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Review

Transitioning Away from Fossil Fuels to Renewables: A Multifaceted Approach and Related Challenges

by
Canan Ozkan
1,*,
Zehra Bilgen Susanlı
2 and
Nesrin Okay
3
1
Central Bank of the Republic of Türkiye, Istanbul Finance Center, Istanbul 34760, Türkiye
2
Department of Management, Bogazici University, Istanbul 34342, Türkiye
3
Department of Management and Financial Engineering Program, Bogazici University, Istanbul 34342, Türkiye
*
Author to whom correspondence should be addressed.
Energies 2025, 18(19), 5068; https://doi.org/10.3390/en18195068
Submission received: 14 August 2025 / Revised: 18 September 2025 / Accepted: 19 September 2025 / Published: 23 September 2025
(This article belongs to the Special Issue Managing the Low-Carbon Energy Transformation: Strategies and Prospects for 2050)
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Abstract

This paper aims to provide an assessment of the current global outlook in the transition from fossil fuels to renewables. This subject is especially important, given the significant economic and environmental impacts associated with continued reliance on fossil fuels, the global commitments under the Paris Agreement to limit the temperature increase, and the growing demand for clean, sustainable energy sources to support sustainable growth. While global renewable capacity more than doubled in the last ten years, the share of renewable sources in total energy consumption remains stable at 17 percent, indicating the multidimensionality of the transition from fossil fuels to renewables. This increase in renewable energy capacity fell short of the stronger rise in global energy consumption, also highlighting the need for an assessment of the outlook. This study proposes a multifaceted approach for a smooth energy transition. The facets addressed in this paper are: technology, innovation and R&D, investment and financing, energy efficiency measures, domestic policy support, and international cooperation and collective effort. Additionally, the challenges related to each facet of transition are presented. Among the facets discussed, this paper proposes that renewable energy technologies and energy efficiency practices are at the heart of the transition, due to the potential synergies. Furthermore, there is a need for an integrated approach that considers technological, economic, and other aspects of the transition in a unified manner. Last but not least, international collective effort for low-carbon transition should not be overlooked.

1. Introduction

Climate change might be defined as long-term shifts in temperatures and weather patterns. As the implications of climate change have been more pronounced around the globe, the need for a global response has become more urgent than ever. To address this need, the Paris Agreement serves as a significant landmark to establish a global climate effort. Since the Agreement was signed by jurisdictions in 2015, there has been some progress in cutting global emissions. Still, the level of ambition of climate targets and the timelines for meeting those targets need more improvement. Supporting this argument, in the case that jurisdictions do not increase new Nationally Determined Contributions (NDCs) and start delivering those immediately, a global temperature increase of 2.6–3.1 °C is expected over the course of this century [1]. The report also estimates that 42% and 57% emission cuts are needed by 2030 and by 2035 respectively, to get on track for 1.5 °C temperature increase.
Despite the need for urgent emission cuts, global emissions have been increasing. The authors of [2] highlight that global greenhouse gas (GHG) emissions (The GHG emissions do not include emissions from Land Use, Land Use Change and Forestry) reached 53.0 Gigatonnes (Gt) carbon dioxide equivalent (CO2eq) in 2023, which is 1.9% or 994 megatonnes (Mt) CO2eq higher than the level in 2022. The same source also reveals that in 2023, while fossil carbon dioxide (CO2) constitutes the biggest portion (73.7%) of total GHG emissions, methane (CH4), nitrous oxide (N2O) and F-gases account for 18.9%, 4.7% and 2.7% of emissions, respectively.
As energy accounts for two-thirds of global GHG emissions, many jurisdictions are exploring ways to transition away from fossil fuels. It is highlighted that for the governments to meet targets that have deadlines in the 2020 and 2030 period, a significant level of renewable power capacity improvements is needed [3]. International Energy Agency (IEA) and the International Renewable Energy Agency (IRENA) forecast that, to limit temperature increase to 1.5 °C, the world needs to triple renewable energy capacity by 2030. Together with the increases in renewable power, the average annual rate of global energy efficiency improvements must be increased from approximately 2% to over 4% every year until 2030. Furthermore, United Nations Sharm el-Sheikh Implementation Plan emphasizes the need for 4 trillion United States Dollars (USD) annual investment in renewable energy up until 2030, to reach global net zero emissions by 2050 [4].
Checking the historical investment figures, it is seen that global clean energy investment has marked a 14.8% growth in 2021–2022 and 7.6% in 2022–2023 periods, driven by renewables and electric vehicles [5]. Despite the fact that renewable energy capacity has more than doubled over the last ten years, its share in total final energy consumption has remained stable—at approximately 17%. This was mainly because the denominator of the ratio, the global total final energy consumption, also marked a similar growth pattern during the stated period. Another barrier that prevents the growth of the share of renewable energy in total energy consumption is the inadequate grid infrastructure to handle the influx of renewable energy, specifically in the case of electricity generation. Global electricity generation by source statistics also indicate that fossil-based sources are still widely used and generate 61.4% of total global electricity output. On the other hand, 28.5% of this output is generated with renewable sources [6]. The numbers imply that there is still much to achieve for an adequate global low-carbon energy capacity.
In order to reach global net zero emissions by 2050, all sectors of the economy should undergo an ambitious transition. However, as energy is the main driver of global emissions, its transition is critical to mitigate the impact of climate change. Energy transition might be defined as the shift from fossil-based sources of energy such as oil, natural gas and coal—to renewable energy sources as wind, solar, geothermal, hydropower and biomass.
Energy transition is a complex and comprehensive task. It must be supported with enabling policies and actions to decarbonize the energy and electricity supply, increase electricity use, improve energy efficiency, and develop new energy technologies to tackle hard-to-abate emissions. Green hydrogen is one of such new technology that gains traction due to falling electrolyzer costs, increased efficiency from proton exchange membrane (PEM) technologies, and pilot projects in heavy industries and transport [7]. Carbon capture and storage (CCS) is another method that may complement renewables in decarbonizing heavy industries, though concerns remain over its cost and potential to delay fossil phase-outs [8].
Energy efficiency and renewable energy technologies are key drivers of the transition [9]. Transparent policy processes, inclusive governance, and accountability mechanisms must also be embedded throughout the energy transition [10]. The responsibilities of governments, corporations and international organizations are critical in achieving climate commitments. To achieve a smooth transition, there are number of facets to be considered including but not limited to (i) Technology, innovation and research and development (R&D) (ii) Investment and financing (iii) Energy efficiency measures (iv) Domestic policy support (v) International cooperation and collective effort. Scheme 1 depicts five facets of energy transition.
This study aims to lay down the above-mentioned critical facets of energy transition, while also highlighting associated challenges. The main objective of this paper is to determine the leading facets towards a smooth low-carbon transition, while also emphasizing the potential interrelations among them.
This study is structured as to include sections that discuss the details of each five facet. The Section 3 concludes with an overall summary of the main discussions and proposes some policy recommendations. The study is finalized with the Section 4 on limitations and avenues for future research.

