The Future of Energy, Climate, and Geopolitics

Speakers discuss the rapidly-changing global energy landscape, climate change, and emerging geopolitical threats.

SHERWOOD-RANDALL: Welcome to today's Council on Foreign Relations meeting, “The Future of Energy, Climate and Geopolitics.” I'm Liz Sherwood-Randall and I will be presiding over today's discussion. I teach a fall course on energy and national security at Georgia Tech, so I very much appreciate the lens through which Dan Yergin has written the new book that we will be discussing today. In it, he considers how geopolitics are shifting as a result of the changes in the sources and ways that energy is produced, transported and used, and how we should think about the implications. What is energy security? And how does it fit into the broader frame of national security for us, for our allies and partners, and for our rivals? In what ways is energy abundance a power tool? And how should it be effectively wielded in pursuit of economic growth, national security, and international stability? How should we think about the fight against climate change in this dynamic energy landscape? We'll talk about this swirl of hot topics with a superb panel today.

Dan Yergin is a world leading energy expert. Trained as an historian, he is best known for what is now a trilogy of books on energy, international politics, and economics—The Prize, The Quest, and now The New Map: Energy, Climate and the Clash of Nations. He is vice chairman of IHS Markit and has been a sort of modern-day Delphic oracle on all things energy for decades. He is a director of this Council on Foreign Relations' board, and we are delighted to have the opportunity to talk about his latest book today.

Sherri Wasserman Goodman has been a pioneer in defining the intersections of energy, climate, and national security. Indeed, after serving on the staff of Armed Services Committee Chair Senator Sam Nunn—when I was working on the staff of a young Senator Joe Biden—Sherri served as the first deputy undersecretary of defense for environmental security from 1993 to 2001. In that capacity, she was the chief environmental safety and occupational health officer for the Pentagon. In subsequent decades, she sustained her intense focus on these issues, including as vice president and general counsel at the Center for Naval Analyses and as president and CEO of the Consortium for Ocean Leadership.

Jason Bordoff is the founding director of the Center on Global Energy Policy at Columbia University and a faculty member there. He served in President Obama's first term as a special assistant to the president and senior director for energy and climate change, the National Security Council, and prior to that in senior policy positions on the White House's National Economic Council and Council on Environmental Quality. He is a prolific author, and most recently conceptualized and oversaw the publication of a terrific report called Energizing America, on how investment in energy innovation needs to be scaled up to successfully meet our energy needs and climate challenges.

What a group of big brains. So let's get started. I've asked Dan Yergin to launch us with a ten-minute TED talk on his new book, looking at the evolving energy landscape that has the power to transform global relationships in ways that have not yet been fully understood or anticipated, after which I'll engage the whole panel in a conversation. We'll also go to you, our members, in the Zoom audience for questions in the second half of our hour together. Let me just note that because we have an outstanding crowd of nearly five hundred people participating, we'll probably not be able to get to everyone's question though I know the Council staff will do their best. So now, Dan, over to you.

YERGIN: Well, thank you very much, Liz, and very glad to be on this panel with you and with Sherri and Jason, heavy responsibility to be an oracle, which, but I will do my best to do that. I finished The New Map only in July, I didn't really finish it, the publisher just took it away from me, as happens sometimes with books. So I think it's very much up to date in terms of where we are now. And when I say the new map, it's about this new map of energy and geopolitics. And although there are maps in the book, I really mean map as a metaphor. So much has changed in such a short time in terms of the interaction of energy and geopolitics, and what I try to do is provide a guide through this terrain. It's organized around these metaphorical maps.

Climate map is a culmination, but I start with America's map and the shale revolution. You know, you look at the big forces of history, but sometimes you just think about the contingency. If someone had not gone to a baseball game in Dallas in 1998 and talk to somebody else there about a new way of producing oil and gas, maybe the shale revolution would not have started, maybe or not for another twenty years. But it did happen and it's had very far-reaching impacts that I think are not really recognized on the overall U.S. economy, U.S. foreign policy, and the United States' position in the world.

It's also been very important—Liz talked about energy security. Last year, as some of you will remember, there was an Iranian drone attack on the most important oil infrastructure in the world called Abqaiq. Five or six years ago that would have been panic. But the response was almost a shrug in the marketplace because of the shift in energy security, partly because of the change in the U.S. position. And I do think sometimes we've heard over the last year slogans about banning fracking or severely restricting it. The flip side of that would be, actually, and I'm sure you might get this discussion, it would be a more "import more" oil policy, because there's still 280 million cars in the United States.

No less than the authority that Vladimir Putin has attested to the significance of shale development, and he's expressed his antipathy to it, both because it means U.S. energy competes with Russian energy in Europe, and also because he sees it as upholstery in supporting U.S. foreign policy. So that gets us to Russian's map and Russia's map is really the degree to which energy has been a very important part of enabling Putin to reassert or assert Russia as a great power despite the fact that it has an economy that is only slightly larger than that of Spain. Inevitably, and I know it's been a subject often at the Council, is discussion of the effectiveness of sanctions. And it's—I'm struck that the discussion over sanctions on Nord Stream 2, which is a $11 billion pipeline that runs under the Baltic from Russia to Germany, not quite completed, is really part of a pattern.

