BOSTON – March 14, 2024 – Confidence in the world’s ability to achieve net zero by 2050 looks to be eroding as it becomes even more difficult to ensure adequate investment returns and progress diverges across a fragmenting world. Bain & Company’s fourth annual Energy & Natural Resource Executive Survey shows an increasing percentage of industry executives expect the world to reach net zero by 2060 or later—with 62% sharing this sentiment in 2024 versus 54% in 2023.

Bain & Company surveyed over 600 industry executives* across the globe to better understand industry leaders’ views on the energy transition, new technologies, and investment opportunities, and where they see the greatest challenges for decarbonization.

“This year’s survey found that energy and natural resource companies have not dampened ambitions for their transition-oriented growth businesses. However, customers’ willingness to pay is a growing issue, as is the ability to generate adequate return on investment (ROI) in energy transition-oriented projects. As a result, companies are focusing on projects with a viable ROI path,” said Joe Scalise, head of Bain & Company’s Energy and Natural Resource practice, based in San Francisco. “Clearly, the longer the executives are at the front lines of the energy transition, the more sober they are getting about the transition’s practical realities.”

The report highlighted five themes to watch as the industry prepares for CERAWeek 2024:

1. Fewer executives expect the world to achieve net-zero carbon emissions by 2050.

Despite energy and natural resource companies’ continued investments in decarbonization, about 62% of executives now anticipate the world will reach net zero by 2060 or later, up from 54% in last year’s survey. This view is consistent across most regions and is most strongly held among oil and gas executives.

2. Most companies are maintaining or increasing investments in their transition-oriented growth businesses.

Executives in the Middle East (61%), Asia-Pacific (55%), and Latin America (51%) are feeling more optimistic about the prospects of their transition-oriented growth such as renewables, hydrogen, bio-based products, and lithium and other transition commodities that will contribute to their company’s valuation and profits by 2030. Hence, they are maintaining or increasing green investments. Only 4%, 12% and 10%, respectively, of executives from the three regions expressed less optimism, while the remainder showed no significant change.

The survey revealed a more balanced picture in Europe where 30% of executives revealed more optimism vs. 27% who were less optimistic of their new energy growth business areas contributing to bottom-line.

In North America, 29% of executives were more positive compared to 17% who were less positive on their transition-related growth areas.

3. Executives are more concerned than ever about generating acceptable returns to scale up their transition-related businesses.

Like last year, executives say the greatest obstacle to scaling up their transition-oriented businesses is finding enough customers willing to pay higher prices (or having equivalent policy support) to create sufficient return on investment. In fact, the share of executives identifying this as a very significant roadblock jumped 14 percentage points from 2023 to 2024, to 70% of executives.

“The direct impact of higher interest rates on the cost of transition projects is one of the most important stories of 2023 and is likely shaping executives’ perspective on the challenges associated with customer willingness to pay.  Higher rates put real upward pressure on the effective cost of low carbon projects,” said Grant Dougans, a leader of Bain & Company’s Energy and Natural Resource practice, based in Washington, DC.

A 500-basis-point increase in the cost of capital can increase the total annual revenue required to finance a project by as much as 50%, Bain has found.

4. North America is now viewed as the most attractive region for investment, followed by Europe and then Australia and New Zealand.

North America has emerged as the leader for green investments as 79% of all executives view it as an attractive region for energy transition investments. The next-most attractive region is Europe at 65%. Interestingly, executives from every region ranked North America as more attractive than Europe—including executives based in Europe. Australia and New Zealand comes in as second runner-up at 43%. However, executives from Asia-Pacific did not view Australia and New Zealand in the top three most investable regions for green investments.

Even as increasing government subsidies make some regions, such as North America, more attractive for investment, executives have growing concerns about policy stability.

The US Inflation Reduction Act (IRA) is a major factor in North America’s investment attractiveness, but factors such as the availability of relatively low-cost natural gas feedstock also influenced the result. However, while almost two-thirds of US executives surveyed agree that the IRA’s subsidies target the right areas, less than one-quarter believe that the policy regime will remain stable over the next five to 10 years. Furthermore, 42% of US executives think the IRA’s subsidies are unclear and that the rules are not easy to follow.

About 70% of executives worldwide say that reducing policy uncertainty would very significantly improve their ability to scale up transition-oriented businesses.

5. Artificial intelligence is increasingly seen as a difference maker.

More executives (65% in 2024) believe AI (including generative AI) and digital technologies will have a significant effect on their businesses by 2030 compared to 56% last year.

The most promising AI applications include improving maintenance, production, and the supply chain, while emissions reduction is seen as the least promising.

Most companies are focusing first on applications with a clearer, shorter path to a return on investment.  Over time, Bain expects the industry to pursue more advanced and potentially higher-value use cases, such as increasingly automated design and engineering work.

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*Refers to industry executives in oil and gas, utilities, chemicals, mining, and agribusiness.

Editor's Note: For more information or interview requests please contact:

Gary Duncan (London) — Email: gary.duncan@bain.com

Katie Ware (New York) — Email: katie.ware@bain.com

Ann Lee (Singapore) — Email: ann.lee@bain.com

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