Energy Transitions Forum: Low-Carbon Pathways for Growth and Sustainability

Available Downloads

Sarah Ladislaw: OK, good afternoon. My name is Sarah Ladislaw. I am senior vice president and director of the Energy and National Security Program here at CSIS, and it is my great pleasure to welcome all of you here today.

Before we get started, it is my job to make sure that you all know that in the case of an emergency – which we don’t plan to have happen today – that you guys are aware that we do have emergency evacuation plans, so please make yourself acquainted with the two emergency exits. You go out those doors, they take you to a hallway, the hallway takes you to the stairway, the stairway takes you to an alleyway. And then you cross the street and await further instructions. But again, we don’t anticipate that any event like that will be necessary today, but we do want make sure you know we take your security very seriously.

So tonight’s event is the first-ever Energy Transitions Forum here at CSIS. And, as we all know, countries around the world face the same challenges: to provide enough energy to fuel improved standards of living and to do so in a way that leaves the best outcomes for the environment and their citizenry.

However, today countries are each facing this challenge from a different stage in their development with differing various needs and varying levels of capability to enact those solutions. And this means that energy must be affordable, and secure, and clean – excuse me – as affordable, and clean, and secure as possible to be able to enable them to make that transition.

So for nearly half a decade now, the global community has organized around two overarching goals for the energy sector; namely, to eradicate energy poverty and to combat the pervasive effects of global climate change. Each of these challenges has become more urgent and more complex. The mission to eradicate energy poverty is not simply about improving energy access, but also providing modern energy services to the world’s growing and developing populations.

The need to address climate change is not simply about reducing emissions. It is about achieving net-zero emission economy while tackling local environmental concerns, addressing key questions about a just transition, and making sure we do so in a way that is quick and affordable.

Just this past week, the U.N.-led Global Commission on Adaptation released a report calling on countries to transform key systems in their economy to boost resilience and productivity in the face of climate impacts. The report provides an additional sobering assessment of the challenges that lay before us.

Excuse me. The discouraging news is that we’re not on track to achieve either of these objectives. The uplifting news is that we’ve made progress on key measures on the technological, policy, and societal front that can better enable us to meet these goals if we commit to taking additional action.

The purpose of this forum is to take stock of where we stand relative to this dual challenge and to discuss areas where real progress can be made over the near term. Today’s event also serves as the launch for a new, year-long project where the CSIS Energy Program will explore strategies to address the dual challenge in several key countries around the world and identify public and private sector resources that can be brought to bear to help these countries achieve these goals.

We’re very pleased to count BP, the World Bank, the International Energy Agency, and the Climate Policy Lab at Tufts University, as well as many others, as partners in this effort.

Before introducing the first panel, I’d just like to take a moment to recognize the context in which this event is taking place. Next week, global leaders will converge in New York to discuss a host of pressing climate – global issues, including the ones that we will discuss this evening. Both the U.N. General Assembly meetings, the U.N. climate change summit and New York climate week will all feature discussions of these topics. And then, at the same time, an unprecedented youth strike will accompany those meetings, encouraging greater attention to these issues of climate change and the need to take action to address them.

We hope that as much as possible tonight’s conversation and our work through this project can be about taking concrete actions that are necessary to rise to this dual challenge. Through other work here at CSIS we are focusing on what we can do here in the United States, but I firmly believe we need to roll up our sleeves and find some pragmatic pathways and options for many of the world’s rapidly developing countries, and we’re thrilled to be able to do that with this project and the support of sponsors like BP.

Now it’s my great pleasure to invite our first panel to the stage. My colleague, Nikos Tsafos, who is a senior fellow in the Energy and National Security program, will introduce our panel of experts and get the program underway. Thank you very much.

(Break.)

Nikos Tsafos: (In progress) – with the Energy and National Security Program here, and so we’re going to kick off this event. We have a fantastic panel, and it tells you a little bit about how great this event is that we are the warm-up panel – (laughter) – and so right next to me we have Riccardo Puliti, who is the group director for Energy and the Extractive Industries practice at the World Bank and also the regional director of Africa for Infrastructure.

Next to him is Spencer Dale, who is the group chief economist for BP, and on the far left – my left – is Malfada Duarte, who is the head of the Climate Investment Funds – so a great, very diverse panel in terms of perspectives.

So I want to go straight into it and start with you, Riccardo. You – the World Bank, in collaboration with other institutions, put out this big report talking about the progress we are making towards the SDG – Sustainable Development Goals – and Sustainable Development Goal 7. So what did you find?

Riccardo Puliti: OK, first of all, good afternoon to everybody. I have to say the finding of the report are positive, but not as positive as we would have liked them to be. So between 2010 and 2017, the access-to-electricity rate went up from 83 to 89 percent. It means that instead of having 1.2 billion people of the world population without access to electricity, now we have 840 (million). So as I said, it’s a positive piece of news, but it’s not as positive as we would have liked.

Then the improvements are very, very, very different from region to region. I’m afraid to say Sub-Saharan Africa – out of this 840 million, 570 million are resident in Sub-Saharan Africa.

So there has been very, very good improvement in Asian countries. I’m thinking about India, I’m thinking about Bangladesh, I’m thinking about Myanmar, while, I mean, there are just a few African countries where improvement has been very notable. One of them is Kenya, which is very much of a success story. But I have to say I have here a list; countries like Burundi, Chad, Malawi, Democratic Republic of Congo, and Niger have still the very, very, quite low electrification rate.

The situation is a little bit made more complicated by the kind of conflicts that have been present in the area of late, so there is a substantive part of the population which is displaced, that there are a lot of conflicts, and there are hard to reach location in countries where there are wars, or violence – thinking northern Nigeria, northern Cameroon. I’m thinking, for example, southern and eastern Somalia, South Sudan, so you can see it is not very, very easy to – always to – I mean, it’s not only a matter of planning or technology; it’s also quite linked to the political situation.

In addition, if you think about lack of access to energy only in a rural community, I think it is a kind of idea that is not like that. There are a lot of – with the phenomenon of urbanization become more and more and more important, there is a lot of people residing in urban area that they don’t have access because they are very much based on kind of frail, old, overburdened kind of grid, so this is a problem. So I say improvements, no doubts, but still I have to say a lot of work – a lot of work to do.

Moving always in the SDG 7, moving in the issue of clean cooking – and I have to say this is a matter where I am quite unhappy myself I have to say. I mean, the improvement has been minimal because between 2010 and 2017 we have gone from 57 percent to 61 percent, which is not much, which means that still around three billion people of the world population don’t have access to safe and clean cooking. So again here, a lot of improvements. I have to say – and this I put it to myself as the head of – the global head of Energy and Extractives, I think sometimes I really think what else we can do because I always try to help all the institutions to get more money, to do more, but I have to say not – I would have liked to be more successful in this area.

Going into the – always part of the SDG 7, the – I would say this is a far better picture from the viewpoint of the renewables’ penetration, so nowadays 17.5 percent of the energy consumed in the world is generated by renewables. I have to say the growth rate is very, very high; the highest it has been in the last 12 years. Of course it has to do with competitiveness, so it’s really about – it used to be about policymaking; now it is really about the market. Actually renewables are very competitive with any other fuel, so they are there to stay, and they are there to move – to move pretty quick.

I have to say we are very, very, very supportive of renewables always – always been. I have to say the vast majority of our annual lending, the group that I lead has an annual lending of around $8 billion per year. The vast majority goes, either directly or indirectly, to renewables.

But I have to say I like to think that renewables are not alone – is not a standalone technology. Technology is all together, so we look very much about having renewables with storage, which is very important – electrochemical storage is running very, very, very quick, moving from the automotive industry into power systems; renewables with gas whenever is necessary in order to accelerate the arrival of renewables. Power systems – I mean, certainly we look at them a lot because in many of our countries where you have losses – I’m talking about technical losses of 15, 16, 20 percent. It’s not really a matter of adding more capacity; it’s really a matter to use it correctly.

But I have to say – this is very, very important – a point I would like to make is the point of affordability. It is not only access to electricity; it is also how much does it cost because it is not only a matter of a kind of technical access, it is economic access. So I have to say the good news on renewables certainly are very, very helpful for the population.

So this is – on energy efficiency, we see improvements, but, I mean, I have to say not – again, a little bit like in clean cooking, not as quick as we would have liked. I mean, it is – I don’t know, I mean, a good friend of mine always made a joke that energy efficiency is the low – the low-hanging fruit, but it must be really very well ring-fenced because because, though, it’s not easy to pick up.

So having said that, and just to conclude, I know – I just have five minutes – I have to say – well, I’ll leave you a little bit with two thoughts. One of them is that in our calculation, in the years that goes between 2018 and 2030, there is a need of farther investment for a cumulative number of around $1.3 trillion. I have to say I’m not a big believer in these kind of numbers because they are too big, and they are too large numbers.

But certainly I would say I’m a big believer in working together public and private sector, and this is not the kind of – the party line of the World Bank. This is the real thing. I think that it is very, very important, and if we want to get to the objectives of the SDG 7, certainly it is a very, very, very important point.

And the second thing that I will never stop saying more and more is the importance of technology. I think that technology, in my opinion, will be the accelerator that will move us quicker – as quick as possible – to a world of clean, affordable and secure energy because that’s, at the end, what we want. So we are working a lot on – at the moment on batteries. I want to say batteries represent less than 5 percent – batteries in power systems represent less than 5 percent of the total of batteries around, but it is a kind of world which is moving very quickly.

And I finish then.

Nikos Tsafos: Thank you. No, that’s a great – you put a lot of things on the table, and we’ll kind of come back to you. I definitely want to talk a little bit more about cooking, but also see if we can drill more deeply into some of the success stories and what the countries that are lagging behind might learn from the success stories.

Spencer, I want to come to you. You know, you come to CSIS, you give the outlook of BP. You’ve done this for a few years now, and this year you added a section talking about the link between energy consumption and the human development index. So talk to us a little bit about how you think about this overarching challenge that we have.

Spencer Dale: Yes, thank you.

So, first of all, thank you to Sarah, and Nikos, and CSIS for both today’s session, but also launching this program of work talking about the dual challenges – the dual challenge that the energy system faces, which Sarah identified: this sort of need, on the one hand, to eradicate energy poverty, but on the other hand, also to do that in a way consistent with reducing carbon emissions.

And so another way of saying that in more simple terms is the world needs more energy and less carbon. And we are very familiar with these dual challenges. They are rooted into – all the major touchstones that we’re all working towards reflect both of these two things. If you look at the Paris climate goals, they talk very, very clearly about the need to reduce carbon emissions, but in a way which, at the same time, you eradicate poverty.