Actually, for about sixty years, the U.S. periodically has sought to block Soviet and Russian gas and oil going to Europe, often with the same vocabulary about political leverage. In the past, whether the leverage was there now, I think it's not there. Maybe we'll get into this because of two things: one, the European pipeline system is much more flexible. And LNG, including LNG from the United States, provides options and choices that doesn't exist when you just depend upon pipeline gas. I also find myself reflecting in the book on a comment, a wise comment I think from George Shultz during the gas battle of the 1980s about Russian gas, or then Soviet gas, to Europe. And he described sanctions as a wasting asset. So the question is, is it only sanctions that one continues to apply? Are there other tools other than sanctions in this difficult relationship with Russia? And that will be certainly a topic next year.

From a geopolitical point of view, what really struck me as so significant is the deepening relationship between Russia and China and Putin-Xi, down to Putin delivering personally to President Xi Jinping his favorite flavor of Russian ice cream. These two guys know each other a lot, well, and have met many, many times. There are many aspects to their relationship, including a coordinated pushback against a U.S.-led international order. But I was struck that within days of the sanctions going into effect on Nord Stream 2, Xi and Putin had a very elaborate ceremony where they turned on the switch to this big pipeline called the Power of Siberia sending Russian gas into China.

And I think that's symbolic of the new relationship. And while there are many aspects to the relationship, I think there's some discussion in Washington—can they be pried apart? I think in these circumstances very difficult. Russia, as I said, many aspects, including its selling of advanced weapons to China, which it had been resistant to do before, because it was afraid of reverse engineering. But I think it's still noteworthy to say that a relationship that was once based on Marx and Lenin is to a significant degree today grounded in oil and gas.

China's map is very intertwined with energy. China, you know, people may not know this, it has the fifth largest oil industry in the world in terms of production, but it's not enough. The country imports 75 percent of its oil, and China regards that as a major strategic problem. What I've done is I've actually did build this part of the book around two maps, the famous nine-dash line map, which describes China's view that the South China Sea belongs to China, and the complicated map of the Belt and Road. This is kind of one book on energy and geopolitics where maybe the only one that actually has a picture of Jackie Chan in it, the actor, and that's because he stars in a movie called Kung Fu Yoga, which is part of the cinematic side of Belt and Road, and in fact, you can watch it on Netflix. But the Belt and Road has a very strong energy component to it, and obviously, if you look at the map of it, it's very complicated and ambitious in its objectives.

Another accident of history, if a French captain in 1933 had not planted some flags on uninhabited islands in the South China Sea, would there been a nine-dash line map drawn? I don't know, but it was drawn, and it's unfolding today. And it's at the basis of the clash between the United States and China in that region, along with other countries. What's unfolding today, overall, is a shift from what I call the "WTO consensus," the notion after 2001 that, as one president put it, the United States would have a constructive relationship with China in a globalized world. Well, that's gone, the vocabulary has changed.

Most everybody on this call knows it's now strategic rivalry, great power competition, which unfortunately, have echoes of the early years of the twentieth century. It really brought home in COVID, the U.S. helped set up the Chinese Center for Disease Control, but instead of a collaborative response to this pandemic, it's been a contentious one. And it's sort of symbolizes this fragmented world. So where does this go? I'm reluctant to use the term a new Cold War, but it certainly has elements, it would be very different because of the embeddedness of the two countries in each other's economies and the global economy. But as tension mounts, you have to ask the question, where does it go?

Maps of the Middle East, not so important, and much of the history in the last many decades has been known about overturning those maps—and Iran and its Revolutionary Guards are part of it—but just two things to note. One on oil, an emphasis because of what we'll talk about later, climate, diversify away from oil, but I think lessons that come through to this, that it's very hard to diversify an economy that's heavily dependent on oil. It takes a lot of oil revenues, it turns out, to diversify away from oil, and it's more difficult during the time of COVID. The other thing just to note is that in the chapter that I wrote called “The Plague” that goes through July—what a big shift it was from the traditional mode in people's minds of OPEC versus non-OPEC to what I call the world of the Big Three: the United States, Russia, and Saudi Arabia dominating the oil market. What they do matters and shapes the market. And last April, kind of what would have been unbelievable, the United States brokering a deal between Saudi Arabia and Russia, which were having an oil price war, in order to bring stability to the market.

I have a section about roadmap to the future about how transportation will change. And I focus on bringing together electric vehicles, ride hailing, and self-driving cars, autonomous vehicles and raising the question of whether we're going to have a very different model for transportation and all of our relationships with automobiles in that it might be a world that would be called "auto tech." And then it comes to climate map. And as I wrote the book, it became clear to me that there are absolutely two eras in energy today—there's before Paris and after Paris—Paris being the 2015 climate agreement and it is striking in the half decade since then, whatever the politics in the United States, how the Paris objectives about two degrees and one and a half degrees have become embedded in government policy, in companies' strategies, and indeed into decisions by investors.

And that gets us to the question of the energy transition. You know, I think energy's been transitioning or evolving since 1709, when an English metal worker named Abraham Darby figured out how to use coal instead of wood to better manufacturer iron. But where we are now, and it's what we're hearing in the campaign, of course, it's already happening in Europe, is the drive to speed it up. Is it possible to transform the foundations of industrial economies in thirty years? It would be fast—wind and solar as industries, modern wind and solar, are fifty years old. In the last ten years they've really matured, gained scale, and become much more cost-efficient and competitive. But I think it's clear we need other technologies, and I talked about some of them, one of which is carbon capture. Also, and this ties into work that the Council is doing, is the work on supply chains for net zero carbon.

