Key messages
- Geopolitical risk and instability can have varying impacts on a country’s energy transition. They can, for example, act as structural brakes that reverse decarbonisation efforts and encourage fossil fuel investments or as catalysts that accelerate domestic renewable energy adoption. The type of impact is highly dependent on countries’ institutional maturity, financial strength, and access to resources and technology.
- Overall, evidence suggests that heightened geopolitical risk hinders the global energy transition by driving market volatility, disrupting supply chains, and redirecting policy priorities.
- Geopolitical fragmentation, reflected in a decline in multilateralism, can compound asymmetries in energy transition progress and global inequalities. Wealthy nations consolidate their advantage and diversify their energy portfolios, while neutral and sanctioned economies face heightened instability and slower decarbonisation, raising important justice concerns.
Will global conflict and geopolitical risk slow down or speed up the shift towards renewable energy? The answer, it seems, depends heavily on a nation’s economic circumstances and the policies in place before a shock hits. While the direction of these effects remains ambiguous, advancing a just energy transition is non-negotiable in the face of escalating global socio-ecological crises and countries’ commitments under the Paris Agreement. To some extent, international tensions can trigger a structural brake on decarbonisation, with leaders doubling down on fossil fuels. Conversely, they can also become a catalyst for accelerated investment in domestic renewables. Studies of how these opposing reactions play out globally reveal how distributional asymmetries can exacerbate inequalities, placing the just (energy) transition at risk.
This apparent paradox can be explained by two theories of how political priorities interact in times of volatility. “Geoeconomics theory” holds that geopolitical risk accelerates the transition. It proposes that reliance on imported fossil fuels exposes a strategic weakness, prompting willing and resource-rich governments to invest in renewables to strengthen energy independence. In contrast, “energy security theory” suggests that nations are driven towards rapid fixes to keep the lights on during supply shortages and rising prices. Often this means prioritising domestic fossil fuel production or subsidies, thereby delaying or reversing clean energy progress.
Empirical evidence, on balance, suggests that heightened geopolitical risk hinders the transition. It drives market volatility, disrupts supply chains for critical minerals needed in renewables, and redirects policy priorities towards military spending and immediate material security. This slowdown is sharpest when capital earmarked for green infrastructure gets diverted to conflict costs, causing a collapse in the readiness of countries actively advancing their transition. But the picture is complicated by studies that also document the reverse effect. Energy-importing countries with strong technological capacity have used geopolitical shocks to accelerate towards energy independence. See Box 6 for how the two trends played out within the EU following Russia’s full-scale invasion of Ukraine in 2022.
Much depends on institutional readiness and sustainable innovation capacity, particularly on whether countries can step up public research and development investment to build domestic technological leadership. The BRICS nations offer a case in point. In these countries, geopolitical instability has suppressed fossil fuel use and driven a strategic shift towards renewables, in pursuit of long-term energy security. Unfortunately, this “strategic adaptation” is not available to most nations. Lower-income economies, lacking the fiscal space and institutional maturity to absorb these shocks, may end up slowing their green transitions. The net effect is a widening gulf. Geopolitical risk becomes a security booster for well-placed countries, while triggering a structural brake for others, as macro-financial pressures raise the cost of capital and tighten the fossil trap.
This asymmetry is compounded by geopolitical fragmentation. In recent years, we have seen a shift away from a cooperative, integrated global system towards one of economic segmentation and competing, walled-off blocs. The results can reinforce existing inequalities. Wealthy nations consolidate their advantage and diversify their energy portfolios, while neutral and geopolitically isolated economies face heightened instability and slower decarbonisation. This raises profound climate justice concerns, as the burdens of the transition – energy price shocks and stranded fossil fuel assets – often land disproportionately on the most vulnerable.
What can global institutions do to ensure a fairer transition? Unlike the oil crises of the 1970s and 1990s, which were managed within established multilateral frameworks, today’s fragmentation is straining the institutions built to coordinate a global response. The clearest example is the USA’s withdrawal from the Paris Agreement, first in 2020 and again in 2026, which has reduced financial support for low-income nations through mechanisms like the Green Climate Fund. This creates a leadership vacuum that risks prompting others to weaken their own commitments.
