RFF is releasing the first episode in its new Policy Leadership Series podcast, based on conversations with leading decisionmakers on environmental and energy issues at RFF’s flagship Policy Leadership Series events. This week, RFF president and CEO Richard G. Newell and Pulitzer Prize-winning energy historian Daniel Yergin discuss Yergin’s new book, The New Map; struggles ahead for major oil-producing countries like Russia; and burgeoning tensions over energy issues between the United States and a technologically dominant China.
Visit the event webpage to watch a video recording of this conversation.
Listen to the Podcast
- Daniel Yergin: “I never expected to be writing another book about the origins of cold war, but you certainly see us moving in that direction. Here in Washington, there are very few things that Republicans and Democrats agree on. One thing that really is quite striking, and this really precedes President Trump, is this sense that China is no longer our partner … Now, the term you hear is “strategic rival” or “great power competition.”” (17:30)
- Daniel Yergin: “We live in a different era. We have technology, we have money, we have know-how. Wind and solar are not 10 years old. They're 50 years old. The question is the speed [of deployment].” (21:48)
- Richard G. Newell: “One of the things that I recall, particularly in teaching, is that there is sometimes an impression among some people that the incumbents are not as technologically advanced as some of the newer companies. That’s definitely not true.” (25:40)
- Daniel Yergin: “Turns out diversification is hard under any circumstances. It’s harder when you have COVID and then it also turns out in order to diversify away from oil you need a lot of oil revenues. Over decades, [Saudi Arabia is] going to be in trouble.” (29:35)
- Daniel Yergin: “You’ve got to have carbon capture. People are skeptical about it, but it took 40 years of wind and solar for them to be where they needed to be. Carbon capture [could require] maybe 10 or 15 more years of effort. That’s an area where we really do need some very important answers.” (32:12)
The Full Transcript
Elizabeth Wason: Welcome to the Policy Leadership Series Podcast, new from Resources for the Future, in which leading global decisionmakers speak to RFF President and CEO Richard Newell about big environmental and energy policy issues. In this episode, Richard speaks to international energy expert and Pulitzer Prize–winning author Daniel Yergin. The conversation took place on October 2.
Richard G. Newell: I'm really delighted today to be joined by Dr. Daniel Yergin. Dr. Yergin is one of the foremost thinkers in the world on energy. He's the vice chair of IHS Markit, where he cofounded Cambridge Energy Research Associates. He also chairs the global CERAWeek Energy Conference, which many of us have attended. Dr. Yergin is also the author of several renowned books examining the complex relationship between global energy and politics, including The Prize, The Epic Quest for Oil, Money, and Power. The Prize won Dan the Pulitzer Prize in 1992. It also became a documentary series watched by millions of people on PBS.
His most recent book is called The New Map: Energy, Climate, and the Clash of Nations. Thanks again for joining us, Dan.
Daniel Yergin: Thank you, Richard. It's great to be here. I know that Resources for the Future goes back to really President Truman and President Eisenhower, and ever since, it's made a huge contribution to understanding, as you've said, resources, energy, all these things put together, and certainly all of us who are in the field look toward Resources for the Future today for its insights and its analysis.
Richard G. Newell: Thanks so much, Dan. You're known around the world as one of the foremost global thinkers on energy, but your background is actually in English and international history. You have a BA from Yale and a PhD in international relations from Cambridge University, where you were a Marshall Scholar. I'd be interested to hear about how you first became interested in energy and how this disciplinary background—how has this influenced your global energy work over the decades?
Daniel Yergin: Thank you. As one looks back over one's career, you think there's a logic to it, but you realize one thing leads to another. As an undergraduate, I did history, economics, but I also did English literature, in particular, the nineteenth-century novel. I think it's always given me an ongoing interest in storytelling as a way to communicate things and engage people.
Then I did a PhD in international history and international relations at Cambridge, but at that point, I also did work on economic history. I think, in a way, I see myself as an economic historian. If I look at the work I've done, it's really a blend of those different things.
As for energy, in one of these accidents, I had a two-year postdoc at Harvard after my PhD, and no one was supervising me, so I could kind of do what I wanted. I just became obsessed with energy and then became involved with the International Energy Seminar at Harvard. Out of the blue, I had a job at the Harvard Business School where we became part of an energy project, and that was the course that launched me to where I am today. It set up our original company the same year I started writing The Prize, which I look back on as also thought was a little insane, but I guess I could say it all worked out.
Richard G. Newell: Yeah. I think it did. That's really interesting. I actually didn't know that history, some of those parts. Earlier I mentioned The Prize, which was your celebrated account of the history of the global oil industry, which if you can believe, it was published in the early 1990s. I'm wondering as you look back on the last 30 years of energy, what surprised you the most?
Daniel Yergin: The other day I actually came across the phrase—actually my wife told me—she works on Russia, that Vladimir Putin has the phrase, “The dog barked and the caravan moved on.” In a sense, the caravan has really moved on in terms of energy. As I look back at The Prize, China's hardly in it, climate is not an issue. In fact—I was thinking the first time Joe Biden ran for the presidency—climate was not an issue.
