Every year, the International Energy Agency’s (IEA) World Energy Outlook (WEO) maps out possible energy futures. These are not forecasts, but scenarios based on economic, technological and political assumptions. The 2025 WEO (1) marks a turning point. It introduces new perspectives, revives concerns, but also confirms that the energy transition cannot be avoided if we are to keep global warming below pre-industrial levels, and that means the end of fossil fuel expansion.
The 2025 WEO offers a nuanced picture. Despite some limitations, the central message of its Net Zero Emissions (NZE) scenario remains unchanged. It is still the only trajectory compatible with the Paris Agreement (2). Alongside the Stated Policies scenario (STEPS), the Current Policies pathway has been updated and describes a world without climate ambition. This analysis aims to clarify what these projections imply for the financial sector.
NZE 2025, still essential for the 1.5°C objective
The NZE scenario now includes a temporary exceedance of the +1.5°C threshold, with a peak around +1.65°C before a gradual return to below +1.5°C by the end of the century. This change reflects the observation that current climate policies, slow progress in energy efficiency gains and delays in some electrification projects are making the trajectory more difficult to maintain.
However, this change does not alter the underlying logic of the scenario. The NZE is still based on a very rapid reduction in global greenhouse gas emissions, by around -55% by 2035. This comes primarily from the shift to low-carbon electricity, with global renewable capacity increasing fourfold by 2035. Electricity grids are expanded on a large scale, battery storage increases 17-fold, and energy efficiency plays a central role. Electricity becomes the backbone of the global energy system.
In this context, the trajectory of fossil fuels is clear. As demand for coal, oil and gas declines rapidly, investment in upstream fossil fuels is limited to maintaining production from existing fields. No new oil or gas fields are needed. This conclusion stems from a simple physical constraint: burning the reserves already exploited is enough to far exceed any carbon budget compatible with 1.5°C, or even with 2°C of warming (3).
The NZE 2025 scenario does however give a greater role to carbon dioxide capture and removal technologies (4), in removing several gigatonnes of carbon dioxide per year in the second half of the century. But their rise to prominence is based on fragile assumptions. They are costly, scarcely deployed today, and their effectiveness on a large scale has not been proven yet (5). The scenario itself emphasises that emission reductions must remain a priority, as removal technologies cannot compensate for a structural delay in climate action.
Despite these adjustments, the NZE scenario retains its core elements. It shows that achieving net zero by 2050 is technically achievable, but only at the cost of a massive reallocation of capital towards low-carbon electricity, energy efficiency and infrastructure. Above all, it confirms that investing in new fossil fuel projects is incompatible with a sustainable climate trajectory.
A broader scientific consensus on “no new fields”
The NZE scenario’s conclusions on fossil fuel expansion are not an exception, but in line with other reference climate scenarios. The Intergovernmental Panel on Climate Change (IPCC) scenarios compatible with limiting global warming to 1.5°C, with no or low overshoot, all imply a rapid phase-out of coal and a significant decline in oil and gas production starting this decade (6). The IPCC stresses that global fossil fuel use must decline sharply by 2030 to maintain a realistic chance of meeting the 1.5°C target.
When scenarios based on unrealistic levels of negative emissions are excluded, this conclusion becomes even more stringent. An analysis by the International Institute for Sustainable Development (7) concludes that no new oil or gas fields can be developed on a path compatible with 1.5°C. Recent work by the Institut de la Finance Durable in France (8) reaches similar conclusions when comparing different fossil fuel production trajectories.
In other words, the ‘no new fields’ principle is not unique to the IEA’s NZE scenario. It forms a common basis for all serious climate trajectories.
The CPS scenario: a worst-case trajectory to avoid
The WEO 2025 also marks the return of the Current Policies Scenario (CPS), which had been omitted from reports for several years. This scenario is based exclusively on policies already enshrined in law, without considering announced climate commitments. It describes a world where all efforts or planned projects of transition are frozen, energy efficiency is stagnating, and fossil fuels remain central.
In the CPS, global energy demand continues to rise sharply. Oil and gas consumption increases until the middle of the century, and coal declines, but too slowly for a stable climate trajectory. The result is a warming trajectory of close to +2.9°C. The CPS thus corresponds to a scenario of climate chaos.
This trajectory is also socially unjust. Energy is more expensive for households than in the NZE and STEPS. Universal access to electricity and clean cooking methods are not achieved. Air pollution remains high, with more than five million premature deaths per year linked to fossil fuel combustion by 2035.
Above all, the CPS largely ignores the dynamics already at work. It underestimates the growing competitiveness of renewables, the central role of electricity and the economic benefits of energy efficiency. It implicitly assumes that less costly and more efficient solutions would be ignored in favour of a more expensive and polluting energy system.
The WEO 2025 does not mark a step backwards on the essential issues. It highlights the growing gap between what is needed to stabilise global warming and what current policies will deliver. The status quo, based on continued fossil fuel exploitation, amounts to locking the global economy into a crisis trajectory.
For financial institutions, the message is clear. The CPS cannot serve as a reference for capital allocation. Conversely, despite its limitations, the NZE scenario remains the only consistent compass for assessing long-term climate and financial risks. Financial institutions must drastically reduce their financing to fossil fuels, immediately end any support to their expansion, and massively increase financing to sustainable power supply.
