By: Mannat Jaspal, Parul Bakshi, Cauvery Ganapathy, Lydia Powell, and Piyush Verma
The following excerpt is from Chapter 4 — Climate and Energy Transitions of ORF Global Quarterly: Navigating Megatrends for 2026.
According to the United Nations Environment Programme’s Emissions Gap Report 2024, the full implementation of unconditional or conditional Nationally Determined Contribution (NDC) scenarios is projected to lower global warming to 2.8°C and 2.6°C respectively over the course of the century, demonstrating that we remain clearly off-track in meeting the goals of the Paris Agreement to limit temperature rise to 1.5°C above pre-industrial levels. As of June 2024, 101 parties covering approximately 82 percent of global greenhouse gas emissions have adopted net-zero pledges either in law, in a policy document or via a high-level government announcement.
Yet as we enter 2026, climate and energy policies are being shaped not only by decarbonization imperatives. Geopolitical upheaval, technological competition, economic transformation, supply chain resilience, and national security concerns are exerting influence over the future of energy and climate policies worldwide. For the Global South, these present both unprecedented opportunities and enduring vulnerabilities—calling for a delicate balance between access, affordability, and industrial competitiveness.
1. DEEPENING DIVERGENCES IN ENERGY AND CLIMATE POLICY
The fierce pursuit of energy security; intensified since the Covid-19 pandemic and the conflicts in Europe and the Middle East, has evolved into political narratives centered on energy sovereignty and dominance. Early in 2025, for instance, the United States (US) established a National Energy Dominance Council to restore American energy dominance and expand American energy production. While renewable energy additions have expanded at record levels, fossil fuels continue to contribute over 80 percent of the energy mix, given renewable energy conversions remain inefficient in many applications. Oil demand and production are projected to continue growing through 2026. In this context, the recently concluded COP30 Summit in Belem was notable for the stark absence of any reference to fossil fuels in the official communication – a departure from the landmark “United Arab Emirates consensus” agreement at COP28 in Dubai, which included the breakthrough commitment from countries to “transition away from fossil fuels.”
At the same time, we are witnessing a rise in inward-looking domestic clean-energy industrial policies. First accelerated by the U.S. Inflation Reduction Act and EU Green Deal Industrial Plan, a similar trend is emerging globally as Latin American and Asian economies replicate frameworks and policies to localize production of renewables, storage, and hydrogen components, increasingly extending to energy-efficient AI chips. This reflects the return of industrial policies manifesting through growing state intervention using policy tools such as subsidies, public investment, and green manufacturing. The aim is to incentivize and secure domestic clean-energy supply chains, prompted strongly from a desire to significantly reduce exposure and reliance on deeply entrenched Chinese green energy supply chains. Climate governance, therefore, is increasingly being framed through a security lens, linking emissions reduction to national resilience, industrial competitiveness, and export dominance. This stark dichotomy and divergence in fossil-fuel-driven energy security and domestically anchored clean-energy industrial strategy is likely to be the defining divergence to monitor with caution in 2026.
Five megatrends will define climate and energy transitions in 2026 — this is just one. Discover the other four in ORF Global Quarterly: Navigating Megatrends for 2026.