As we enter a new year, people around the world are grappling with rising costs for housing, energy and food. Most worry about the state of the economy. Job prospects feel uncertain in the face of widespread AI, automation and other disruptions.
These concerns have eclipsed climate action at the polls and in political discourse, especially in wealthier countries. Vigorous debate around climate policies in the EU and backpedaling in the United States reflect a common belief that tackling climate change will make day-to-day economic struggles worse.
Yet at the same time, a growing group of countries see climate action as one of the best tools to improve lives and strengthen economies. Take Pakistan, where cheap, dependable solar has slashed power costs for households and businesses. Or Brazil, where land restoration is creating hundreds of thousands of jobs in rural areas and Indigenous communities. Around 35 million people now work in clean energy globally, outstripping fossil fuel employment.
Today, the question is no longer whether the world will transition to a low-carbon future, but how it will happen. Who pays, who benefits, and who gets left behind?
Each year, WRI identifies the major moments, issues and decisions that we believe will shape the world’s trajectory. This year’s Stories to Watch are not about climate and biodiversity targets that will come due decades from now. They’re about the choices countries are making to address climate change and economic challenges right now. They’re about how we can — and must — improve people’s lives today.
1) Growth: Can Climate Action Power a New Era of Prosperity?
A persistent argument against climate action has been that it will slow economic growth. Last December, for example, the European Commission watered down its landmark plan to ban petrol and diesel car production by 2035, giving into the German and Italian governments’ fears that it would harm their auto industries.
However, it is also possible that delaying the electric vehicle transition risks Europe’s long-term competitiveness and growth.
Leading experts say that low-carbon growth can help economies expand faster than business as usual. In China, for example, clean energy now contributes over 10% of GDP — $1.9 trillion in 2024. Thanks to early investments and government support, the country dominates global markets for solar panels, electric vehicles and other clean technologies, markets that are expected to grow significantly in the coming decade.
Overall, a UN report finds that the world could produce an additional $20 trillion in economic benefits per year by 2070 by investing in clean energy, resilient food systems and other climate solutions.
But it’s not just about the money.
Inclusive, low-carbon growth could reduce poverty and connect households to reliable, affordable power. Reduced air pollution alone can avoid 9 million premature deaths by 2050. All of this has knock-on effects for economies.
Reaping these benefits means being intentional about how growth happens.
The Kenyan government, for instance, has zeroed in on electrifying two- and three-wheelers. Millions rely on these vehicles to get around and earn a living as taxi or delivery drivers, but fuel costs can swallow up to half their daily earnings. These efforts are not just putting money back into peoples’ pockets, but deliberately boosting the local economy from the bottom up.
On the corporate side, IKEA, the world’s largest furniture retailer, is proving that sustainability can go hand-in-hand with growth. Using its resources more efficiently and investing in clean energy, the company has reduced its climate footprint 30% since 2016. It increased revenue by nearly 24% over the same period.
But we need to see much more of this across the board.
What to watch this year:
- With evidence that it is possible to deliberately grow and decarbonize at the same time, even today, leaders like Ethiopian Prime Minister Abiy Ahmed have championed green policies and investments as the growth opportunity for the next decade. Will more countries set long-term development plans that deliver for people, nature and climate?
- Last year’s UN climate summit (COP30) saw the establishment of 13 new country platforms, bringing together all sources of finance at the country level with specific investment plans. Will more countries align finance behind their low-carbon transition priorities?
- Today, the world’s most electrified steel mill is under construction in Sweden. The project has secured $7 billion dollars in financing, aiming to disrupt a massive market. Will we continue to see major investments in clean industrialization?
- Any economic transition needs vast innovation and entrepreneurship in every sector. Emerging economies like Vietnam, Indonesia and Kenya that aim to become high-income economies by 2045 are investing in local green innovation to reach their goals. Will more countries nurture local green innovation?
2) Affordability: Will Climate Solutions Lower Everyday Costs?
Prices have increased noticeably around the world. People are paying more for groceries, electric bills, transportation and other basic necessities.
From the state of New York to countries like Nigeria and Senegal, leaders are citing affordability as a reason to continue investing in fossil fuels in the face of rising energy demand.
