Global agreement for renewed momentum to implement clean energy transitions

As part of the UAE Consensus at the COP28 climate change conference in Dubai in December 2023, an historic agreement was signed signalling the “beginning of the end” of the fossil fuel era. Governments agreed to double the annual rate of energy efficiency improvement by 2030 and, in the same timeframe, to triple the global deployment of renewable energy capacity, putting the principle of energy efficiency at the centre of policy making. While these ambitions will be translated into national action plans, cities are uniquely positioned to lead the way and serve as transition accelerators because of their high population densities and positioning as centres of commerce, productivity and innovation. 

Cities as catalysts for change

Urban areas are the economic powerhouses of their nations. They are undergoing rapid development and contributing to higher energy consumption and rising greenhouse gas emissions. Globally, cities account for around 75% of global energy consumption and 70% of global greenhouse gas emissions – figures that are set to rise.

Almost 10% of the increase in global emissions since 2015 can be attributed to urbanisation. It accounted for the record high urban-related emissions of almost 29 billion tonnes of CO2. Despite this rapid escalation, many people in urban areas still lack proper access to power grids. For example, of the more than 100 million people living in cities without access to electricity, more than 90% are located in sub-Saharan Africa, the fastest-urbanising region of the world.

Fortunately, cities also present unique opportunities for transformative change. Cities can leverage public procurement to create economies of scale and bring down costs of clean energy technologies. More than 60% of public investment occurs at the subnational level, of which nearly a third is channelled into transport systems, underlying the importance of cities investing in green and resilient urban infrastructure.

This important potential of cities to be front runners in the energy transition is gaining recognition in many regions, including in multilateral forums. Recently, the G7 recognised the transformative power of cities, and the G20 identified the need to finance the infrastructure of the cities of tomorrow. This is critical because, based on existing stated policies, without further urgent action globally in cities and on grids, climate goals will be missed and economic growth could be affected.

Cities with net zero targets in policy documents or laws, 2023

Cities With Net Zero Targets In Policy Documents Or Laws 2023

IEA analysis based on data from Net Zero Tracker

Cities fostering innovative and cost-effective people-centred solutions

A people-first approach exemplified by community energy projects not only promotes environmental sustainability, but it also stimulates local economies, reduces energy bills and fosters public trust in clean energy transitions. These advances are crucial to achieving the large-scale change needed to overcome today's status quo. Supporting city-level action has the potential to provide the greatest carbon mitigation return on investment and accelerate inclusive clean energy transitions. The evidence is that investing in infrastructure and technology to decarbonise the energy sector can reduce greenhouse gas emissions by up to 75% by 2050 – as long as the right policies are in place.

Most urban residents around the world are breathing unhealthy levels of pollution, a major portion of which is a by-product of using fossil fuels, which is responsible for around 5 million premature deaths each year. City-led action can improve air quality, reduce energy demand, improve grid stability, and create savings for households and businesses. It can empower people to take on a greater role in managing their energy demand through user-centred initiatives. City-led action can drive inclusive transitions with information campaigns, guidance and advice, policy support for efficient appliances and support for energy communities.

Matching urban growth with increased ambition for inclusive clean energy transitions

Globally, urban populations account for more than half of the 8 billion people on Earth today, a share that is increasing. The total global urban population grew by around 400 million between 2015 and 2020 alone. More than 90% of this growth occurred in cities in emerging markets and developing economies (EMDEs). Between 2024 and 2050 the share of the urban population is expected to increase from 56% today to around 70%, with the number of urban inhabitants increasing by around 1.8 billion. Projections show that urban land areas are expected to expand by around 1 million km2 up to 2050, equivalent to the total land area of Japan, Germany and Italy combined.

A small number of progressive cities are stepping up and setting sustainability and CO2 reduction targets that are bolder than those of national governments. Globally, of the cities with more than 500 000 inhabitants, around 20% have proposed or pledged net zero targets, of which only half have stated policies in place. Whereas there may be net zero targets at the national level, at the municipal level, more than 900 cities, many of which continue to grow in size, currently do not have net zero targets.

Historic and projected urban population change over time per region, 1950-2024


Power grids feel the heat as climate change begins to take effect

As the world heats up, so the demand for cooling is increasing. The installed capacity of space cooling equipment is expected to nearly double by 2030 from 850 GW today, and then to double again by 2050. Demand for cooling also drives peak demand, which creates challenges for grid operators and poses access and affordability issues for customers. By 2040 cooling is expected to account for 30% of peak electricity demand in ASEAN countries, mostly concentrated in urban areas. This is up from around 10% today, and further studies suggest that globally each degree Celsius increase causes an average increase of almost 4% in peak electricity demand.