And I have three comments about that. Everybody knows the term big oil; people love it in headlines and things like that. Well, as we try and move into a transition, we'll move from big oil to big shovels, because you're going to need a lot of mining to achieve the scale that's talked about. Secondly, is about supply chains—supply chains have been, you know, turned to because they're efficient, because they're economic, because of technology, but they're much more political. The Council's looking at them. And China has a big position in the supply chains of new energies, and as technologies become political in terms of supply chains, I think here too.

Just two last comments to make. One is that energy transition has different meanings in different parts of the world. The World Health Organization speaks about three billion people, the forgotten three billion people who cook with waste wood, animal waste, crop waste, and says that indoor air pollution is the number one environmental issue in the world today. And if you look at a country like India, they're saying, yes, we want to move to wind and solar in a big way. We also want to move to commercial energy, to natural gas as a way to address the environmental problems. So I think it's important to keep that in mind.

So to summarize, you know, you sit down, you're writing a book, you think of all the surprises, call them black swans, gray swans, whatever, that have happened since 2000, and wonder now if rapid digitalization is going to be the next really big disrupter, as for all of us gathering like this, and also what it does to the future of work, commuting. And I think something else that people are discovering, what does it do between the borders between work and non-work, like lifework balance. But I think with all the surprises that lie ahead, there will be two big constants that will dominate the new map, and one is climate, and how to deal with it. And the other is the clash of nations, and that clamor grows somewhat louder. Thank you, Liz.

SHERWOOD-RANDALL: Thank you, Dan. You know, I will follow up with the first question about the clash of nations. You talked about the rapprochement between Russia and China. And I want to ask how you would apply ideas that you developed in your earliest publication, one I haven't yet mentioned called A Shattered Peace, about the origins of the Cold War. How you would apply your conceptual frame for that to the present-day challenges that a new administration would face with China? Then you would let me just add one more point here to frame it, you argued then that there were Riga axioms and Yalta axioms, and one of those frames came to define our approach to the Soviet Union [inaudible] detriment. So I'd like to ask you, if you can advise Americans, what is the right lens through which we should be looking at the China challenge today to understand and plan for what's coming at us, especially in the energy and climate domain?

YERGIN: Well, I think it's a mixed lens, you know, if you say the Riga-Yalta axioms, I mean here, I guess, we have the WTO axioms and the strategic rival axioms. But I think, you know, the degree to which the U.S. and China are interdependent is not fully recognized in terms of where's GM's biggest market, U.S. Treasuries. So I think it's much more complicated to deal with, and I think you have to look through both lenses and I think it's important to be consistent in how you approach it and I think it's also important actually to be prudent.

SHERWOOD-RANDALL: So similar to your critique then of the past, which is that you have to do many things at once in a relationship with a rival or an adversary?

YERGIN: Yes, but the differences, of course, the Soviet Union was not integrated into the world economy, that was about ideology and nuclear weapons. Here, and I think one of the things, and Foreign Affairs has had a couple of very good pieces including by the prime minister of Singapore on this, other countries are beginning to ask, “Don't make us choose.” And because they start to see a world and, you know, to paraphrase Deng Xiaoping, one world and two systems, and that would be a world, a more fragmented globalization that'd be harder for companies to operate in it. A playbook of globalization doesn't work so well in that, and I think it'll be a world of lower economic growth.

SHERWOOD-RANDALL: Thanks, Dan. Jason, I'm going to come to you next, because you've also been wrestling with similar questions in your mind. In a Foreign Policy piece that you just published, you argued, and I'll quote you: "If policymakers don't get a clear-eyed understanding of how global power relations will change, not only in a future era of zero carbon energy, but during the long and messy transition to get there, they won't be able to manage the coming era of foreign policy risks and their efforts to combat climate change will be stymied." So give us a sense of your counter-intuitive thinking that should guide U.S. policymakers as they navigate this shifting energy landscape that Dan has described in his book.

BORDOFF: Sure, thank you for the question on those. And first let me say congratulations to Dan, who's been a friend and mentor for so many years, and I'm holding the book right here and have read it cover to cover. I encourage everyone to do that, it's really an extraordinary piece of work as everything else Dan has written is. And when we think about combining energy and climate and geopolitics and national security, few people do that better than Sherri and Liz, so it's really a pleasure to be here with you both.

I've been thinking, you know, it's kind of like how, in Dan's many maps, how they intersect with one another. Meaning how does the map he comes to at the end around the energy transition, how will that unfold and what will it mean for some of the maps he speaks to in the beginning, what it would mean, geopolitically for the U.S., China, Russia, these major powers, the Middle East? This is thinking I've been doing in sort of research collaboration with someone we all know well, Meghan O'Sullivan at Harvard, who's brilliant and a board member at CFR who may be watching. I think she was on the RSVP list. And so, I think, what we have been interested in thinking about is not only—I think too often this question of what an energy transition will mean for geopolitics gets framed in an end state, a world without fossil fuels.

