Audioblog 15: The Pragmatic Climate Reset Part 1 — The Energy Transition Is Not Dead

Michael Liebreich

Hello, I’m Michael Liebreich, and this is Cleaning Up.

It is now seven months since Donald Trump swept back to the White House. 

And already the sheer scale of his ambition to turn back the tide of clean energy, and consolidate the US dependency on fossil fuels is clear. 

And it is finding resonance around the world. 

Those who would build a clean energy future face a choice. 

They can either double down on their old narratives, press on with existing plans, and preach largely to the converted. 

Or they can refresh their offer. 

They can wind back historical over-reaches, address the legitimate concerns of voters, and come out fighting. 

This is the first part of a two-parter, based on my latest piece for BloombergNEF, in which I am going to make the case for a Pragmatic Climate Reset. 

As always, we’ll put a link in the show-notes to the original piece, and I thank the team at BloombergNEF for allowing me to make audio versions of the pieces I write for them.

In Part 2, I am going to lay out what a Pragmatic Climate Reset might involve, across all sorts of different areas. 

First however, in this Part I, we need to have a conversation about where we are, and look at why a reset is needed, and examine some of the narratives out there.

With everything going on, it is no surprise that there are plenty of pundits and politicians explaining that net zero and the energy transition was never anything but a dream, always doomed to fail.  

I’m going to explain why they are wrong, and why rumours of the death of the transition are greatly exaggerated. 

But why, nevertheless, the climate and clean energy community can’t just pretend that business as usual is an option.

So let’s get started with Part I of the Pragmatic Climate Reset.

In February, veteran fossil industry advisor Dan Yergin and two co-authors published a piece in Foreign Affairs called The Troubled Transition. 

In it they dismiss the idea that there is or can ever be an energy transition, anchored on the fact that fossil fuels contributed 85% to so-called primary energy in 1990 and still contribute 80% today.  

Needless to say, their argument was immediately amplified by the oil and gas industry. 

For instance, in his remarks at the industry’s CERA Week conference in March, chaired by Yergin, Saudi Aramco Chief Executive Amin Nasser joked that “there is more chance of Elvis speaking next than the current plan working.”    

Well, through the wonders of AI, here’s Elvis!

Delve below the surface, and we can see what the authors of The Troubled Transition are doing. 

The apparent stasis in fossil fuel dependency, of which they make so much, conflates periods and regions with dramatically different trends. 

Between 2000 and 2010, China’s coal use surged by 130%.

Between 2015 and 2025, by contrast, wind and solar soared – so much so that these two technologies now meet 17% of global power demand.  

So, while overall fossil dependency may have declined only marginally, any forecast based on projecting out the global figures, rather than each region and trend individually, would be grossly misleading. 

Yergin and co. would have us believe that new energy technologies are only ever additive. Someone should tell the whale-oil, town-gas and marine-coal industries, which must still be flourishing somewhere in the world

In fact, in order to believe the “additivity” theory, you would have to believe that increased use of hay, firewood, charcoal, peat and animal dung in developing countries is causally linked to their decline in the OECD. 

The fact is, global energy trends are made up of wildly different trends in different parts of the world. 

A heuristic that says new energy technologies can only ever be additive is worthless – except, of course, to fossil-fuel companies. 

Yergin and co. play several other games. They promote the so-called primary energy fallacy, by which the world’s apparent dependence on fossil fuels is significantly inflated.

The global economy’s real figure for fossil dependency is not the 80% cited by the authors, but 68%, because of the differential inefficiency of fossil fuels compared with clean energy, something which is also missed or dismissed by Bjorn Lomborg, Vaclav Smil, US Energy Secretary Chris Wright and others. 

If you are interested in more on the Primary Energy Fallacy, make sure you read my piece on the Five Superheroes of the transition from February 2024, or listen to the audio version - once again, we’ll put links in the show-notes.

Now, in case you think the difference between 68% and 80% is not that important, try foregrounding the clean energy portion instead of the fossil portion. 

Zero-carbon energy sources are not  meeting one part in five of real energy demand as claimed, they are already meeting one part in three.

The transition is about to enter its middle third. Ask any endurance athlete what that means: the start is over and we’re into the middle of the race.

The transition is far more advanced than its detractors would have us to believe.  

But Yergin and his co-authors continue. 