2. A Multifaceted Approach to Energy Transition

2.1. Technology, Innovation and Research and Development (R&D)

Ideally, energy transition requires widespread usage of renewable energy sources, while also involving a drastic reduction in fossil fuels. However, many forms of renewable energy technologies are not totally mature yet. Despite the recent improvements in renewable energy installation and operating costs, the efficiency of many types of renewable energy solutions is not adequate. For instance, in the case of solar panels, efficiency refers to the percentage of solar energy that is converted to electricity [11]. The sources reveal that the average efficiency of solar panels available today is 21% [12]. Furthermore, other solar technologies such as organic, dye-sensitized and perovskite solar cells are not yet market-ready due to their low efficiency [13]. The authors of [14] reveal that while energy density remains lower for renewables, electrification of end-use sectors and hybrid systems (e.g., solar-thermal for industrial heat) are being developed to bridge the gap. Some high-efficiency concentrated solar power (CSP) systems are reaching thermal efficiencies of over 40%.
Another challenge regarding the renewable energy technologies is their intermittent nature. As renewable energy plants are dependent on weather conditions and the nature, they may not work for most of the year. Power and utility industry players could find it hard to integrate the intermittent renewables such as wind and solar to the main grid, while maintaining reliability and energy security. To address this problem, jurisdictions need to adjust their electricity transmission infrastructure such that it could optimally allocate generated power, with maximum utilization of renewable-sourced electricity. Another solution to the energy intermittency problem would be deployment of complementary storage technology solutions like batteries. The improvements in the development of battery technologies and energy storage solutions might further increase the preference of renewable energy solutions by jurisdictions. In addition to storage, demand response systems, smart metering, and flexible load management are being deployed to smooth demand fluctuations. Sector coupling—integrating electricity with heating, transport, and industrial use—can also reduce reliance on fossil fuel peaking power plants [15].
Supporting this argument, the authors of [16] find that energy storage systems could effectively improve the utilization and efficiency of renewable energy. The authors of [17] also emphasizes positive market developments and supporting regulations related to energy storage systems, in the case of European solar and wind energy integration. It is also important to note that reducing battery and storage system dependency on lithium-ion technologies through alternative chemistries such as sodium-ion, redox-flow, and gravity-based storage can alleviate supply chain pressures. Circular economy approaches, including battery recycling and repurposing, are also essential to improve lifecycle efficiency [18].
Additionally, innovation and technology are indispensable for a smooth green transition. Technology investments require high upfront capital investments. Renewable energy technology innovation is not an exception. Government investment in research and development and public finance are key to providing the resources in promoting innovation in renewable energy. The green growth indicators calculated by OECD and shown in Table A1 and Table A2 of Appendix A reveal that fiscal support for innovation and technology is not still sufficient. Furthermore, in terms of renewable energy public R&D budget share in total energy public R&D budget, emerging market economies are more disadvantageous to developed ones, due to their narrow fiscal spaces. To the contrary, global fossil fuel subsidies are still prevalent, amounting to 7 trillion USD in 2022 and 7.1% of global GDP [19]. This is mostly attributable to the fact that fossil fuels are the main source of energy for many countries. However, policies that target to shift the resources away from fossil fuels to renewable energy technologies would definitely support future decarbonization efforts. However, one should also bear the counter argument in mind, namely, the argument that renewable sector is too dependent on government subsidies, and need to respond to the question that if it is possible for the industry to sustain itself without these subsidies. Here comes the crucial role of national emission trading system revenues or specialized climate funds that might be redirected to green transition projects, more specifically to clean energy projects. It is undoubted that there is high potential from carbon markets and this potential might be unlocked to increase much needed climate finance. Based on current figures, as new schemes and instruments are introduced, global public revenues from carbon pricing mechanisms reached a record USD 104 billion in 2023 [20].
More recently, there appears additional challenges related to the mining of materials used for solar and battery technologies. Limited supply of rare earth elements and critical minerals lead countries to green protectionism. For instance, China embarks on green protectionist policies, such as imposing export limitations to rare earth elements such as gallium and germanium, which are the main raw materials used in telecommunications and electric vehicle industries. Another export restriction of China is to graphite, which is key to the batteries of electric vehicles [21]. Stated export restrictions of the country aim at further improving its position in global sales of electric vehicles market. The IEA Policies Database also reveal about the establishment of China Rare Earth Group with a merger transaction. The newly established group aim to further utilize rare earth resources and develop rare earth industry in the country [22]. The limited supply of these critical minerals is expected to continue to be challenging for the global renewable energy market as well. Recent technological efforts such as strategic resource stockpiling, advancement of recycling technologies, and R&D into material substitution (e.g., replacing cobalt with iron-based alternatives) can help reduce supply chain vulnerabilities [23].
Furthermore, strict social and environmental regulations are known to significantly extend permitting timelines. According to a report by the Boston Consulting Group, the average period from exploration to initial production now takes 16 years, reducing a project’s value by over 60%, lessening its appeal to investors and diminishing its overall feasibility [24].
Another challenge, mostly resulting from the limited supply of critical minerals, is the price volatility of lithium, cobalt, and rare earth minerals. The authors of [23] argue that strategic reserves, long-term procurement contracts, and development of secondary markets (via recycling) might help provide a degree of protection against price volatility and supply shocks.
The problem is not only the limited supply of critical minerals but also the fact that mining and processing of these raw materials and minerals might have some negative implications to rural, local and indigenous communities. Employment of child workers in the exploration appears as the most depressing problem in the field. This phenomenon might be considered as a negative repercussion of the shift to renewable energy technologies [25]. Based on [26], over 1 million children work in mines and quarries. Even if this number also includes child labor in mining of minerals that are not related to renewable technologies, it is undoubted that this phenomenon should be given close attention as it poses significant risks to children’s health and safety. Beyond the issues regarding child labor, the mining and extraction of the rare earth mineral raises concerns over metal toxicity, radiation exposure and acidity of the residues, which in turn raises further challenges of social acceptability [27].
More generally, the assessment of social and environmental impacts as well as the economic consequences are vital for a rapid transition. Social acceptability of energy sources varies and depends on the perceived impacts. The authors of [28] distinguish between the following six types of perceived impacts: aesthetic, economic, environmental, community and health, temporal, and usability. Based on 141 studies published between 2000 and 2021, the authors document that renewable energy sources are perceived more favorably than nuclear energy and fossil fuels, considering environmental, social and health impacts. Among social drivers, trust and quality of institutional governance appear to be main drivers of renewable energy deployment [29]. Another study, namely [30], also underscore the importance of maintaining trust throughout the lifetime of a project, employing a cross-country analysis.
In addition to social repercussions of renewable energy utilization and penetration, there are some other environmental trade-offs of renewables, such as land use for solar farms, water requirements for hydrogen production, and biodiversity impacts from wind farms. Ref. [31] states that material recovery technologies, circular design principles and Extended Producer Responsibility (EPR) policies being adopted in the EU and elsewhere addresses the concerns about management of recycling or disposing of solar panels, turbine blades and batteries.
Table 1 summarizes the main challenges pertaining to renewable technologies and innovation, with a focus on different dimensions.