In light of these developments, we urgently need to build geopolitical risk, evolving power relations, and societal dynamics explicitly into both short-term and long-term transition strategies and scenarios, rather than treating them as an afterthought to techno-economic planning. Similarly, fragmentation must be treated not as a passing disruption but as the new normal – one that requires stronger institutional capacity. Closer coordination between civilian and military planning, and between public and private investment, would also help countries break more decisively from fossil fuels during periods of crisis. Ultimately, coordinated international action remains essential for a just energy transition. In practice, this means giving low-income and emerging economies real access to risk-mitigation tools and climate finance, as well as ensuring meaningful participation and a real seat at the decision-making table. If we fail to do this, we risk global inequalities growing ever wider, which is not in line with a just transition, and the energy transition getting further out of reach.
Box 6. The EU energy crisis under geopolitical instability
The EU’s response to the 2022 energy crisis, triggered by Russia’s full-scale invasion of Ukraine, is a case study in the push and pull of fossil fuels. Governments first scrambled for short-term security by rapidly expanding fossil fuel infrastructure, as exemplified by Germany’s “Liquefied Natural Gas (LNG) Acceleration Act”, which expanded liquefied natural gas supplies. Such measures were clearly at odds with long-term climate targets.
However, the shock also forced a reorientation. The green transition shifted from an environmental choice to an urgent security strategy, formalised in the REPowerEU Plan, which mobilised between EUR 210 billion and EUR 300 billion to fast-track renewables and diversify supply. Renewable energy capacity expanded at historically high rates in 2025, with approximately 70 gigawatts (GW) added during the year. Solar power drove this growth, with total installed capacity reaching 359 GW at year-end, up by 19% from 2024, equivalent to an additional 56 GW. Wind capacity, encompassing both onshore and offshore installations, increased to 244 GW, marking a 6% rise over the previous year, or 13 GW in absolute terms.
The 2024 Israel–Iran escalation and ongoing conflict around the Strait of Hormuz further underscore how vulnerable global energy markets are to a handful of critical chokepoints. Again, however, these events have also strengthened the EU’s long-term commitment to renewables and decarbonisation as a means to safeguard economic resilience.
Policy implications
- Centre decarbonisation as a pillar of energy security. National governments should treat renewable energy, energy efficiency, electricity grids, storage, and demand flexibility as strategic resilience assets that reduce exposure to fuel-price shocks and supply disruptions.
- The energy outcomes of the GST1, i.e., tripling renewable capacity, doubling the rate of energy-efficiency improvements, and transitioning away from fossil fuels, offer directives to guide sectoral policies and investment plans.
- COP31 is an opportunity for the Presidency to gather support towards the voluntary “35 by 35” electrification target. Important spaces for these discussions are the GCAA’s “Clean Energy Transition and Electrification” track and the “Climate Implementation Bridge”, which helps countries turn NDC priorities into investable/finance-ready projects.
- Include resilience mechanisms in energy transition planning to anticipate geopolitical tensions. NDC implementation plans and national energy strategies should include mechanisms to prevent short-term crises/shocks (e.g., armed confrontations, sanctions, trade restrictions, supply-chain disruptions, and capital-cost shocks) from causing long-term carbon lock-in.
- Before approving any “emergency fossil fuel infrastructure”, Parties should be required to provide an assessment of lower-carbon alternatives, compatibility with the country’s NDC and long-term low-emission development strategy, financial and stranded-asset risks, and a time-bound decommissioning or conversion plan.
- Any significant changes to Parties’ energy policy should be reported through their Biennial Transparency Reports, so their collective effects can be considered in the GST2.
- Climate finance flows should be resilient to geopolitical shocks. Pledges and risk-mitigation tools must feature contingency mechanisms to protect vulnerable economies and critical mechanisms such as the Loss and Damage Fund in the face of geopolitical shocks. An agreement on near-term milestones for implementing the Baku-to-Belém Roadmap (COP29: USD 1.3 trillion annually by 2035) is a central priority.
- Scale transition finance in hard-to-abate sectors. Broader investment across countries in energy transitions and clean technology could help avoid new geopolitical dependencies and long-term carbon lock-in.
- Develop secure, just mineral supply chains and protect regulatory space for the transition. Mineral-producing and importing nations, development banks, and companies should diversify critical-mineral supply and processing; expand recycling and material substitution; and support local processing, skills, and value creation in producer countries, while applying safeguards on human rights, Indigenous rights, and environmental protection.
- Because investment treaties and investor–State dispute settlements fall largely outside the UNFCCC’s mandate, governments should pursue treaty renegotiation and relevant UN processes and multilateral fora. Talks should seek to protect the right to regulate, narrow investment-protection standards, and consider excluding fossil fuel investments from treaty protection.