If you look at the sustainable development goals, we have SDG 7, which Riccardo was just talking about: access to energy for all. And we have SDG 13, which is talking about climate mitigation. So this idea of these dual challenges, this need to for more energy and less carbon, is well understood.

And we’re doing dismally on both of them. If you think about carbon, if you just look at last year, carbon emissions, we estimate, grew by 2 percent last year. That’s the fastest growth rate we’ve seen for seven or eight years. So they’re not falling. They’re not even slowing; they’re accelerating. That growth in carbon emissions last year was about null-point-6 (0.6) gigatons. What null-point-six gigatons means is equivalent to increasing the number of cars on the planet by around a third, so around another 400 million cars on the planet last year equivalent.

Just to put it in perspective, we talk a lot about electric cars. There’s about – total – five million electric cars on the planet. Last year’s growth of carbon emissions, 400 million, OK? So we’re not doing well on climate.

But likewise, we’re not doing well in the need for more energy, and Riccardo just took us through that. It’s now less than a billion people don’t have access to electricity, but it’s a bit frightening that when it’s less than a billion we think that’s good news.

We then have three billion people will poison their families tonight because they don’t have access to clean cooking fuels. In the report that Riccardo was referring to, I think the U.N. estimates that some almost four million people will die premature deaths this year due to their not having access to clean cooking fuels. And the same next year, and the same the year after that.

In the work we did on the human development index linking energy to the human development index, we estimate that something – around 80 percent of the world’s population live in countries where increases in energy go hand in hand with very significant improvements in human development. And so, to be clear, the world needs more energy. So the world is on an unsustainable path in terms of climate, but the world needs more energy in terms of enriching lives and to continue to grow and prosper. This is well understood, and I said – as we’ve said, we understand these are written into our major touchstones that drive all of us.

What I worry about is this balance between more energy and less carbon is becoming somewhat lopsided. So you go to big meetings – say you are at the World Economic Forum, and you are sitting in the World Economic Forum. There would be big oil and gas companies like BP, there would be governments, there will be major investors, and typically there will be strong advocates from – climate advocates making the case for the need to reduce carbon emissions. Every argument that they are making are right, they’re real, they’re urgent. I agree with all of them. What I worry about is I don’t often have in the same room people making the need for more energy and the need and importance of that energy development.

And so this debate of more energy, less carbon, is becoming lopsided with enormous amounts of emphasis on less carbon and quite considerable less emphasis on the need for more energy. That type of lopsidedness and that sort of emphasis that’s given is encouraged, I’m afraid, by when the World Bank announces they’re no longer going to invest in upstream oil and gas. That reinforces that. When some of the world’s major central banks around the world talk about greening the financial system, it reinforces that. That seems to suggest, well, actually there’s clearly – there’s clearly a hierarchy here about what matters more rather than the other.

Where I think, for me, the only sustainable path for the global energy system is we need to take account of both of these objectives. We can’t carry on producing energy in a way which doesn’t take account of the impact that will have on long-term climate. But likewise, we can’t go around – we can’t start tackling the climate problem in a way which ignores the fact that huge portions of – a third of the population – just look around. One in three of us in terms of the world don’t have access to clean cooking facilities – one in three. OK? And so this is the point to say what I hope and what I – why we are so keen to support this initiative is to try and sort of rebalance this thing. It’s written into all our objectives, the Sustainable Development Goals. It’s written into Paris. But let’s try and remember that there’s a dual challenge we have to face here, and that we need to try and crack both of them at the same time because any sinking of one more than the other is not a sustainable path.

Nikos Tsafos: Great. Thank you, Spencer. We’ll come back to some of the things that you’ve put on the table.

I want to turn to Mafalda and get your perspective on climate investment funds and how you think about this challenge.

Mafalda Duarte: Thank you very much.

The good news is that we have been trying to do exactly what Spencer was talking about: think about the ways and the mechanisms that we actually tackle both: the climate and the energy poverty agendas.

For those of you who are not familiar with the Climate Investment Funds, this is a set of multilateral funds that were established in 2008 at the peak of the financial crisis to basically help developing countries make different investment decisions, and do it with the support of the multilateral development banks – a group of multilateral development banks like the World Bank who have the technical and the financial capability and the on-the-ground knowledge in developing countries to help – to help demonstrate and pilot new investments, new business approaches.

So this is what we’ve been doing. Most of what we do is in the energy sector. Out of our more than $8 billion in capital, more than 6 (billion dollars) goes to energy transition in middle-income countries, and energy access in low-income countries. And we are on track in the next couple of years to have supported 30 gigawatts of new renewable energy installed in a number of countries, and support energy access to 8.5 million people.

Just to put this in perspective, I mean, the U.S. is a big country so these numbers might not be very significant, but the 30 gigawatt is the equivalent of the whole power installed capacity of Vietnam – or even more than Vietnam – and Netherlands as a country, and 8.5 people with energy access through renewable energy sources is the equivalent of the population of Switzerland or Sierra Leone.

And so I agree that – you know, Riccardo touched on a very important point which is core to our concerns as well, and the reason why these type of funds exist. One of the tradeoffs that exists – I mean, so here we are talking about tradeoffs between – and we are putting it like that. Is there a tradeoff between tackling the energy problems and the climate problems? Is there a tradeoff between SDG 7 and SDG 13? And so there are. There are tradeoffs. One of the important tradeoffs to bear in mind is affordability – is affordability to consumers because, whether we like it or not – and I keep hearing people talk a lot about costs of the technology have come down – they have come down, and they are making these investments more affordable and less costly in developing countries.

They are still more costly in developing countries than in developed countries. For a number of reasons, it’s just not – or we don’t have to think only – but we can’t think only about the cost of the technology; we have to think about cost of capital and other risks that imply premiums – higher premiums on equity and higher costs in terms of debt – that exist in developing countries that are not the same in developed countries.

And so – and therefore, you know, basically these countries have two ways of looking at it: either they pass it through to consumers, and then the issue of affordability; or they take it on into their fiscal space, so that would have a fiscal impact in terms of the countries’ budgets. So this is – it is precisely – and we have to find ways of achieving the carbon – the climate objectives while ensuring affordability, and while ensuring that we are not constraining fiscally these countries. This is why, you know, the mechanisms like the Climate Investment Funds exist – because we provide finance. We blend our finance with the ones from the multilateral development banks, the private sector, other entities, and we are able to bring down the cost of capital and take on risks that others are not well prepared to take, and because of that, as I said, enable or drive investment decisions in a different way, and in a clean and resilient way.

I’ll stop here for the time being. I mean, I can give examples. We have plenty of examples. I know Sarah said, you know, we should focus on examples where maybe you –

Nikos Tsafos: That’s the next round I’m coming. You’re not going to get away without examples, so we’ll get into it.

Riccardo, I also saw you scribbling away, so I also wanted to see if you wanted to respond to something you heard before I –

Riccardo Puliti: Yeah, I have to say I can understand it if the only thing you attend is the WEF – the World Economic Forum – you may have the perception that the dialogue is about emissions and not access. Actually, I have to say the dialogue is about everything at the same time. I mean, I think that everybody in this room has heard a million times the words about affordable, secure, and clean energy.

The truth of the matter is that you have to do the three things at the same time. But you see, it is not a global thing. It is not that we are here and we say, hey, we have to do everything at the same time. It is a work that you have to do country by country, specific by specific, because every country is different in terms of endowments, in terms of how much solar irradiation they have, how much wind they have, do they have fossil fuels, and all the rest.

So every country – and I’m very proud that the World Bank tried to help each country as much as possible – has to define what is their energy policy for the next 30 years because, you see, we can build – all of us – a huge amount of power plants and in five years we have access to everybody. The only problem is that – well, to almost everybody of course – but at a certain point, are these power plants going to be obsolete? Are we locking us in on a future that is not the future we all want and we all need?

So where we find that the countries that we work with, that – where there is a weakness, is really planning, and that’s where we want to help them because if you want to have, at country level, at the same time access as quick as possible; if you want to say – to have the at the same time clean energy, affordable energy, secure energy, you have to plan. And that is where there is a lot of difficulty. I have to say I find that the international community understand very, very well the issue of getting there all together. I mean, I think that – I think that the idea that nobody should be left behind in terms of energy transition that came out with a lot of strength around a couple of years ago, it’s a great point. So you have to – you have to make sure that we get to clean energy, but in a way where access is solved and in a way that is – that is – that is as clean as possible.

So I think and I strongly believe that these three objectives must be dealt with at the same time and must be dealt country by country, and of course, with regional integration as a big answer because we don’t want to see countries that build a lot plants when they could actually import at better prices from their neighbors.

So a lot of work to be done but, yeah, I don’t see this dichotomy in this way, and certainly I don’t see an imbalance.

Spencer Dale: So if it was just the World Economic Forum then I’d be somewhat relaxed. I don’t think it is just the World Economic Forum. So have we seen central bank reports talking about the financial stability risks of insufficient investment in energy? You want to think about a significant financial stability risk? We have insufficient investment in energy, and that slows global growth. Where is all global growth? The vast majority of global growth comes from – in the next 20 years is coming from the developing world. What is absolutely essential for that developing world is access to energy, and so if we don’t have enough investment in energy, what’s the – how much impact would that have?

How many shareholder resolutions have we had asking us about what are we doing to make sure that we are providing clean, affordable energy to all? None. So I don’t think – I don’t think it’s my imagination, Riccardo. I think that the conversation at the moment is imbalanced, and I think it’s there in terms of – in terms of within the investors we speak to, I think it’s there within – I’m sure we can – if you like we can go and do a media search about how many articles have been written about these two topics.

And I think there is, in the official world as well in terms of the commentary, and I think that the point here is we all agree. It’s in SDG 7 and in SDG 13. It’s in the Paris goals. We all – we accept them, but I think just in terms of the dialogue out there at the moment, there is an imbalance. And that is why I think trying to think about the dual challenge and how we manage to do the dual challenge, I think is important.

Nikos Tsafos: Mafalda, I wanted to ask you, because in some ways the type of projects that you focus on are sort of – in a way they go away from that tradeoff because they’re all about the synergy between the – both on the climate and on the energy side, as well as on the carbon side.

So, I mean, do you have that same perspective, or do you see that there’s a lot – enough synergy there that it’s less conflict?

Mafalda Duarte: I don’t – I mean, at least in the world that we live – and Riccardo probably, you know, it’s a similar world, development world. You know, we have to take these two things into consideration at the same time. There is no way we are going to tackle development if we don’t think about energy poverty, but we also know that if we don’t tackle climate change, you know, we are jeopardizing development, and we will be jeopardizing development.

