2026: Energy Transition and Global Security

Luisa Palacios:
So, yeah, good morning, everyone. My name is Luisa Palacios. I'm an adjunct senior research scholar here at the Center on Global Energy Policy at Columbia University and also an adjunct faculty at the School of International and Public Affairs.

Thank you for having us. This is a stellar panel of some of my most favorite people and also my colleagues at the Center on Global Energy Policy. I cannot think of a better group of people to discuss energy transition and global security.

I don't think that I have to tell this crowd that this has become a really important topic. Just very clearly, one of the things that we're seeing with the Iran war is that this is not only about oil or natural gas, but it is about the whole spectrum of the energy supply chain, which is having significant implications globally. And so with us, we have this group of panelists that what I'm going to do is I am going to ask them not only to introduce themselves, but to tell us a little bit about their career and how for a few minutes.

And then I'm going to ask them specific questions. And what I think is interesting about their career is that these are people that have done energy, energy policy, and energy security. And so the exact questions that we're dealing with in this panel.

So I am going to start with Jason Bordoff. And one of your first questions, in addition to introducing yourself in a minute, it is one of the things that we're seeing with this Iran war and the major supply outages that we're looking at is the different kinds of strategies that both the US and China seem to be, or how this event seems to be deploying or making very clear the different strategies that these two superpowers are pursuing. One you see with the US seems to be a doubling down of a hydrocarbon type of energy or legacy type of energy, while it seems that in the case of China, we do have a doubling down of the concept of electrostate.

And so it will be just interesting to see if that is the case, if that's how you're seeing it. And what does that mean for energy security in both countries?

Jason Bordoff:
Thanks. Well, thanks for the invitation to be here and have the chance to talk with this group this morning. And apologies that I'll step, I'll just walk off stage like 15 minutes before we wrap up just to get to the airport.

But so maybe say an extra word or two in the beginning. So I'm Jason Bordoff. I'm a professor of practice at SIPA and direct the Center on Global Energy Policy.

It's the largest energy think tank in the country, a little over 100 people. In addition to all the faculty we work with at SIPA and all the other schools that we can collaborate with being part of a great research university, I started it 13 years ago after serving as the Energy and Climate Advisor to President Obama at the National Security Council. Before that was at the Brookings Institution, worked in the Clinton administration.

So I started my career in the private sector at McKinsey, but mostly for the last two decades plus have been moving back and forth between either making policy or hopefully trying to help people make better policy, which is an important part, although not the only part, of what we do at the Center on Global Energy Policy. And I'm really proud of the organization we have built, no more so than the fact that people like Louisa and Anne and Ajay, who have their choice of anything to do with their time and are some of the most highly respected experts in the world and could choose to be part of any organization, have chosen to make an important part of their professional home with us. So I'm really, they're just phenomenal colleagues.

And the people I call all the time to understand the world that we are in. Obviously, we're in the middle of the worst energy supply disruption in history. It's not the same as the worst energy crisis in history.

And we can come back to why that might be and why we have lost nearly 15 million barrels a day of oil supply through the Strait of Hormuz. And Brent, at least yesterday, I haven't checked this morning yet, was below $100 a barrel. That in itself is sort of striking.

You asked about the different approaches that countries are taking to energy security, transition, or security in particular, I guess, is front of mind right now for people more than it has been in a long time. And I guess I would say it's important to like, look hard at the differences, but also the starting point is to distinguish between rhetoric and reality in terms of what countries are actually doing. So the rhetoric would lead you to believe that the U.S. is all in on a drill baby drill strategy and China is an electrification and transition kind of strategy. In, what are we in? Month 15, no, 16, something like that of Trump's second term. Oil demand went up faster to this point in time in Biden's presidency than it has under Trump's presidency.

If you look at the outlook for renewables according to Trump's Energy Information Administration over the next two years, renewable consumption in the U.S. will grow 15%, oil use will grow a production. I mean, renewable production will grow 15%, oil production will go 3%. So market forces have a lot more to do with the outlook for different forms of energy than policy sometimes does, notwithstanding the rhetoric.

Right now, companies might be changing some of their investment decisions because oil prices have gone up substantially because of what's happening in the Gulf, more so than because of changes that the administration has made to policy. But that shouldn't change the fact that when you take a much longer time horizon, a decade, two decades, obviously this administration has a pretty different approach than the Biden administration did. A, to prioritizing climate change, of course, and that takes you in a different direction, but also how to think about energy security.

And I think within days of the attack on Iran by Israel and the U.S., our colleague Erica Downs and I wrote a piece in Foreign Policy about why China could be the winner from this. And it was a little, it got a reaction like, what are you talking about? At the time, I think it's, I stand by it.

And the points we made were that what's happening now is a validation of an energy security strategy, not just transition that China's been pursuing for a long time. It's tried to electrify more of its economy. A larger share of the Chinese economy is electrified than anywhere else in the world and the global average.

It's built an enormous strategic stockpile of oil while the U.S. has been on both sides of the aisle selling our strategic stockpile off. And then you want that electricity when you're focused on security, domestic production, reducing imports, you want more of that to come from domestic sources. For China, that's renewables, it's also coal.

Like in terms of what it means for transition, they are very heavily leaning on coal as a secure source of domestic power generation. I think the U.S. administration has a view that if you're the largest oil and gas producer in the world and one of the largest exporters in the world, security comes from a domestic resource. So what are you buying all this stuff from China for?

Why are we gonna shift to an economy where we have batteries and solar panels and critical minerals and electric vehicles, which China dominates 90 plus percent in most of these markets? And it's a fair question. I think there are good answers to it, including the fact that even though we are a net exporter, gasoline prices are going up because oil is priced in a global market.

So security comes from using less, not just producing more. If you wanted to make the U.S. economy more resilient to oil shocks, you would not just produce more. You would not eliminate or roll back fuel economy standards or support for electric vehicles.