And you say, well, you know, what would that look like, and petro-states collapse and China rises, that is pretty far away. And what's interesting, I think, also to think about is the messy and uncertain process of getting there which will unfold over many decades, if we get there at all. And I obviously hope we do. So I think the thinking today ignores a little bit the timeframe that we're talking about. I think it also, people often have too simplistic a notion of what that end state might look like, which is batteries, and solar, and wind, but it's much more than that. It's also a hydrogen economy, a global carbon capture economy, maybe direct air capture, there's a set of technologies for aviation, for shipping, for heavy industry that go beyond renewables and batteries, say in our cars, and that has a different set of geopolitical implications in terms of which countries might lead.

And then third, I think there's a little bit of a status quo bias, we think about geopolitics from the risks we're familiar with, like the Arab oil embargo, or Russia turning off the gas taps to Europe in 2006 and 2009. We need to imagine a world that is deeply decarbonized with more energy use than we have today, because the world is continuing to grow and population is growing, and ask sort of what that looks like, a world that might be more electrified and digitized, and perhaps is more vulnerable to cyber security risk.

So I'll give you just three quick examples for where I think it might be more complex and counterintuitive than conventional wisdom might appreciate. One is the rise of China and certainly we have seen China, I think, will dominate many clean energy technologies because the energy powers of the future will be less those that have, by grace of God, a geologic abundance, and those that can manufacture and produce things cheaply like solar panels or batteries. But you don't get the same geopolitical leverage by producing an input to a manufactured product that you do from supplying the fuel that is sort of the daily lifeblood of the economy. If China were to, you know, restrict the export of solar panels, it would raise the price of new installations but not the electricity that you use today. It wouldn't cause the lights to go out, wouldn't cause people to freeze in their homes as some southeast European countries fretted about when Russia stopped gas deliveries in the 2000s.

In the Middle East, there is sort of a widely accepted view of sort of petro-state collapse and a descent into conflict. And certainly that's what we're concerned about in the long-term, but there is a period of transition in which we're still using a lot of oil, although less than we are today. Even in a scenario consistent with the Paris process, the IEA says in 2040 we're using about two-thirds of the oil that we are today. So which countries will be supplying that? It'll be the ones that are lower cost, the ones that have lower carbon intensity, less methane emissions, less flaring. And the Gulf states look pretty good in that regard. Now, you might say less demand means they're still going to get less revenue because prices will go down, but oil production declines 8 percent per year without any investment.

So even if we were on track with our Paris goals, you might still need some investment, because otherwise the pace of natural decline would exceed that of the actual decline in demand. If this sector falls into disfavor with rising social pressures, if we see peak oil demand, and there's a widely accepted view that this is an industry in long-term decline, you know, who's going to invest in multi-decade, you know, multibillion dollar oil projects—you could actually see periods of scarcity and shortage, that ironically could accelerate the pace of transition, because it makes the economics of renewables look that much better.

And then finally, another, you know, example might be Russia, which would obviously be a loser if we move away from oil. In a Paris Agreement consistent scenario, we still are using gas for a while, as Dan talked about with Power of Siberia. Russia is becoming an increasingly important supplier of gas to China, a major LNG player. And if European gas demand declines, the share that comes from Russia will go up, not down because they're the lowest-cost producer. China is also as you know, Liz, a very important nuclear power. And I think the U.S. should be concerned that we have ceded leadership in nuclear technology to Russia and China. If you see a world that's deeply decarbonized, that will be a world that is more electrified, we're going to have to electrify things like cars and maybe buildings with electric heat pumps.

So you're using more electricity, a lot of that's going to be renewables, probably not all of it, if we're using more nuclear power, too, and China and Russia are having an opportunity to lead in that sector, which raises a whole host of national security and non-proliferation risks. So I think, you know, in order to be able to move aggressively with climate policy, as we must, we need to anticipate these counterintuitive and unexpected geopolitical risks and then manage them, because otherwise those risks will flare up and it will actually make it harder to move forward with aggressive climate policy.

SHERWOOD-RANDALL: Thank you. I do think we should have a separate Council session on the nuclear dimension, this challenge that we face with the transition and managing energy needs going forward and the national security element of [inaudible]. I'm going to move on to Sherri and ask Sherri about her work with the Pentagon. You've worked with the nation's largest energy user for many years. And DoD is, of course, on the front lines of meeting the challenges that we face with a changing climate. How does the Department of Defense see the shifts that are being described here that we've heard from both Dan and from Jason? How's it preparing to meet those challenges? Is it leading or is it lagging? And what more can and should it be doing to prepare to meet what is coming its way whether or not our policies are effective, it will have to be on the front lines?

GOODMAN: Well, thank you, Liz. And, Dan, thank you for your brilliant book. I've read all of them since I was a student. And thank you, Jason, you always have incredible insights as well. And thank you for your leadership. You know, the history of the Department of Defense of energy transitions in many ways reflects, you know, the history of energy that Dan has so well chronicled throughout his lifetime, from sail to steam to coal, on to oil, and then nuclear. And then you know, what next? You know, and one of the very important missions of the Department of Defense, and particularly the Navy, is to protect our sea lines of communication, to ensure free and open trade, and to ensure transit globally. And, you know, we've been doing that across the Middle East for many decades now. You know, it was in the Carter administration that it was actually frontally declared a mission, but it actually has been one of the Department of Defense's mission for some time before that.