And so, you know, this is why, to me, I don’t see it as Spencer sees it, that it’s very tilted towards too much SDG 13 and not SDG 7. I think there’s been a lot of discussions and a lot of focus on SDG 7, and basically, you know, a lot of focus on what else do we need to do to help the countries. And therefore, you know, the plea from many countries – from many developing countries precisely to increase the amount of support through mechanisms like Climate Investment Funds, you know, multilateral development banks and others – to help them deal with these tradeoffs that we were basically talking about.

And there are, you know, very encouraging examples. I mean, we certainly have a tremendous amount of, you know, large number of projects that basically demonstrate – most of the countries, actually, where we’ve worked in the middle-income countries or low-income countries, what we have done is first-of-its-kind investments. So we were pioneering the renewal energy investments in a variety of technologies – CSP, geothermal, solar, you know, wind – because remember 2008. I said we started in 2008, peak of financial crisis. These investments were not happening in developing countries. We’ve come a long way.

You know, when I think about Mexico and, you know, we were there. At the time we were there, there were 85 megawatts of wind power installed; now there’s 4.3 gigawatts. We were, you know, there in the initial private sector operations to basically provide the confidence to the market, provide the confidence to the private sector investor.

In Morocco now – Morocco has become a tremendous example and case that is quite often conveyed in media where they basically set up these ambitious targets of, you know, 42 percent of their energy matrix from renewable energy by 2020. They’ve already increased that, and they said we’re going to put up 2 gigawatt of solar power, concentrated solar. They started to invest in concentrated solar power when it was a lot more expensive than it is.

Nikos Tsafos: And you were involved.

Mafalda Duarte: And we were involved with the World Bank, with African Development Bank, with, you know, other financiers. These are very large investments. We put half a billion dollars. We brought down, though, the costs of the power together. We’ve enabled the country to go through, you know, industrial integration, create jobs, develop industries, both in solar and wind. So it’s not even just a matter of providing energy access there; there was also more than a million people with energy access through these investments. But industrial integration, creating jobs in industries.

Nikos Tsafos: So can I ask you on that – Morocco – if I could just pick up on that, you know, part of – and I want to come back to you, Riccardo –

Riccardro Puliti: Don’t worry.

Nikos Tsafos: – on the same kind of idea of trying to learn from success stories, right? So, you know, what did you learn from that experience that, if a new country that you are not necessarily working in or it’s a new area, you know, what are the lessons that you took from some of those examples that you would like to replicate?

And I want to come back on the same question to you, Riccardo, later on, and electricity access, and some of the success stories, but maybe start with Mafalda on that.

Mafalda Duarte: I mean, so in – this is work by the World Bank which we have supported, and Riccardo maybe was going to reflect on it. There’s this RISE report that – so the World Bank does this analysis of 133 countries globally and where they are in terms of sustainable energy policies, both on energy access, renewable energy and energy efficiency, and it’s very good to see the progress.

You know, we had in 2010 37 percent of these 133 with national renewable energy targets. Right now we have 93 percent. We had only 60 percent of the countries with legal frameworks for renewable energy deployment; now we have 84 percent. You know, our experience has shown these are important building blocks, foundational blocks.

When we started to work in Morocco, for example, these were in place. They were being perfected over time. These were in place. It’s good to see that the countries, you know, have come a long way with the support of many institutions to get to this point.

So some of the other lessons that we have learned – I think it’s very important – one of the things that we have learned is the importance of not thinking about this on a project-by-project basis. We have to think about the power sector. We have to think about the energy sector as a whole like Riccardo was saying. You know, work with the countries in thinking about the sector as a whole, and how do we go about the transition, and come up with, you know, packages of investments that are coherent and bring different partners together with their best capability – technical and financial – to bear. We think, you know, this is quite important.

We also – you know, it also becomes very clear to us that, you know, this type of finance – concessional finance – is really important because of the tradeoffs we were talking about. So I think they will – and in this concessional finance, we’ve also learned that it is really important the predictability of the scale, and the predictability of the finance, and the flexibility. Why? Because there are tough reforms to be made that some of which are difficult from a political economy point of view. So bringing a number of partners aligned in support of these governments and countries towards that vision, and signaling very clearly there will be the scale of investments, the predictability of the finance, but the flexibility because if things change we will be able to adjust are something that we’ve also learned was quite important.

Nikos Tsafos: Riccardo, I want to come to you. I’ve already teed up my question, but I still want to find out why we are so bad at making progress on the cooking side.

Riccardo Puliti: OK.

Nikos Tsafos: So I was wondering if you could also toss in a little bit of an answer there. I mean, the numbers that you presented are startling – you know, the electricity, a lot of progress, the numbers going down – that cooking is not really changing.

Riccardo Puliti: OK. Let me – first of all, you are too lucky and because you read my notes –

Nikos Tsafos: Oh, I see.

Riccardo Puliti: – which is monumentally unfair. It’s a case of cheating, and –

Nikos Tsafos: Would you rather I ask a question that you didn’t have in your notes?

Riccardo Puliti: No, it’s fine, it’s fine.

Spencer Dale: He’s got a big bit saying, “Don’t ask this.”

Riccardo Puliti: OK, so, I mean, let’s be clear. I mean, it is a success moving from 1.1 billion people without access to electricity to 840 million, especially because demographic growth in many of these countries is huge.

But why do you think why we are not doing very well in clean cooking? In my opinion it is really three things. One of all is the lack of – many times the lack of social acceptability of a new cooking device. I have to say we found ourself in this problem many, many times. And certainly, if you think about it – all of you as human beings – food tastes different cooked in one way or the other, and if you spent 300, 400 years cooking food in the same way, well, it’s not very, very easy to change. So social acceptability is a big thing.

Believe me, I hate the number of clean cooking because I know that there is a huge gender component because – regrettably the ones who are going to suffer more are female obviously. So you see it goes back – you have to move everything at the same time; you cannot do otherwise.

I have to say that other things are the fact that there are so many different solutions that often governments have difficulty to choose, to pick one instead of the other. So it is a – and third, last by not least, if I see the amount of grant money that goes to the subject of access, to the subject of clear energy, the subject of clean cooking remains a little bit behind. It is not acceptable. I told you at the very beginning, I take some of the responsibility for myself as well, being able to have a backer, a coalition behind this.

Then you asked a question before: what are your example of success or who did it well? Kenya did it well in electricity access because they were able to take the – to look at the picture all together and to plan. I will never stop saying that planning is key in the energy sector. It is key – it was key in our countries; it’s still key in our countries, by the way, because the energy sector is a sector that, from the technological viewpoint, changed very, very quick. So the risk to remain with stranded assets is very high. Kenya did very well because, at the same time, they knew that they had to provide electricity in the cities, to the less-favored part of the population. And they knew that they had the problem of payments there, of illegal hooking up. So they – we worked a lot together, and they moved towards prepaid cards.

You know, what is really interesting is that human beings are, in my opinion – and I don’t care whatever you think – (laughter) – are always very honest. The level of honesty of the people is huge, and as soon as this poor part of a less-well-off part of the population in this urban area had the possibility to prepay for two, three hours of electricity – whatever they need – they all did it, they all paid because in the reality people are like that.

I worked many years in Russia, and you can see people do pay. So the other thing that they thought, they thought about rural areas: What kind of solution do I have? So they look at solution like solar systems, they look at minigrid and nanogrid and whatever, and they were able to access that.

And actually, think about Kenya with the northern border with – sorry, the eastern border with Somalia. I mean, it’s an area with great conflict, as all of you know very well. So they were able to work with the local communities in order to have people to have electricity, to pay for it, and so you – and make sure that it was not going to be destroyed. So Kenya – you see, you can do it, but you have to segment. You segment what kind of the population you want to address, how to do it, and all the rest.

If you allow me, a different case: Senegal. And we’re working with Senegal. Senegal have important offshore gas reserves. They use a lot of HFO, diesel – very polluting – for their access. So we are working with them – we don’t finance the upstream, but we work with our money a lot with Senegal in order to develop these assets in order to replace more polluting fuel with less polluting fuel. So we are going to get – Senegal is not bad in access, but you are going to have more access by replacing fuels while at the same developing renewables because you don’t want to stay behind in the technology curve. You want to move.

So I want to say that so many example of success; there are also example of lack of success. Of course I will not say the name of the country – countries that have built a huge capacity of power plants where, let’s say, their capacity is 4.5 – this is a real case – 4.5 gigawatt; their peak demand is 2.7. But since a lot of these contracts are take or pay, they have to pay. So now you have problems with public finance, and so on and so forth. So you see, planning, planning, planning.

And then I finalize, regional integration. You don’t need to build – these are not island where of course you have to have your own system. You can integrate system, and reduce the footprint, and increase access, and improve affordability.

Finished.

Nikos Tsafos: Thank you.

I want to do a couple of very quick questions, but then I’m going to come to you, so if you have questions, start thinking about them.

Spencer, number one, if you want to react to some of the things you heard, but also – and I want to ask the same thing for you, Mafalda – talk a little bit about non-power because I think one of the questions that we always end up is we make a lot of progress on power; are we making enough progress – and I know the Climate Investment Funds, you’ve worked on some urban transport, so maybe talk about some of the other areas. And Spencer, obviously you talk about this a lot in the Outlook as well.

Spencer Dale: Yeah, I guess just an observation really. When you think about SDG 7, about energy access, it’s – the intent is trying to capture and harness the value that energy can bring to the wellbeing of certain people. That’s what it’s trying to do.

And if you like, one component of that is the energy which is available to households, but that’s only one component. An equally important one is the availability of energy to industry to allow industry to be productive. There’s a third component, which is the way energy can then build communities, so do you have energy for schools, do you have energy for hospitals.

And the good news is there’s this unbelievably good framework which captures all of those components, which is the World Bank’s multi-tier framework, and it captures all three of those components, and it also does it in a very rich way because the trouble with the way we are sort of forced to measure SDG 7 on electricity is very binary: Do you have access to electricity or not? It’s 0/1.

Where there’s lots of really interesting analysis in the tracking report that Riccardo was referring to is when you say, well, how many people can actually afford to buy a minimum level of electricity, the number is far, far less than 89 percent. So 89 percent may have access to electricity, but how many have real access to electricity in a way that we think of access. This can be different.