2.2. Investment and Financing

The recent Ukraine–Russia conflict and subsequent energy crisis emphasized the need to diversify the energy mix to the benefit of renewable energy. During the 10 years between 2014 and 2023, global renewable energy capacity more than doubled. While global renewable capacity was 1700 gigawatts in 2013, it became 3869 gigawatts in 2023. This progress is mostly driven by the recent capacity growth in Europe and China. In more detail, Europe’s renewable energy capacity has shown 81% growth and China’s renewable energy capacity has more than tripled, during the stated period of 2014–2023. While China accounts for 37.5% of global renewable capacity, 20.3% of this capacity belongs to Europe (Table 2).
These stated capacity improvements require significant amount of investment. In terms of the breakdown of energy investments, there is a striking difference between advanced (AE) and emerging economies (EMEs). While the share of clean energy investments has increased from 50% to 70% in AEs in the 2015–2024 period, 61% of energy investments in EMEs (excluding China) are still channeled to fossil-based sources in 2024. On the other hand, China has halved its fossil-based energy investment from 2015 to 2024, shifting the resources to clean energy. As for the global breakdown of clean versus fossil-based energy investments, it is realized that the investment breakdown of advanced economies dominates the whole picture, namely favoring for clean energy investments in the global arena (Figure 1).
Figure 2 reveals a more detailed breakdown of annual clean energy investments as well as fossil-fuel investments. Based on the figures, China takes the lead in annual clean energy investments both in 2019 and 2024. Renewable power investments account for the highest share of country’s 2024 annual investments. As for European Union, it is seen that in the 2019–2024 period, investments in renewable power almost doubled, while investments in energy efficiency and end-use gets the biggest share of all in 2024. While fossil fuel investment in United States decreased in 2024 compared to 2019 levels, it still constitutes the biggest portion of all investments. In India, Latin America, Southeast Asia, the share of renewable power investments has increased during 2019–2024 period but investments channeling to fossil fuels still dominate (Figure 2).
The divergence of investment figures among regions opens new dimensions in the new energy geopolitics. Countries that possess abundant renewable energy resources, such as wind-rich ones or areas with significant solar potential, might have aspirations to become key players in the energy trade. While these clean energy investments help countries achieve their climate commitments and reduce their dependence on fossil fuels, competition on scarce resources such as rare-earth minerals, energy access and security concerns still prevail. The increased investment on clean energy sources might also enhance economic opportunities, and open doors to potential areas of international cooperation or foreign direct investments. As an example, Chinese electric vehicle (EV) giant BYD has recently shifted its focus from Hungary to Turkey for European EV production. A one-billion-dollar Turkish plant is scheduled to begin operations at the end of 2026, creating as many as 5000 jobs in the country.
Since energy investments require higher capital expenditures, financing of these investments is also a concern. Financial markets are increasingly accommodating green assets, supported by national taxonomies, ESG reporting frameworks, and climate disclosure regulations, though integration into mainstream portfolios remains uneven [33].
Global figures indicate that climate finance has consistently surged amid global crises and amounted to USD 1.46tn in 2022. Mitigation finance gets almost 80% of this financing. Among other mitigation efforts related to the buildings and infrastructure, transport and other; energy systems (including renewable energy), take the lead and gets the highest amount of financing [34]. Even if financing figures indicate that renewable energy projects have easier access to finance, EMEs do not have sufficient amount of climate finance yet. The authors of [35] argue that concessional finance from multilateral development banks (MDBs) and other type of innovative blended finance instruments are increasingly important to address affordability for developing countries. Furthermore, initiatives like the Climate Investment Fund, Green Climate Fund and Loss and Damage Fund help de-risk investments and mobilize private capital.
Finally, renewable energy projects are more responsive to the interest rate increases and subsequent tight financial conditions. This responsiveness is because of the fact that they require higher upfront capital expenditures and cost of capital is an important concern [36,37]. To mitigate market volatility and investment risk, blended finance, political risk insurance, and sovereign guarantees can be employed. Stable regulatory frameworks and long-term energy planning might attract institutional investors [35]. The challenges related to energy intermittency and storage might also cause temporary inflationary pressures during transition, depending on the speed and orderliness of transition. With this said, it is expected that if renewable energy capacity is widely and better utilized, it could ultimately support long-term price stability [38,39]. To avoid transition risks related to the shift from carbon-intensive to clean technologies, targeted credit facilities with longer tenures and lower interest rates would help alleviate the burden for clean technology developers.

2.3. Energy Efficiency Measures

To overcome the implications of latest energy crisis and enhance their decarbonization efforts, countries also employ energy efficiency measures. Energy efficiency is measured by energy intensity indicators, namely the amount of energy required to produce a unit of GDP. During the recent energy crisis, global energy intensity has accelerated to 2% per year in 2022 but current figures show that the progress has halved approximately 1% per year [40]). Energy efficiency efforts might be considered as the most cost-effective CO2 mitigation methods. In addition, efficient energy usage help decrease the costs and improve energy security. Thus, demand-focused energy efficiency policies complement supply-side policies. Behavioral interventions, such as dynamic pricing, energy audits and gamification complement technical efficiency measures and reduce peak demand [41].
In the recent landscape, many jurisdictions started to increase national energy efficiency targets. At the 28th Conference of Parties (COP28) of the UN, global renewables and energy efficiency pledge was signed by 118 jurisdictions to emphasize the critical contribution of renewables and energy efficiency to the achievement of the UN Sustainable Development Goal (SDG) 7 for “affordable, reliable, sustainable and modern energy for all”. As an example, based on its 2030 National Energy Efficiency Strategy and Action Plan, Turkey announced that it will invest USD 20 billion in energy efficiency schemes by 2030 in the public and private sectors, to cut energy consumption by 16%, and decrease 100 million tons of carbon emissions by 2030 [42]. As another example, in OECD countries, energy efficiency policies appear to play a key role in the decarbonization process, coupled with environmentally friendly advancements in technology [43]. Table 3 summarizes various examples of energy efficiency measures implemented by select countries. It is seen that most of the efficiency measures are related to buildings, industrial production and transport, but cross-sectoral programs also exist.