You would try to move in that direction, which again is what China has been doing. It is important to note it's different for natural gas. I mean, the fact that natural gas prices have been spiking in Europe and Asia to 15, $20 per million BTU, and they're less than $3 here and have not moved is a legitimate source of energy security for the U.S. that did not exist 15 years ago. And so that's a pretty huge difference as a result of the shale revolution. But I still think because energy is priced in the global market, it's probably more true for importing regions like Europe, which Anne can talk about, maybe India as well, which Adjaye can talk about, energy security in many respects would take you to a place where you would wanna reduce exposure to volatile global markets, exposed to geopolitical risk, reduce imports, produce more energy at home. And for many countries without huge oil and gas resources, that's gonna mean more electrification and then more domestic sources of electricity. A lot of that points in a clean direction, but not all of it.

I think in some parts of the world, people will look to coal as a secure domestic resource as well.

Luisa Palacios:
Thank you, Jason, for that very comprehensive explanation. I think a couple of things that you said, I think it's important to remind this audience is 20% of the world's oil production, 20% of the LNG capacity, 20% of refining production, 20% of petrochemical, 20% of fertilizers. This is the energy disruption that we're talking about.

Interestingly, the region that has been the most impacted by this has been Asia. And with us, I wanna introduce Ajay Mathur, who is a Distinguished Visiting Fellow at the Center on Global Energy Policy. And Ajay, thank you so much for being with us.

I think this group of people would love to also hear about your career. But the question that I have for you is not only what this means, what the Iran conflict means for emerging market and developing economies, and particularly Asia and India, which is where you are right now, and it's 10.30 at night, it is time. I would like, if you could walk us through how do you see that adjustment taking place?

Does that mean now that, as Jason is saying, energy security and energy transition is almost one of the same in Asia? And is there is a way for nowadays developing countries to pursue alternative developing strategies, given the limitations now that we have with the legacy energy? So over to you, Ajay.

[Speaker 8]
Yeah, yeah, he's muted.

Ajay Mathur:
Well, thank you, Luisa. Thank you, Jason. And wonderful to see you again, and colleagues in the room.

First of all, the limitation of oil flow from the Strait of Hormuz has impacted Asia, as has been pointed out, including India, dramatically. So there is the short-term impact of this critical choke point, leading to huge imbalances in the Indian economy. This has led to a huge shortage of LPG, particularly in the commercial sector.

The government has tried that in the household sector where we use LPG for cooking, this is minimized. But nevertheless, the other area is oil. A lot of companies on the West Coast used oil for boilers, whereas those on the Eastern side and more in Central India use coal in their boilers.

So what is happening as far as the long-term is concerned? As far as the long-term is concerned, the first issue that has happened is that the global confidence on fuel supplies, particularly petrol supplies, has dried up. This means that in modeling future decisions, companies take into account, obviously, the prices that exist today, $95 a barrel, plus a volatility factor.

And the volatility factor occurs anywhere from 1.1, that means effectively approximately $104, to approximately 1.2, which is about $1,112. So that is the pricing that occurs as far as decisions are concerned. This has led to two particular impacts.

The first is that we are seeing all low-cost heat or low-temperature heat, that means heat which is below 100 degrees centigrade moving immediately. And this occurs in places like dairy or paints or annealing, or annealing is not low temperature, but because of the cyclic nature, and occurs also in pharmaceutical industry. In all of these, we are seeing a huge uptake of heat pumps.

Because heat pumps are seen as a low cost, but it's also based on a domestic source of electricity, either coal or solar. The second issue that has started happening is that the gas sector has started, so there's a lot of gas, for example, used in fertilizers. So there's a huge impact on the fertilizer usage.

As a small farmer myself, I've had to run from pillar to post, shop to shop to get fertilizer. This has dramatically decreased the demand for inorganic fertilizer and increased the demand for domestically produced organic and biofertilizers. This has been dramatic.

I'm telling you of the things that have happened in the last six weeks or so. So what we're seeing is that the catalyst is that as far as the low hanging fruit is concerned, those kinds of impacts have already occurred. As far as longer term impacts are concerned, we're looking at obviously electrification, but electrification therefore implies solar electricity.

Now the problem is that the demand for electricity increases, it's not constant, and it increases both during the day and at night. If it is increasing at the day and night, then during the day solar can provide it, what happens at night? Do you put up coal for night and solar for the day?

That doesn't make sense. Why don't I put more coal, which will meet my need both during the night and during the day? So for those of us in the renewable energy industry, storage investments become very important because at the margin, solar plus wind plus storage produces electricity which is cheaper than new coal.

However, it is still, as I said, solar plus wind plus storage. We don't have solar plus storage and wind plus storage being cheaper. So that is a kind of barrier that needs to be crossed.

What we are seeing is therefore a lot of investment is occurring on the growth of the storage industry and storage in all sorts of sense, chemical storage and batteries, but also pump storage and so on. Now, the other thing that is happening and Louis, this impacts one of your questions. What is also happening is that a number of places, a number of places where the electricity supply is erratic are going in for microgrids to make their supply, the electric supply more regular.

They pay high prices, but they pay high prices for that short period of time, four hours, two hours to four hours that the electric supply is not there. This has, we have seen a major increase in the solar mini grid installations in India as we have seen for solar rooftop installations. What we have seen is also people investing themselves in batteries at home.

So that solar plus batteries, even though it is more expensive, it is more expensive to produce electricity, but it is still cheaper than the electricity that they get from the grid. The other thing that has started happening is that we've got more interconnections between various countries. So as far as the ASEAN is concerned, we are seeing a huge movement of hydroelectricity from Laos to countries like Thailand.

