“From Big Oil to Big Shovels”: Daniel Yergin Outlines the Future of Energy

Elon Musk debuts a new Tesla model
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William D. Cohan
September 22, 2021

Daniel Yergin is the Pulitzer-winning author of The Prize, the definitive work on the modern oil oligopoly, and one of the world’s leading authorities on the fossil fuel industry. He’s also a vice-chairman of IHSMarkit, the large data company, which is in the process of completing a massive $44 billion merger with S&P Global (regulators willing) to create a financial data powerhouse to compete with the likes of Bloomberg, Reuters, and DowJones. When that merger closes, expected in December, Yergin will be a vice-chairman of the combined company. He is also a leading intellectual, who sits on the boards of both the Council on Foreign Relations, where I am a member, and the Brookings Institution. 

I recently chatted with Yergin, a long-time friend, upon the paperback publication of his latest book, The New Map, for which he has written a fresh appendix that attempts to figure out whether the Biden administration’s ambitious climate-reduction goals, such as decreasing carbon emissions 50 percent by 2030, and hitting net zero by 2050, are feasible or a pipe dream. “It’s a very awesome goal,” he told me, suggesting that it might be a rather “aspirational” one, too. He said for the “typical” American, achieving these carbon emission goals would require him or her to reduce their carbon emissions down to the level of someone living “in a poor, developing country,” making that “a really big challenge.” He’s not sure Americans are ready, willing, or able to make that kind of sacrifice. 

And that’s the least of it. “You’re talking about a global economy,” he continued. “It’s a $93 trillion (world) economy that now runs 80 percent on fossil fuels. So it’s really a vast change in the foundations of modern civilization. It isn’t an easy job, and there are no good answers for it.” 

In a wide-ranging conversation, Yergin and I spoke about the de-carbonization of the developing world, the role that electric cars will play in the grand scheme of things, and a number of unforeseen challenges that he sees along the horizon, particularly in Europe. This was all top of mind for Yergin given that it’s Climate Week NYC 2021, an event hosted by the international non-profit Climate Group in conjunction with the United Nations. “It is the time and place,” the organization notes, “where the world gathers to showcase leading climate action and discuss how to do more—fast.” But if Yergin is right, the “fast” part may take a little longer and be more complex than many people are hoping.

Just as Elon Musk and Jeff Bezos have conquered earth to the point that allows them to focus on life in space, developed economies are more focused on the existential threat of climate change than underdeveloped nations, who face more quotidian, present, and current catastrophes. Yergin serves as a sounding board for many governments on the topic and he often hears leaders profess their interest in achieving a path to a net-zero future before moving on to their litany of more urgent problems. “We have other goals too,” he recalled numerous leaders telling him, “which are to reduce poverty, to improve people’s health and to raise the standard of living, and for that we need fossil fuels. India, for instance, has on the one hand embraced the 2050 goal but on the other hand it’s also expanded its natural gas infrastructure with a $75 billion program to get gas to poor people who now cook with wood and waste products. Targets are easier to set than the execution is to achieve.” 

He said that many developing countries feel “put upon” by the rich countries with high G.D.P. and social safety nets that are trying to dictate how they go about trying to lift their citizens out of poverty. “If you’re the government of one of these developing countries, you can’t escape the issue of dealing with poverty,” he said. “And so India is committed to big expansion of wind and a big expansion of solar, but also is giving propane to people in villages so that they can live longer.” 

Meanwhile, Yergin said electric cars aren’t necessarily the panacea they are made out to be for achieving the “net zero” emission goals. Surprisingly, he continued, citing IHSMarkit research, if every car in the world today were electric, that existential change would only reduce carbon dioxide emissions by a mere 6 percent. “It’s very striking,” he said. “It doesn’t sound like it’s going to move the needle.” 

Yergin is not against the electric-car movement per se, but he thinks most people don’t realize how much fossil-fuel and other environmental disruption must happen in order to make electric cars. He said some 20 percent of an electric car is made of plastic, which of course is derived from fossil fuels, and that some 500,000 pounds of earth has to be moved to make a 1,000-pound battery because of the minerals—chiefly lithium, cobalt and copper—that are mined to make it. “You get rid of one set of dependencies and you get another,” he said. “The slogans are there, but the reality, when you get down to the engineering and making it happen, gets a lot more complicated. There’s a carbon footprint in mining, as well.” 