2.4. Domestic Policy Support

The study of [44], focusing on the twin deficit of OECD countries, states that renewable energy, as a domestic source and being abundant in nature, would support both decarbonization efforts and energy independence of jurisdictions. Since energy investments require higher capital expenditures, governments might support entrepreneurs with feed-in-tariffs, grants, subsidies, direct tax credits, tax exemptions and credit guarantee and other form of incentive schemes for clean technology investments. This is examined for several country samples across multiple studies (see [45,46,47]) for the European Union, for 16 Asia Pacific countries and for China, respectively. As an additional example, Renewable Energy Sources Support Mechanism (YEKDEM) that is designed as a government purchase guarantee; significantly contributed to the acceleration of domestic renewable energy investments in Turkey. Tailor-made incentive mechanisms such as tax incentives, land allocation as well as social security support for employer’s share are some of the government subsidies provided for renewable energy investments. By the help of these support mechanisms, in 2024, almost 76% of the licensed electricity generation facility investments were directed to wind and solar power capacity installments in Turkey [48].
Additionally, the report of [49] mentions that governments must implement just transition frameworks that include job retraining programs, social safety nets, and regional economic diversification plans to support workers transitioning from fossil-based sectors to clean energy jobs. In fact, just transition mechanisms are key tools to ensure that the transition happens in a fair way, leaving no one behind. Targeted monetary support, financial incentives as well as capacity building programs, awareness campaigns and advisory services might be used to alleviate the socio-economic impact of transition, especially in the most affected regions.
Renewables offer long-term savings but require upfront support. Targeted subsidies, pay-as-you-save models, and public financing programs can also help mitigate energy poverty. For instance, [50] emphasizes that Germany is a front-runner in the adaption of photovoltaics (PV), despite the low number of sunny days in the country. It has achieved a great deal in renewable energy deployment via its supporting policy incentives [51]. China is another country that has highly subsidized its renewable energy market in recent years and subsequently achieved remarkable capacity improvements. It is also worth to acknowledge that while early-stage government support has been essential, there is a gradual shift towards competitive auctions and performance-based incentives, promoting cost efficiency and reducing long-term fiscal dependency [52].
In addition, government support for energy storage solutions as well as policies to align the grid infrastructure would be crucial to address the intermittency of renewable sources. Actions towards this aim would ultimately help improve energy security and affordability [53]. The authors of [54] emphasize that digitalization of the grid through smart metering, real-time demand forecasting, and AI-based grid management systems are central to integrating variable renewables to the system, while maintaining stability. Many jurisdictions are introducing policy incentives to accelerate such upgrades. It is also compulsory to build cybersecurity into the digital grid from the outset. Standards for encryption, intrusion detection, and system redundancy are mandatory for resilience.
To overcome regulatory bottlenecks, countries are adopting ‘one-stop shops’ for renewable project approvals, digital permitting systems, and standardized timelines to expedite clean energy deployment [55]. As an example, in Turkey, it was announced that renewable energy investments will be accelerated with “Super Permit”. The new application aims to simplify long and complex bureaucratic processes such as Environmental Impact Assessment (EIA) as well as reconstruction and forest permits to implement projects in a shorter time. Thus, it is envisaged to shorten the permit processes that currently take up to 48 months. The “super permit” period aims to provide serious momentum to the sector by ensuring that strategic projects such as renewable energy and energy storage are put into operation quickly [56].
Last but not least, as documented in [57], governments might also support energy transition, by establishing an enabling regulatory landscape for the development of clean technologies and removing informational asymmetries regarding green investments. Governments, while supporting the renewable energy landscape via supporting policies, also need to address community resistance to renewable infrastructure through participatory planning, benefit-sharing agreements, and localized ownership models that increase public buy-in and trust. Behavioral nudges, awareness campaigns, and green labeling schemes are essential to encourage adoption of EVs, energy-efficient appliances, and rooftop solar systems. It should be considered to combat with misinformation and information asymmetry through transparent communication, education programs, and public data portals with the help of civil society and academia [58].

