The unstoppable green revolution: Adam Tooze on the "most dramatic story in the history of energy”

Despite the pushback on the climate agenda, which has been a feature of the last 18 months, two years given the shift in politics in the US, at the global level and even in the United States itself, the green energy revolution continues. And this war is an affirmation of the need to go on doing that.

This is the 14th major shock to the fossil fuel system since the early 1970s. So the idea that fossil fuels are the reliable source of power, at least as far as oil and gas are concerned, is profoundly discredited at this point.

That's another element of the deep rationality of China's strategy, is there's one thing the government here does, is it just drives electricity prices down and then produces abundant supply, and then you see what kind of industrial facilities can cluster out, whereas in Europe we've seen the opposite strategy. So a rational strategy for Europe will be one that basically produces low electricity prices for consumers, and then major incentives to shift electricity generation into green and carbon penalties for those that are still dirty.

It's the single most dramatic story in the history of energy or industrialism or the economy in history.

Pleasure to be here.

I am somebody that's really in the sort of sense-making business, I'm trying to make sense of things. I started out as a historian and I'm interested in contemporary history. A colleague of yours asked me this morning what it was that got me out of bed in the morning and I said it was curiosity. I think that's the long and the short of it.

I mean it's a difficult issue especially I think for a forum like Davos because the basic premise of Davos is that we're dealing with people of good will who are interested in common prosperity, stability, growth, development, all of that kind of motherhood and apple pie kind of approach to global history. And the American and Israeli attack on Iran demonstrates that that's just not the world that we are in. You can stack this up any way you like. The Iranian regime are no innocents. This is a regime which pursues its own power politics, its own axis of resistance, as they call it, its own proxy wars. But nevertheless, the escalation of violence and a full-scale assault by the US and Israel, the decapitation, as they like to put it, in other words, the murder or assassination of the Iranian leadership, is an indigestible, violent reality of our current world. And here we are at the Forum discussing how we maintain stability as the basis for growth when we have two actors for whom that clearly isn't the priority. In the case of the Israelis, it seems that sheer mayhem in Iran will be enough for them. And there does seem to have been a conviction that the Iranian regime could simply be shifted. And it turns out to be a tough nut to crack, and the Americans aren't the first person to learn this, right? And it's hit back… So, we're in a world which doesn't yield to the basic diagnosis of, you know, overcoming technical obstacles to economic development, which is one of the core premises of a meeting like this. So it's a slightly schizophrenic situation that we're all in, or at least one of cognitive dissonance, I think.

Not publicly, certainly, and I was at a private meeting, which I won't say more about because it was a private meeting, but nevertheless there was an awful lot of euphemism and not a lot of direct talking, because it's difficult to digest the fact that if, given the way also the Europeans essentially lined up early on with the Americans and Israelis in this attack, you're left essentially with China as the one big anchor of stability in the world, and I think that's a reality. I think it's something that's hard to acknowledge. It's one of the reasons why we're here and so many of us are willing to come to Dalian and to take part in this conversation because unless you recognise that fact about the world right now, I do think you're deluding yourself. China of course has its own strategy, its own direction, its own purposes, its own interests, but they are at least pursuing them in a way which right now is stable, predictable, based around projects of prosperity, technological development, which are at least potentially mutually beneficial and win-win. So that war has reminded us we don't live in a world that's motherhood and apple pie.

Well, we've really learned about asymmetry, haven't we? Because if you're in a prosperous part of the world with purchasing power, or with relatively autonomous energy supplies, it's been one experience which has been less dramatic than many people predicted. This is, after all, in physical terms, the largest interruption to the global energy system ever, essentially. It's the nightmare scenario. And yet, you know, life has gone on. Except not if you're in Thailand or not if you're in India or Pakistan or Bangladesh, in other words lower down the pecking order of purchasing power and access to energy, and we have yet to see what impact the interruption of fertiliser supply and the incredible shocks to fertiliser prices will have on lower income farmers, not now immediately but in the next cropping cycle. So we're yet to I think see the consequences of that. But it's another moment in which, through shocks, through crises, we've learned things about the global economy we probably should have known anyway. But how many of us had really thought seriously about the Gulf as a major source of inputs to the fertiliser production chain? Not enough, clearly.