So I think – and so, A, that – so when we think about energy, I think we need to think about all of these dimensions. It’s not just households; it’s businesses, it’s communities. And as a result of which, it’s not just electricity. You need other types of energy to do this, and I think – I guess what I’m slightly worried about, the spirit of SDG 7 is that; the measurement of SDG 7 is this. And that’s OK because we have to measure things that we can measure, but let’s not think that we’re almost there when really the spirit of it is a far broader measure.

Nikos Tsafos: Mafalda?

Mafalda Duarte: So this was actually a very good question: Are we making progress in the urban sector and transports? So I think you know that we’ve identified four challenges so that our next wave of support is going to focus very much on these challenges. One still is on the renewable energy space, but it’s renewable energy integration. We have to, I mean, recognize that we need a lot more renewable energy power generation to meet both the energy poverty and the climate goals, but a lot of this is intermittent in nature so we have to work in making sure that, through storage investments and, you know, managing the grid in ways that can integrate all of this renewable energy power, so that’s one area.

And storage is one where World Bank and other MDBs with ourselves, we intend to make significant investments in the next few years. The other one is urban. Urban we are not making much progress, and I think there is a clear realization despite, you know, the numbers out there: two-thirds of the population are going to be in urban areas, 60 percent of urban land to be developed. And so, you know, we are – the urban growth models we have are not adjusted to a future where, you know, we basically meet the different SDGs, and so we do need – we do intend to work with multilateral development banks and other partners to pilot and test new urban growth models in a number of cities in developing countries.

Transport is another area that, you know, we do intend to fold it under our urban work. I tend to say – you know, I do it, you know, in very general terms, we should be seeing as much progress as we have seen in the energy sector in transport, and we haven’t – for very good reasons that we don’t have time to explore here – but we do need to see – even though, I mean, of course the energy sector agenda is far from being finalized, but the transport sector is much behind.

Spencer Dale: When you say much behind, in what sense much behind?

Mafalda Duarte: I mean, we are not making – so I can tell you, you know, we’ve been trying for ten years to have a lot more, for example, urban transport projects, and when we compare our transport portfolio with our renewable energy portfolio, it’s a lot more complex. And we haven’t – even though the finance was available to make those investments, most of them haven’t progressed.

Nikos Tsafos: The way I think about it, Spencer, is that I think we are – when you talk about lopsided, I think there is a lot of EV focus and a little bit less urban transport.

Mafalda Duarte: Yes.

Spencer Dale: So I think the idea of trying to get renewables into transport via electricity shouldn’t be the definition of success. I mean, energy efficiency in transportation has been unbelievable, and it’s sort of orders of magnitude more important. If you look forward the next 20 years, even if you have extortionate growth – massive, massive growth in electric cars, the gains you will make in carbon emissions from internal combustion engines becoming more efficient are literally an order of magnitude – literally an order of magnitude more important than penetrating electric cars.

And so when we’re looking at success, success is reducing carbon emissions. Success is not increasing renewables; it’s reducing carbon emissions. And for transport, a really efficient way of reducing carbon emissions at the moment is making cars more efficient. And so, pound for pound what do you get for your subsidizing electric cars or subsidizing people to throw away cars which are 15 years old and replace them with a new car?

And so success can take many forms and we should keep our eye on the goal. The goal is energy and carbon; not renewables per se.

Riccardo Puliti: I have to say this is – nobody is making the case that – the case in transport is about renewables.

Mafalda Duarti: No.

Riccardo Puliti: What we would like to do and what we try to do is, for example, to replace a large public fleet of very old vehicles with vehicles with other fuel. I’m thinking about compressed gas. I’m thinking about other fuels like that. Ultimately, I would be very, very happy at a certain point to see every car to be electric and with electricity generated by wind and solar. I don’t think I will be here anymore when this will happen – not meaning here in this room obviously – (laughter) – and – but, yeah, I think we are talking about two different things. I mean, we have a big work, especially – I mean, I work a lot in Africa. I’m the head of infrastructure of Africa, as well. I mean, they need to renew the fleet. I mean, this is certainly a case.

Nikos Tsafos: Let me – you’re putting a lot on the table, and we can keep going forever, but –

Mr. Puliti: I hope not. The food is there, by the way.

Nikos Tsafos: Yes, but we have another panel before the food, so.

Spencer Dale: Clear the room.

Mafalda Duarte: Just to say – I mean, I didn’t finish with the other area that I think we ought to pay attention to, is industry – is carbon-intensive industries and how we decarbonize those industries as well. So that’s another area that we are quite interested in.

Nikos Tsafos: It’s a great question for any of you. If you want to get more you can ask that question.

So let’s do questions. Three rules at CSIS: one, wait for the mic; second, introduce yourself; third, question in the form of a question; and my bonus point for brevity. (Laughter.) And we’ll do three at a time so we can get as many in. So let’s start from the back right there.

Tom Cochran: Mr. Dale, my name is Tom Cochran. I’m retired.

Do you believe, as an economist, that fossil fuels carry a substantial social cost? Do you believe that that cost should be internalized in the price of the product? And if so, how best to do that?

Nikos Tsafos: OK, any other – right there. Then I’ll take a third one.

Bob Ichord: Bob Ichord from the Atlantic Council. Riccardo, how are you?

Riccardo Puliti: Hi. Fine.

Bob Ichord: As you look at the issue of designing rural electrification or rural energy programs, how do you assess the issues related to whether grid extension makes the most sense, or as we’ve seen, the development of the decentralized renewable – the photovoltaics options, that – is that – are countries moving in that direction or are they still wedded with central rural electrification, and particularly, Spencer, in light of your comment about the importance of product use as an income generation, how does that factor into it?

Nikos Tsafos: OK, third one, Bernie? OK, let’s take these two then.

Spencer, it was prefaced with economist, so I think it was directed at you.

Spencer Dale: So energy has both very significant social benefits. It also has social costs, clearly, in the form of both local air quality and also in terms of climate. The key thing is the benefits are often internalized by the people who produce them, so that’s OK, but the costs are not internalized, and so the way to think about the best way of doing that is to price at externality, and the simple way of pricing at externality is a carbon price. That’s by far and away the most efficient thing to do. It’s the glaring thing that the world needs to do if it wants to get serious about climate, and it’s the thing that the world is not making an awful lot of progress on.

As an economist, carbon pricing seems to me just so obviously the right thing to do, and at BP, we are being strong advocates for carbon pricing for many years, and we will continue to be strong advocates of carbon pricing for many years to come.

I’ve got the floor, but Riccardo knows far more about this than I do. It seems to me this is a really big issue. We were talking about it in the room next door because I don’t know the answer. Your instinct is for – and I’m – so I’m just telling you as an ignorant person here. I don’t – this is not a well-developed view. But your instinct is I can understand the value of micro grids because when you’ve got very little money and you’ve got very little power demand, the rational way of doing that was the micro grid or some sort of micro decentralized grid.

But if you want to aspire to a fully functioning economy, you know a set of micro grids won’t be the efficient way of doing this. We know there’s enormous benefits from having centralized and connected processes.

So question mark: Is there a way of designing smart micro grids, which you can start with a smart one but then they – you can join them in an efficient way. I think up till now, history has said that you start with micro grids and you often then scrap those when you go to a more centralized one, and so it’s not an efficient process.

If there’s not – and this is question for Riccardo – is this the value – is there where, you know, there’s a real credit constraint here because the optimal solution is to jump to a more centralized one. Many countries are too poor, and that’s when there’s a role for development banks, role for actual institutions, because they can solve the credit constraint and allows you to go closer to a first best solution.

Riccardo Puliti: Yeah. I have to say, first of all, carbon price – we, at the World Bank, we do have a carbon price, and I think that in our – when we calculate whether we want to be involved in a project, yes or not, so I think we all agree it’s very, very important.

The question of grid versus off grid – I have to say it is really for me a matter of planning, really. I mean, we – it is a matter of planning and a matter to know a country one by one. All countries are very different. Of course the density of the population is key because building – extending the grid for just a small and sparse amount of the population, it would be absolutely – I mean, illogic.

So we – to be honest, we are not – and I am very proud of it – we are not – we don’t have a kind of bias towards anything. I mean, we have cases where we have financed with our money grid extension. Other times we have financed grid densification because there was already an extension, but it needed to be densified.

Other times we have gone for a mini grid or a nano grid, maybe at a second point to reach the grid. Who knows? And sometimes we have gone to home systems.

So I think the important – I think it’s very, very difficult – different solutions depending on the need of the population. And, yeah, that’s why, once again, I go back to the point of planning. Something that for many of us is a given is not always a given. There are many countries that I am not able to properly plan the demand of electricity in the next ten years coming from household, commerce, or industry, and in that case it’s very, very difficult to have an efficient – an efficient energy policy.

Nikos Tsafos: Mafalda, do you want to add something or not?

Mafalda Duarte: No, I mean, I agree. I mean, I’ve worked extensively in Africa. I’ve lived – I mean, in several countries in Africa. This point on density of population is a critical one. As you travel in vast countries like Mozambique or Tanzania or others, you know, you clearly see there are many locations where grid extension does not make sense. You have to find different alternatives. We wouldn’t even foresee, like, industrial development in those areas. It’s really about providing certain energy services to the population that are quite dispersed.

And in terms of the first question, yes, I think two things that should happen. One is fossil-fuel subsidies being eliminated because they are still quite significant and much higher than subsidies that are being provided to renewable energy globally. And the second one is price on carbon.

Nikos Tsafos: OK. We’ll do one last round of questions before we move on to the next panel. Let’s start in the back there.

Francisco Alvarez: Francisco Alvarez, an independent consultant from Guadalajara, Mexico.

As a young economist I appreciate carbon pricing, but I wonder – I worry whether that measure really captures the urgency of climate change. Speaking today, U.N. Secretary-General Antonio Guterres mentioned a need to put a stop to new construction of coal plants by 2020 and also urged countries to stop dedicating taxpayer funds to any construction of future coal-fueled power plants. And I’ve also read about measures to start penalizing banks and other financial intermediaries for extending credit for new exploration of oil extraction. So I’m wondering if those may be harder measures that we need to capture the urgency for a climate change policy. Thank you.

Nikos Tsafos : OK. Thank you. And then we had a couple questions up here. We’ll take these two and then we’ll open it for the answers.

Madison Sturgis: Hi. Madison Sturgis, Sbach International.

In light of the Bahamas and Puerto Rico, I know the World Bank has said that they’re not particularly biased towards any, I guess, energy system. But with evidence of climate vulnerability really being an issue for these island nations, what role do you think microgrids would have in a preference to those environments and those geographies over a centralized grid? And what part do renewables have to play in that as well?