The sense was that the United States was going to be an importer of ever more oil and whatever happened in the Middle East was going to determine the fate of the world. I think that was the sense, because the book came out, then came the Gulf War where who would control the oil in the Gulf was really central. Those were some of the things that have changed since The Prize.
Richard G. Newell: The energy system moves slow on the one hand, but then as you look back things do change. In some cases, significantly. In 2012, another one of your great books, The Quest, was published. That's only eight years ago.
Daniel Yergin: Yeah.
Richard G. Newell: What's changed since then?
Daniel Yergin: I think at that point I understood just the beginning of the impact of the Shale Revolution. So certainly, the Shale Revolution, which has been so disruptive, has been a big change. The other thing that changed is I got really interested in where the modern solar industry came from, and where did the modern wind industry come from? They went back to the 1970s, and one of the two places for the first solar companies was actually Exxon and another was two scientists who both immigrated to the United States.
The time the Quest came out we were just about to see those two industries mature, I think about the age of 40. They finally reached, let's put it, adulthood, but what's happened since then is the cost of those two, particularly solar, has come down so dramatically. Of course, the growth of renewables is still small in the overall energy mix. I see that as a big change.
The third thing, I go back to China again because in that book, at that time, people still thought there was going to be a zero sum game, a struggle between China and the United States for who was going to have access to world oil. I said there's a lot of interdependence here, and there's still a lot of interdependence. There's no longer that sense it's a zero sum game because of what's happened with shale. The other side of it is that the kind of interdependence is now being offset by the growing tension in the relationship between the United States and with China. I think that's another big change.
Richard G. Newell: All those are really important issues. As I think back to the Department of Energy and around 2008 to 2010, people were starting to understand the shale gas boom, and at that point, on shale oil, people were starting to have a sense maybe there's an application. There was the dollar a watt solar, and it's amazing how after really that period of the last decade those two things in particular have—
Daniel Yergin: Yeah. I think we have a Shale Revolution and a solar revolution. Richard, which were the years where you ran the Energy Information Administration?
Richard G. Newell: It was 2009 to 11. I remember that time really well. I actually remember talking to somebody at a CERAWeek conference about the application of shale gas to shale oil. This is probably around 2010. Numbers started coming out about how maybe it'd add a few million barrels per day. The US at that point was I think at maybe five, six million barrels a day.
Daniel Yergin: Yeah. Five million. That's right.
Richard G. Newell: Yeah. Nobody—well I can't say nobody expected. There were some very prescient people who saw it coming.
Daniel Yergin: I think even then, when it occurred, I think people didn't see the full scale. Even the people who saw it didn't realize it. You're right. First it was gas, and 2008 was the first time that gas output went up, and that was a signal. Oil was later. In both cases, the role of individuals really jumped out here, people who were just determined, obsessive, and stubborn, and are very important in terms of creating it.
The general thing was first that shale gas couldn't work because you couldn't get stuff out of shale. It took about 18 years to demonstrate you could do that and one obsessive person, George Mitchell, down in Texas, because he had a gas contract for Chicago. He had to fulfill it. He needed gas. There had to be a way to do this.
People then said, “Okay, it works for gas. Gas can flow through the fractures, but not oil.” There was a guy named Mark Cafu who wrote about it who said, “We're going to have a gas flood. We'd better get out of gas and get into oil,” and people said, “Oil molecules are too big.” I love the way he tells the story. He said, “Well, let's go look it up.” They looked it up and they couldn't find anywhere what's the size of an oil molecule.
Eventually they found out how much bigger it was than the gas molecule and it turned out that that worked. It was only in 2008, 2009 that the first sense of it, just as the time you said that there's a sense well maybe this is going to affect oil, too, but I don't think anyone imagined that the US, by February of 2020, would be not only the largest oil producer in the world, we'd be producing 13 million barrels a day as opposed to that five million that you had talked about.
Richard G. Newell: I want to come back in a minute and pursue that further. I want to jump to one aside for just a second, which is to bring us right to the present day. We're in an extraordinary time in our history. It's a potential inflection point for huge industries and sectors of the economy. Some of that hopefully is passing. If we just look at the upcoming presidential election, one question is how consequential do you think November's election will be for the future of US energy policy and particularly the oil and gas industry?
Daniel Yergin: I think this will be very consequential depending on the outcome. Obviously Joe Biden has a $2 trillion climate plan. Climate will be a major theme, not just running through all departments, and there will be a question of what happens to this position that the United States is in in terms of oil and gas; We will essentially go down two avenues or one avenue.
I think that you do look at 12.3 million jobs before COVID, the impact it's had on the balance of payments. You look at a state like New Mexico, 40 percent of its budget comes from leasing from oil and gas leases. In terms of what it means for manufacturing, over $200 billion of investment in factories in the United States. What it's done for our foreign policy. Two thoughts. Joe Biden was chairman of the Senate Foreign Relations Committee and recognizes that in a way that many Americans don't, that this has had a big foreign policy impact, too.