Now as we move into a new era of energy, and the Asian pivot, which has already begun, and the turmoil that regularly roils us in the South China Sea, there is continuing tension among that mission of protecting the Straits of Malacca and the sea lines of communication. And with the energy and the climate change, there are some new sea lanes that could be opening in the future. One that is still quite a ways away for regular shipping but that is emerging, is also in the Arctic. And that's a place where we see even deepening Russia and China cooperation. Russia now looking at the Northern Sea Route as a toll road from ports in Asia across to Europe and China's ambition of a "Polar Silk Road." And that raises, let's say, for the Department of Defense, the fact that we have not been ensuring open transit through those sea lines of communication because we haven't felt the need until the last decade to do so, and now we're scrambling to keep up.

Now, we talked about supply chains. You know, the U.S. Department of Defense learned a very hard way in Afghanistan and Iraq in the early years of those wars that transiting fuel to the front was putting the lives of our soldiers, sailor, airmen and Marines, particularly the soldiers and Marines, at risk through those convoys. And so we looked at how to shorten the burden distress on those logistics chains when so many of our military convoys were about fuel and water. And that's when the military really started to pursue the engine that it's been on, the engine of innovation in energy, that it's been on now for some time to look at other types of fuels, how to power forces at the front with renewables, automation, digitization now.

The Department of Defense has obviously also been at the forefront of technology, leadership, all of you know that, Liz has also been part of that, and everything from defense technology to defense energy, and I think climate technologies. As the nation’s single largest energy user and with its vast buying power, it has the ability to be an innovation leader as we invest more heavily in a whole range of technologies, many of which are laid out in the roadmap that Jason's group recently put out of clean energy, and nuclear will be one of them.

And the nuclear risks are one of those that will be also important for decarbonization but then present additional risks for our supply chain. And the military also faces those supply-chain risks for some of the rare earth minerals as it moves ahead with new batteries and new others. So I think that there are opportunities for our military both to reduce its supply-chain risk and to move towards lower carbon energy futures. And at the same time, climate proof some of its military installations, which are also much at risk as we continue to deploy our forces around the world.

SHERWOOD-RANDALL: Thank you, Sherri. So much to talk about there. And honestly, I have so many more questions to ask you, but I promised the Council I would go to questions from the members. So I'm going to move now to open the Q&A session to invite members to join in our conversation. And I want to remind everyone that this meeting is on the record. And our operator will now remind you about how to join the question queue.

STAFF: (Gives queuing instructions.)

Our first question will come from Ed Cox.

Q: Yes, this is a question for Dan Yergin, and I ask it as a former director of Noble Energy, which was big in eastern Mediterranean gas and the Permian Basin. Given that Russia can balance its budget and given its foreign exchange buildup at a lower cost than Saudi Arabia and given the expense for the returns in the Permian Basin, is Russia trying to hold oil at a level that would undermine both a Saudi Arabia and over a medium-term, our advancement of the shale revolution.

YERGIN: Well, there's certainly some very powerful and important people in Russia who were very outspoken about giving up market say, why should we restrict our production to make room for U.S. shale and I think, you know, welcome a price going down and try and put pressure on shale. So I think, you know, they have thought about market share and maintaining it. But I think when everybody looked at the abyss of negative prices of oil being below zero, that's when they stood back and said, well, we all got to be part of a deal. But I think Russia has been quite averse to shale. I mean, I asked the question once at a conference in St. Petersburg, and I mentioned shale and Putin got very loud in expressing his views of shale. So I think you certainly have a point there. And I think the other point is that Russia has had a lower price target than Saudi Arabia, although maybe Saudi Arabia thought maybe it's not a part of just dealing with the reality of where the market is right now.

BORDOFF: The only quick thing I would add, I think Dan will agree, in addition to a slight—there's a difference between the Saudi and the Russian price target—but I think Russia's willingness to cooperate with Saudi in OPEC cooperation is about more than just the oil price. And they see some measure of geopolitical benefit to being a leader in the OPEC Plus coalition right now.

YERGIN: Right. And I think it also liking, you know, having a strategic relationship with Saudi Arabia, which happens to be, that Jason is implying, a very important ally of the United States. You know, that's part of the global chessboard.

STAFF: Our next question will come from Seth Johnston.

Q: Good afternoon and thank you, everyone. I know the moderator suggested that we have an entirely separate panel on nuclear energy, but I hope you'll forgive another question on nuclear since there's already been so much mention of it. Perhaps to Daniel Yergin, could I ask you, sir, to describe what does the nuclear map look like? We talked about the United States, Russia, and China—to what extent are U.S. allies, such as France and Japan, still committed to nuclear energy, for example?

YERGIN: Well, I think it varies. Obviously, Japan has been struggling to come back from Fukushima. Germany is closing down its nuclear. At the same time, I know to China, and this goes to what I think Jason just said, has added more nuclear than Germany's closing down, so it is that mixed picture. But I think that's actually also a question for our chair to take that.