Dave Rabinowitz: Thank you. Dave Rabinowitz, retired engineer.

And about 50 years ago somebody had proposed giving telephones to everybody in Africa, the reply would have been there’s not enough copper to wire the continent. Today people in Africa have telephones because of new technology. I’m just wondering, would putting in – with the rate of change of technology and power, would putting in big grids today make any more sense than putting in a wired telephone system 20 years ago, especially in terms of stranded assets?

Nikos Tsafos: OK. Three questions, three panelists. I’ll let each one kind of pick and choose what you want to answer. Maybe start from Mafalda and work our way back to me.

Mafalda Duarte: This is a question from Mexico – colleague from Mexico. I mean, we have to think clearly – we have to internalize. We’re talking about here internalizing costs. We have to internalize as human beings that we are at great risk from climate change. And I think, you know, even though all of the rhetoric we hear, oftentimes we feel, are we really internalizing the urgency of the problem; that, you know, if we don’t make certain types of decisions and choices and investments in the next decade, we are really jeopardizing ourselves and certainly, you know, our – the future generations.

And so when you look at, you know, the numbers on coal, right now for a 2-degree scenario we have more installed capacity – coal installed capacity globally than is consistent with a 2-degree scenario. And so, you know – and I think this is why Antonio Guterres, the secretary-general, has picked this as, you know, a theme – a very strong theme in the runup also to the summit.

So, you know, I do think that we do need to think seriously what is it that we need to do so that the countries stop investing in coal-fired power generation and, in fact, retire the existing ones. There will be different – you know, and therefore, you know, there will be – one will have to adjust what is needed in different countries, but – and think of a set of different measures. But I do not think, you know, personally that, you know, continuing to invest in coal-fired power plants is anywhere consistent with a – you know, ensuring development and ensuring prosperity for ourselves.

I will leave the – I mean, I can – I don’t want to – I will let Riccardo talk about because –

Nikos Tsafos: I’m trying to add the dual challenge of answering but also making sure that the next panel can start soon. Can I get one minute from either of you?

Spencer Dale: In the spirit of the dual challenge, can I put the other side for coal? Last year, renewable power generation in China grew by over 25 percent. The increase in nuclear generation in China accounted for three-quarters of the global increase in nuclear generation. Those two things together didn’t even come close to meeting the growth of power demand in China last year, and as a result of which coal consumption went up. In India last year, renewable power generation grew by over 25 percent. That, again, didn’t come close to meeting the growth of power demand in India last year, as a result of which coal consumption in India went up.

An average Indian consumes less than one-tenth of energy of an average American. For them to not use coal and use natural gas is extraordinarily expensive. And so when we’re thinking about what’s right and what’s wrong, if you’re in the developed world power demand’s not growing, OK? It’s flat. There, trying to justify new investment in coal-fired power stations in a world where power demand is flat is a hard ask. And I can understand that. That I accept. What we going to do in India? What we going to do in China? Renewable generation growing by over 25 percent. It’s not like it’s not growing quickly. But that’s not enough to meet power demand. Should we say, well, I’m afraid you can’t have the power you’re demanding? Or should we say, in fact, you’ve got to consume something which is extraordinarily more expensive than coal, even though your incomes are a fraction of the incomes in the West?

I don’t know there’s a right and wrong here, but there are both – there are two sides to this thing. It’s exactly the same thing we were starting from the beginning. I can understand why new investments in coal-fired power generation feel really at odds with SDG 13. I really understand that. But it gets us to SDG 7 as well. And I don’t know – and there’s no simple answers here. But what I’m nervous about is this, again, OK? Because we all nodded, and the only reason for putting the other side is to do that.

Nikos Tsafos: Riccardo, wrap us up.

Riccardo Puliti: Oh, good Lord. What can I say? I mean, I have to say China certainly is still building coal-fired power plants. It’s also true that compared to the plants they had, or the programs they had five, 10 years ago, nowadays they’re building far less than that. The issue they are – these are very complex thinking. The issue there is not really global climate issues. It’s the local pollution. So that’s why China has decided to build coal-fired power plants, to – I mean, in a less important way, in a less substantial way.

At the World Bank, we took the – we took the – we took the point that we are not going to finance coal-fired power plants, above all because we think that what is going to be built now may not be useful in the future. So just to tell you, for example – which is very different from what is in Asia at the moment – I think the average coal-fired power plant in Asia has an age of around 12 years. So they still have 20 years to go. In Europe it’s different. It’s around 30 years. So you know, they’re ending – going to the end of their life. But I do acknowledge that there are different circumstances.

And since your question was not only on coal but also on other fossil fuels, I mean, it’s true what Spencer said that we don’t finance upstream line gas. But it’s also true that we work with government to make sure that they have the right choice between what is their energy access need – and it’s not only household. I would agree with you 100 percent on that. But at the same time they don’t block themselves, or they use as clean energy as they can. So I think, you know, there are many ways to push in the same direction.

Nikos Tsafos: Which is why we’re going to have a whole year to study this topic and hopefully come back with some interesting insights. But please join me in thanking our speakers.

And we’re going to have Sarah and our next panelists come in right now. No break. So just give us one second to get off.

(Break.)

Sarah Ladislaw: (In progress) – and thank you to Nikos and the great first panel for getting us kicked off. I have the honor of being able to moderate this panel with group chairman – excuse me, Group Chief Executive Bob Dudley and President and CEO – excuse me – Group Chief Executive of BP Bob Dudley – there’s a lot of B’s going on in the runup to that title – and the President and CEO of the Energy Futures Initiative and also former Secretary of Energy Ernie Moniz. Thank you both for joining us for this conversation.

So little do people know you were listening backstage to the whole conversation that we just had and sort of the framing for this.

Bob Dudley: Sort of.

Sarah Ladislaw: Tell us what you really think. No.

And this whole sort of framing of this dual challenge, right, and the fact that we’re here trying to take stock of where we stand relative to the need both to provide affordable and reliable energy supplies, but also deal with the climate challenge. You both have been around the energy industry for a bit. You’ve seen sort of the differences in the changes, the energy transitions that are really quite remarkable. Probably many of you – both of you at the beginning of your careers wouldn’t imagine some of the things that we’ve seen over the course of your careers. But you’ve observed in the business that you do and the work that you do how people are thinking about both of these challenges and where we stand, you know, rather pessimistically relative to where we need to be. And so I just wanted to see if you had any reflections on some of the conversation or some of that challenge as it intersects you in your work.

So maybe, Bob, if you could start.

Bob Dudley: Sure. Well, thanks. Thanks, Sarah. And thanks for being here. CSIS and you’re launching some work –

Sarah Ladislaw: Yes.

Bob Dudley: – in fact, on countries and their energy needs and this dual challenge that many of you talked about earlier.

I think – of course, energy is always changing. When I started in the industry, which is only 40 years ago, I remember those days coal was going like that and there was competition. Energy in oil was coming on. Renewables were, you know, a distant thought. People were talking about it and thinking about it back then. And I remember the worst thing you could do in an energy company was find natural gas. It had no value. Nobody knew what to do with it. It was always stranded assets. And now look how the world has changed and the importance of natural gas in an energy transition is very clear to me. I know some people don’t like natural gas, but I actually don’t know how the world’s going to get there without natural gas sort of displacing coal in the transition over time.

The amazing changes in technology that are used day to day that we take for granted. In energy, it used to be very labor-intensive work, and the new technologies have brought down actually the human activities, and the pace and scale of decisions is amazing. You know, years and years of change.

And of course, the year that I started, 1979, at that time was regarded as one of the most dangerous years in history because you had the Iran-Iraq War, there was terrorism in this country, the Iran hostage crisis. And then things calmed to a bit and we’re now back to, I think, what feels like the most dangerous year in history, and weeks – this event will show you this week. And then geopolitically, it just continues to change.

But I have watched the change in the energy transitions and the move to renewables; the phaseout of hydro, that’s now back in; nuclear everyone was enthusiastic, that’s dropped off. So all the energy mix continues to change. And as you look out to 2040, I think we’re still going to need all of them to actually make it.

I think that’s enough. This is the real expert next to me. (Laughter.)

Sarah Ladislaw: Yeah. Well, no, it’s a – I mean, it’s a very good point. And Secretary Moniz, maybe from your perspective, you were in government at the time that some of these goals were established, right, and the goals were established for the purposes of motivating us to try and achieve them. And since then you’ve seen sort of, you know, where we – where we’ve made progress and where we haven’t. How are you thinking about this? And particularly, you just launched a big initiative last week on ending global energy poverty. How does that sort of, you know, factor into where your priorities are as you think about this challenge?

Ernest Moniz: Well, a lot of moving parts in that question.

First of all, in terms of – you mentioned the goal setting during our time in government. And Paris clearly was, in my view, a watershed event in terms of getting commitments, various kinds of commitments made by most countries in the world. But I would – I would characterize it as saying that at that time the targets – this is, obviously, 2015 – the targets of, let’s say, typically 20, 30 percent reductions by 2030, 80 percent reduction by mid-century, certainly seemed like fairly aggressive, but necessary set of targets. Pretty short time, the science has moved on. And now what we see is a general recognition that, actually, those were not aggressive enough targets in terms of what has evolved, in particular the IPCC Report and the – and the U.S. government national assessment. And now what we see is, in the United States, certainly in Europe and some other parts of the world – let’s go, let’s say, from mid-century – kind of a convergence towards net-zero emissions, at least for the industrialized countries.

I do want – maybe we’ll come back to this, but I cannot emphasize enough the importance of attaching the word “net” to the word “zero.” But again, that’s another discussion.

Now, having said that, and recognizing – I think also, by the way, there’s been an evolution of language. I think now “climate crisis” is a much more common expression than “climate change,” and I think it’s quite appropriate.

But two points. One is that as we look globally – and I’ll comment on the energy poverty work – so we look globally – and the last panel came back to this time and time again, quite correctly – it is crazy to think that we cannot balance – we don’t have to find some balance with economic development in the – in the least-developed parts of the world, because we’re not going to get there otherwise. That’s really the point. And indeed, I think there’s plenty of evidence that is – that as societies do improve their – OK, let’s call it the human development index, we have a better chance of women empowerment, of environmental stewardship, and all of those things. So it’s going to be a very, very tough balance to strike there.