We are also seeing that industrial policy is being redefined. If you are looking at industrial policy in India, solar electricity is seen as the centerpiece of it. China, of course, Jason talked about, but there is an investment in the entire supply chain, including batteries, the CATL success story and the supply of these both solar PV panels and batteries across the world.

In Southeast Asia, obviously the grid is becoming a lot, they're depending a lot more on the grid, moving electricity to countries where it is. But what is also happening is that the amount of bioethanol that is coming in, so fuels mixed with bioethanol have become, let me just say that the amount of bioethanol in fuels is increasing, and it's increasing to somewhere, I'm told the magic number is 20%, I can't vouch for it, but that is the level to which people are going. So what we're seeing is that we are looking at investments.

However, one of the issues that is occurring is a capital cost asymmetry. Now, while renewables have handsomely won the higher risk premiums, the emerging markets are looking at lower costs, which are higher. So what happens is that crises like the one that we are facing at the moment, it makes it a lot more viable to accept these higher prices than it would otherwise.

Luisa Palacios:
Oh, we lost him. I think he was finishing up what he was saying, but anyways, okay. Ajay, I think the last point was about this higher prices for fossil fuels is just making clean energy technologies even more competitive in Asia, basically.

You are muted and we cannot hear you.

Ajay Mathur:
Yeah, so I was about to end and say that while this does create a balance of payments crisis, it will lead to a higher debt burden and therefore a balance of payment crisis. The bottom line is that the global South no longer depends on cheap fossil fuels. And that is a fear that has percolated the entire system.

I mean, this is a heartbreaking moment because the global trade in energy is being questioned. I'll end it there and Luisa, I look forward to the discussion.

Luisa Palacios:
Thank you, Ajay. I think that how you ended it is particularly insightful. I don't know if we understand that 50% of the world's oil produced is traded, about 30% of the refined products that we produce are traded.

So energy is by definition a globalized market. And so I think what Ajay is coming to is the idea that this crisis is probably gonna lead to a deglobalization of energy markets and is going to be accentuated as well in the global South. And so we're moving to another part of the world and this is Europe, also an energy importing region.

I particularly like Anne's point of view. I come from the energy transition, not necessarily from a climate perspective. I come also from the point of view of a business disruption.

This is a, the energy transition is anything, it is also a disruption of energy markets as we know them and disruptive businesses lead to technological innovation. There is just, Anne has been one of the most important voices on linking the energy transition, clean energy technologies, security and sovereignty. And so with that, Anne, I, the questions that I will pose to you was, this is the second time in a few years that Europe has had to confront an energy shock.

And what can you say about the lessons that Europe learned from the Russian invasion of Ukraine? And are they working or not? Now that we are, Europe is also facing another shock from another important supplier.

And do you think that Europe can lead or can continue leading in clean energy technologies?

Ann Mettler:
Excellent. Thank you so much, Louisa and Jason and AJ. Great to see you as well.

Well, first, maybe you said I should give a very brief introduction. So it was already said, I'm a Distinguished Visiting Fellow at the Center of Global Energy Policy. Which is a big honor, obviously.

And secondly, I'm also co-founder and president of a new organization called Catalyze Europe, which works on clean energy at the intersection of security and resilience and industrial competitiveness. Because so far, clean energy has been mostly viewed as a climate issue. And as was just said, it most definitely is a security issue as well.

And I'm also on the board of the European Innovation Council, which is the EU's 10 billion deep tech fund. Previously, I led Breakthrough Energy in Europe. Breakthrough Energy, as some of you may know, was founded by Bill Gates to accelerate the development and deployment of new emerging clean technologies.

And prior to that, I was a Director General at the European Commission. So like Jason, most of my life was really spent either in public policy or outside, but always dealing with public policy. And with that in mind, you're absolutely right.

For Europe, this is now the second really existential energy crisis in just four years. And this time around, it was said, it's basically not just a cost crisis, but really a supply crisis, which cuts across oil and natural gas and also derivative products such as fertilizers. So what's a little bit surprising is that despite the severity of the crisis, because it's definitely there, there seems to be much more calm this time around, at least for now.

I think it is partly because it's the second crisis in four years and four years ago, that seemed much more of a palpable shock. And the biggest concern I have to say, and this is a very European view, I think the biggest concern was really what happens to kerosene, because the holiday season is about to start. So if the Europeans can't go on holiday, then you have a big crisis, but so far so good.

So, but just from my own perspective, there is no reason for this situation being so calm. Inflation has already gone up. We're seeing accelerated de-industrialization, particularly in countries like Germany, which have a very, very solid industrial base.

More than 10,000 jobs a month are being lost. And basically we have just changed dependency. So we used to get more than 50% of our natural gas from Russia.

Now we're getting 60% of our LNG from the United States. And that's making quite a few people in Europe uneasy. And of course in clean technologies, we're very dependent on China.

I think this is a theme that's already coming up. However, I would argue that this time around something is different. Because in 2022, there was sort of a palpable feeling that this is a one-off crisis.

And that's why despite having basically natural gas weaponized against us, you have to recall that in 2022, after the war started, within weeks, the price of natural gas had shot up eightfold. I mean, imagine what this does to an economy and especially to energy intensive sectors. So despite that happening, Europe actually doubled down on structurally more expensive LNG.

So we didn't wean ourselves off, quite to the contrary. In Germany, as part of this government strategy, there was a plan to build 20 new natural gas fired power plants. So that was always surprising.

I was very much against basically not using the opportunity of the 22 crisis to wean ourselves off, instead doubling down on LNG. And really quite troublesome, as 60% of our energy in Europe is imported in the form of fossil fuels. And despite a lot of nice strategies to want to be global climate leaders, that percentage of 60% has barely gone down in the last 20 years.

So we are very dependent on fossil fuels. And this, of course, as a geography that doesn't have fossil fuels within the EU. So one of the other responses in 22 was really, we want all in on renewables.