2.5. International Cooperation and Collective Effort

The authors of [59] underline the tangible global improvements in shifting towards renewable energy but also takes attention to disparities among different regions of the world. Geopolitical, technological and economic reasons are referred as determinants of these disparities. Thus, it is undoubted that there is a need to undertake collective effort towards enacting concrete policies and actions to achieve a just transition and sustainable development. In this regard, finance, capacity building, technology development and transfer might be considered as critical enablers of climate action. The study of [60] argues that a differentiated approach is needed—while developed nations lead on innovation and deployment, developing nations require financial and technical support, along with policy flexibility, to meet energy security and growth needs. The important question for developing economies is how to ensure energy security while reducing reliance on fossil-fuel-rich countries.
Although public finance needs to play a central role in providing the resources to combat climate change, privately sourced climate finance and investment should also be scaled up, specifically in developing countries. In the United Nations climate change conference called Conference of the Parties 29 (COP29), countries agreed on a New Collective Quantified Goal (NCQG) on climate finance. The new goal calls on developed countries to take the lead in mobilizing at least USD 300 billion per year for developing countries by 2035.
Furthermore, to increase the private sector’s contribution to green investments, the risks and uncertainties should be alleviated [61]. Public-sector and ecosystem actors have an important role to play in addressing these concerns. They might create an enabling environment for the design of new innovative financial instruments or for the better utilization of existing resources. For instance, innovative applications such as blended and structured finance or risk-sharing and derisking instruments such as guarantee mechanisms might be enhanced, as a solution to inadequate participation of private actors in climate investments. Recently, to increase the private-sector’s involvement in the game, the World Bank Group established the Private-Sector Investment Lab. Similarly, the UN established the Global Innovation Lab for Climate Finance to drive more private investment.
In addition, multilateral development banks (MDBs) might increase their efforts to better mobilize private green sources, specifically in emerging countries. MDBs might support green transition via providing financial and technical support. First, to scale up climate finance, they might create blended finance opportunities with better terms, utilizing their own low-cost funding means. As for the technical support by MDBs, they might enhance capacity of emerging countries, via being a liaison in reshaping policy frameworks that address the needs of private investors. Finally, MDBs might increase supply of bankable projects so that private actors become more inclined to participating in green projects.
Increased international collaboration would also support broadly accessible technological innovation across the world. The transfer of clean technology knowhow would help technology importer countries improve their innovation landscape. For instance, countries that are more reliant on imported materials for solar cells might start producing these materials in house or at least increase the percentage share of local materials in the production of solar panels.
Finally, governments might also target policies to address job losses in fossil fuel industries while ensuring a smooth transition for workers. Green skillset improvement and training programs are just a few vehicles to support the workforce.
It is also essential to ensure equitable energy access. Policy designs should prioritize off-grid renewable solutions, subsidies for low-income households, and inclusion of marginalized communities in decision-making processes [62].
After a detailed review of each facet, there is also a need to focus on interdependencies among these facets. In fact, an integrated approach on technological, economic, and other aspects is required. For instance, weather-induced variability in renewable energy generation cannot be addressed through technological solutions alone; it requires funding for investment as well as a thorough review of supporting domestic policies. Furthermore, weather-induced variability also needs to be supported through alternative means such as, an expansion of storage systems, government support for grid modernization, and consensus on implementation of smart technologies. Some literature also highlights the interdependencies among the facets discussed in this study. The authors of [63] highlight the interlinkage between R&D, cost reductions and investment cycles to achieve the Paris climate agreement. There are also articles showing empirical evidence related to the interdependencies. For instance, the study of [64] empirically shows that public R&D spending lowers energy intensity, linking R&D to efficiency improvements. The authors of [65] empirically support the argument that efficiency-focused R&D drive environmental improvements and highlights combined effects of technology and structural change. On the policy-related interdependencies, the study of [66] finds empirical evidence on the interactions among investment, storage, and policy frameworks. The authors of [67] also argue for the interdependencies between policy or regulation and investment, with a cross-country empirical analysis and claims that policy uncertainty and regulatory design shape private investment flows. Finally, [68] depicts policy–innovation feedback loops, via showing evidence that environmental regulation stimulates renewable energy innovation and patents.