On that I will just say that what Sarah referred to – we can discuss it more – is last week the Rockefeller Foundation, together with MIT, has established a Global Commission to End Energy Poverty. We’ll actually have an event next week in New York as well. And it’s – I co-chair it, along with Raj Shah, who is the CEO of Rockefeller Foundation, former head of AID – he and I did a lot of work particularly in things like Power Africa in the – in the Obama administration – and also the CEO of the African Development Bank. We had a very lively meeting last week I think reinforcing something that the last panel discussed as well, that there’s not a lot of binary choices that are going to make sense.

Like, for example, there was a discussion of grid and off-grid, or microgrid, or minigrid, or I even heard nanogrid I think from our – from the World Bank. Nano is below your scale. But anyway, the but the point is, as in all of these issues, it’s really about getting some integration and planning because the idea that there is one solution for low carbon for everywhere is complete nonsense. And we’re going to have to find solutions that are fit to purpose and have strong regional focus.

Now, the second point I was going to make besides the – that one in terms of how we manage to accommodate the need for dramatic action with realities comes from the point of view – I would say this here in the United States is certainly something that my colleagues and I are promoting, we call the Green Real Deal. And in that what we’re trying to emphasize is that the basic underlying principles of getting to low carbon and doing it with social justice are right on. To get there, however, we have to be pragmatic and we have to build coalitions. Coalitions are critical. I don’t know of anything major that gets done in this country – I’ll speak for the United States – has been done in this country and sticks without getting a coalition together across many, many different segments of the – of the stakeholders. And that’s where we got to be pragmatic and get real solutions put forward and go as fast as we can to low carbon, which regrettably is not as fast as many of us would like. But that’s what we have to do. It doesn’t help to talk about it and not actually get out there and do something and build the coalitions, do the hard work to actually make progress.

Sarah Ladislaw: Well, that’s a great point. That’s one of the things – and I want to come back to a couple of the ideas that you raised. But you know, one of the things that I think came out clearly in the panel before us is this need to take action. And there’s – you know, sometimes there’s a lot of passing of the buck about whether it’s the governments that need to take more action or companies that need to. And for Bob, you know, your perspective out there as a businessperson, you know, trying to do deals in a lot of these countries where, frankly, it is quite difficult to do business for the same lack of planning reasons that I think Riccardo brought up early, how do you view the role of companies in sort of navigating the position between this dual challenge or just trying to make those energy investments in some of these landscapes?

Bob Dudley: Well, I think as the secretary said, we’re trying to solve globally probably one of the most difficult systems problems you can imagine, and we have to do that through coalitions working together. The role of companies, of course, there’s a lot of – a lot of – you know, unfortunately, I think in many, many countries around the world the role of business is being demonized just in general – business is not a good thing – when actually our role in society really has been to bring products to market, pay taxes, make investments, pay dividends to shareholders – very important. Most of the dividends, in fact, go to pension funds, often by pension fund managers – states, governments. So that’s been our role and we’re navigating through this.

I think we have to have a purpose. People get up in the morning every day, worked for BP for many years, saying our role in the world is to bring heat, light, and mobility to the world. I think it’s now moving on further. We’ve got to have a even greater purpose, which I think is helping advance the energy transition and our role in that, as well as providing energy, heat, light, and mobility to societies that desperately need it. You know, there are a billion people the planet who don’t have access to electricity. Can you – none of you can imagine in this room, even think about that. And the 3 billion people that cook with wood, cow dung, kerosene, and coal – not in their kitchens; in their homes. You think about the cost to society, the health there.

So we as a – as a company in the energy transition, we have lots of people, resources, energy, research, money, people. We’re working coalitions in the oil and gas industry together – you know, Oil and Gas Climate Initiative – and working with governments. Not everybody wants to listen. There are swaths of the public that say – some say we have to solve the entire problem. I hear that. And I hear others that say you have no right to even be in the debate; you are the cause of all the problems. Of course, those are two extremes, you know. We’ve got to be part of this.

We’ve got another issue as a company, and many companies will have this issue. We could move tomorrow to be – get out of oil and gas and go into renewables. I think we’d be around for about five years. The pension funds, all the things, you know, we’ve got to – our role is also to create a rate of return on investment or we go away, or we don’t exist. So getting the right balance. And I can think out of 20, 25, 30 years we’re going to have to manage a return and cash flows as businesses transition, just like many companies have done in the United States.

A great example would be Microsoft. They went from computers and operating systems, and now they’re the seller of services in a completely different way. That’s how I think about the role of companies in this energy transition. We’ve got to have the spirit to do that. And as the secretary said and I think Riccardo said, every country is different. You cannot – we talk about this on a grand macro scale, but actually how it works in every country, as you said, it’s difficult around the world. I think we do not transactions; we do relationships. We work in many of these countries all around the world.

So that’s the great dual challenge: How do you balance complex things through coalitions, government policy? We can’t do it as a company without governments, without regulations that are well – sensible regulations, and without people or families and the individual choices they make to create the right demand for energy. And all those things have to happen. I think it creates enormous opportunities for companies who get this right. It’s not – it’s not a threat.

That’s why we do work – and if you heard Spencer earlier, we’re heavily involved working with governments on policy. We helped with the design of the European Emissions Trading System, which people said didn’t work. Well, it didn’t work for a while after the financial crisis, but now it’s working really well. And that model – you can’t do a global carbon price, I don’t think. I don’t think you can do a global trading system, because actually then you’re getting into currency exchanges. So we’re working with the Chinese government designing their carbon trading right now. So if you get big centers – North America, Europe, China – to have a carbon price and have regulations at least there, then they’ll start to connect in ways. I’m very optimistic about this. No industry that I can think of has ever dealt with challenges the way the big energy industry has.

Sarah Ladislaw: Yeah. Well, and one thing I wanted to add – that’s really interesting about the way in which you’re intersecting with different, you know, policymaking entities particularly on, you know, carbon pricing mechanisms. The other complicating factor here, though, is, of course, innovation, right? And this is something, Secretary Moniz, you’ve spent a lot of time talking and thinking about and working on as well, and Bob, you do the same at BP. Can you talk a little bit about this idea that, you know, several years ago, you know, the idea was we’re dropping the cost of a lot of renewables? We’re going to be able to distribute them at a more affordable price in more developing economies and they might be able to leapfrog, right? There might be this way that innovation is going to help make the low-carbon development pathway or the industrialization pathway different for those places. Is that bearing out in reality, or are we seeing a lot of the same sorts of challenges? And what is the role, as we think about innovation, especially in the context of innovation towards a low-carbon future, as that is being manifested particularly in some of these developing economies?

Ernest Moniz: I think it is to a certain extent happening in front of our eyes but happening in different ways in different places. Certainly, if we start with the United States, the energy scene here is extremely different from what it was 10 to 15 years ago. And that also came from innovation – I’m starting with the natural gas revolution, then we’ll go to renewables – but you know, we tend to think of too often, you know, innovation as some lightbulb suddenly was turned on and, oh, I got a great new idea, and tomorrow it’s going to have a 45 percent market share. Not quite. So even the – and Bob said in some sense often now maligned – natural gas developments in the United States, if you think about that, that was an innovation process that started, roughly speaking, in the late 1970s – yeah, your favorite year of 1979, apparently, with oil shocks.

Bob Dudley: I was born then.

Ernest Moniz: Right. So it started with some DOE investments in characterizing things. It then had public-private partnerships. And a lot of things just suddenly came together 15 years ago in terms of, in that case, horizontal drilling and fracking. And the benefits for carbon have been quite evident. The majority of our CO2 reductions in this country have come from coal-to-gas switching, and that’s going to continue for another 15 years, in my view.

At the same time, the renewables revolution. Once again, it isn’t as though, you know, NASA wasn’t working on solar panels a long time ago. But there’s the issue of getting into the mass-commodity market has a much more difficult economic test. By the way, I just – as an example – maybe we’ll come to this soon in terms of innovation – I think – and next week – I’ll advertise – next week we’ll be issuing a report on carbon direct removal, one aspect of which is technologically removing carbon dioxide from the air. There’s many other pieces. But once again, removing carbon dioxide from the air has been done for a long time. How do think people live in submarines, for example? It’s just that the price point isn’t quite right for doing this at scale – yet. But now we’ve come to the place where, in the renewable space, obviously – well, LED lighting, but solar photovoltaics, at least onshore wind – offshore wind making a strong run now, bringing the cost curve down, which is going to be very important for my part of the country in the – in the Northeast. But having those costs come down is fantastic and it’s – and it presages a much, much greater expansion of wind and solar still to come on top of what we are seeing.

But on the other hand, we also have to be realistic. There’s a lot of happy talk about, for example, wind, solar, and batteries – A, about the actual cost. This year, Lazard and Bloomberg put out – and they kind of know what’s going on – they put out a levelized cost of solar plus batteries today in the double digits, cents per kilowatt hour, and that’s going to keep coming down. But we have to think about – sorry, I’m going off in a rabbit hole here – but we have to think about a system that is reliable and resilient. The reality is batteries, in my view, will never manage the storage timescales that you need for a system. Absolutely we need hours type of timescale, and batteries are beginning to do that, and the costs will come down. I don’t see batteries doing days, weeks, months, and seasons. That’s called a fuel. Maybe it’s hydrogen. Hydrogen I think of as carbonless natural gas.

You can use that, Bob. You can build your business model around that.

Bob Dudley: I always try to decarbonize natural gas. You made it simpler.

Ernest Moniz: That’s right. That’s right.

So, you know, we’re going to have to take this kind of serious system view. Sometimes it’s the systems of societal systems. Sometimes it’s these technical systems. But it doesn’t help any of us to make claims that I would say challenge the laws of physics. And so – but I’m optimistic. I’m very optimistic about the innovation pathway.

And I’m also, by the way, to change subjects slightly, very optimistic about in this country the bipartisanship that has developed around the innovation agenda for addressing low carbon. You know, in 2015, at the beginning of the Paris Conference, I will say facetiously what may have been in the end a more important day than the last day of the Paris Conference was when 20 countries came together with Mission Innovation and said, look, we’re going to strive to double the innovation budget over five years. Not surprising it’s not happening but pay attention to what’s happening in the U.S. Congress. Despite administration requests for 30 to 40 percent reductions, the Congress actually has put those budgets on a 10-year doubling. OK, it’s not five, but you know, I’ll take it for government work, you know.

So this innovation agenda is critically important. I believe you cannot overestimate the impact that that’s going to have down the road in the business model innovation that he’s got to worry about and in the policy innovation that we’re going to need, because it’ll both be new opportunities and lower costs for other low-carbon technologies.

Sarah Ladislaw: That’s great. So I wanted to –

Ernest Moniz: In fact, if I just may, I – Sarah, sorry, but just one thing that – going back to net zero – and I emphasized the important of “net” – it’s almost a tautology that net zero means you’re going to have substantial negative carbon technologies as well. And that’s, I think, going to be a very, very interesting part of the story.

