Energy transition may lift 193 million out of poverty

A study led by UNDP, in partnership with the Pardee Institute and Octopus Energy, finds that aligning renewable energy targets with broader development policies could lift 193 million people out of extreme poverty by 2060 and generate US$ 20.4 trillion in global savings. The study analyzes three energy scenarios, highlighting that the most significant social and economic benefits emerge when clean energy growth is combined with investments in health, education, and infrastructure. It calls for an urgent, inclusive energy transition embedded within a comprehensive development framework to achieve the Paris Agreement objectives.

A recent study by the United Nations Development Programme (UNDP), conducted in collaboration with the University of Denver’s Pardee Institute and Octopus Energy, reveals that aligning renewable energy targets with broader development policies could lift 193 million people out of extreme poverty by 2060 and unlock cumulative savings of US$ 20.4 trillion for the global economy.

While the developmental benefits of renewable energy and energy efficiency are well established, the extent to which they yield measurable gains when integrated with broader policy measures is less clearly understood. This includes evaluating their impact within the context of national climate strategies under the Paris Agreement, or Nationally Determined Contributions (NDCs). 

The research explores how time-bound renewable energy targets, backed by coherent policies and financing mechanisms, can deliver triple wins—reducing emissions, boosting economic growth, and improving social outcomes. Using scenario-based modelling, the report evaluates the global impacts of three different energy scenarios.

In the business-as-usual scenario, the global energy system remains heavily reliant on fossil fuels, which continue to account for over 50% of the primary energy mix by 2060. This trajectory would result in a 2.6°C rise in global temperatures, exacerbating poverty, malnutrition, and inadequate access to essential services such as electricity, clean water, and sanitation.

The second scenario aligns with the targets set in the first Global Stocktake under the Paris Agreement, calling for a tripling of renewable energy capacity and doubling of energy efficiency, and phasing out fossil fuels. Under this framework, fossil fuels would account for just 12% of the global energy mix by 2060. This scenario limits global warming to under 2°C.

However, it is the third and most ambitious scenario that yields the most transformative results. It combines an accelerated shift to renewable energy with parallel investments in health, education, clean water, and food systems. This approach not only reduces emissions but also addresses the root causes of poverty and inequality. The scenario is expected to deliver universal access to electricity and clean cooking, lift 193 million people out of extreme poverty, prevent malnutrition for 142 million individuals, and provide 550 million more people with access to clean water and sanitation.

Beyond its social and environmental benefits, the third pathway also offers substantial economic dividends. The scenario could provide cumulative savings of US$ 20.4 trillion, with US$ 8.9 trillion coming from energy efficiency and another US$11.5 trillion coming from lower renewable energy costs. 

Additionally, the study projects a 21% boost in global GDP and a US$ 6,000 increase in per capita income by 2060.

Clean energy investments are expected to reach an unprecedented US$2.2 trillion in 2025, surpassing fossil fuel investments for the second consecutive year. Renewable power capacity has risen to 4,448 GW, contributing to more than 90% of new power additions, driven by rapid technological progress in solar, wind, and energy storage. Despite this momentum, fossil fuels continue to dominate, supplying over 70% of the global energy mix. In 2024, global energy demand increased by 2.2%, with renewables leading the growth. However, fossil fuels still accounted for 54% of that rise. Meanwhile, energy efficiency improvements slowed significantly, advancing by only 1%—just half the rate seen in the previous decade.

“To build the future our children deserve, we must be thoughtful and strategic in our priorities,” Jonathan Moyer, Director of the Pardee Institute stated.

The report further highlights that meeting the Paris Agreement targets requires a swift transformation of the global energy system toward cleaner, more efficient energy sources. This shift must go hand in hand with progress in vital areas like adaptation, resilience, and nature-based solutions. Importantly, these changes should be embedded in a broader development agenda, where expanding renewable energy delivers gains for both human well-being and economic growth.