Yet renewable power is now cheaper to build and operate than fossil fuel plants almost everywhere. With costs continuing to fall around the world, countries that choose to invest in scaling up clean energy have an opportunity to translate these long-term savings to lower power bills for consumers.
While energy is often at the center of affordability and climate discussions, housing itself is generally the largest household expense. People don’t usually connect housing to climate change, but buildings account for 40% of global greenhouse gas emissions. Families can also be at higher risk from climate impacts like floods, fires and storms depending on the location and condition of their homes. One in three people globally live in substandard housing or informal settlements, leaving them highly exposed.
In Brazil, where more than more than 16 million people live in informal settlements, the government is working with residents to co-create neighborhoods with safer housing and better access to basic services, transportation networks and jobs. Their solution isn’t building new homes somewhere else, but upgrading the places where people already live.
It may be more costly upfront to ensure energy efficient and climate-resilient housing, but it helps families and governments save money in the long run. More leaders need to start thinking about how to address climate and affordability together.
What to watch this year:
- This May, housing will be the focus of the World Urban Forum in Baku, one of the biggest gatherings of urban leaders. Will housing, one of our biggest affordability problems, also be understood as a climate challenge?
- Solar adoption is reaching tipping points in countries like Pakistan and South Africa, where it is an alternative to grid electricity. As prices continue to drop, will cheap renewables reach a tipping point in more countries?
- Energy demand is rising across the world thanks to trends like increasing electrification, more need for cooling, and economic growth. How will countries meet this growing demand affordably? How much will come from renewables and other low-carbon sources?
- Trade was a hot topic last year, and countries agreed to discuss trade at the UN climate negotiations for the first time. Will new trade rules, such as the EU Carbon Border Adjustment Mechanism, encourage or stifle green growth?
3) Jobs: Will Workers Benefit from a Clean Economy?
The deepest concern in any economic transition is jobs. Few things are scarier than losing a job. It’s not just the loss of income, but the threat to our sense of identity and a family’s future.
Coal is a classic example of climate-related job loss. Other sectors beyond energy, like manufacturing, construction and agriculture, will also be impacted.
All told, however, the transition is expected to create more jobs than it eliminates across the economy. Recent research shows that shifts across five key economic sectors could lead to a net gain of around 375 million jobs over the next 10 years.
Around 630 million jobs, representing 18% of the global workforce, will be impacted by the low-carbon transition. There are real risks that people will remain out of work if it isn’t properly managed.
Leaders need to be proactive in preparing people for these changes. This means investing in reskilling and upskilling programs and designing thoughtful transition plans that put workers first.
In India — a major supplier of car components globally — it’s estimated that one in three auto workers will be affected by the transition toward electric vehicles. However, many car components are supplied by smaller businesses that operate on thin margins and cannot afford to invest in training programs. To help close the gap, industry associations, technical experts and supply chain partners are coming together, supporting workers through the transition and opening up pathways for women into manufacturing, an area long dominated by men.
Reskilling is a top priority in all sectors, but such programs are relatively nascent around the world. Truly supporting workers will require more effort and investment — not just from governments, but also companies, unions, schools and other training providers.
What to watch this year:
- LinkedIn data shows that demand for sustainability-related skills is growing almost twice as fast as the supply of qualified workers. Will companies hardwire skills training into corporate low-carbon transition planning?
- Only half of countries include explicit plans to address workforce needs in their recent climate commitments. And just 1% laid out measures to finance these policies. Will governments at all scales start planning and investing more intentionally in workforce development?
- AI has been all over the news for its potential impact on jobs, a disruption that is happening at the same time countries are transitioning to a new economy. How will AI impact jobs for the new economy in 2026?
Building Stronger Communities Today
Evidence from across the world shows that this economic transition will not happen at the speed and scale necessary unless people are at the center.
Families around the world are focused on how they will make a living, how they will pay their bills, and whether they feel secure and optimistic about the future.
Though the transition is inevitable, it will not automatically be good or bad for growth, affordability or jobs. That will depend on decisions we make.
Choices exist today for governments, businesses and communities to make the transition good for people and the planet at the same time. These choices also exist for each one of us in 2026.