3. Conclusions and Policy Recommendations

The international community acknowledged the key role played by renewable energy for a just transition [59,69,70,71]. This study attempts to provide an analysis of the current state in achieving a smooth transition towards renewable energy sources. This paper also addresses various challenges associated with the transition. The insights from this review are expected to be particularly valuable to policy makers, international organizations, academic researchers and other key actors participating in the transition to renewable energy. The most important findings of this article are as follows:
  • Recently, there is a global shift of investments from fossil fuels towards cleaner energy sources, although emerging market and developing economies lag behind other regions.
  • Renewable energy capacity improvements have been remarkable over the last ten years, with the growth mainly driven by China and Europe.
  • Due to the synergies created, renewable energy technologies and energy efficiency practices are at the heart of the transition. However, the intermittent nature of renewable sources is yet to be solved.
  • There is an urgent need for creating an enabling regulatory environment to increase private investors’ involvement. The form of support mechanisms might include both monetary and non-monetary practices.
  • The cooperation between governments, multilateral agencies and other key actors in the ecosystem are crucial to close the disparities and achieve a smooth global energy transition.
Over the past decade, the share of fossil fuel investments in total global energy investments has declined markedly, decreasing from 55% to 35.8%, indicating a shift towards cleaner energy sources. This shift towards clean sources of energy was observed in almost all regions, with varying shares of clean energy investments. As of 2024, the share of investment in clean energies is the lowest in the group of emerging market and developing economies (38.7%) and highest in China (78.5%). While significant progress has been achieved in expanding renewable global energy capacity, developments have been uneven across regions, with growth primarily driven by China and Europe. The uneven improvement across the world might be attributed to the reluctance, from specifically oil-dependent countries. However, it should be borne in mind that while fossil fuels may appear to be a more economical option at the point of purchase, they carry a hidden cost in terms of environmental damage, health burdens and other climate-related risks, which are not reflected in market prices. Thus, in order to achieve true competitiveness in energy markets, it is essential to incorporate externalities such as carbon pricing [72].
Among the five dimensions examined in this paper, energy efficiency and renewable energy technologies emerge as key factors, with their synergies playing a crucial role in the transition. However, challenges related to efficiency measures to complement supply-side policies and energy intermittency still remain to be addressed. Public finance also appears to have a critical role, given the large upfront capital investment requirements. Looking at the magnitude and share of investment in clean energies, China emerges as the leader with the largest renewable power investments and the total capacity in 2023.
In addressing the challenges related to financing of the clean energy investments, government policies in the form of grants, subsidies, feed-in-tariffs, tax cuts or direct tax credits play a vital role. In order to attract private sector to invest in renewable energy technologies, the risks and uncertainties must be addressed. Hence, this further underscores the role of the governments in providing a regulatory environment that eliminates information asymmetries and facilitates investment.
Taken together, this discussion highlights the importance of different facets of the energy transition as well as the interdependencies among them. As such, the current perspective in the transition to renewable energies depend critically on the interplay between governments, multilateral agencies and key actors in the ecosystem to overcome the existing disparities in progress towards clean energy sources. A successful transition depends not only on technology and capital, but also on public trust. Thus, it is clear that an integrated approach is needed to address the challenges related to each facet.