Sarah Ladislaw: Yeah. So –

Ernest Moniz: Both – and not only geological, but biological as well.

Sarah Ladislaw: As well, yeah, yeah. Well, and so Ernie brought up a couple – a bunch of ideas that I think you, Bob, in your – in thinking about that transition that you mentioned, right, going to be an all-renewables company by tomorrow is not going to work necessarily. But you have the very serious job of trying to figure out where your company fits in this transition, and much of that is a different kind of an innovation – not on bringing the cost down of those technologies, necessarily, but sort of learning about what the cost curves for different technologies could be and what the business case for those things are. Can you talk a little bit about how you all approach thinking about the role of new technologies in the energy system and how you choose to get involved in them in your own sort of pathway of the energy transition?

Bob Dudley: Well, we’ve been involved in – first off, to the innovation point, I think companies can’t do all the innovation. There are times when, like what the DOD to subsidize –

Ernest Moniz: DOE, DOE.

Bob Dudley: DOE. Whatever. I mean the Department of Defense – Department of Energy for sure. He kind of knows both, I think.

But you do need that forward thinking work sometimes by government, and then transferring that and working with the private sector is how these things go in terms of innovation on many, many fronts. Solar’s a great example. That’s what started in space, really.

For us, we are deeply involved in renewable energy. We have a very large wind business in 15 states in the U.S. and we have solar projects now in 11 countries and 16 U.S. states. We’ve been involved with this since the early – late 1990s. Economics didn’t work, I have to say, over time, probably ahead of our time. We had to write off a lot of those investments, kept the expertise. So it’s part of what we do in planning for the future.

We have to allocate capital. One of the most important things a company does is think about how you allocate your capital. And you have capital-intensive businesses and capital-non-intensive businesses. Oil and gas businesses tend to be capital-intensive, of course. Marketing, which we do on a large scale with 10 million customers a year – a day, that’s not highly capital-intensive. Our solar investments – we found a better way to attract capital into renewables. I mean, I’m – it’s been an a-ha for me.

BP went back in heavily a year-and-a-half ago and bought for $200 million Europe’s largest solar development company, put $200 million into that. The economics and returns if we were just to go into that probably provide the cost of capital. So as – putting billions into that, tough for BP. However, that now half-owned independent company has attracted $7 billion of capital through infrastructure funds, World Bank, others who are OK with those rates of return. So people say to me, oh, you only invest 3 percent of your capital into renewable energy. We’ve probably attracted half of what we do in a slightly different way. And I think companies like ours in this world where you have to have the returns can actually enable large investments into it that I don’t think would happen had we not made that purchase and then developed that country – company from one country, the U.K. to 10 or 11 in 12 or 14 months.

And then we take these new technologies and we combine them with what we do on the upstream part of the business, natural gas. Now we’re putting lots and lots of solar in Egypt, Oman. We’re talking with Azerbaijan, places where this wouldn’t probably go. And so the economics of that start to look better when we start combining renewables and natural gas. And I’ll just – I’ll just say, I don’t think the world can get to be where we need to be, net zero, without the reality, the world does not really want to grow nuclear which is, of course, the ultimate renewable.

So the world’s got to build renewables as fast as they can, I think combine it with natural gas or just natural gas displacing coal, because you’ve made these really important points that carbon capture use and storage, CCUS, has got to be part of the solution for Paris or we can’t get there, or the SDG goals. And then I think hydrogen – I’m optimistic by mid-century hydrogen is going to be a huge thing in the world. You can generate it two ways. Many ways are called blue hydrogen, through industrial processes, or you can do it with electrolysis, using solar and wind, for example. But the world’s got to do all of those things.

And that’s why natural gas – people who don’t want natural gas – natural gas is the perfect carrier for hydrogen. You can move the natural gas then decarbonize it where you need to, and it can have huge impact. So wiping out natural gas is just – well, it’s not going to happen in the world. But it is a greenhouse gas. Methane – or, I’m in the U.S., it’s methane. In Europe it’s methane. I’m very personal. But I think – I think it is a greenhouse gas. Everyone recognizes that. It’s not like CO2 that sits in the atmosphere for 80 years. We need to stop it, detect it, plug the leaks, burn it very efficiently.

And all the technology is now coming – that’s one area, you asked about innovation and technology – in the short period of two years the ability to use infrared, all kinds of detectors, drones, has changed the world, and being able to find where there’s methane leak, go out and fix it, satellites and air and workers that work – walk around facilities on many things, by the way, with 3-D goggles that just have to look at something – in a refinery, with the temperature and pressure. And the same thing is happening with methane. So I’m – I think methane is really essential. And I’m glad to hear you say that. I knew that already, but it’s vitally important. So innovation is going to move a lot of things really fast. And detection of methane leaks and doing something about it is a perfect example of technology that’s going to change things very quickly.

Ernest Moniz: Let me just say that in 2011 when I was at MIT we published a pretty influential, I think, study, “The Future of Natural Gas.” And as I’ve said – I said many times, I’ll repeat it now, that when we started we – a question was, was natural gas part of the problem or part of the solution? And our answer was yes. That because it was very clear – and I think we were pretty prescient in our modeling – that for decades in the United States, now, again, the United States, for decades you were going to see coal substitution by gas as being a major CO2 reducing approach. But that eventually, as you got out a couple more decades, you had to start worrying about the CO2 emissions. Now, that was before a lot of the recent science as well.

So I think, you know, that’s where – again, that’s where the innovation will come in. And I agree that carbon capture will be part of that. And I’m also agreeing – I’m going to agree with you again, Bob, on something that you said – that I think that there are a number of possible pathways to get low to no carbon by midcentury. I personally think hydrogen is looking extremely attractive. And today – so I think a system based upon essentially zero carbon electricity plus hydrogen could be something because in fact – a point I haven’t made, and I’m making now – is that even implicitly a lot of our discussion here tends to gravitate towards renewables and electricity.

And we have to remember, in the United States and globally electricity – OK, in the United States electricity is 27 percent of emissions. There’s another 73 percent to worry about. And by the way, in California it’s 16 percent electricity emissions because they’ve been pretty successful in a lot of what they’ve done with efficiency and renewables. We’ve got to think economywide. And elements of the transportation system, industry, agriculture. Again, California, 8 percent of emissions, CO2 equivalent, are agriculture. It’s a pretty it’s a pretty big business. It’s an important business. It’s called food, right? It is not very easy to decarbonize.

So we’re going to have to look at something like hydrogen, because it can also be used as, quote, “a fuel,” can service many parts of the economy. It can act, by the way, as a big-time storage medium. In fact, again, California – because we studied California – people tend to forget – they don’t forget that the sun produces more in the day than at night. They don’t forget that very often. But they do forget that there’s a lot more sun in the summer than in the winter. And of course, in California – and it’s a question of latitudes and clouds and stuff – the sun in the summer – the data – the data say it’s two to one. And by the way, in California, which is not true everywhere, but in California it so happens that the wind resource is actually more than two to one summer to winter, unfortunately the same peak. So if you’re now going to a system of a lot of wind and sun, you’d better have something in your back pocket for a lot of seasonal storage. Hydrogen could play that role.

Sarah Ladislaw: Well, this is the systems issue that you were saying about – yeah.

Ernest Moniz: Yeah, exactly. So we have a lot of pathways, but we got to get on it because we are nowhere near close to having these available for large-scale deployment.

Sarah Ladislaw: So to that tend, I mean, one of the things that – and we’re almost at time, but I do want to ask you one more question and then open up just for a few questions from the audience. But both of you have spoken and are actively involved in coalitions, right? And we can sort of know all the technological answers to all of these problems, but really it’s about inciting action. It’s about doing something about these things. So both of you were involved in a meeting at the Vatican, where you came out with some pledges. And it was an industry coalition with some other thought leaders involved as well, about trying to incite action. And I just wanted to get a sense of, you know, that’s not a normal place for an oil and gas company meeting, right? That’s not a normal place to be talking about these things. But it is a very strong example of a way in which you’re trying to build a coalition around these issues. And so you could talk just a little bit about why you did that, and what’s come out of it, and what you hope to have come out of it, if that’s a good example of a coalition?

Bob Dudley: I think, Mr. Secretary, you were part of organizing that meeting a year ago, and then the second meeting.

Ernest Moniz: Well, what’s your view?

Bob Dudley: So I thought that first year was a small group. So the first year it was a much smaller group. And it was invited not just for oil and gas companies, but it was also centered around investors who invest in energy and what their point of view was, and then some very experienced government officials who are active in the industry came together, and some state governments. Investors in Europe and the U.S.

So the first year, I have to say, I felt lectured to – not by the secretary – but I felt lectured to. I mean, this was not from the Vatican. They were convening. They wanted to learn, which was fantastic.

Sarah Ladislaw: I’m Catholic. They do that too.

Bob Dudley: Yeah, I grew up Catholic too, so I obviously could not say no. But this last year was different because 10 of the CEOs of major energy companies where there, about 10 or 12 of the largest investment funds – from BlackRock to the CalPERS in California, to some of the European funds were there. And then a group that mediated a little bit called Switzerland – which the secretary was part of it – was to make sure that we reached some sort of agreements on statements.

Ernest Moniz: It’s called negotiating.

Bob Dudley: It was – yes. And it was – but these to me were – it was remarkable that you got this group together with investors who are, in my view, looking for a scenario – and publish yours scenario to Paris. And of course there’s many, many, many scenarios. But we put forward and signed – everybody of the CEOs and the heads of the funds actually signed a document in support of the Paris agreement. It was in support of evaluation on carbon needed. Carbon price turned out to be too political for some countries, believe it or not. Evaluation on carbon. And that public companies would be transparent about essentially how they allocate their capital. What are your scenarios and why are you allocating capital like that? And we’ve agreed with resolutions of shareholders.

But to get that group to sign it, and all the CEOs, and all the legal risk in the United States, by the way. This is the most litigious country in the world, and it prevents so much of people wanting to be open because you’re sued for everything, I have to say. So the fact that these statements came out, were signed, very big companies, I thought was remarkable.

Ernest Moniz: Let me just add to that. So – because for one thing I’d say the – having this over two years – so maybe go back a step, first of all. So the Vatican, with the executive agency, I should say, of the University of Notre Dame, pulled together a meeting that had – asked two major constituents, Bob said, oil and gas CEOs. Including, by the way, four of American companies – I can say this now because it’s public – ExxonMobil, Chevron, ConocoPhillips and Occidental, and then a number of other – seven other, actually, companies from Europe – headquartered in Europe at least. And major financial institutions. Some investors, like equity investors, but a lot of also financial institutions. And a few – and a handful of others.