There was a lot of consensus around wind and solar, but at the end of the day, one of my arguments is always that that was really an industrial policy gift to China, because we bought a lot of Chinese solar panels, we bought a lot of batteries. And despite this consensus around renewables, which I just talked about, that didn't really translate into the deployment of wind. Europe almost lost its wind industry in 2023.

And of course, any hope that we had to be players in batteries pretty much died in 2025, when Northvolt, which was our battery champion, declared bankruptcy. So if I have to compare 22 and sort of today, one of the positive elements is, I think no one believes that this is another one-off crisis. I think there is an understanding this is a structural challenge that we have, because we are a fossil fuel poor and energy poor geography.

And there is now a consensus that this is really a critical vulnerability. So this is now part and parcel of security and resilience type of discussions. And it's about time, I have to say.

And I would say there's also unease about the great dependency on China. We are living through what is often described here as the second China shock, which is hitting Europe particularly hard, because it really goes into a lot of what we are good at, sort of the production of machinery, automotive, et cetera. So this is definitely felt.

Some of the responses on the European side recently has been, it's called the Industrial Accelerator Act. It has a made in Europe provision, so it requires local content requirements. However, it's been very watered down.

I don't think it'll have that much of an impact, but nonetheless, we are at the start of what some might consider a more protectionist, but which I'm actually quite a bit in favor of, because I have seen that it's been impossible to deploy and really scale clean technologies in Europe when our markets are so wide open to a competitor who basically offers non-market prices. So, but if I have to say, what is sort of the overriding solution now, what everyone's looking to, it's really around electrification. So France was first out saying they're gonna double this public support for electrification by 2030.

They have a target to half the dependence on fossil fuels by 2035. And this has also led now others to follow suit and the EU will have an electrification action plan, which has already been delayed several times, but which will hopefully now come out in July of this year. So just like we have the consensus around renewables, there is now really the consensus around electrification.

However, some of the dangers I see is that basically, and this was already alluded to, this will again empower China potentially. And China, most definitely from a European vantage point is the winner coming out of this. So I totally agree with what Jason said earlier.

As basically the world's first electrostate, China has reduced its vulnerabilities and has basically reaped huge advantages because it is the key manufacturer of basically the hardware that underpins electrification. So for Europe, what may this mean? This may mean that we will actually increase further increased dependency on China.

What it has also meant is that China is looking at Europe actually as a production site. So we're seeing really an uptick in greenfield investment in Europe, particularly in batteries and electric vehicles. And of course, that is potentially very, very detrimental to efforts, European efforts to restart maybe a homegrown battery industry, et cetera.

But member states are basically competing for these greenfield investments. And so China is moving a lot of that over here, which of course means if you, I spoke about Made in Europe, that stuff that is made in Europe, which means you can no longer deploy defensive tools you may have as part of your trade policy. So you wouldn't put tariffs, you wouldn't be able to put tariffs on these products that are made.

So I think what Europe needs is in addition to electrification, it needs a lot of focus on basically what are sources of firm, clean and homegrown power, right? So one of the problems with renewables is of course the intermittency. So, but here, I think we're seeing some developments in nuclear.

So for instance, Belgium had announced a phase out of nuclear, which in 2022, they said, okay, we're gonna prolong these nuclear power plants. And now the whole decision has been reversed by the government. And they were basically forcing the company that is running the Belgian nuclear power plants to continue.

So that we are seeing some of that here, but I think geothermal, the potential of geothermal, for instance, is totally underutilized in Europe. We should really have a geothermal strategy. Also this morning, I was just on a panel with someone who does basically marine energy, so tidal and wave power.

And I would personally be in favor of really coming at this from a European perspective with a lot of innovation, with a lot of new technologies, and basically using this momentum for made in Europe and more homegrown production to build out new sectors of the economy, because it's important also maybe to go back to the 1970s oil crisis when Europe got wind and solar underway. This came out of Europe. And I think now is the time to think big again and really to double down on what are still inherent strength in Europe.

And that is around deep tech, that is around engineering, and that is around really focusing this as an opportunity to build out new markets. So this is what I am personally engaged in, and that's what I would like to see as a European action.

Luisa Palacios:
Thank you. Thank you, Anne. That was quite comprehensive in terms of how the Europeans are looking at this crisis not only from the point of view of vulnerabilities, but also from the point of view of opportunities.

And so I'm gonna take your last point and I'm gonna go back to Jason. And so I'm gonna do a short round of second questions before opening it up to all of you. So start thinking about your questions.

So Jason, in a recent Wall Street Journal article, you said the following, nations dramatically rethought energy policy after the oil shock of the 1970s. Disruption of the scale will force governments around the world to rethink energy strategy. So I actually wanted you to talk about going to the last point that Anne was mentioning, how was it, how did we rethink in the 1970s and what did you think is gonna happen?

How are we rethinking now energy systems and energy security? What kind of toolkits do we now need to have or what kinds of things do we now need to double down on?

Jason Bordoff:
Yeah, the 1970s was probably the worst energy crisis. As I said, today's the worst supply disruption, but we saw oil prices quadruple after the Arab oil embargo. We haven't seen, they're up 30% now.

So it's nothing comparable. And there was the 1970s and it wasn't just 73, it was 79. It was like that period, the lines of the gas pump.

It was like a national trauma in a way that really we haven't seen since. Maybe Europe saw it in 2022, but for the United States, we haven't seen since. And traumas like prompt significant change.

And so the sense that we need to get off of Middle East oil became an overwhelming national priority. It meant on the production side, pushing through things like the Trans-Alaska Pipeline, which were bottled up in environmental fights and Congress just approved it and moved that forward. Speed limits and inflate your tires and fuel economy standards and smaller vehicles to reduce demand.