Thus, climate change is posing new challenges to grids in increasingly densely populated cities. Around 70% of cities are already experiencing the negative impacts of extreme temperatures and frequent storms of increasing intensity, which push power infrastructure to the edge of its operating limits.

Modernising and expanding power grids for sustainable urban energy futures

The transition away from fossil fuels, including by tripling renewable energy capacity and switching to electrical demand-side energy assets, is vital for countries to achieve their climate goals. This transition leads to an increased demand for electricity in all IEA scenarios.

To achieve the changes consistent with a net zero pathway, the EV fleet is expected to increase tenfold, from nearly 30 million today to around 315 million by as early as 2030, while total heat pump capacity may triple from 1 000 GW today to 3 000 GW by 2030. Substantial electrification of transport and heat, as well as across industry, will see demand for electricity increase. It could increase by up to two and a half times by 2050, depending on the pace of decarbonisation. Based on existing announced national policies, electricity grids will need to expand globally to manage the increased capacity, requiring up to 80 million km of new or upgraded lines by 2040. Crucially, grids will also need to become increasingly smart to manage the increased share of renewable energy capacity.

These ambitious but essential plans to decarbonise the electricity systems, coupled with rapid urbanisation, make it crucial to focus on investment in grid modernisation and digitalisation. As cities become focal points for energy consumption, efficient grid management becomes paramount in addressing urban energy challenges. To be on track for net zero, global annual investment in grids needs to more than double from around USD 330 billion per year to USD 750 billion by 2030, and approximately 75% of this will be needed to expand, strengthen and digitalise distribution grids.

The power of digital-driven integrated planning

Urban areas contribute more than 80% of global GDP. Electricity has facilitated the growth of industry and commerce in many regions, driving GDP and contributing to development. As demand for electricity continues to grow, power grids need to adapt rapidly to manage both today's grid constraints and the challenges of tomorrow, particularly in cities.

Bottlenecks in power grids delay housing developments, prevent the completion of new renewable energy projects and can put the uptake of customer-owned clean energy resources at risk, such as rooftop PV systems and EVs. These bottlenecks could create further problems for up to 1.5 million households by as early as 2030. In the United Kingdom, as an example, grid congestion costs may reach as much as GBP 2.5 billion each year in the same timeframe.

In addition to investment in physical infrastructure, taking advantage of the proliferation of connected technologies, which are creating new data sources, offers the potential to better manage urban power systems and the increasing variability on them. Cities have the right level of density and granularity for demand-side energy assets to be optimised and aggregated at the building, neighbourhood and community levels.

Analysis suggests that digitally enabled technologies could reduce the curtailment of variable renewable energy systems by more than 25% by 2030, increase system efficiency by 30% and reduce costs by up to 30% for customers. However, while regulatory and technological barriers stand in the way of maximising the use of data, many of these barriers could be overcome through closer international collaboration.

International collaboration is essential to address global challenges

Meeting the ambition to double the annual rate of energy efficiency improvement as per the UAE Consensus requires a 4% sustained improvement in primary energy intensity through to 2030. While individual countries have achieved more than 4% in certain years, collectively the world has not reached this target in a single year since the beginning of this century.

Meeting this goal requires global investment in energy efficiency to triple by 2030. However, there are large regional differences, as currently 9 out of every 10 dollars spent on clean energy since 2021 has been spent in advanced economies and China. This regional imbalance means that, whereas in advanced economies spending must more than double by 2030, the increase in emerging economies is closer to a factor of 3.5.

Technologies and solutions exist to fast-track energy efficiency implementation and to support the integration of renewables in power systems; however, they are still not being widely used. Similarly, best practices and innovative approaches exist, but opportunities are being missed due to a lack of co‑ordination.

Illustrated by more than 100 case studies, this report showcases the leading role that cities can play in implementing faster decarbonisation and energy efficiency gains. The supportive roles that national governments and other stakeholders need to play are highlighted. We suggest four specific areas where national policy makers can take action to empower cities towards faster and more effective implementation. We have emphasised the potential for cities and national governments: to place people at the centre of policy making in order to build for the future; to support data-driven integrated planning to ensure that grids are fit for purpose; to address specific areas of focus so as to create a supportive environment; and to pursue the benefits of fostering strengthened international co‑operation.