IEA forecasts rise in electricity emissions by 1% in 2026

Electricity demand climbs while emissions show mixed signals

Global electricity consumption is climbing at its fastest pace in years. The International Energy Agency forecasts demand will grow by 3.7% in 2026, following 3.3% growth in 2025. For context, total consumption is expected to exceed 29,000 terawatt-hours in 2026 alone.

What makes this significant for UK businesses is the underlying question of how that electricity gets generated. The IEA says renewables and nuclear power will meet most of the new demand. Consequently, emissions from power generation are expected to plateau or decline slightly, despite the surge in consumption.

However, different IEA reports present slightly different numbers on emissions. One outlook shows a slight decline in 2026, while another suggests a 1% rise. The discrepancy appears to stem from regional differences and specific comparison periods rather than a fundamental contradiction.

For businesses managing energy costs and carbon reporting, the key issue is whether clean generation can keep pace with rising demand in the markets where you operate. The answer varies considerably by region.

Strong demand growth driven by industry and digitalisation

The IEA attributes rising electricity consumption to several factors. Industrial electrification continues to spread, particularly in manufacturing sectors moving away from fossil fuels for process heat. Electric vehicle adoption is accelerating, adding new load to distribution networks.

Air conditioning demand is growing rapidly, especially in emerging economies where rising incomes coincide with warmer temperatures. Data centres represent another major source of new demand, driven by cloud computing and artificial intelligence applications.

The IEA’s Electricity 2026 report projects that global demand will grow at an average annual rate of 3.6% from 2026 through 2030. This rate significantly exceeds overall energy demand growth, reflecting what the agency calls the “Age of Electricity.”

Essentially, electricity is taking a larger share of total energy use across the economy. This trend affects procurement strategy, infrastructure planning, and carbon accounting for businesses of all sizes. Companies that locked in fixed-price electricity contracts before this demand surge may face higher costs at renewal.

Meanwhile, businesses with on-site generation or power purchase agreements may find their positions strengthened. The shift also influences carbon footprints, since electricity consumption increasingly drives total emissions for many organisations.

Power sector emissions plateau despite consumption growth

The IEA’s messaging on emissions requires careful reading. Its mid-year update states that CO₂ emissions from electricity generation are forecast to plateau in 2025 and record a slight decline in 2026. Weather patterns and economic conditions could shift this outcome in either direction.

The broader Electricity 2026 report says global power sector emissions remained flat in 2025. Furthermore, the agency forecasts emissions will plateau over the 2026 to 2030 period as renewables and nuclear power take larger shares of generation.

A separate report suggests the IEA warned that electricity-related CO₂ emissions could rise by 1% in 2026. This creates an apparent conflict with the outlooks pointing to flat or declining emissions. The most likely explanation is that the 1% figure refers to a specific regional comparison.

The IEA’s formal outlooks emphasise overall flat-to-slightly-down emissions because clean generation is expected to cover demand growth. In practical terms, this means low-carbon sources are expanding fast enough to meet most new electricity consumption without additional fossil fuel generation.

Approximately 13,900 million tonnes of CO₂ are emitted annually from electricity generation globally. Whether that figure rises or falls depends on the speed of renewable deployment relative to demand growth in specific regions.

Regional differences create varied emission outcomes

The global picture masks significant regional variation. Some markets are adding wind and solar capacity rapidly, while others remain heavily dependent on coal-fired generation. China, for instance, continues to operate substantial coal capacity even as it leads the world in renewable installations.

European power systems have reduced coal use significantly, but gas generation remains substantial. The United States has shifted from coal to gas in many regions, cutting emissions moderately while maintaining fossil fuel dependence. India’s electricity demand is growing quickly, with both renewables and coal contributing to new capacity.

For UK businesses with international operations or supply chains, these regional differences matter considerably. Carbon reporting under frameworks like the Streamlined Energy and Carbon Reporting requirements captures emissions from electricity consumption. If your suppliers operate in high-carbon grids, your Scope 3 emissions reflect that.

Similarly, businesses bidding for public sector contracts under Procurement Policy Note 06/21 must demonstrate carbon reduction plans. The carbon intensity of electricity in your operational regions affects your baseline and your ability to show credible reduction pathways.

UK grid emissions have fallen substantially over the past decade as coal generation has been phased out. However, businesses importing goods from regions with high-carbon grids carry that intensity in their supply chain emissions, regardless of UK progress.

What this means for business energy planning

Rising electricity demand has immediate commercial implications. Wholesale power prices respond to supply and demand dynamics. If consumption grows faster than generation capacity, prices typically rise, particularly during peak periods.

Businesses renewing electricity contracts over the next few years should expect this growth to influence pricing. Fixed-price contracts offer certainty but may lock in higher rates if signed during tight supply periods. Flexible contracts expose you to spot price volatility.

Companies with significant electricity consumption should review their procurement strategy. Power purchase agreements for renewable generation can provide price stability while reducing carbon intensity. On-site generation, whether solar panels or combined heat and power systems, may become more economically attractive as grid prices rise.

Carbon reporting obligations add another dimension. The emissions associated with your electricity consumption depend on grid carbon intensity. As more renewables come online, average grid emissions fall. However, marginal emissions (the carbon intensity of additional generation during peak periods) may remain high if that peak demand is met by gas or coal.