I think that if you have severe restrictions on the industry, then it really becomes an ‘import more’ policy, and you wouldn't want to be president and preside over the most rapid increase in oil imports. I think there'll be a huge focus on climate. I think that there'll be more regulation on oil and gas, and what I think is really bipartisan is continuing the research in basic science, the $6.5 billion that the DOE now spends, which is to give us the technologies we need for the future. I guess I would say obviously Donald Trump doesn't have a $2 trillion climate plan.
Richard G. Newell: Agreed. Pretty big contrast on the energy and environmental front in the upcoming election. I want to turn now to your most recent book. It's called The New Map: Energy, Climate, and the Clash of Nations. In that book, you explore what you call the new map in global energy and in geopolitics. I'm wondering how did you arrive at that framing? Why a new map?
Daniel Yergin: It started off looking at the flows of energy that were going on because of shale, how the map of US energy was changing the direction oil and gas were flowing, looking at the global LNG market, looking at the new map of renewables. All of those things were there in a kind of literal way. Then it really became a metaphor for describing this new world of the interaction of energy and geopolitics and the sense that the book provides a framework, a guide for how to think about how this world is changing and where it's going and how all these things are interacting. That's how I came up with the idea of calling it The New Map.
Richard G. Newell: Reading the book, as you get into it, it provides a really interesting and provocative framing for the overall discussion. Early in The New Map, you go back to the late 1990s and you alluded to this a bit earlier, Dan. You tell the story of S.H. Griffin number four, which was a natural gas well drilled by Mitchell Energy in a small town in Texas. You write about how in that drilling they're doing something, and I'm going to quote you here, “Something that petroleum engineering textbooks said was impossible, which is namely cracking the code for extracting natural gas from dense shale rock in a way that was not only technically but also commercially viable.” Tell us a bit about the trajectory that that well created, and why it is so central to the new global energy map.
Daniel Yergin: You go out and look at it today, it's just a little wire fenced-in closed thing. There's some houses nearby and so forth in a town called Dish, Texas, near another town called Ponder, Texas. It was the last throw of the dice. They'd been working for 17 or 18 years to try and figure out how to do this. This is the kind of accidents of history that a project manager happened to go to a baseball game in Dallas and happened to meet some guys who were using a different technique of fracking in another part of Texas, not in shale, and let's try it here. Lo and behold, wow, it works. That was the beginning.
It still took another five years to yoke that technology to horizontal drilling, which is really the way to penetrate two miles underground in a horizontal fashion. That came together in the summer of 2003, and I remember a big study that was being finalized at that time about how the United States would become the largest importer of liquified natural gas. That was happening at the same time these guys, in 100 degree weather were drilling these wells and finally it worked, it clicked.
It was still slow. This is just things that independents do that are not serious. Then suddenly you started seeing the volumes going up. Then of course on oil it went up. Suddenly the US had become number one gas producer in the world overtaking Russia and also the world's largest producer of oil. I have a chapter in the book called The Plague. By the way, I only finished this book in July. I didn't really finish it. They took it away from me. I have to explain that that's what actually happened. About in April when oil prices went negative as a result of what I call in the book, “the economic dark age,” that descended as a result of COVID, it was really the United States that brought Saudi Arabia and Russia who were fighting with each other in the oil market together. It demonstrated that these were the big three oil-producing nations, and it demonstrated the influence and impact of the United States.
Richard G. Newell: You mentioned Russia. Maybe say a little bit about China and Russia and how have their energy maps changed?
Daniel Yergin: This is really interesting. There are a lot of forces at work. There's a wonderful picture in the book of Putin and Xi Jinping wearing aprons together making pancakes, and Putin is showing Xi Jinping how to make these Russian pancakes that are called blini. The caption is pancake diplomacy. At the same time, Chinese troops were for the first time participating in this huge Russian military exercise. The master chef Vladimir Putin showing Xi Jinping how to make it, but at the same time, the troops.
They have come much closer together for many reasons. They both believe in absolute sovereignty. I was at one conference last year where Putin said to Xi Jinping, “I apologize I kept you up until 4:00 AM talking,” and Xi Jinping says “It's okay, we never have enough time to talk.” We know one thing they talk about is their antipathy to an international system led by the United States. We also know that they talk about energy. That is a very important part of their relationship.
Not completely, but I do say that a relationship that was based upon Marx and Lenin is now based upon oil and gas because Russia's become a big supplier to China of energy and energy is very important to China, which is now sort of in a position the United States was 10 or 12 years ago to import 75 percent of its oil and China regards that as a big strategic problem. That relationship, Russia selling weapons to China, they've gotten closer and closer. That's one of the big geopolitical changes, and you can also trace it out on the map in terms of the flow of energy supplies.
Richard G. Newell: Yeah. If you look at China's import of almost all forms of certainly traditional energy, but in particular oil, their import dependence is well beyond what we ever had in the United States. You can understand how that influences their thinking. To focus a little bit on China and China and the US, are we headed into a cold war with China?
