Ep28: Fatih Birol 'Setting the World's Energy Agenda'

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ML  00:11 

Cleaning Up is brought to you by the Liebreich Foundation and the Gilardini Foundation. Hello, my name is Michael Liebreich and this is Cleaning Up. My guest today is Fatih Birol. He's the Executive Director of the IEA, the International Energy Agency. He is, without doubt, one of the leading energy economists in the world. Please welcome Fatih Birol. So, Fatih, welcome to Cleaning Up. 

FB  00:42 

Thank you very much, Michael, for inviting me. Thank you very much. 

ML  00:46 

Well, I'm delighted and thank you for spending a little bit of time with us. I'm actually very sorry, as well, because in preparation for our conversation, I bought a Galatasaray official T-shirt. Because of COVID, unfortunately, it's left in London, and I'm here in Switzerland. 

FB  01:04 

Don't worry, I will come to London and take this T-shirt. Thank you very much, very kind of you. As you know, Michael, I have two passions in life. One of them is energy. The other one is football, and it's very kind of you, I am very touched, to be honest with you. 

ML  01:22 

Well, I was going to wear it for the interview. And then maybe 

FB  01:29 

I thought you bought it for me, but it's even better. 

ML  01:32 

But to be honest, I'm not sure that I would have any other occasion to wear it because it might be a dangerous thing on the streets of London to wear a Galatasaray t-shirt, I don't know. 

FB  01:41 

It is even more dangerous in Istanbul, I can tell you. 

ML  01:46 

It depends which bank of the Bosphorus, correct? 

FB  01:48 

You are completely right, if you're on the European side, no problems. You will even be invited for a cup of tea or eat baklava or something. On the Asian side you might have some difficulties. 

ML  02:01 

Well, I'd have to take it off and put Fenerbahce on instead, right? 

FB  02:05 

Please don't go so far. 

ML  02:07 

Okay, good. So let's start with some of the actual, you know, some of the stuff that's current that you're working on, and that the IEA is working on. And the most recent was the announcement that you will be producing a 2050 net zero scenario, which is pretty big news, right? 

FB  02:27 

Yeah. It's a big news. It is something that we have been working on since September last year. We have never, ever produced a full-fledged scenario, roadmap, in that context. We check our models, as you know, we have two main publications World Energy Outlook, and the Energy Technology Perspectives, they have two different models. We have integrated these models in the last few months to see whether we could provide a roadmap for the governments around the world, how, and if, and under which conditions they can provide net zero emissions in 2050. So this is our main preoccupation for the time being and is a key priority for us. 

ML  03:22 

Very interesting. How does it differ because you have produced a Sustainable Development Scenario, which was consistent with the SDGs. But this is more aggressive on the energy side by quite a bit, isn't it? 

FB  03:34 

That's great. And it's you know, it's fantastic to hear that you're working on that. And as you say, this kind of, these pledges have really changed the weather. Before we get on to those that I just want to clarify on your figure of 66% of emissions, and how are you going to deal... does that include China? Because China has said 2060, not 2050? So how are you dealing with that sort of 10 year gap? Definitely. So the Sustainable Development Scenario comes to net zero in 2070. And this time, we want to see 2050 net zero. The main driver for this, and there are two drivers, one of them is, you know, as much as me, maybe even better, several governments around the world made pledges: European Union, UK, China, Japan, Korea, Canada, and I expect very soon, some other, I know, some other major emerging countries will join this club. And if the United States comes to the picture, more than two thirds of the current global emissions, those countries who produce more than two thirds of the global emissions, would commit to net zero 2050. This is very good, committing pledges is good, but the other thing is how to do it. And to put the pledge is not enough to make this happen. So therefore, we are working now to suggest governments around the world, what kind of energy policies, realistic energy policies they can put in place to reach those targets. This is the number one driver. Second driver is that in your home country, in the UK, we have a very important meeting this year, the COP26. It's perhaps one of the most critical meetings ever, not only in terms of energy, but beyond energy. And I am happy that your government puts a lot of emphasis and gives a lot of importance to that. And I have received an official request from the COP president, whether IEA can provide such a roadmap to underpin the deliberations of different governments, different leaders. And it is the reason why we are doing this. And I can tell you, you know IEA very well, we are more than 330 energy experts here. I told them, this is a key priority for the IEA until May this year. So we also consider China part of this game. And in fact, none of those countries, they have pledges, except for UK and Netherlands, none of them are in law. They are pledges. Now 10 years earlier, 10 years later, for me more than this, what is critical is that whether or not those countries, those governments have the right policies to reach those targets. And when I look around, I see a big, big gap between the pledges and the energy policies that are put in place and the incentives for those. When I look at, for example, Michael, this sustainable recovery packages around the world up to now, I cannot say that I am happy with the amount of incentives the renewables, electric cars and the others received from the governments. But 2021 may be a game changer, it's a pivotal year, I expect the US government very soon will come with big stimulus packages with a huge incentive on the clean energy technologies. 