They confuse investment in clean energy with cost. They compare apples with pears by ignoring the investment requirement of a purely fossil-based counterfactual. 

They gaslight proponents of climate action by pretending they are all fundamentalists, interested in achieving global net zero by 2050, or nothing. 

Most cynically, they fail to acknowledge the ever-increasing economic impact of climate change from our current trajectory, including the severe expected damage to the coastal and offshore fossil fuel installations owned by their clients. 

The authors of the Troubled Transition conclude with a demand for a new approach – which they call a “pragmatic path”. 

There is indeed a need for Pragmatism, but not for the pragmatism of defeat. 

Not for the ‘pragmatism’ of believing fossil fuels hold the key to all further human progress. 

Not for the ‘pragmatism’ of addressing climate change only if it suits the interests of fossil-fuel companies.  

What is needed is the pragmatism of robust but affordable climate action. 

A second narrative of failure comes from Michael Cembalest, chairman of the market and investment strategy group at JPMorgan Asset Management. 

In his 15th annual Eye on the Market Energy Paper, he acknowledges some progress on cleaning up the energy system, but decides that “after $9 trillion spent globally over the last decade on wind, solar, electric vehicles, energy storage, electrified heat and power grids, the renewable transition is still a linear one, slowly advancing at 0.3% to 0.6% per year.” This is a bad miss for a usually excellent analyst. To see why, we can use a very simple model, requiring only a four-line spreadsheet, and explore what happens as clean energy continues to outgrow overall energy demand over the coming four decades. 

Let’s start with the global economy, which has been growing at 3.3% per year since the year 2000. Let’s assume this continues into the future. 

Next, let’s assume that the historic 1.3% average annual improvement in demand-side energy efficiency continues too, leaving 2% annual growth in demand for energy. 

Of course we’ll be using real energy demand, not primary energy, which as we now know, is really a measure of supply.  

Now let’s assume clean energy - and by that we mean all renewables, nuclear, waste and the ambient heat used by heat pumps - start at today’s 32% and averages a conservative growth rate of 5% per year over the coming decades. 

This is considerably lower than the historic growth rate in renewables over many decades. 

Finally, we’ll let fossil fuels make up the gap between total energy demand and clean energy provision, as it does in the real world.

The first thing our very simple model shows is that, despite growing faster than energy demand, clean energy is not able to meet all the additional demand for energy today.

For the next ten years, fossil fuel use continues to grow. It falls as a percentage of energy use, but only from just below 70% to just below 60%. 

Clean energy continues to struggle to meet additional energy demand until 2035. 

Boo, failure: growth is linear and slow! 

However, roll the clock another ten years. 

By 2045, with clean energy continuing to outgrow energy demand by 3% per year, fossil fuel use drops below where it was in 2025, though only by a modest 8%. 

By now, the global economy in our model is using nearly 50% more energy than today, just as all the other forecasters say it will, but sourcing less than half of it from fossil fuels.  

Fast forward another decade to 2055, and through the wonders of compound growth, fossil-fuel use has dropped by 40%. It is now meeting less than one quarter of actual energy demand. 

And by 2065, fossil fuels have been squeezed entirely out of the system. 

Now, as I said, this is a very simple model. In reality growth in clean energy won’t be a flat 5% every year. 

It will start quite a bit higher and then drop away as the various constituent sectors mature.

And there will no doubt be a tail of obstinately hard-to-abate fossil-fuel use cases. 

However, what the exercise demonstrates is that, in any scenario in which clean energy grows faster than energy demand for enough decades, fossil fuels are squeezed out of the system. 

It also demonstrates that any realistic transition scenario will follow a trajectory quite different to that in the vast bulk of the net-zero literature. 

It doesn’t deliver the large initial drop in emissions – 45% below 2010 levels by 2030 - that activists want to see, followed by a long tail. 

Emissions stay higher for longer, and fall away later, still delivering an outcome broadly consistent with the 2°C of warming that lies at the heart of the Paris Agreement (though perhaps needing a little carbon dioxide removal in the second half of the century).

Please note - I am not ADVOCATING for slower action on climate change. Two degrees of warming will bring far greater impacts than 1.5 degrees. 

I am just exploring what happens if the current rates of change persist into the future.  

And what our simple four-line model shows is that the failure so far to see dramatic reductions in fossil-fuel use says nothing whatsoever about whether or not we are on a pathway to net zero. 