Daniel Yergin: I worry about that, Richard, as you mentioned previous books. One book builds upon the other. My first book was on the origins of the Soviet-American Cold War. That was a cold war that was based on ideology and nuclear weapons. I could say I never expected to be writing another book about the origins of a cold war, but you certainly see us moving in that direction.
Here in Washington, there are very few things that Republicans and Democrats agree on. One thing that really is quite striking, and this really precedes President Trump, is this sense that China is no longer our partner. Previous presidents talked about a constructive relationship with a changing China or positive engagement. Now the term you hear is strategic rival, great power competition.
Now if I quote some of the Chinese military documents and they say the same thing. That's a big change for two countries that happen to be the two biggest economies in the world, that happen to be very interconnected and both of them deeply embedded in the world economies. Henry Kissinger talked about being in the foothills of the ‘new cold war.’ I think it's something of concern. and I think it's going to be the big geopolitical question to deal with, and it has big economic implications because the United States and China are much more integrated than people know.
I think General Motors sells more cars in China than it does in the United States. I think if people look in their 401K plans they'll see that they own Chinese equities as part of assuring their retirements. This is a very different kind of competition because Soviet Union was hardly a factor in the world economy. That's a very different thing.
Richard, if I can add one other thing that really strikes me, is I hear from other countries when I was traveling, and just in conversations with them, whether in Asia, whether in the Middle East, whether in Latin America, is that we don't want to have to choose. Don't put us in a position to have to choose. We've seen that with issues over technology like Huawei. This is one place where we really need a new map because this is risky terrain to be in. There's some destinations we don't want to end up in.
Richard G. Newell: Yeah. That framing of not making us choose is very compelling. Just shows you the benefits of cooperation and collaboration wherever that's possible. I want to turn again to the issue not transition so much in geopolitical relationships but in energy and energy technologies.
If you look back on the past century, there's been maybe some types of transitions, but if you look at an aggregate level and the world as a whole, what we've really seen is a lot of energy addition. We've seen, while shares of energy change, we use more biomass, we use more coal, we use more oil, we use more natural gas, nuclear, and now renewables. Huge growth in renewables.
What we've tended to see, so far at least, at a global level is energy addition, one kind of stacking on top of the other. Particularly from a climate point of view—because people are interested in an energy transition that isn't just adding on top—what the environment cares for and also what most companies care for is the absolute amount of energy. You write about this in your book about energy transitions. Are we at the frontier of a possible major energy transition and your thoughts about where we are in that? What does that depend upon? How does that influence the energy industry and also potentially geopolitics?
Daniel Yergin: I tried to, in The New Map, look at a framework for thinking about energy transition, because the phrase is thrown around a lot, but you say if we look at the numbers its energy addition so far. The second thing is if you look at the numbers, the US CO2 emissions are down to the levels, I think it's now, the early 1990s. Our economy's doubled and that's largely because one energy source, gas as coal and generation. It's a more complicated thing.
Sometimes I want to make this book a very lively book, a narrative book, but sometimes I go down rabbit holes too. I wanted to go back and say when did the energy transition really begin? You can say well, they were burning wood in London in the 13th and 14th century, but I think I pick out a date of January 1709 when a metal worker in a village in Shropshire in England figured out that you could make better iron using coal rather than wood.
Then it took two centuries until coal became half of the world's energy supply. You see this over a long time, oil discovered in 1859, doesn't become predominant until the 1960s. We live in a different era. We have technology, we have money, we have know-how. Wind and solar are not 10 years old. They're 50 years old. The question is the speed.
The view that I take in the book—and this is really an engagement in an ongoing dialogue and a discussion—but it seems that it's still based on everything. In particular, I mean that I am not just generalizing from the US, north Canada and Europe, but from the world, the world oil demand actually continues to grow until the 2030s or so and then begins to decline just by looking at the numbers.
There are 280 million cars in the United States. We're going to see more electric cars, electric utilities in the United States, most of them are very committed to moving towards wind and solar. We see that shift in investment going on. I think it takes time to happen. I think we also need technologies. One of the other people you had in this series was Ernie Moniz, the former energy secretary.
We did this study for the Bill Gates Foundation and the Breakthrough Energy Coalition, about the technologies we don't have. Obviously one of them is batteries of a different nature, potentially hydrogen, but another one is carbon capture. You go to India and they talk about indoor air pollution because people are burning wood and animal waste and crop residues. They have a $60 billion project to introduce more natural gas into their economy to have more commercial energy.
There's no question an energy transition is going on and governments are going to push it, a lot of popular opinion behind it. There is the reality of an $87 trillion world economy and how quickly it can turn. One other question that's out there, Richard, and this is your economist hat, is how deep are the wounds from this COVID crisis, and how much flexibility would governments have to spend there as opposed to there? I tend to think we will be moving into more of a transition. We'll reach a point where it's not just energy addition, but I don't think we're there yet.