And what I think is interesting is that, OK, the outcome of the second meeting was actually formally two statements. They are on the internet. What’s interesting is that everyone who was there – there were 34 potential signatories. And everyone who could sign – for technical reasons three of them could not sign the carbon pricing statement – there was a carbon pricing statement. It called for carbon pricing and social justice. And a second statement on corporate carbon disclosures. The – a couple points. One is, the two-year dynamic is very interesting. When you’re building coalitions of these type, you got to be a little bit patient. You got to get to know each other. That was the first year. The first year, you may have felt lectured in one particular moment that I remember – but we have Chatham House rule – but it was – I’m sorry, Bob. It was probably good that you were lectured. And you and your colleagues, I mean. And that was important.

And then going into the second year, having found a basis of discussion – because I would say when all was said and done there was amazing harmony, even in the first year, despite a few little eruptions, right? But that was good. You got to do that. The second year then, with our Notre Dame colleagues, some draft statements were sent to the participants in advance, with the statement that: You don’t have to sign anything, but these are – we’re going to refine these, and they will be available for signature. And they were refined. They were refined. But in the end, every single person from the oil and gas and financial industries signed both those statements.

And I think that is the kind of coalition building now that we need to keep building around. Labor has been tremendously involved, but labor also – it’s a public letter, I mean – the AFL-CIO wrote a letter after a particular magical solution was put out. They said, hey wait a minute, we’re signed onto low carbon, but if that’s your idea, displacing every worker we can think of, we’re off the bus. So, you know, we’re going to have to just – this is hard work. I mean, I know from other kinds of arenas. This is hard work.

Sarah Ladislaw: Yeah. Do you want to add something, and then we’ll go – yeah.

Bob Dudley: Yeah, I’ll just put a quick footnote on coalitions, because I’ve been sort of steering something called the Oil and Gas Climate Initiative now for about five years. And to watch that evolve, 14 of the companies that produce 30 percent of the world’s oil and gas. National oil companies as well, from China, the Middle East, Brazil, Mexico, and then companies from Europe, and now the U.S. companies. It’s remarkable about what you said, about patience of building coalitions, because when we got together and said: Well, what should we do? I think we spent a year and a half, because everybody wanted to do everything.

Sarah Ladislaw: Everything.

Bob Dudley: And we said, how do we focus? And I think that’s also a practical way, with people working on these things – focus. So it was methane – in Europe methane, detection leak, technology develop, put a billion-dollar fund together. Focus on that. And now cc: U.S.

Ernest Moniz: So building coalitions, first of all, within, in this case, the energy industry is important. But then building those coalitions with the other sectors will be really important.

Sarah Ladislaw: Is important as well, yeah.

Ernest Moniz: And all I’ll just say is I think now, as we build these coalitions, we got to get beyond crawling the talk to at least walking the talk, because we’re going a little bit too slow.

Sarah Ladislaw: Walking the talk, yeah. Well, listen, we – you guys have a lot to say on these topics, and we could do this for a lot longer. But we are standing in the way of this and a discussion and a reception. But I do want to let everybody ask – maybe get one round of questions in.

So same rules as before. If you can state your name and affiliation, question in the form of a question. We’ll take three quick ones, and then we’ll try to address them quickly, and then we’ll continue the conversation outside with some food and drink. So any questions in the audience? Got one right here.

Patricia Loria: Hi. Patricia Loria from the Global Carbon Capture and Storage Institute.

I can imagine you know what I’m going to ask you about. (Laughter.) So we have a lot of great projects going on in the United States on carbon capture and storage. The OGCI has certainly helped move those. What are your thoughts about China, India, how we help get more projects going on there, because obviously that’s kind of critically important?

Bob Dudley: So OGCI’s identified about 130 possible projects around the world. I think that 33 of them look real. We’re going to focus on six for OGCI. You asked me about China and India specifically. One of them is in China. And it’s led very strongly by CNPC, the Chinese National Petroleum Company, who seems to be really behind and want to make this happen in a practical ways around one of their refineries and industrial centers. So China, it seems to me, like they are really interested. India, we have not had those discussions, to be honest, on CCS. I think India has so many problems with growth and just providing energy that that’s just not on their focus today. But we’re going to keep trying.

Ernest Moniz: I’d just add that in the in-depth California study that we did, we were surprised to find – to conclude that for California to reach its 40 percent reduction goal by 2030 carbon capture was our third-longest pole in the tent for both some NGCC plants but also industrial plants. So that’s one point. Secondly, we are going to have to face up – and so I think – and I think it’s very important, by the way, if we could really establish this as a kind of a practical means of lowering carbon, even in the relatively near term of 2030 as well as beyond, in the United States. I think that would have a lot of spillover effects to other countries doing that.

But let me just also say something that’s not for the faint of heart. So –

Sarah Ladislaw: I always get worried when he says that.

Ernest Moniz: I mentioned – I mentioned earlier carbon direct removal. So not capture from a concentrated source, but from the air or other – let’s say the air. The National Academy of Sciences had a report recently that suggested that to reach the goals that we’re talking about we would probably need 10 billion tons per year by 2050 of carbon direct removal. Now, that can have many pathways, including biological, which we can discuss. But let’s just say suppose you wanted to put those 10 billion tons underground, sequestration, for a year.

Sarah Ladislaw: That’s a lot.

Bob Dudley: There’s not that many reservoirs.

Ernest Moniz: That would be – that would be 88 billion barrels of super-critical CO2 per year, more than double the global oil industry.

Sarah Ladislaw: You could just have a totally different business.

Bob Dudley: Right.

Ernest Moniz: So, in other words, we’re going to need multiple pathways, but we got to think about scale because we’re going to need big time – I believe we’ll need big-time carbon removal.

Sarah Ladislaw: OK. And we’ll just take these two together very quickly, and then quick responses. Andy and then over there.

Andy Patterson: Sure, yeah. Andy Patterson with Environmental Business International.

Dr. Moniz, you wrote a cover story in 2011, “Why We Still Need Nuclear Energy.” Russia, China and India are still building it. Your colleague, Jim Hansen, at the COP meeting, said we can’t meet the goals without a significant contribution from nuclear energy. What’s the update?

Sarah Ladislaw: Wait one second on that.

Chris Knight: Hi. Chris Knight with Argus Media, this is a question for Bob.

Is BP on track to meet the goals in the Paris climate accord right now? And what is it doing to get closer – or get to those goals?

Sarah Ladislaw: Do you want to start?

Bob Dudley: Well, so, it’s very – I mean, it’s interesting. Goals of Paris. So I personally, and the management team sat down three or four times this year, looked at the goals of Paris and looked at the IPCC scenarios to get to the goals of Paris. Out of 1,100 scenarios there are many, many ways. So the world is going to need all fuels. It is going to need oil. So what we’ll do is on our – we look at advantaged oil in the portfolio. And that has a whole lot of characteristics – not only economics but the carbon footprint of what we do. But there is not a roadmap. And this is what I keep saying to investors. You want us to put in our annual report the scenario to Paris. Look at yourself at the number of scenarios.

And the IPCC, I think you will know better, in February is going to update all those scenarios. And you need to look at a hurricane set of tracking scenarios for 48 hours. And I just did this with Tropic Storm Humberto. Over 48 hours – and it’s not just a line, but the number of scenarios and modeling to run for a tropical storm is unbelievable. And we’re trying to – people are asking us to model 30 years. So it’s hard to know. Are we on track? I think we’re doing all the right things and focusing on the right things. I may need to go – you need to get to the direction. I think there’s a quadrant to head in, rather than a single point on the compass, or the world can’t get there.

Ernest Moniz: I would just add, again, focusing on the United States more, that the electricity sector is an easier one than the fuels sector. But it’s very encouraging. Even yesterday I think Duke, but a whole bunch of U.S. utilities have now committed to some version of low to no carbon by 2050 and are making serious progress towards it. I’m on the board for transparency of Southern Company. And Southern Company is already 37 percent down. So, I mean, you know, there’s a lot of progress in that sector. But now we also got to worry about other sectors, which are more difficult to do.

Sarah Ladislaw: Yeah. Nuclear in two minutes.

Ernest Moniz: Yeah. On nuclear, first of all, I remain committed to the idea that nuclear can be a very, very big part of the solution. But, again, in the United States, I have to say – I’m on the Southern board, as I said, building the two plants in Georgia, which are still below twice the original budget a little bit. (Laughs.) And I have to say, barring a major change of the entire regulatory structure, which I now anticipate, I have a hard time seeing any gigawatt-scale plants being built in this country, at least for a long time. On the other hand, I’m much more bullish on the small modular reactors, especially moving from the light-water, then going onto other types, molten salt and the like, which have really good safety characteristics.

And I think the whole issue is going to be what is the economic performance and will we ever get over the hump? There are lots of interesting – we’ve never had so much innovation with the nuclear business as we have today, both fission and fusion, in fact. In the fission area, there are a whole bunch of interesting technologies, Some of them have made real progress in the regulatory structure. But I got to say, there’s still the common problem, what happens when you need the billions for the first plant?

Eventually if you get an order book of 20 of them and you build them on a – in a – in a production line in a factory and send them on site over the roads or rails or rivers, for that matter, there’s a serious prospect of substantial cost reduction, making this extremely attractive. The trouble is the – it’s how do you get from here to there. I personally believe – again, I’m talking about in this country – I personally believe the U.S. government is going to have to find some way of a public-private partnership to get these going. I still have a hard time imaging that means an order book of 20 – (laughs) – as opposed to a first of a kind. But that’s the challenge we face. Technologically, it looks very, very encouraging. The financial engineering is tough.

Sarah Ladislaw: Yeah. Well, listen, I want to say thanks to both of you, and to our first panel as well, for joining us for this conversation today. These are, indeed, very complex issues. The thing that I want to pledge is, you know, next year when we sit down to do this we’re going to have rolled up our sleeves and gotten into the specifics of what this actually takes to implement these transitions, address the dual challenge in some very specific countries because I think, as we heard on the first panel, it’s really hard to do this in the aggregate. All countries are different. We don’t think about the political economy of those countries, about what it takes to get some of the financing mobilized, the new technologies introduced, and all of those sorts of things. So we look forward to doing that work. And I want to thank you very much for spending some time talking with us about this challenge today.

So please join me in thanking our panel.

(END)