4. Limitations and Future Research

This paper aims to provide a comprehensive and multifaceted perspective on the transition from fossil fuels to renewable energy sources, distinguishing it from existing reviews in several aspects. First, this paper combines insights from technological, economic and policy dimensions into a single framework. By doing so, this paper provides a holistic understanding of the challenges and opportunities associated with the energy transition. Second, it utilizes a regional comparison and hence evaluates the differences in transitions and obstacles. Third, by referring to relevant academic papers, the current paper also identifies existing gaps in the literature. By bringing together these elements, this paper provides a clearer perspective for both researchers and policy makers.
While the current study adopts a comprehensive approach, it still has limitations. First, the sources utilized may introduce bias as many institutional reports utilized in this study have specific policy and economic goals, which may influence the framing of the challenges and opportunities in the transition to renewables. Hence, reliance on such sources may generate a tendency to adopt a policy-aligned perspective. Second, due to underexploration of the impacts of renewable energy deployments in developing countries, this paper should be interpreted with caution when generalizing findings to these contexts. Finally, the fast-evolving nature of renewable technologies implies that the evidence cited needs to be updated continuously, highlighting the need for an ongoing assessment. In light of these limitations, future work, particularly based on underrepresented countries, would result in a more detailed and broader perspective.

Funding

This research received no external funding.

Conflicts of Interest

The authors declare no conflict of interest.

Appendix A. Green Growth Indicators

Table A1. Advanced Economies.
Table A1. Advanced Economies.
Developed Countries
CountryAUCAFRDEITJPNLSGESSEUKUSWorld
IndicatorUnit
Economic opportunities and policy responsesTechnology and innovation: PatentsDevelopment of environment-related technologies, % all technologies%9.1710.9513.3114.919.7511.3710.778.0111.6512.5011.7210.1410.95
Relative advantage in environment-related technologyRatio0.841.001.221.360.891.040.980.731.061.141.070.931.00
Development of environment-related technologies, % inventions worldwide%0.561.663.7511.041.3821.261.080.240.620.962.6920.40100.00
Technology and innovation: R&DEnvironmentally related government R&D budget, % total government R&D%3.61..1.772.692.833.710.64..3.851.331.830.37..
Renewable energy public RD&D budget, % total energy public RD&D%24.5810.2013.1419.6819.5315.1744.55..62.9322.2217.0110.21..
Energy public RD&D budget, % GDP%0.020.050.060.030.030.060.03..0.010.040.030.04..
[73] Data extracted on 1 July 2023 18:04 UTC (GMT) from OECD.Stat
Table A2. Emerging Market Economies.
Table A2. Emerging Market Economies.
CountryEmerging CountriesWorld
BRACHLCOLINDKORMEXRUSCHN
IndicatorUnit
Economic opportunities and policy responsesTechnology and innovation: PatentsDevelopment of environment-related technologies, % all technologies%11.8418.8612.658.7113.5712.929.188.9610.95
Relative advantage in environment-related technologyRatio1.081.721.160.801.241.180.840.821.00
Development of environment-related technologies, % inventions worldwide%0.230.070.041.1910.980.110.3112.86100.00
Technology and innovation: R&DEnvironmentally related government R&D budget, % total government R&D%..1.7616.58..3.001.32......
Renewable energy public RD&D budget, % total energy public RD&D%12.83......24.8419.35......
Energy public RD&D budget, % GDP%0.05......0.030.01......
[73] Data extracted on 1 July 2023 18:04 UTC (GMT) from OECD.Stat