Richard G. Newell: I'm going to bring in a question from the audience that directly relates to this. There's been some major announcements by some oil and gas companies like BP. There's many others. To what extent do you see the energy transition being driven by these existing large companies relative to, let's say, the new guys?
Daniel Yergin: It's going to be a mixture. I have a wonderful chapter about the rise of the electric car, where Tesla came from and how it began at a lunch in a fish restaurant in LA, J. B. Straubel was trying to convince Elon Musk to do an electric airplane. He says, “I'm not interested.” “What about an electric car?” He says, “Well, I might be interested in that.” There's individuals, small groups, couldn't have been done probably anywhere other than Silicon Valley. Great deal of ingenuity, creativity, and just sheer determination and grit. There'll be players like that.
On the other side, you have these big companies that have the capability, they have deep engineering skills. They are used to working at scale. They know how to execute complex projects. They'll have a big role in this as well. I think it's a kind of mixture of the two. There is—between the companies—obviously a difference right now is the European companies are very much saying we've got to move to be energy companies and either keep level or bring down our oil and gas business while we develop renewables, while we move into electric power, while we do new technologies. One thing I see all the major companies very focused on, more than I've ever seen it before, new technologies, on startups, on venture capital. These are technology companies at the end of the day, and they're looking for the new technologies.
Richard G. Newell: One of the things that I recall particularly in teaching is there is sometimes an impression among some people that the incumbents are not as technologically advanced as some of the newer companies. That's definitely not true. I would tend to agree with you that the more that those assets and that capability can be deployed in the transition alongside-
Daniel Yergin: Yeah. I mean, I think it's one of the major energy companies that has more PhD.s in science and engineering, I seem to remember it was something like more than Harvard, MIT, and Stanford combined. One thinks of them as just commercial organizations for many people, but at the heart they're run by people who are very technical.
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Richard G. Newell: I want to turn back for a moment directly to your book. There was a really fascinating extract in the book that appeared recently in the Wall Street Journal. In that you're talking about the prospect of an energy transition and you say, I'm going to quote here, “China is posed to be the big winner. Russia and the Middle East, exporters, the big losers. The US is likely to fall somewhere in between.” Talk us through a little bit why you reached those conclusions. What do you think is fueling China's success and what will ultimately determine whether the US ends up leading the world on energy or following others?
Daniel Yergin: I think China gets into the winner's circle in two things. One, if it imports less oil, because as we said before, oil's a strategic problem. China is more aggressively promoting the electric car than anybody else. Half the world's electric cars now are in, not surprisingly, China.
The other side is that China is focused on what they call new energies. It's 70 percent of the world's solar panels, lithium ion battery supply chain, rare earths; Their position in all of those things. As the world, as you say, makes that shift, they're in a very strong position. It does raise a question. This is a big research area that I'm helping to lead at IHS Markit: What are these new supply chains going to look like in a net zero carbon world? Under some scenarios, the amount of wind and solar capacity to put in is twice all the existing electric generating capacity in the world.
How are these supply chains going to work? This is where energy transition and geopolitics, which one is there and one is there, that's where they come together right now. I think China's in a strong position. Vladimir Putin said that Russia's government's revenues from oil have gone down from 40 percent to 30 percent and this was good. Of course, this went down because volumes are down and price is down. Russia still continues to struggle with diversifying its economy, which it's been talking about for 20 years.
Saudi Arabia’s GDP, directly and indirectly, is so dependent upon oil, and it is trying to diversify. Turns out diversification is hard under any circumstances. It's harder when you have COVID and then it also turns out in order to diversify away from oil you need a lot of oil revenues. Over decades they're going to be in trouble. That's why also Saudi Arabia talks about building up a sovereign wealth fund so they can be in a position of Norway and Abu Dhabi heavily diversified in the global economy.
The United States, I say it's mixed. On the one hand, the US benefits pretty greatly from this Shale Revolution in the position that the United States is in, a very substantial part of the overall US capital investment over the last 10 or 12 years has been related to this sector. There's that side.
What I really believe, and goes back to when you were in the EIA at the Department of Energy, the US is enormously gifted with an innovation ecosystem that begins with the national labs, this half billion dollars the DOE spends in basic science, through the universities, the research centers, through start-ups, through big companies, the ability to innovate, people take chances, success, failure, and no country can match, not even China, the United States in that kind of capability. We just have to be sure that we continue to put resources into that.
Richard G. Newell: Let's build on that a little bit. There's also several audience questions related to this, the importance of new technologies, innovation. I'm wondering, and you talk a bit about this in your book, The New Map, wondering what energy technologies you're watching now, what you see being consequential, what do you think is also kind of needed to enable an energy transition?
Daniel Yergin: Some of it is obviously dispersed. It's building technologies, it's efficiency. When I started working on energy at the Harvard Business School, the focus I had was energy efficiency. I remember people thought we had really radical ideas about it, radical enough to get on the front page of the New York Times, and it turned out that we've become a much more efficient society. That's dispersed.