SHERWOOD-RANDALL: Thank you. I will comment on this, and we do face a big challenge here because I believe that nuclear power will be a very important element of providing baseload power around the world as we shift to the greater integration of variable sources. We need to still maintain the stability of the electricity system, and many countries will rely on nuclear. The U.S. is basically out of the game now. Our own industry has really struggled, it has not been competitive and we have lost market share. And with the loss of market share, we also lose influence. And that's enormously important to us from a national security perspective, because when we are the innovators, when we bring technologies to market as we have done for decades in the nuclear space, we also have the power to set the norms.

And that is something that we have done continuously, but which our competitors do not do. And so when we require that countries do not make the transition from a civil nuclear program to a defense nuclear program, that advances our non-proliferation goals. When that isn't happening, because of the way in which sales are undertaken by our rivals, then it increases the risks of proliferation around the world. So my own view is that we need to have a very deliberate effort to invigorate our own domestic nuclear industry, and support them in being competitive internationally, and continue to do the work to innovate that will enable us to bring those technology solutions to market that the planet needs for the future.

GOODMAN: Let me just add that, you know, of course the U.S. Navy has been operating with nuclear power safely for four decades. And you know, the Department of Defense has considered looking, and is looking, at small modular and other related micro-reactors for other missions and could be a testbed for advancing that. But Liz is certainly right, we've fallen behind globally, and that presents a lot of risk because as Russia and China are providing nuclear technology to Egypt, Bangladesh, and many others, we can't be sure they're going to adhere to the same safety protocols and standards and high levels of non-proliferation considerations that we would assign.

And Russia in particular is very much nuclearizing the Arctic now and when people ask me what keeps me up at night, it's often a scenario of a Russian nuclear icebreaker escorting a Chinese LNG vessel through the Bering Strait, where the U.S. and Russia are only thirty miles apart and some accident occurs and there's miscommunication and it's difficult to resolve. So I think we need to, as Liz said, move forward in reenergizing our nuclear power industry.

STAFF: Our next question will come from Meghan O'Sullivan.

SHERWOOD-RANDALL: Congratulations, Meghan.

Q: Thank you, Liz. And thank you for this fantastic panel. It's great to see some of my favorite people talk about my favorite topic of energy, and I wanted to ask Dan something that you have referenced and also address in your fantastic new book. But I was wondering if you could comment on a scenario that we hear a lot of people speaking about today, and that is that there's going to be this reluctance to invest in oil and gas just because of the uncertainty about the demand going forward. But as you point out in your book, we're still meeting massive percentage of the world's energy needs with fossil fuels. Do you anticipate this scenario where there's a gap between investment and global demand that could actually produce a spike in prices, or a shortage of oil, and maybe even gas in the next whatever timeframe you anticipate? Or do you think that that's an overblown argument and one that's kind of peddled by an industry that really wants to ensure more investment than maybe is needed. And again, thanks to everybody for a fascinating discussion, and for Dan for a great book, another great book.

YERGIN: The industry, I mean what's happened is of course investment has been cut very dramatically by the majors by about 30 percent from what was anticipated at the beginning of this year, by the larger independents by 50 percent or more. And ever since I, you know, wrote The Prize, I thought there are many characters in that book, but the two most important is supply and demand, and so I think that we will see the impact of lower investment. Of course costs are lower now too, but in two or three years, if we have a strong economic recovery, or a relatively good economic recovery, demand will go up and it would create a tight market again, and of course keeping in mind that 84 percent of world energy comes from fossil fuels.

So it would have impact on the whole economy, whether it's a price spike, or just prices going up, I don't know, it depends on all those other factors. But if you have this kind of cut in investment, and then you have some kind of recovering demand, it could be definitely a tighter market that might or might not have a price spike, which would then have other consequences. I think, as Jason suggested, it might speed up movement towards alternative change the competitive field, but I don't think the laws of—even in this economic dark age or this economic twilight zone that we're in right now—I think the laws of supply and demand has not been abolished.

SHERWOOD-RANDALL: Jason, do you want to add anything in response?

BORDOFF: No, I agree. I agree with Dan. I mean, I think there's very different views about this in different, obviously, parts of the world. And so at the same time you see some of the majors, particularly the European majors, you know, moving in a direction—BP saying it's going to sharply cut back its investment in oil, shift that capital and let production decline—first of all those assets, many of them are still being bought by others who will still develop them if the resources are good, but I think, you see, it's going to get delayed a bit because of COVID. But Saudi Aramco, for example, still has plans to invest tens of billions of dollars to increase its production capacity, notwithstanding all the talk of transition because they see the call on Saudi crude going up, not down in the medium-term whether, you know, they can successfully transition to an economy that is less dependent on oil and build other sectors, as Dan talked about, is still necessary and very difficult, but this does take time to play out.

It kind of comes to Dan's point, you know, this phrase energy transition gets used a lot, Dan talked about it going back to 1709. I just want to make the observation that what the climate cares about is tons of CO2 and greenhouse gas going in the atmosphere. When we talk about an energy transition, historically speaking, what we are talking about is large shifts from wood to coal, and coal to oil and then gas, and on and on. As a share of the total, right as a percentage, we're using more wood today than we did in the 1850s. We're using more of everything today than we did in the past. So when you look at that same chart, not as zero to 100 percent, but in total metric tons of energy or total BTUs, everything is going up.

