world, because the economics tip more and more in favour of transport that doesn’t depend on costly fossil fuels.

International electrical automotive gross sales continued their speedy ascent, in response to the IEA, climbing 20 per cent year-on-year to round 21 million fashions bought, that means EVs now comprise round 1 / 4 of all automotive gross sales worldwide. 

China stays the world’s largest EV market, the place battery vehicles account for greater than half of all new automotive gross sales, however Europe as an entire overtook China because the quickest rising main marketplace for EVs. Within the UK, new EV gross sales now account for 25 per cent of the home market, whereas in Norway market penetration now stands at a world-leading 96 per cent. In India, in the meantime, EV gross sales grew 75 per cent final yr to succeed in a file 2.3 million and loads of different markets in Asia and Latin America additionally noticed EV gross sales develop considerably.

Nevertheless, the image is not fairly so constructive for warmth pumps, gross sales of which really fell by round two per cent worldwide final yr. Regardless of rising demand for the low carbon heating home equipment in Europe final yr of 11 per cent, gross sales had been flat in China and Japan. Warmth pump gross sales additionally declined within the US, partly pushed by a slowdown in housebuilding, though they nonetheless outsold fuel boilers for the fourth yr working within the nation.

However with oil and fuel shortages sparked by the Iran Battle having despatched the prices of fuel hovering in latest weeks, the warmth pump business shall be hoping it interprets into renewed coverage, shopper, and enterprise help for decrease carbon heating applied sciences that don’t depend on costly fossil fuels.

5. Fossil gas demand is falling quick

Inevitably, the tendencies in the direction of electrification, renewables, and clear applied sciences are all beginning to eat into fossil gas demand worldwide.

The IEA has beforehand projected a peak in oil demand earlier than the top of the last decade, and final yr demand progress slowed but once more to only 0.7 per cent, signalling that an historic peak is nearing.

The slowdown mirrored weaker progress in petrochemical feedstock use, in addition to the continuing erosion of demand from rising electrification of street transport and better biofuels use, in response to the IEA.

“The 2025 enhance fell nicely wanting the 2010-19 common annual rise of 1.4 million barrels per day, providing additional proof of a structural deceleration in oil markets,” the report states.

Fossil fuel demand progress additionally slowed considerably final yr, rising only one per cent amid weaker industrial exercise and comparatively excessive LNG costs. Development was strongest within the US, the EU – partly as a result of colder climate – and the Center East, however successfully flatlined within the Asia-Pacific area in 2025, with differing regional elements at play in all cases.

Nevertheless, the usage of applied sciences equivalent to photo voltaic PV, wind generators, and warmth pumps now displaces fossil fuel demand equal to half of all world annual liquefied pure fuel (LNG) exports worldwide, in response to the report.

International coal demand progress additionally slowed to only 0.4 per cent in 2025, considerably under the 1.4 per cent progress seen the earlier yr. International coal demand progress has now slowed yearly since 2021.

Backed by the help of the Trump Administration, demand for coal in electrical energy era grew 10 per cent within the US final yr, reversing the decline of latest years, however in China – the world’s largest coal shopper by far – energy era from coal fell for the primary time in a decade in 2025. Coal era additionally fell in India and the EU.

Many rising and growing nations proceed to fee new coal-fired energy era, and round a 3rd of the world’s coal demand is for heavy industrial manufacturing of commodities equivalent to metal and cement. However with renewable and clear applied sciences within the ascendency, there’s a rising danger that additional funding in coal and different fossil gas property will find yourself stranded because the power transition gathers tempo and new energy crops expertise decrease utilisation charges than buyers count on. 

Certainly, because the IEA report factors out, the cumulative deployment of low-emissions applied sciences since 2019 has now served to keep away from annual fossil gas consumption equal to the whole power demand of Latin America. The averted coal demand alone equates to greater than the whole coal use of India final yr.

General, the deployment of photo voltaic PV, wind, nuclear, electrical vehicles, and warmth pumps since 2019 is stopping some three billion tonnes of CO2 emissions yearly, or round eight per cent of world emissions. Is that sufficient to ship on internet zero targets and restrict temperature will increase to nicely under 2C, as required beneath the Paris Settlement? Actually not as issues stand, most economies stay o observe to overlook their local weather targets and world emissions are persevering with to tick upwards. However the tendencies examined by the IEA clarify that the worldwide clear power transition was accelerating even earlier than the Iran Battle additional strengthened the case for decarbonisation. There’s trigger for hope {that a} world peak in fossil fuels and related emissions is close by, and far before oil, fuel, and coal firms are anticipating.