I think the continuing advance of digitalization, which these seven months under COVID have really accelerated. Batteries that take renewables from intermittent to base load, batteries on a different scale are necessary. Hydrogen has come to the fore. I know some of the people watching this have different views of hydrogen and say we've been there before, and others think well maybe this time. You certainly see a very deep interest in hydrogen, blue hydrogen, green hydrogen and making hydrogen with electricity from renewables.
Daniel Yergin: To go back to what I think I said before, you've got to have carbon capture. People are skeptical about it but it took 40 years for wind and solar to be where they needed to be. Carbon capture will probably require, I don't know, say maybe 10, 15 years of effort. That's an area where we really do need some very important answers.
Richard G. Newell: Yeah. I'm glad you mentioned the history of solar because before we write off things like hydrogen, which is true, we've gone through cycles where there was a lot of attention. Actually, electric cars are another example. I think many folks said the same thing about solar until the last decade. It took quite a lot of effort and a long time for solar, PV in particular, to really take off, and then things change and all of a sudden it's much, much, much less expansive.
Daniel Yergin: Yeah. You wake up suddenly and you say, “That's really a big change.” Your mind gets locked into a mindset by a previous experience and then things just keep advancing. There's sure a lot of people working on the battery questions today.
Richard G. Newell: I don't think you mentioned nuclear. Do you talk about it? I didn't see if you covered nuclear in the book.
Daniel Yergin: I think nuclear is still about 20 percent of our electricity, some nuclear plants are being closed because they are having trouble competing with inexpensive natural gas. They do provide base load. California could use some extra base load right now. Depends where you are. Germany shutting down its nuclear by 2022. In the period that it's been shutting it down, China has added more nuclear capacity. You see China, Russia, being the kind of global providers of nuclear.
What really strikes me, and this goes back to that innovation system we have in this country, something like over 60, maybe 62 companies in the United States working on next generation or next, next generation of nuclear. I think given what we've seen in the recent history, people would be really surprised by that, but if that means there's a lot more than 60 people who do think there are other avenues to make nuclear carbon free electricity part of the mix. It's not by introducing new software, because nuclear takes a lot of effort and it takes approval by the nuclear regulatory commission to come on stream and so forth. It's kind of more advanced than actually people realize in terms of new technologies.
Richard G. Newell: Really interesting point. The title of the book is The New Map: Energy, Climate, and the Clash of Nations. We haven't focused so much on the climate yet in the conversation. Particularly, we focus a lot along the shale gas boom, shale oil, relative to certainly even just 10 years ago the notion of there being scarcity in fossil fuels, oil and gas in particular. it's turned out very different from that. Even beyond shale gas and oil, there's huge potential for other kinds of fossil fuels, like methane hydrates and so on. Question. How do we reconcile this with the desire also to bring down our emissions of carbon dioxide and methane? How do you think about both this energy boom but also the need to address other very important-
Daniel Yergin: I think the potential, in The New Map, you have the advantage, you stand back, you look at something, and you see things more clearly than you may have seen at the time. I think we have two energy eras in the context in which you're talking. One is before Paris and one is after the 2015 Paris Agreement.
Again, there's another great photograph in the book of people cheering when the Paris Agreement was announced in December of 2015. I think that only gets more powerful. The EU has said “we want to be net zero carbon by 2050.” I think that's basically in the Biden plan, too. And already, 195 countries signed on to the Paris Agreement.
What governments are doing in terms of policy—Europe has a particularly strong policy on it—to take a stronger hand in the allocation of capital and regulation to try and accelerate what you're talking about. It's become increasingly important to investors in terms of what's called ESG (Environment, Social and Governance), asking companies, "How do your strategies comport with the Paris Agreement or Paris objective of no more than two degrees or one and a half degrees?"
Actually I think that both can exist. That goes back to your question under a Biden presidency, if there is one—the United States, instead of being absent from the table will be back at the head of the table. That's why these other technologies that we've been talking about are important, because if you look at the numbers, it's hard to see how you get there today with what we have today.
These other issues of carbon capture, for instance, have to be addressed. And there is still potential for something to come that we're just not seeing now that makes a radical difference in the impact of COVID, like: how is digitalization impacting what we're doing today and what does that mean for travel, which is more than half of world oil consumption. If you think back to the things that in 2011 and 2012 in The Quest were not yet obvious, what's not yet obvious today that will make a difference a decade from now? That's why this is, to slightly borrow a title of Hemingway's book, A Moveable Feast. This is a movable story.
Richard G. Newell: Two things I want to build on there. One, which is earlier we talked about tensions between the United States and China. One of the very important aspects of the Paris Agreement on climate was US and Chinese collaboration. Really that was the first time where there were major commitments across the board.
Daniel Yergin: In fact, Richard, that was the essential foundation when Xi Jinping and Barack Obama stood in the great hall in Beijing and said, “We have a deal,” that is what made Paris possible.