And the challenge of taking the goals of the Paris Agreement seriously and meeting them, means not only meeting all the incremental growth in energy demand with zero carbon energy, but replacing the 80 percent of the current mix that comes from hydrocarbons or otherwise offsetting the emissions or removing the CO2. It's a staggering challenge, and it actually isn't something we've done before. We've had clean energy additions in the past, not clean energy transitions. And that's what we need to do for the total tons of greenhouse gas that are being emitted if we want to come anywhere close to meeting one and a half or two degrees, you know, Celsius warming, which the impacts we're seeing around the world of what climate change is going to mean, I think we need to take those targets pretty seriously.

STAFF: Our next question will be from Mahesh Kotecha.

Q: Thank you very much. I'm not an energy expert, but I have a macro kind of perspective. A lot of the discussion is on the supply side, as it were, of energy. There's less discussion today on the demand side. There was some technology mentioned as far as alternative sources that could be quite attractive, but I think it would be important to ask—are you optimistic? Are you pessimistic? And what is the demand side of this as you sort of look out in the future? Thank you.

BORDOFF: Well, I think energy demand is going to grow, that sort of comes to the point I made a minute ago about, you know, the fact that the percentages change but not the total volumes of all these fuels because the denominator is getting bigger, we're just you know, global energy demand has risen. The biggest factors are GDP growth and population growth, and that will continue to be true moving forward as South Asia emerges. Not should we talk a lot about China, but looking at India, looking at other South Asian economies, looking at Africa, beyond that looking at the Middle East, rapidly growing economies, that's where the energy demand growth is coming from.

We need to do much more to increase energy efficiency, we talk a lot about energy technology, but we often talk about it in the context of a U.S. landscape or a European landscape. What are the kind of clean energy innovations we need in emerging markets? Look at what demand for electricity is going to grow in sub-Saharan Africa or Middle Eastern regions because in part because of the impacts of climate change, the amount of air-conditioning we are going to need as temperatures rise and people become, you know, wealthier is going through the roof. It's a major driver of electricity demand. So we're going to need new innovations that help to create more energy efficiency and how we do cooling, for example, around the world. So that can temper the growth rate of energy demand but I think, you know, the projections still are 30 or 40 percent higher energy demand out into 2040 or 2050 than we have today, and that would be with pretty big energy improvements.

YERGIN: Let me add to that, two things. One is actually what really originally drew me to energy was the question of energy efficiency—it's probably the least dramatic part of the energy picture, but as Jason pointed out, it's really basic. And if you just look at the amount of energy per unit of GDP, you can see how significant it is. Secondly, I think you're also alluding to this debate that's now become, you know, the kind of new debate which is when does oil demand peak? And one scenario from one of the major companies has it, you know, sort of now, others push it out. It seems to me for the reasons that Jason said, which has to do with population and GDP and decent economic recovery, they're probably the peak for oil is, you know, in the kind of first part of the 2030s. We'll see how that actually plays out and if it doesn't plummet as he suggests, as the IEA suggests, but it declines.

STAFF: Our next question will be from David Fenton.

Q: Yes, hello. I think that the issue of baseload power is being overstressed here. The technologies are advancing very rapidly, micro-grids are coming, you're going to be able to store your solar power in your Tesla car overnight and get paid for it. These things are advancing very rapidly, and I think that they will make the need for nuclear much less than is being emphasized here. But my question is, if you're going to go nuclear, how are you going to plan for the accidents that the trucks and trains are going to have that carry the waste? Everyone is a terrorist target and trucks and trains will have accidents.

YERGIN: Liz, that's in your wheelhouse.

SHERWOOD-RANDALL: I'm sorry, I don't understand why the trucks and trains are the issue. I mean, we did, Sherri actually spoke about the imperative of having the highest possible safety standards associated with the reactor.

Q: But nuclear waste on trucks and trains being transported to waste facilities—they will have accidents. We haven’t invented trucks and trains that don't have accidents.

SHERWOOD-RANDALL: Thus far it has not been a major issue in this domain. I mean, there are a lot of worries around nuclear power, and this is a good example of why I suggested it would be worthy of an entire session on its own. The security challenges are substantial, the safety challenges are substantial. We have a long track record of managing this quite well, and we have assisted other countries in securing, for example, their research reactors from those who are probing around to see if there's some material available that they can gain access to in order to do something malicious with it.

And so, I am not proposing that we have a wanton deployment of nuclear power, I was actually proposing the opposite, which is that if the United States is involved in bringing additional nuclear power capabilities to bear in countries which are going to seek nuclear power as a means of meeting their clean energy targets for the future, we have a better chance of preventing the kinds of risks that you're describing, then if we allow others to dominate the market who do not have similar scruples.

BORDOFF: And I would just briefly say on the first point, I mean I agree that, you know, we've seen 85 percent cost declines in solar in the last decade, 50 percent in wind, 85 percent in batteries, there is a much more optimistic outlook now for the role that intermittent renewables plus battery storage can and will play in the power sector. It doesn't do all of it, we still have challenges with long-term storage with many days at a time or even weeks at a time where there are shortages of wind and solar. And you'd have to overbuild the grid to such an extent to compensate for those that most of the modeling shows, you know, some renewables get up to 80 percent in the U.S. grid, some lower, but there is some segment of the grid that will still sort of need, whether it's gas with CCS [carbon capture and storage], and then nuclear power that's existing, maybe not new, and then there are different parts, you know, different parts of the world have different renewable resources. So I think the role of some of these technologies play in different parts of the world may look a little different than it does, say in the U.S. or Europe.