Consequently, businesses measuring carbon footprints need to consider both average and marginal grid emissions. Time-of-use tariffs that shift consumption to periods of lower carbon intensity can reduce both costs and emissions. This requires operational flexibility but can deliver measurable benefits.

Key figures from the IEA analysis

• Global electricity demand is projected to grow by 3.7% in 2026, following 3.3% growth in 2025.
• Average annual demand growth of 3.6% is forecast from 2026 through 2030, driven by industry, transport electrification, cooling, and data centres.
• Total global electricity consumption will exceed 29,000 terawatt-hours in 2026.
• Power sector emissions are forecast to plateau in 2025 and decline slightly in 2026, though regional outcomes vary.
• Approximately 13,900 million tonnes of CO₂ are emitted annually from electricity generation worldwide.
• Renewables and nuclear power are expected to meet most new electricity demand, limiting emissions growth despite rising consumption.

Carbon intensity depends on generation mix changes

The relationship between electricity demand and emissions is not fixed. It depends entirely on what type of generation meets the additional consumption. If new demand is covered by wind, solar, or nuclear power, emissions remain flat or fall. If it is met by fossil fuel generation, emissions rise.

The IEA expects renewables to dominate new capacity additions globally. Solar photovoltaic installations continue to set records, with costs falling below new fossil fuel generation in most markets. Wind power is expanding both onshore and offshore, particularly in Europe and Asia.

Nuclear power is also growing, though more slowly. Several countries are extending the operating lives of existing reactors, while new builds proceed in China, India, and parts of Europe. Nuclear provides low-carbon baseload generation that complements variable renewables.

However, fossil fuel generation is not disappearing quickly. Gas-fired power stations provide flexibility to balance renewable intermittency. Coal generation persists in several major economies, particularly where existing plants have not reached the end of their technical lives.

For businesses, this means the carbon intensity of grid electricity will continue to fall in most developed markets. Nevertheless, the pace varies by region. Understanding the generation mix in your operational locations helps you forecast future emissions and identify opportunities for reduction.

Planning for continued electrification of energy use

The IEA characterises the current period as the “Age of Electricity” because electricity demand is growing faster than total energy consumption. This reflects a broader trend towards electrification across the economy. Heat pumps replace gas boilers, electric vehicles replace combustion engines, and electric furnaces replace fossil fuel heating in industry.

This shift affects business energy strategy fundamentally. Companies that historically focused on gas or oil consumption now need to consider electricity as their primary energy vector. Infrastructure planning must account for higher electrical loads, including potential upgrades to connections and internal distribution.

For manufacturers, electrification of process heat can reduce carbon emissions if the electricity comes from low-carbon sources. However, it may increase energy costs in regions where electricity remains expensive. The business case depends on relative fuel prices, carbon pricing, and the carbon intensity of the grid.

Transport fleets are electrifying rapidly, creating new charging infrastructure requirements. Businesses with vehicle fleets need to plan for depot charging or public charging access. This affects capital expenditure, operational costs, and carbon footprints.

Similarly, heating systems are transitioning from gas to electricity in many commercial buildings. Heat pumps offer efficiency benefits but require different infrastructure. Building managers need to assess electrical capacity and consider generation options like rooftop solar.

Data centre growth adds significant electricity demand

The IEA specifically identifies data centres as a major driver of electricity demand growth. Cloud computing, artificial intelligence, and cryptocurrency mining all require substantial power. Data centre electricity consumption is projected to continue rising rapidly through 2030.

For businesses relying on digital services, this trend has indirect implications. Cloud service providers are major electricity consumers, and their energy costs influence pricing. Many providers have committed to renewable energy, but the speed of their demand growth tests the ability of renewable capacity to keep pace.

Companies operating their own data centres face direct electricity costs. Server efficiency improvements help, but total consumption typically rises as computational requirements increase. Power purchase agreements for renewable electricity can lock in costs and reduce carbon intensity.

The concentration of data centres in specific regions creates localised demand spikes. This can strain grid infrastructure and drive up regional electricity prices. Businesses planning new data centre capacity should consider locations with access to low-cost, low-carbon electricity and available grid capacity.

Where to find detailed electricity and emissions data

The International Energy Agency publishes regular updates on global electricity markets through its Electricity Market Report series. These reports provide detailed analysis of demand trends, generation mix, and emissions forecasts by region.

For UK-specific data, the Department for Energy Security and Net Zero publishes electricity statistics covering generation, consumption, and carbon intensity. These figures inform carbon reporting calculations for UK operations.

Businesses measuring their carbon footprints can find emission factors for grid electricity in the government’s greenhouse gas reporting conversion factors, updated annually. These factors reflect the changing carbon intensity of UK grid electricity as generation mix evolves.

The National Grid Electricity System Operator provides Future Energy Scenarios that model potential pathways for UK electricity demand and generation through 2050. These scenarios help businesses understand possible long-term trends affecting energy strategy.

For support with carbon reporting compliance and energy procurement strategy, our compliance services help UK businesses navigate regulatory requirements and reduce energy-related emissions.