We got 20% of our electricity from oil in the 1970s. And they're like, well, that makes no sense. Let's get rid of that.

Pushing nuclear until Three Mile Island, pushing solar and coal, right? Jimmy Carter, who's a great environmental president, no president, Teddy Roosevelt did not do as much as President Carter to protect national lands and put certain lands under federal control as Carter did. And he was all in on coal because it was the way we could reduce oil for energy security reasons.

So it prompted a very significant set of policy reforms along the lines of a little bit of what Anne just talked about. The other thing that I think came out of it was the creation of the International Energy Agency. We're gonna work together and cooperate with other countries through diplomacy to deal with crises.

We're gonna collectively hold strategic stockpiles and release them collectively when there's an emergency. We're gonna create well-functioning integrated oil market so that market forces can be a source of security. If there is a supply disruption somewhere in the world, what happens?

And this happened in 2022 in Europe. Gas, a meaningful amount of gas supply was cut off. Gas prices went through the roof in response to those higher prices.

US LNG cargoes that would have gone to Asia went to Europe instead. So a well-functioning integrated market was seen as a source of security. And there was no, oil was not a globally traded commodity in the 1970s.

It was sold in long-term contracts between buyer and seller. So it was more possible to impose an embargo. Today, I mean, note that Russia cut off the gas supply to Europe.

It didn't cut off the oil supply because if it had, it would have lost an enormous amount of revenue. It would have stopped selling millions of barrels a day and supplies flows would have shifted around where Europe would have been able to get oil. It just would have gotten it from somewhere else.

So that integration was a source of security. As Anne just described, people don't view interconnection as a source of security anymore. In today's fragmenting geopolitical world, they view interconnection as a risk.

And security is perceived to come from disconnecting and becoming, as she said, made in Europe, isolating, self-sufficiency. That makes sense given what's happening in the world. It's enormously costly, right?

The idea that like Europe needs to make all of its own energy and then America needs to make all of its own energy and everyone needs to make all their own energy is really costly. It was striking listening to Anne. I was thinking about President Biden after the US passed the Inflation Reduction Act.

And then he got on a plane and went to Sharm el-Sheikh for the UN climate meeting in Egypt and sort of expected everyone to say, thank you. And they were like, well, you just spent hundreds of billions of dollars on clean energy for yourself. What are you doing for us?

And the answer was by making clean energy cheaper through all of this domestic subsidization, we're gonna make it more affordable for you. So that's a good thing. China would say the same thing.

And the sense that like we need to electrify and buy more batteries and buy more electric vehicles and buy more solar, but as Anne said, non-market pricing, China is making all of that cheaper is seen as a risk economically and from a national security standpoint and energy security standpoint, not a contribution, not like something to make it easier to move toward an electrified economy. So I do think there's a real challenge that we need to be very precise about what energy security risks actually are and are not. They might be different in a solar panel than they are in heavy rare earths with military applications and batteries for drones and then design pretty targeted policy responses in this era of state capitalism where government is intervening more in energy markets and the private sector in the name of national security.

Because if every country pursues a fortress like mentality, it's gonna be really impossible to afford to do what we're talking about at a time when every advanced economies like Europe, nevertheless emerging economies are facing fiscal crises and debt levels we haven't seen since World War II.

Luisa Palacios:
Thank you, Jason. I'm going to double down on the concept of fragmentation and the globalization and the crisis of multilateralism. And I'm gonna go to Ajay.

You wrote recently at, it was a blog at CJEP called Bilateral and Minilateral Treaties. It was about how we can accelerate energy transition even in the context of lack of multilateralism. Could you talk a little bit about that and how you think this idea of bilateralism and minilateralism can advance energy transition and energy security?

You're muted, Ajay. You're muted. Thank you.

Ajay Mathur:
Well, so at the heart of it, the thinking happened because of the India-EU and then the India-Germany agreements that occurred in January this year. And under those agreements, Europe committed to provide a market for green hydrogen from India. They identified a buyer, we identified a seller.

They identified that they would invest in developing green hydrogen. Group has already announced that they're going to do so. The key issue was that it led to an agreement between the two geographies on standards, the standards under which green hydrogen is produced.

This is something that has separated the world, but fragmented the world at the climate negotiations that have occurred. I am wondering, therefore, whether these bilateral agreements or minilateral agreements could become the basis of the multilateral agreements of tomorrow. If that is the case, then the standards that are the basis of the bilateral agreements today could become the standard, will become the basis of multilateral agreements tomorrow.

The second issue is human capacity. Once you've got the standards defined, you need people to be able to move and decide on how they will produce so that they meet the standards. This is human training.

This is something that we know very well. That becomes the second part. So standard is the first part, human capacity development is the second part.

And I wonder whether this is the key template on how to move away from the fragmentation that has occurred in the global multilateral process towards a world in which such minilateral agreements could become the basis of multilateral agreements of the future.

Luisa Palacios:
Anne, you had a very insightful phrase in a recent interview that appeared in the innovator. You said Europe cannot import energy security. This conference or this panel is called Energy Transition and Global Security.

So where you're going with this, it seems that this is really not global security. This is about Europe's national security. In that context, we have also that Europe just unveiled, the European Commission just unveiled the tech sovereignty package.

Do you think that Europe's role in the AI race needs to first solve the energy security conundrum?

Ann Mettler:
Yeah, thank you. So I said, in addition to Europe cannot import energy security, I also said Europe cannot outsource energy security to China. Because of course we have imported, we have tried to import it in the form of fossil fuels and we have tried to outsource it when it comes to clean tech to China.

It's been a disaster for Europe. I really have to say this has not been well managed. And it was actually something that I heard when I was at Columbia and Center on Global Energy Policy a few weeks ago, someone said, energy is 5% of GDP, but it's the first 5%.