All the transition requires is a growth rate in clean energy that remains a few percent above the growth in energy demand for long enough an approach which I believe is much more plausible than walking away from our existing energy infrastructure. 

This brings me to Tony Blair. 

Two days before UK local elections in April, with Nigel Farage’s hard-right Reform party promising to “make net zero the new Brexit”, the Tony Blair Institute released a report entitled The Climate Paradox: Why We Need to Reset Action on Climate Change, with a foreword by Tony Blair.  

Now, Blair is spot on in calling for a reset – I was intending to do exactly that in this column before he beat me to it – but his proposed solution is pretty much the diametric opposite of pragmatic. 

Blair opens his foreword to the report by pointing to the “irrationality” of the current debate over climate change, explaining that people are “turning away from the politics of the issue because they believe the proposed solutions are not founded on good policy”. 

In order to build a burning platform from which to propose his reset, Blair paints a dramatic picture of the failure of past climate action, repeating many of the talking points of Yergin and Cembalest, falling into the primary energy fallacy, and presenting a set of “inconvenient facts”, curated to show the futility of the current pathway.  

Many of Blair’s “inconvenient facts”, however, are either not facts, or are misconstrued. 

For instance, he makes much of China last year beginning construction of “95 gigawatts of new coal-fired energy, which is almost as much as the total current energy output from coal of all of Europe put together.” 

But construction starts are not the same as completions – for each of the past five years China completed construction of 34GW of capacity and retired 2.5GW. 

A lot, for sure, but not 95GW. And capacity is not “energy output”.

The capacity utilization of China’s coal-fired power stations, how much they are really used, dropped from more than 60% in the year 2000 to just over 50% in 2020. 

The surge in gas prices as Covid receded and as Russia invaded Ukraine, pushed China back to coal.

However, if gas prices ease further, we should expect the capacity factors of Chinese coal plants to plummet again, and many older power stations to be shuttered. 

Indeed, the most recent data already shows China’s coal use falling for more than 12 months. 

Other so-called “facts” are in fact forecasts.

Tony Blair points out that urbanization will continue in developing countries (he doesn’t mention it is coming to an end in China), and that Africa will see a doubling of its population over the next thirty years. 

I very much hope that energy supply DOES soar in the Global South in coming decades. 

What the facts show, however, is that these new economic powers are leapfrogging to a far cleaner energy mix than other regions at the equivalent stage of development. 

They are investing in renewables, with exponential growth in Chinese solar panel and battery imports, as well as in gas, rather than coal.

Where Tony Blair’s reset really hits the buffers is in its choice of solutions. 

Having stated that “net-zero policies, once seen as the pathway to economic transformation, are increasingly viewed as unaffordable, ineffective, or politically toxic,” he hangs his reset on the world’s most unaffordable, ineffective and politically toxic solutions. 

The first hint of this is in the picture on the report’s front cover: It’s Climeworks’ Mammoth direct air capture (DAC) plant in Iceland. 

Whatever the solution to climate change is going to be, it won’t involve anything that costs $1,000 per metric ton of carbon removed, or even the $400 to $600 the company promises by 2030. 

In fact within a month of the publication of Blair’s call for DAC to be at the heart of his climate reset, it was reported in the Icelandic press that Climeworks plants had not even captured enough CO2 to cover emissions released during their construction. Pretty embarrassing. 

In fact, Blair goes big on all sorts of carbon capture and storage (CCS). “At present,” he asserts, “carbon capture is not commercially viable despite being technologically feasible – but policy, finance and innovation would change this.” Really? 

What does carbon capture being commercially viable even mean? 

Clean energy solutions are commercially viable when they are cheaper than their fossil equivalents. 

But CCS costs money to build, money to maintain, and money run.

Unless you’re selling the captured carbon dioxide to extract more oil (in which case, from a climate perspective, your project is a huge self-licking ice cream), the only revenue is from abating emissions. 

And that means carbon capture and storage can never be “commercially viable” in the absence of a regulatory framework that prices in the cost of carbon or at the very least a voluntary market for carbon abatement: something which doesn’t and won’t exist at anything like climate-saving scale.

And that means you can forget CCS in the Global South, whose emissions growth Blair says he’s most concerned about. 