He reminded me that 70 percent of the cobalt used in batteries comes from the Democratic Republic of the Congo, where according to the International Energy Agency, he said, “something like a million children are working in mines.” He added, “that’s why this is such a momentous undertaking. We’ve gone through energy transitions, starting in January of 1709”—the first use of coal metallurgy—“but they unfold over a century … here you’re trying in less than 28 and a half years to totally remake the foundations of the world economy. Some of the technologies are there, some are not, and technologies don’t happen overnight.” 

Mandates to convert vehicle fleets from gasoline to electric are sweeping the Western world: Biden recently announced a target for half of all vehicles sold in the U.S. to be battery electric, fuel-cell electric, or plug-in hybrid by 2030, and the E.U. has advanced legislation to phase out all combustion engines by 2035. Globally, however, progress may be far slower. Yergin predicts that only half the cars on the road in 2050 will be electric, half gasoline powered. Gasoline will still be available. “Governments are not going to tell people that ‘Sorry you can’t ever take your car out of the garage, because there’s no more gasoline,’” he said.

In his new appendix, Yergin writes about the promise of hydrogen as a potential game-changing fuel source. He said it holds much promise but at the moment it is still in limited supply and is primarily used today as an industrial fuel. Making it widely available as a fuel source is a more difficult technological problem than it seems like it would be. To extract hydrogen from water, he explained, you need an “electrolyzer,” which can run on renewable energy such as wind or solar, making so-called “good” or “green” hydrogen. But most of the world’s hydrogen is made from coal or natural gas, which is less environmentally friendly. Hydrogen is very flammable and is used to make rocket fuel, fertilizers, and by oil refineries to make sulfur out of some streams of oil. Hydrogen also has the potential to be a potent form of energy. “But to go from saying ‘Oh it’s going to be 25 percent [of our source of energy] to actually creating the industrial scale infrastructure, again isn’t something that happens overnight,” he said. “Wearing the hat of an economic historian, I’m struck. You have a breakthrough. And you think, ‘Oh it’s a breakthrough, it just happened’ but you didn’t realize it took 20 years to get there. We’re in the very early days for hydrogen … but you have to make it because it doesn’t really exist in nature by itself.”

Naturally, Yergin explained, there are no easy answers. And 2050 isn’t that far away. “It’s hard to create massive new industries overnight,” he said. He’s also worried about what he calls the “geopolitics” of the shift from fossil fuels to other sources of energy, whether they be renewables such as wind and solar, or whether they be hydrogen or nuclear fission. The change will create the need for new supply lines, say, away from pumping oil in the Middle East, to importing essential minerals in other geographies. “You’re going to go from Big Oil to Big Shovels, a lot more mining,” he said. He noted that this will create new concerns, especially since opening a mine in the United States is beset with so many regulatory problems. That means importing lithium from China and cobalt from Congo. “Eighty percent of the lithium battery supply chain is currently controlled by China,” he said. And he worries the United States will end up with a new set of interdependencies, unless of course the Biden administration makes it easier to permit mines. “You wouldn’t be able to build the interstate highway system today if you were trying to do it,” he said. “You wouldn’t get it permitted.” He said while the Trump White House was looking to ease up on regulations, Biden has put that easing on hold. “Politically, it’s an important challenge for the Biden Administration because it wants to move in a certain direction in terms of renewables and new technologies, but there are constraints on what you can do in the United States,” he concluded.

Yergin is also concerned about the surprising “energy crisis” faced by much of Europe. “Not oil,” he said, “but electricity, natural gas prices, and carbon prices are all at the highest level ever. Demand is up because of economic recovery, and supplies are very tight. The wind hasn’t been blowing and wind-generated electricity is way down.” He said Germany is getting more of its electricity this year from coal than from wind. China’s imports of liquefied natural gas are “way up,” he continued, resulting in higher natural gas prices in both Europe and the United States. “You actually have major factories shutting down in Europe because energy prices are too high,” he said. “Politicians are growling, and the head of the European Central Bank is warning about the impact on inflation, and rightly so. Some are asking if what’s happening in Europe is a portent of what’s to come.”