SHERWOOD-RANDALL: I think that's a very important point, Jason, and again draw people's attention to the work your Center has done on the innovation agenda, because truly to reach the goals that we have, if you want to move away from existing technologies, there is an enormous amount of invention that still needs to take place. Many of the technologies that we would need are not yet developed and deployed, and so we need a very deliberate strategic investment agenda. It should be coordinated with allies and partners around the world. And we need to drive forward toward it. We've gone in reverse for the last almost four years. And that question now is whether a choice is made to again reengage in playing that leadership role, which we have to do as a national ecosystem if we choose to be.

BORDOFF: Sorry, yes, I was just going to say in the International Energy Agency scenario of net-zero emissions by 2050, in that scenario, fully half of the emission reductions between now and 2050, they find come from technologies that are not yet commercially available. We can do a lot with the technologies we have—renewables and batteries—and we will but there's certainly, I think, a need for innovation as well. And not just new technology, but also scaling up and deployment and bringing the cost down of existing technologies. We know how to do direct air capture, but that's not a commercially available technology yet.

SHERWOOD-RANDALL: Thanks. I think we have time for one last question.

STAFF: Our last question will come from Mac Broderick.

Q: Hi, thanks so much for the panel. So Jason, I'm going to direct it to you, given your association with Columbia. And Varun Sivaram in Energizing America, has said innovation isn't one of the things we need to do to tackle climate change—it is half the game. And so elaborating on this point of innovation, how do we avoid getting locked into, say first- or second-generation technologies which aren't getting us to that point where we need to, such as, and not to pick on lithium-ion batteries, but obviously they're not getting us over the line in terms of energy storage? And how do we avoid, as we deploy these technologies at scale, getting locked into them going forward? Thanks.

BORDOFF: Yes, well, I appreciate the shout-out for Energizing America and for Varun. I appreciate Liz saying nice things about my role in it, but my role was just to convince great people like Varun to come and do good work for us at Columbia, and he sort of was the brain behind putting that whole project together. And you know, I think what he would say is, so do you walk and chew gum at the same time? We know we need to scale these technologies quickly. What I mentioned before the dramatic decline in the cost curve for solar wind, for batteries, some of that was innovation, but a lot of it was just scale and more efficiency and building up these supply chains and we can do a lot there to deploy the existing today technologies we have.

And we also and we kind of—this is the roadmap we laid out—we want to think about what it looks like to significantly scale up government investment in clean energy R&D, and think broadly about what that means including many of the sectors in which it is just going to be harder for electricity, and therefore renewables, to be part of the solution. Again, I come to heavy-duty trucks and ships and planes and heavy industry and petrochemicals, maybe parts of buildings, I mean, electric heat pumps have gotten much, much better, but you know, renewables have grown enormously. Renewables last year, non-hydro renewables were, I think, 10 percent, or maybe with hydro over 10 percent of electricity last year—yes, with hydro, renewables were 10 percent of electricity and electricity is 20 percent of final energy consumption.

So there's a lot of things beyond that, that we also need to work through. And that would include hydrogen, whether blue or green sort of gas with CCS or renewables. We just saw Saudi Arabia announce a $5 billion project to turn solar into hydrogen, they just sent the first ammonia shipment to Japan. Carbon capture, I think, will play a role and direct air capture will play a role. Look, we've just done so little, unfortunately, about climate for so many decades that if you take seriously these targets, you need to start reducing emissions pretty quickly. There's no model that doesn't include negative emissions at this point.

YERGIN: Jason, let me jump in there that somebody asked before—optimistic-pessimistic. I'm an optimist because of technology. China has a lot of advantages right now, because it's dominating these clean energy supply chains. But what we have is this incredible ecosystem from our national labs, $6.5 billion dollars of basic science all the way through universities, research centers, startups, and everything, sixty-two projects on, you know, advanced nuclear now in the United States. So I think that's what's going to, you know, the answers will come from technology. We're not there yet. In the new map I lay out, you talk about some of the areas where we really need to advance and there will be other areas. But, you know, with concentration with resources, we will see in an impact, but we just have to keep this ecosystem, keep it very vibrant.

GOODMAN: Right, and let me just add to that the military's energy needs there are a very important part of enabling that ecosystem and innovation to go faster, because it's got great research and development, testing, evaluation, demonstration, capability, and its buying power can often help the U.S. create a first-mover advantage in some of these new energy markets we want to—

YERGIN: Sherri, on that point, it was the Department of Defense that sponsored the competitions and the research for autonomous vehicles—

GOODMAN: Exactly.

YERGIN: —because of the reasons you said in part, people moving supplies in areas of danger. And you know, look what's happened at ten or fifteen years, you know, from where they started just having a competition with some prize money. It motivated people.

GOODMAN: So we need to do that again in these areas, and we can.

SHERWOOD-RANDALL: That is a perfect place to end this conversation. Thank you each for participating—Dan Yergin, Sherri Goodman, and Jason Bordoff. We appreciate everything you've done in this field and participating today in this lively panel. The audio and transcript of this meeting will be posted on CFR's website. I want to especially thank each of you and our membership for joining us today. This Council meeting is now adjourned.