So you basically you mess up your energy system, the entire economy will feel it. And I think we're living at this moment and you're alluding to it, where basically we're seeing sort of a fusion between power and compute. And what this has meant for Europe when it comes to artificial intelligence is we're in a really poor sort of a starting point because we just don't have enough electricity to power it.

I spoke at another panel earlier today and you may have seen that last week, SoftBank made an announcement that they would invest 75 billion euros in France to build data centers. Why did they choose France? Because of nuclear power, because France actually has the firm, clean and homegrown power that I just spoke about.

So they would have never made that investment in Germany. So we're seeing something happening that is really extraordinarily interesting, which is that the ability to pursue AI and really do remember this is a global race and sovereignty is basically belongs to those who lead the technology frontier. So this is a race, but right now it's a race between the United States and China.

And the US is at a disadvantage because basically not because you don't have enough computing power, but because you don't have the power that is needed and the power grids and so much of what is needed for your data center, which basically the data centers are the modern infrastructure for the age of AI. So it's a really interesting moment. And this is why I repeat what I said earlier, Europe needs to now pull out all the stops to produce as much firm, clean and homegrown power as possible.

Not only because we need the energy, but because we wanna be players in AI. Europe can forget about being a sovereign player in AI if we can't power these data centers. So this is a very important question.

And what concerns me is the way the public sector is organized where one part is sort of responsible for energy and another part is responsible for digital technologies. They don't really talk to each other. And one of the disappointments that's already been felt here in Brussels since it was announced yesterday, is that apparently there isn't really this mate, there's a lot about weaning ourselves off US digital platforms, but not a lot about the power aspect that I just spoke about.

So that's a real shortcoming because I think you can basically forget about sovereign digital technologies if you can't solve the power problem.

Luisa Palacios:
Thank you. And Jason has to leave in a couple of minutes because he has a flight to catch. And so why don't you tell us your parting thoughts about one of the things that, for example, that you've been talking about, which is that we seem to be complacent about the risks ahead from this crisis.

Jason Bordoff:
Oh, I mean, I think the, this is a really interesting conversation. I'm sorry, I need to leave a couple minutes early, mostly because I want to hear more from Ajay and Luisa and Anne. Anne's ambition is really admirable.

I think she would agree, she knows the skepticism that exists within Europe and the rest of the world. I would guess US policymakers are worried about competition from China in AI. I'm not sure they're worried about competition from Europe in AI.

And so there's a lot of work to do to improve the regulatory environment in Europe beyond what's been done, which is why the work Anne is doing is so important. We have a lot of work coming out of the center on the challenge and the connection of AI, data centers, energy. It is a different world, I think, for the last several decades.

If you said energy security to people, or if you talked about energy affordability as a political issue, the ExxonMobil station across the street from Capitol Hill is famous for press conferences where one side of the aisle was beating up the other over high energy prices. Nobody talked about electricity prices because nobody knew what electricity prices were, and they were basically flat, and electricity demand was flat for a long time. That is a huge issue now in the election, as data centers are.

I mean, the backlash that we will see politically against data centers, some warranted, but some unwarranted, is a huge issue right now. We've been looking at what's actually driving power price increases in the US, and it's mostly not data centers. So I do think a role for a research institute is to analytically look at the evidence and really explain what is going on, why is it happening, just the connection building on what Anne said.

Globally, air conditioning is a bigger source of power demand growth than data centers are when you look at the global trajectory of electricity demand growth. Data centers are a source of stress in certain countries, and particularly in certain regions within certain countries, like Virginia or some other places. So it's a real issue, but it's quite localized to certain places.

It is pretty remarkable, I think. I mean, I'm curious your take on this too, Louisa. Like I said at the start, that three months into this crisis, market, if we had gone back when I served in the White House and we did scenario planning about nightmare scenario risks to the global oil market, closing the Strait of Hormuz would have been top of the list.

We struggled in the Obama administration to figure out how to impose sanctions on Iranian oil exports and take 2.5 million barrels a day off the market without collapsing the US economy in the process. We've now taken 15 million barrels a day off the market and somehow, you know, gasoline is more expensive, but it's not through the roof and economic outlook is still reasonably strong. There's a lot of reasons for that, including some unexpected new sources of supply and demand reduction.

There's a lot of interest in why Chinese imports have fallen as much as they have. There's a difference between the physical market reality and the traded markets where people are unsure if this thing's gonna end tomorrow and many betting that it will. But I still think there's no, at some point, the physical reality of losing this much supply catches up to energy prices and prices have to rise high enough to destroy that much demand.

We can estimate exactly what loss of supply we're talking about, 15 roughly through the straight is lost. You said 20%. We found some other routes like pipelines through the UAE and Saudi Arabia.

Demand is down in some places. So whatever the number is, seven, eight, nine million barrels a day of demand has to be destroyed through price. What's different today than in the 1970s, and I think there's gonna be a lot of interesting economic work to do and research after this crisis, because so much of the oil demand growth in the last two decades has been in emerging and developing economies like where Ajay lives.

The demand destruction happens there now, and it takes a lower price to do that. So that's economically catastrophic for those regions, but it changes the economics literature on what the oil demand elasticity looks like. And it actually means advanced economies are more insulated than would otherwise be the case because the pain is being born somewhere else.

So I think it's gonna be like a really interesting set of questions for all of us at a place like the center to look at going forward. And sorry to leave a few minutes early.

Luisa Palacios:
Thank you so much, Jason.

Jason Bordoff:
Thanks.

Luisa Palacios:
So we are going to continue with questions. And so the three of us, Ajay, Anne and myself are gonna send those questions. Yes, let's start here.

Could you introduce yourself, please?

[Speaker 5]
No, thank you very much. My name is Surprise Maliasi from South Africa. I thought Jason, but I think that Anne, she will respond.