I mean, I think the simple story is that people are going to diversify away from oil and gas. Why wouldn't they at this point? There are alternative sources of supply. The Americans have been making hay with the promise of LNG. The Europeans have taken advantage of that. This time it's one of the reasons why the shock has been less dramatic there. I think, the more optimistic reading is that we're going to see a surge in imports of Chinese green technology, of green electrotech, as Ember likes to call it, so that's solar panels, batteries, EVs as well. So despite the pushback on the climate agenda, which has been a feature of the last 18 months, two years given the shift in politics in the US at the global level, and even in the United States itself, the green energy revolution continues. And this war is an affirmation of the need to go on doing that. I think Javier Blas's number from Bloomberg is this is the 14th major shock to the fossil fuel system since the early 1970s. So the idea that fossil fuels are the reliable source of power, at least as far as oil and gas are concerned, is profoundly discredited at this point.

Yes, we're moving in a different direction. I mean even in the US know that the 73-79 shocks are an inflection point. You see it incredibly clearly in the fossil fuel consumption and in CO2 emissions in the developed world. The curve breaks. In the U.S. It then starts to ease back up again in Europe it's one way from there on in. I think the current moment, and it's as much the questions as it is the actual reality of prices, right? Because prices have not gone through the roof. Many people would have been predicting $150, $200 a barrel. That's not happened. But it's the fact that you're asking yourself the question. I have members of my family that spent most of the last couple of months planning for a world in which the UK couldn't access diesel to maintain basic logistics. No one should be forced to ask themselves that kind of question. And electrification is a way of diversifying and ultimately just simply moving away from this kind of model of imported energy dependence.

Well, because they are basically making themselves dependent on another monopoly supplier, in this case, in fact, even more monopolistic, because China's dominance of green electrical technology is far more clear than, for instance, that of OPEC over oil and gas. So that's one aspect. The other one is, are issues around… China's politics itself, China, especially from the European point of view, who would be the high income countries most likely to do this, the Americans have made abundantly clear that they're not interested in Chinese EVs or photovoltaics and they'd do without batteries if they could. And obviously the president, as we heard at Davos in Switzerland, has a thing about windmills. But if the Europeans were serious, as you say, they would go hell for leather. And it's the alignment of China with Russia in the Ukraine war that makes that profoundly problematic from the European point of view. Because they, for obvious reasons, see Ukraine as an existential threat. And China's alignment with Russia, at least as perceived from the Europeans side, really raises the red flags. Nevertheless, in 2022, there was a huge spike. Tens of gigawatts of photovoltaics were imported. That continues. And for the rest of the world, I think the fundamental point, after all, is that if you buy the hardware, of course at some level there's a dependence. And some of the technology, the inverters for photovoltaics, are rumoured to potentially have kill switches. And the Chinese have not worked as hard as they might to disprove these rumours. So there's anxiety around that kind of conditionality. But the basic difference is that once you bought the kit, as long as you can keep it operating, you've got no further dependence. You don't have to regularly import oil or gas. And that's what structurally makes this a different bargain. Of course, it's a kind of dependence. But I think radical independence, full autonomy in the modern world is an illusion in any case, right? The real question is how you pick your risks, how you manage those risks, how you hedge, how you diversify. How you maybe look for political mechanisms. I mean, to my mind, it's a real miss that Beijing, for instance, isn't organising a global forum on energy security in which they systematically show up, you know, and display their green technology and answer questions about its security implications. Are there or are there not tracking devices in BYD cars? Break them down and just show that there aren't to their satisfaction. Make the case. And I feel that's a great missed opportunity because the questions out there and it's not being addressed in a systematic way, you need some sort of test and verify kind of mechanism I think to address this concern.