ML  07:24 

Right? Because the previous big piece of work was that Clean Recovery Plan. And in that, if I paraphrase, you said there's essentially we're at a crossroads, we can either build back better or bounce back brown, bounce back with fossil fuels. Probably not appropriate to call them brown, but the range of fossil fuels in the way that the bounce back from the great financial crisis occurred. So we're now six months after that piece of work, which I think was in April, we're more than eight months after, are we bouncing back? Are we building back better or bouncing back badly as it were? 

FB  08:05 

I am afraid currently the numbers are not encouraging. I can tell you now here, in this interview, in this discussion with you that the 2020 global emissions declined about 7%. And at that time, we said: if the recovery packages do not put the clean energy at the heart of those packages, we may see a rebound of emissions. And what we see now, Michael, is that we are going to announce the exact numbers in a few months of time, we are seeing a rebound of the emissions. I can give you one example: China, is you know, China is the largest emitter of the world today. And China is also the country, which went through the COVID crisis and got out of the COVID in big sense, and the economy is rebounding. And then we look at the Chinese emissions as we speak now, currently, Chinese emissions now are higher than it was in the year 2019. If you can take China as an example, if the other countries around the world do not take the necessary measures, we may see a strong rebound of the emissions, unfortunately. 

ML  09:28 

Before COVID, at the end of 2019, I wrote a piece called Peak Emissions Are Closer Than We Think and Here Is Why. Of course my reason wasn't COVID, we didn't expect that. But I did expect the peak to be before 2030. So somewhere around let's say 2025/2026 and maybe decline of 5% or 7% by 2030 from the 2019 figure. COVID clearly knocked a big hole... Have we seen peak emissions in 2019? Or are you now saying: no, it'll be higher globally in 2021, 2022, 2023? And what happens next, if we don't intervene aggressively? 

FB  10:13 

For 2019 the good news was the emissions were flat. We came up with this number. 2020 - big decline and 2021 - I expect, unfortunately, a rebound. But how big is this rebound? It is early to say, but again, looking at China, the first country when the economy rebounds, the numbers are not encouraging. And when we look at the economic numbers around the world, many countries will see a rebound of the economies. And if the pandemic is under control, if the social activity is going back to normal, I am afraid this rebound may be stronger than, I am afraid, today. 

ML  11:03 

Let's go back to that period before COVID just for a moment, if we might, because when you said that 2019 was flat, if we go back the six years up to and including 2019 there were actually four years when the emissions were either flat or plus 0,1%. Yes, there was, I think it was 2017 and 2018, would be you know, was a growth spurt. But other than that, 2013/2014 2014/2015? I'm not going to get the years exactly right, but I do know that from the last six years, four of them were flat. And the global economy grew 23% in GDP terms in that period, and emissions grew only 3%. So when you hear people, when you hear, in particular Greta Thunberg say: you adults are doing nothing, you've done nothing? Do you not sort of say: well hang on a second, we're actually kind of winning, we may not be winning fast enough, but we are winning. 

FB  12:00 

We are definitely seeing a major penetration of renewables in the electricity generation, which is the best news ever. And then, and some improvements in energy efficiency helped to slow down the emissions growth, or in some cases, as you mentioned, flat emissions. 2019, we talk, emissions were flat, vis a vis, more than 3% of the global economic growth, this was excellent news. And if we didn't have COVID, this year, last year, 2020, I would have no reason to believe that such a positive picture would continue. But winning is depending on how you define the winning. If winning is to see a structural decline in the emissions, which, IEA, I do want to see, then we need strong penetration of the clean energy technologies to be in line with our Paris goals. So here therefore, there is a need for much more aggressive penetration of the clean energy technologies, and not only electricity generation, but in transportation sector, industry, and others. 

ML  13:20 

Yes, I suppose winning was maybe the wrong word to use, because, you know, winning is net zero. But you know, I sort of look at it as well, you first need to get to a stable peak, you know, flat plateau for a while, at least that would be base camp towards winning. So maybe that's that's how I look at it. But if we're going to see you know, that really net zero, it's such a massive challenge. I don't know I'm not sure, you probably have the numbers of per year, what sort of decreases we need to see in the next decade to have a chance. Because people talk about 7% per year, 10% per year. I'm not sure what the IEA sort of figure version of that is going to be. 

FB  14:04 

So we will come to those numbers as I said in May 18th, 18th of May, three o'clock we announce the numbers. But I can tell you one example for, two examples maybe: electric cars. Electric cars is something we believe can help substantially to reduce emissions. And today about slightly more than 2% of the new car sales, about 3% are electric cars and this should be, in the next 10 years, at least every second car sold should be electric car. This is one example. Second, on the electricity side: today, we spend about 380 billion dollar for the renewable electricity investments. And this needs to be multiplied by four, about $1.6 trillion. And just put in a context, Michael, the entire energy sector investments last year: oil, coal, gas, in the entire energy sector, not on the power, but industry, transportation, whatever, they were 1.6 trillion. So whatever we spend for the entire energy sector, we just need to spend for the clean electricity in order to reach our net zero targets, Herculean effort is needed. 