I think that it might be something similar. I think that starting from a positive side, it is good to have different energy source in as much as perhaps it is a conversation that may be very uncomfortable conversation within the developing nation, especially countries that are well unionized who would want at all costs to protect job security. But the question of the just transition and who funds that process, but I think that the issue of the financial commitment and that's the fear of many developing nation, I think that there was a view that was expressed in our last panel that the world economy at this point is still rely completely on fossil fuel.

Even those countries would want to embrace new technology and profit would have highlighted that in terms of renewable, but how do we reconcile with this conflict that exists between international commitment and national interest with the fear within the developing markets that they would want to at all costs to protect job security.

Luisa Palacios:
Wanna take this one?

[Speaker 8]
Sure, go ahead.

Ajay Mathur:
Go ahead, would you like to go first Lisa?

Luisa Palacios:
No, please go ahead.

Ajay Mathur:
So the key issue is that it has become industrial policy because it is related to jobs. Consequently, using renewables on the demand side is as important as increasing supply on the grid side because the larger number of jobs are created by the demand side. Now that's one part.

The second part is that it has changed the calculus as far as the cost of capital is concerned. All of us in developing countries face higher costs of capital because the risk premia are higher. But because the operating costs, the cost of getting oil or gas is now thought to be higher than it actually is, at least right now that's the case.

I don't know whether it will be five years from now or not. That implies that the cost of capital is therefore, which is part of the capital cost, is therefore managed against the lower cost of the oil or the operating costs. This implies therefore that the decision making favors things that have a lower operating cost.

This is something that we have fought for many years. How do you differentiate between capital cost and operating costs? How do you categorize them?

How do you get companies to focus on different budgets for operating and capital costs? But this crisis has shown that for developing countries, lower operation costs are better.

Ann Mettler:
Louisa, I'm happy to say something about this.

Luisa Palacios:
Oh yes, Anna. Yes, if you wanna add something.

Ann Mettler:
So Europe, in my opinion, hasn't done this well. Europe is the largest donor of overseas development assistance. When the Green Deal was started in the year 2020, I advocated that we not do a Green Deal that focuses only on Europe, but that instead we take the 1 trillion euros that we said we were gonna spend in the next decade, basically bringing European clean technologies into the world in fast growing markets, where you could have really made a difference when it came to CO2 emissions.

Europe was at the start of the Green Deal, 8% of CO2 emissions. We are now down to 6%, also because the economy has shrunk so much. So whatever we did was very regulation focused.

It cost a lot of money and basically led to deindustrialization. I think had we been more imaginative, which by the way, to its credit, China was with the Belt and Road, taking its own products into the world, helping countries to basically modernize their economies, but also selling their own stuff along the way would have been a better option for Europe. I think we, I'm sorry, totally screwed this up.

I am now working with a company or helping them that wants to produce solar panels actually in South Africa. And they call it coast shoring. So it's not offshoring, it's not nearshoring, but coast shoring.

They want to build solar panels for the European market. I think it's a great idea and I'm trying to help them, but it is very difficult in reality to do because you have to deal with development policy. You have to deal with sort of financial institutions.

You have to deal with many different actors that are not all aligned. But I think that this concept of coast shoring is really good because one of the really the necessities to achieve energy security is diversification. You cannot be too dependent on any one source of energy nor any one country.

And right now, when it comes to electrification, we are all too dependent on China. So I will do whatever. And by the way, the Europeans could have also helped India to set up, India has very ambitious plans to basically produce all solar panels for its own market by itself, right?

I mean, we could have helped with some of these efforts, but we didn't. And I think it was a big mistake.

[Speaker 7]
Thank you, Anne. Thank you very much. I'm Elsa Jean Roux from France.

So it's gonna be a bit cliche because my question is about nuclear energy. It's not very controversial in France, but it is in Europe, as you mentioned, Anne. And my question was, do you see a role for this type of energy in the autonomy of the developing countries?

Because for now, it's mainly, I mean, Europe, India, China, US, et cetera, but is there a role for nuclear energy in developing countries? Thank you very much.

Luisa Palacios:
Anne, you wanna take this? And then Ajay, I can also add.

Ann Mettler:
Well, Ajay, probably for developing countries. I mean, I'm coming, maybe I'll just say a word about nuclear in Europe because it's really, as was just alluded to, there's been a spectacular change in the attitude towards nuclear since 2024. So this was two years after the last energy crisis.

And the Belgian Prime Minister, Alexander de Groot, held a nuclear summit here in Brussels. Most of the leaders showed up, made big commitments to nuclear. And since then, basically, nuclear has been rehabilitated.

Also partly because the Germans, they basically got out of nuclear in the spring of 2023, in the middle of an energy crisis, which basically, I'm sorry, they started because they were so dependent on Russian natural gas. The Germans pulled the plug on nuclear, and it's been devastating to the country, devastating. I spoke at Nuclear in Europe earlier this week, and I said it was a little bit like Brexit.

The Germans thought others would follow, and everyone's looking to Germany now and say, oh my God, whatever you do, don't get out of nuclear. And this, I think, has also led to the reversal here in Belgium. So things are changing in Europe, but for the developing countries, I think, Ajay, you would have a better perspective on that.

Ajay Mathur:
Well, there are two separate things that occur. One, at least before the crisis occurred, nuclear electricity was thought to be very expensive. So this capital-intensive investment and produces electricity that is expensive.

This would need to be re-established with the new numbers because with the new cost of coal and the new cost of oil and gas, what are you comparing against? So that's the first point. The second is, let's see what happens to SMRs.

When I was at CEGEP with Anne and Ambassador Holgate, she was talking of Dow Chemicals moving in for the permitting of SMR at their facilities. If this happens, then I think we've opened the floodgates to a lot of SMRs because SMRs require lower capacity, lower capital, and hopefully lower amount of land as well because isolation zones would decrease. It would be a win-win-win for the developing nations.