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Energies 18 05068 sch001
Scheme 1. Multiple Facets of Energy Transition.
Scheme 1. Multiple Facets of Energy Transition.
Energies 18 05068 sch001
Energies 18 05068 g001
Figure 1. Breakdown of Energy Investments by Regions and World (%). Source: [21].
Figure 1. Breakdown of Energy Investments by Regions and World (%). Source: [21].
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Figure 2. Annual Investment in Clean Energy by Selected Country and Region, (%), 2019 and 2024 Source: [21]. Notes: 2024 values are estimated. Low-emission fuels are modern bioenergy, low-emission H2-based fuels, and CCUS associated with fossil fuels.
Figure 2. Annual Investment in Clean Energy by Selected Country and Region, (%), 2019 and 2024 Source: [21]. Notes: 2024 values are estimated. Low-emission fuels are modern bioenergy, low-emission H2-based fuels, and CCUS associated with fossil fuels.
Energies 18 05068 g002
Table 1. Main Challenges Pertaining to Renewable Technologies and Innovation.
Table 1. Main Challenges Pertaining to Renewable Technologies and Innovation.
CategoryChallengeDetails/ExamplesPotential Mitigation
TechnicalLow efficiency of some technologiesSolar panels ~21% efficient; organic/dye-sensitized/perovskite cells not market-readyHigh-efficiency CSP (>40%); hybrid systems; continued R&D
TechnicalIntermittency and grid integrationWind/solar depend on weather conditions and grid infrastructureStorage solutions (batteries, gravity-based, redox-flow); smart grids; demand response; sector coupling
Economic/FinancialHigh upfront capital costsRenewable R&D and infrastructure require large investmentsPublic finance, specialized climate funds, carbon market revenues (>USD 104 billion in 2023)
Economic/FinancialDependence on subsidiesDebate on sustainability without government supportShift subsidies from fossil fuels; use ETS revenues and green funds
Resource and Supply ChainCritical minerals scarcityLimited supply of lithium, cobalt, rare earths (gallium, germanium, graphite)Recycling, substitution (iron-based for cobalt), stockpiling
Resource and Supply ChainPrice volatilityFluctuations in price of in lithium, cobalt, rare earthsStrategic reserves, long-term contracts, secondary markets
Regulatory and PoliticalLengthy permitting processesAverage mining project: 16 years to production, reducing value 60%Streamlined permitting, enabling regulatory reforms
Regulatory and PoliticalGreen protectionismExport restrictions (China on gallium, germanium, graphite)Diversification of supply sources, international or bilateral agreements
SocialLabor exploitation in mining >1 M children in mining (ILO, 2019); unsafe conditions in mineral extractionStronger labor standards, responsible sourcing policies
EnvironmentalLand, biodiversity and water impactsSolar farms (limiting land), hydrogen (limiting water), wind (impacting biodiversity)Circular design, EPR policies, recycling technologies
EnvironmentalWaste managementDisposal/recycling of panels, blades, batteriesEU Extended Producer Responsibility, material recovery technologies
Source: Authors’ own compilations.
Table 2. Total Renewable Energy Capacity by Select Regions and World (Megawatts).
Table 2. Total Renewable Energy Capacity by Select Regions and World (Megawatts).
201420192023
China414,651.00758,870.001,453,701.00
United States180,970.00263,820.00387,549.00
European Union352,565.00450,804.00641,478.00
India71,894.00128,475.00175,929.00
Latin America194,878.00261,998.00336,193.00
Southeast Asia51,202.0074,558.00105,275.00
Africa32,546.0050,429.0062,107.00
World1,700,116.0025,503,190.003,869,705.00
Source: [32].
Table 3. Examples of Energy Efficiency Measures Implemented by Select Countries.
Table 3. Examples of Energy Efficiency Measures Implemented by Select Countries.
Country/RegionSectorMeasure/ProgramKey Features
EUBuildingsEnergy Performance of Buildings Directive (EPBD)“Zero-emission” standard for all new buildings from 2030
GermanyBuildingsKfW Efficiency House ProgramLow-interest loans for insulation, efficient heating, solar systems
The NetherlandsBuildingsEnergiesprongIndustrialized retrofits transforming old homes into net-zero energy houses
IndiaIndustryPerform, Achieve, and Trade (PAT) SchemeEnergy-saving targets for firms; trading of surplus savings certificates
ChinaIndustryTop-1000 Enterprises Program & Action PlanMandatory audits and energy intensity reduction for large factories
JapanIndustry/ProductsTop Runner ProgramAppliances and vehicles must perform at least as efficiently as the best model
USATransportCorporate Average Fuel Economy (CAFE) StandardsProgressive tightening of fuel efficiency standards for cars and trucks
ChileTransportElectric Bus Program (Santiago)Over 1700 e-buses, they are one of the world’s largest electric fleets
NorwayTransportEV Incentive ProgramTax exemptions, free parking, toll waivers led to rise in EV sales share to %80 in 2022
Republic of Korea (Seoul)City-wideOne Less Nuclear Power Plant ProgramRetrofit 20,000 buildings, LED rollout, solar promotion, citizen participation
United KingdomHousingEnergy Company Obligation (ECO)Energy suppliers must fund insulation and heating upgrades for households
TurkeyCross-sectoralNational Energy Efficiency Action Plan (2023–2030)USD 20 billion investment, 16% reduction in energy use, 100 Mt CO2 cut by 2030
UAE (Dubai)Cross-sectoralDemand Side Management Strategy 2030Target to reduce electricity and water consumption by 30%
Global (COP28)Cross-sectoralEnergy Efficiency Doubling Goal118 countries pledged to double the rate of efficiency improvements by 2030
Source: Authors’ own compilation from different country sources.
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Ozkan, C.; Susanlı, Z.B.; Okay, N. Transitioning Away from Fossil Fuels to Renewables: A Multifaceted Approach and Related Challenges. Energies 2025, 18, 5068. https://doi.org/10.3390/en18195068

AMA Style

Ozkan C, Susanlı ZB, Okay N. Transitioning Away from Fossil Fuels to Renewables: A Multifaceted Approach and Related Challenges. Energies. 2025; 18(19):5068. https://doi.org/10.3390/en18195068

Chicago/Turabian Style

Ozkan, Canan, Zehra Bilgen Susanlı, and Nesrin Okay. 2025. "Transitioning Away from Fossil Fuels to Renewables: A Multifaceted Approach and Related Challenges" Energies 18, no. 19: 5068. https://doi.org/10.3390/en18195068

APA Style

Ozkan, C., Susanlı, Z. B., & Okay, N. (2025). Transitioning Away from Fossil Fuels to Renewables: A Multifaceted Approach and Related Challenges. Energies, 18(19), 5068. https://doi.org/10.3390/en18195068

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