Richard G. Newell: If we think to the future, and the future of United States-China relations, do you have thoughts on the role of climate in that, particularly between the United States and China?
Daniel Yergin: Yeah. Xi Jinping said that China intends to be net zero carbon by 2060. That's a big challenge since that's an economy that today is almost 60 percent based upon coal. 2060 is farther away than 2050. Clearly they have an extra 10 years for that.
I think that goes to a larger question which is the breakdown of a global community that you need. Climate is one issue, but look at COVID-19. You have not seen international collaboration. You've seen international, beyond competition, contention over it. Yet it's a global problem that needs to be addressed globally.
I think climate's at the top of this. There'll be other issues. There'll be world trade issues that are going to be harder to deal with. To paraphrase Deng Xiaoping about Hong Kong, now overtaken by events, he said, “One country, two systems.” Are we moving to a global economy which will be one world, two systems in terms of technology, in terms of finance and other things? Yet, for dealing with issues like climate, you really do need global cooperation. I think historically if you look at the Paris Agreement, that's a pretty astonishing achievement to have 195 nations come around to sign onto something like that. That's a huge achievement.
Richard G. Newell: Yeah. One of the other things that you mentioned as being a turning point is not only that the national level, sub-national, in the United States at least, and also corporate. You mentioned earlier, the number of corporate commitments that are aligned there, and you also mentioned the financial community. We had a great event with Commissioner Behnam from the Commodity Futures Trading Commission and Bob Litterman and other great folks from Citi and from Bloomberg LP. The conversation was around climate risks in US financial markets. The tension also of the financial community and investment community around this issue has, I think, changed dramatically even in the last three years.
Daniel Yergin: Yeah. I think in the last year I'm struck about how fast it's changed. That's a very important point. One of the European-based companies, of course it's based in the United States too, Shell, has also announced it's moving to be an energy company rather than just oil and gas. When I did one of those CERAWeek conversations with the CEO Ben van Beurden, he has this phrase that he talks about, “in step with society.” I think that means in step with investors, with governments, as well as the popular public opinion. I think those factors have come together and that's why you're seeing some of those companies really trying to redefine, if not their DNA, at least their character.
Richard G. Newell: You mentioned a little bit ago our anticipation or maybe lack of ability to anticipate unexpected things. Certainly, the coronavirus pandemic has been one of those. Elements like the collapse of the US airline industry, negative US oil prices. As with previous economic crises, and forecasting miles in energy projections, I really didn't anticipate the crisis really, nor of the depth of the potentiality of it. How do you or maybe your colleagues at IHS, what have you learned from these recent crises, and how do you just more generally think about planning for the unexpected?
Daniel Yergin: First, let me say, one of the things I've always been interested in is when you wear your historian hat, things happen that aren't expected and then you explain why they happened, the logic of it. In the plague chapter, why was there no anticipation except but for a relatively few people of this kind of pandemic? I came to the conclusion that one reason is that the thing that people remembered the most was the SARS epidemic at the beginning of the century. At the SARS epidemic I asked people, “How many people do you think got sick from it?” They'll say “100,000, 200,000 people.” The fatalities were less than 800.
I think when this happened people just had the model that ‘oh, this is SARS, it'll be contained.’ I've always been interested in surprise and how you build resilience. I've come to believe in scenarios, so we did a scenario before the 2008 financial crisis about mortgages and real estate in the United States. People said, “Oh, you just wanted to put in a negative scenario.” I think it really is important to think about the outliers and how you would respond to them.
You just think of all the surprises since the beginning of the century, some very negative and some of them really quite positive. That's, I think, the fundamental question for countries and organizations is how do you build resilience into the system? I think in the conclusion of the book I say there are going to be surprises and things that just seem to come from left field, but you might have caught it in your peripheral vision. I think two constants that are going to be there for this world that I talk about in The New Map, one is climate. It's just a huge central issue. The other, worrying in a different way is the clash of nations. Managing that and prudently managing that is going to be the greatest geopolitical challenge in the decades ahead.
Richard G. Newell: I think I have time for a couple audience questions here. One of the issues that have shown up, it's not just specific to renewable energy, but it has shown up is the question about rare earth materials. This is important for batteries is one example. To what extent has that come up in your work? There's a geopolitical dimension to that.
Daniel Yergin: It certainly comes up. I mean, Japan's certainly seen it when China basically cut off rare earth to Japan. I forgot what the issue was. People stated actually that rare earth's are not rare, but they happened to be produced heavily in China. One of the things you talk about oil companies, that phrase big oil, and as we move in an energy transition, we're going to be in this era of big shovels, because it's going to involve a lot of mining. It goes back to those supply chains, and to understand not one company but how you see the whole picture.
Often I find that people see it in their own area but they don't see the whole picture. I think actually COVID-19 made people look at their supply chains in ways that they hadn't, because you had efficiency, you had economic reasons for doing it, you had technical reasons for doing it. You didn't really think about the geopolitical issues, but now you can see that people are having to rethink those because of geopolitical issues. That goes back to that rare earth question.