Even where there is a carbon price, it is far from clear that “policy, finance and innovation” would result in CCS becoming CHEAPER than the entire gamut of clean energy solutions. 

Especially in the light of the decades of failure of the former, and the decades of rapidly falling cost of the latter.  

Don’t get me wrong, we will have to do some CCS. 

We will need it to capture emissions from industrial processes like cement production and aluminium smelting, to make affordable clean hydrogen, because hydrogen from natural gas with carbon capture is and will remain cheaper than green hydrogen. 

We will also need to sequester biogenic carbon to cover sectors where abatement is simply much more expensive, like aviation. 

But post-combustion CCS on large gas and coal plants will never be close to “commercially viable”, so putting CCS at the heart of a climate plan is a huge self-own. 

The other big technology Blair promotes is, of course, nuclear.

“The new generation of small modular reactors, the report says, “offers hope for the renaissance of nuclear power, but it needs integrating into nations’ energy policy.” 

This is ironic, because SMRs already lie at the beating heart of many nations’ energy policies. And from a climate perspective, they offer exactly what Blair says they offer: Hope - and nothing more.

I’m as big a fan of nuclear power as it is rational to be. I studied nuclear engineering early in my career. 

But seventy years after the promise of “electricity too cheap to meter”, it is surely time to stop hoping for miracles. 

As I wrote in my Power and Glory piece on AI - once again, there’ll be a link in the show-notes - you should be highly skeptical of anyone claiming power prices below $180/MWh from a first-of-a-kind SMR, or below $120/MWh from an Nth-of-a-kind plant.  

SMRs can and will be built, not least because the hyperscalers, the richest companies in the world, want to build them. But they won’t be cheap.

And as a potential contributor to climate action, the biggest problem with SMRs is not even their cost, it’s their numbers. 

Last year, wind and solar globally generated 4,600 terawatt-hours of electricity. 

To match that amount of power with the 300MW SMRs being designed by GE-Hitachi or Westinghouse, you would need to build 1,960 of them. 

Alternatively, you could build 1,250 Rolls Royce SMRs, each producing 470MW. Or over 8,000 smaller units like those promised by Oklo and Kairos.  

By the time you are done building those, say in 2050, you will be delivering less than 10% of soaring global electricity supply, and meeting less than 5% of total energy demand. 

Meanwhile, wind and solar, with the help of batteries, will be ahead by a factor of three or more - and very possibly much more. 

To make any sort of dent in global emissions, you would need to build not just thousands, but tens of thousands of SMRs – each of which requires permits, customers, fuel, security, trained staff, and so on. 

In the real world, we will be lucky to see half-a-dozen SMRs by 2030, and perhaps a few hundred by 2040. 

So, where does this leave us? Let’s summarize. 

We are at or near peak emissions. 

We have seen coal use plummeting across the developed world and starting to drop in China. 

We have seen the cost of wind and solar decimated, and they now make up 93% of new capacity added to the grid worldwide. 

We have seen electric vehicles accelerate from a standing start to make up one car in every five sold worldwide, and one in two in China.  

We are not on track to keep temperatures to 1.5°C, but we have seen that 2°C is still on the table, as long as we think like a tortoise, not a hare. 

And yet, as Tony Blair rightly points out, we have seen the fracturing of the consensus behind climate action. 

It has fractured completely in the US, has been rescued from the brink in Canada and Australia. 

It is under severe strain in the UK and is showing signs of cracking across Europe. 

So we need to recalibrate. 

Continuing to insist on technological purity and policies that drive up costs, especially for the poor and vulnerable, or even for the tired and inflation-battered middle classes, is not a viable plan. 

Not any more. 

And that is why I’m calling for a Pragmatic Climate Reset. 

As ever, I would like to thank my producer, Oscar Boyd, video editor Jamie Oliver, the team behind Cleaning Up, and the members of the Leadership Circle, who make all this possible and you, the audience. 

Finally, let me thank  BloombergNEF once more, for permission to make this episode.

Bryony and I discuss this Part I of the Pragmatic Climate reset in the final episode of Season 15 of Cleaning Up - we’ll put a link in the show-notes as soon as that is released.

In Part II, we’ll be looking at what the Pragmatic Climate Reset might entail, across eight different aspects of the net zero transition.

We’ll be back with that as soon as possible, and meanwhile, I hope you find time to enjoy the summer.