I would therefore argue that in the short term, we will start seeing a reassessment of large nuclear reactors, and in the longer term, a reassessment of the possibilities of using SMRs to produce as much electricity as we want.

Luisa Palacios:
If I can add to Anne and AJ's comment, I think it's gonna make, hopefully it's gonna make a huge difference. The change in policy at the World Bank because these are hugely capital-intensive type of projects for which you need that type of patient concessional capital that doesn't need to be repaid in two years. So you actually need long duration type of loan treatments and the technical capacity to go with it.

And so I do think that the World Bank is not, there are other multilateral institutions that are open to nuclear financing, but they're actually, they were not very frequent. There are very few only. The change in the World Bank is not only about the World Bank, but it might actually also lead to other multilateral development banks following through.

The second point is to answer previous issue. Right now, the two countries that are helping emerging markets and developing economies with their nuclear energy are Russia and China. And so this is already happening.

And so if Europe and the US want to also be part of that technology transfer and that export of technology, I do think that that idea of co-investment or co-participation with a multilateral development bank might be the right way to go. So I'm interested in the developments that are happening. And to Anne and Ajay's point, definitely SMRs is the way to go.

This is gonna be, if this really, you can get the cost down, that's gonna be the technology.

Metin Esen:
Thank you. Thank you very much for this comprehensive panel. My name is Metin Esen from Turkey.

I mean, as you know, energy transition and global security are interconnected in today's globalized world and fragmented world. And technology plays an important role in this respect. So I would like to ask, are we entering an era in which energy security is no longer primarily access to resources, but control over the technologies and critical infrastructure that connect them to global markets?

I'm curious about this issue. Thank you.

Luisa Palacios:
If you could allow two more questions, Anne and Ajay before responding, because we're running out of time and I would like that there are more questions in the room at the moment.

Brenda Ammeral:
Thank you. My name is Brenda Ammeral. I am from the Netherlands, but I work with the UN.

At the risk of sounding hopelessly idealistic in this new world of energy security and the focus on diversification, innovation, to what extent do environmental concerns still factor in the strategic thinking of policymakers? Thank you.

Luisa Palacios:
One last one before we... Okay, that's it. Okay, and Ajay, do you wanna take on both of these questions?

Ajay Mathur:
Let me start, Anne, if it's okay with you. I personally believe that technology innovation is at the heart of global jobs. Investment is important, but at least as far as the emerging economies are concerned, that is largely a function of national safety.

So for example, in India, as far as renewables are concerned, 84% of the investment in renewables is from domestic sources. 16% is global. This compares favorably the 14% average across the economy.

However, we are serial technology importers and as technological change accelerates, we find ourselves importing more and more technology. There is a concerted effort, therefore, towards technology development through things like the performance-linked incentives program and so on. But the fact of the matter is that innovation matters, technological innovation matters a great deal.

This is also part of the industrial policy that I've talked about because at the end of the day, you are looking at ways in which you can help create technologies which meet the kinds of labor force that you have. As far as the second question is concerned, there is no doubt that environmental concerns have taken a second tier seat. There is no doubt that environmental permitting has been relaxed in the recent years.

However, what is also I see happening is that environmental concerns are becoming part of the technology development framework. So we are looking at ways in which, for example, the recycling, the waste, the entire life cycle, cradle-to-grave concepts are becoming part of the design cycle itself. It's a bit early to say goodbye to environmental concerns.

I don't think that is happening, but certainly there has been, in the near past, a decline in the relative importance given to environmental concerns.

Luisa Palacios:
And your comments, we finish. With your comments, we're gonna finish the panel.

Ann Mettler:
Okay, just to say on technology, I used to be a director general, as I said, at the European Commission, 2014 to 2019. When I went into the European Commission, 2014, we thought of China as a developing country. By the time I left, we called it a systemic competitor, five years.

Why? Because China advanced so much in technologies, digital technologies, clean technologies, also manufacturing, robotics, autonomous systems. So the thing to know is the world is in a competition for technology supremacy.

China is winning. The US is not winning this, because you don't have, maybe you have your hyperscalers, and that's very good, but in clean tech, in manufacturing, and also in robotics and autonomous systems, you're not strong. I'm not saying this as criticism, because in Europe, we don't even have the digital tech, but just to know the importance of technology and embedding that technology in infrastructure, in critical infrastructure, cannot be overemphasized.

And right now, we're building out a lot of infrastructure with Chinese hardware, and we already have all the Chinese 5G all over our communication networks, right? So this is really important to understand that once it's in the infrastructure, it's in there. You can't really get rid of it.

So these are very important points, and I thank you for raising them. As to environmental concerns, sort of agree with AJ, but also see an opportunity here. In the environmental movement, that there is this, you know this, I mean, sort of the planetary boundaries, and I think we're reaching them.

And so issues such as circularity and also substitution, they will come up, you know, and they already are very present. And I would say, at least in Europe, because we are a resource-poor energy-poor geography, actually what is clean is also is secure, is more secure, is more resilient, and I really believe will also lead to more industrial competitiveness if we are able to build out new sectors of the economy. So I would actually see that, and we may not call it environmentalism, but I think it's not all bad what is happening right now when it comes to environmentalism.

Luisa Palacios:
Thank you so much, Anne, AJ, and obviously Jason. This has been, I think, a very comprehensive view about energy transition, global security, and everything around it. I hope that this was informative for you.

We are available at the Center of Energy, Center on Global Energy Policy, if you wish to continue this conversation with any of my colleagues. Thank you.

[Speaker 8]
Thank you. Greetings from Brussels. Bye-bye.

All good wishes.

Luisa Palacios:
Thank you, AJ. Thank you. Good night.

[Speaker 8]
Good night.