Richard G. Newell: Are there implications for the coronavirus that you think that are lasting or trends that maybe it accelerated that were maybe underway but that might unfold it under a much longer time frame?
Daniel Yergin: I think seven years of digitalization in seven months, what this means for particularly international travel, how people communicate, how much do people need to be together? What actually is the question for everybody watching, what's going to be the nature of work? People talk about work life balance. In a digital world, I think that balance becomes actually harder, because there's no division. It just blends together.
I think a lot of people feel it. I think work is one big thing, and there are other changes that we'll see as a result of that. What does it mean for commuting? On the 1918 flu epidemic, the knowledge of it was partly suppressed because it was during World War I. Woodrow Wilson did not have a stroke at Versailles Peace Conference. He actually had the Spanish flu.
This is not something that's going to disappear from the public conscience. This is going to be there for a long time, and you worry about particularly the impact not only on large organizations but small businesses. Just what kind of recovery are we going to have? Back at IHS Markit, one thing our economic VP really thinks is that it's not until 2022 or 2023 that we'll nearly regain economic footing. I think your team probably thinks something like that too when you look at the scale of it.
Richard G. Newell: I think I have time maybe for one more question. It relates to the role of developing countries. How do you think The New Map will affect developing countries, what role do they play, and also in the context of the energy transition?
Daniel Yergin: I think it's particularly interesting to look at what's happening in Asia. Shots exchanged between India and China. I think that's the geopolitics. China has its Belt and Road strategy, and there's a great photograph in the book of Jackie Chan, and you say why does an energy book have Jackie Chan? It's because he was in a movie called Kung Fu Yoga, which was celebrating the Belt and Road strategy. You see the Japan, US, India having an Indo-Pacific strategy, and he's talking about it. I think that's part of the picture.
I think those countries, because they don't have our safety nets, are just going to be a lot more focused on recovery and bringing back their economies. I think the other thing is that Prime Minister Modi, big commitment to wind and solar, but big commitment to $60 billion to build a natural gas infrastructure and sees imports of US oil and gas as a very important part of the overall US India relationship. I think that's a very evident and a very important case study.
Richard G. Newell: Yeah. In terms of what you think about global population, so much of the world's population is located just in those two countries that you mentioned. One of the things, Dan, to bring us toward the end here, one of the joys of doing research like the kind of research you did for this book is that you come across new unexpected phenomenon, maybe spark new areas of interest. We're certainly very familiar with that at RFF. I was hoping you could say that based on your journey of this last book, what's next for Dan Yergin? Is there another book in the works?
Daniel Yergin: I think that I need a little time to recover from the book, because you always start off thinking oh, this one's not going to be so hard. I'm not going to have to work day and night on it, and lo and behold you end up doing that. Right now as a research topic I'm very interested in the supply chain issues because they combine energy and geopolitics. Do I have another topic? I didn't have a map for The New Map when I began writing the book. It sort of evolved.
I think at some point in here I'm sure I'll get the itch again because writing books is just one of the things I like to do. I do it in kind of an old fashioned way, long hand. I think writing a book for me is, in a way I love doing narrative, and that goes back to the question in making sense. I also see it as solving a puzzle. I think there's going to be no shortage of puzzles in this area in which we work. I'm sure there's one more coming.
I'll just say that one reviewer criticized the book for this amazing thing. He said it wasn't long enough. I've never been criticized for writing a book that was not long enough. I think in this Twitter age each book needs to get a little bit shorter.
Richard G. Newell: For those of us readers, we appreciate that as well. I think many folks will say, “I'm going to make more work for them.” If you come out with a new book too soon we won't have fully digested your current one. Dan, I want to thank you so much. This has been a real pleasure. We've been able to both catch up on some of the events over the last year, but also get a place in the context of much bigger, longer term changes for the US and globally.
As always, we'll be paying close attention to your analyses, your next book, but along the way other really prescient things that you always have to say. We've reached the end of the session. Thank you so much Dr. Yergin, for joining us today.
Daniel Yergin: Thank you, Richard. It was great to be here. Of course, I look forward to the continuing work by RFF. Thank you everybody for joining us today.
Richard G. Newell: Thank you so much.
Elizabeth Wason: That was Richard Newell, President and CEO of Resources For the Future, in conversation with global energy expert, Daniel Yergin. If you like what you heard, remember to like or favorite RFF's Policy Leadership Series on your podcast platform of choice. We will release new episodes every month with leading environmental and energy decision policy makers. You can also find recordings from our Policy Leadership Series events at RFF.org/pls and receive updates about RFF's events and podcasts at RFF.org/subscribe.
This episode of the Policy Leadership Series Podcast was produced by John Taylor Williams. The live event was produced by Hillary Alvare, Libby Casey, and Justine Sullivan. Music is from Blue Dot Sessions. RFF podcasts are managed by me, Elizabeth Wason, and made possible by you, our listeners. You can contribute to RFF today by visiting RFF.org/support. Thank you for joining us.