ML  15:46 

Yeah, that's right. That's what I was fishing for, some idea of the scale of the challenge. And, of course, you know, the miracle cost reductions in renewable energy get us a long way, but they don't get us all the way there, do they? 

FB  16:01 

I completely agree with you. One of the dangers or the challenges I should say, I see is that some people think that everything can be done easily, but policymakers are hesitating to do it. Policymakers may be hesitating, yes, but it is not easy to do these things. You have to transform the entire energy infrastructure which has been built decades and decades of time. And there are many complicated issues, the issue of the developing countries versus developed countries, issues of the already locked in energy infrastructure, coal plants in Asia, the aluminium and steel installations in developing countries, how we are going to transform them? It will not happen by sending a tweet or making some protests here. We need those, but those alone will not be enough. It needs cool-headed, well designed plans for the transformation of the global energy system. And it is the reason why we are, as organisation, taking this issue as our top priority to provide such a roadmap for the governments around the world and, of course, for all other stakeholders. 

ML  17:23 

And I'll ask you a question. Do you find it frustrating in a sense, because you know, electricity is only 20% of the energy mix right now, and renewable energy fantastic, but it's only 11% of that, after, you know, I would consider that an incredible performance far beyond what I had expected when I started New Energy Finance, but it is currently 11% of 20% or 22%. So, you know, we have just such a Herculean task. Do you find it frustrating that the public debate is sort of so far away from the energy economics? 

FB  18:01 

I completely agree. What is happening in the energy world and the public debate is a big decollage, there's a big gap between those two. And I'll give you one very frustrating, one of my favourite examples. You may remember Mrs. Brundtland, the former prime minister of Norway. And when I met her, I told her the following: I don't know if you remember, Michael, Madame Brundtland made the first report on sustainable development some 30 years ago, at the request of the UN Secretary General at the time. I told her when she made this report, which one of the main goals was to reduce the share of fossil fuels in the global energy mix. 30 years ago share of fossil fuels in the global energy was 80%, 30 years ago. And in the last 30 years, many things happened. In political terms, the sensitivity for clean energy became much stronger, clean energy technologies became much more affordable. And in Europe, for example, if one political party wants to get votes, they just... to say green things is very important for them. And despite all of these things, this 80% today came down to still 80%. So this is very, very frustrating. And this is despite all these changes in the political spectrum, in the energy business. Why? Because I think the public debate misses one point. One of the points that it misses, for me a key one: the biggest growth of the emissions do and will come from the emerging world. How do we incentivize the emerging world to make the right decisions? This is my number one priority. Because we work, it is the reason, very closely with the emerging countries, we talk about China. Just last week, I had a meeting with the Chinese environment minister, together with the Chinese chief climate negotiator. They asked the International Energy Agency to help them to build their roadmap to 2060. How we can do that? And it is, of course, we work also with India, with Indonesia very strongly. I think it is important to see what is happening in UK, in Sweden, in France and everywhere. But the emissions growth are not coming from there only it is mainly coming from those countries. I think we should keep an eye on those countries and support them for their efforts. 

ML  21:04 

Well, indeed the developed world, you know, is already decreasing its emissions, they're decreasing per capita, per unit of the economy, even taking into account imports. It's actually... the developed world has decoupled, if you look at it. But the developing world clearly hasn't. And I, I find it, I have found it frustrating, actually, for a long time that we don't talk about leapfrogging. The debate is around, it's always around, you know, Article 6 of, COP this and this. It's very technical discussions, instead of saying: okay, look, fundamentally, isn't the issue that particularly with India, and particularly with Africa, and some of the big countries, Indonesia, Malaysia, and so on, Vietnam, you know, the big countries, big populations, Bangladesh, Pakistan. We need to help them leapfrog not to go through the stages of development that the West, you know, went up and then slowly start to push emissions down. But to jump to that point. Is that wishful thinking? Or is that the right way to think about it? 

FB  22:12 

It is the right thing to think, definitely right thing to think. Whether or not it happens is a different topic. But I have... many countries we talked about. For example, in terms of leapfrogging one country comes to my mind, because I work with India very closely, I expect India to be a very strong candidate in terms of leapfrogging if I have to put two key words here, one of them is the solar, the other one is the batteries. I think India is a very good candidate there. And it is the reason India is a priority country for the International Energy Agency. And I know from the Indian leadership, that they are very keen to be a leader in the clean energy technologies. And we should expect soon, India to come with some strong commitments in that respect. 

ML  23:12 

Well, certainly in terms of COP 26, I'm pretty sure that the UK government, my government will be very happy if India was able to make quite a strong statement there because that's now the the last big... Well, I mean, there's Brazil and a few others that also need to but... You know, really, the leapfrogging needs to look like Indians, as they become wealthier, they join the middle classes, their first car has to be electric, and they have to not go through the period of fossil fuel electricity, but go straight to as you say solar, wind, nuclear, geothermal, whatever else, right? 

FB  23:48 

Exactly. For India, I mean, there are many opportunities, but two of them I can tell you, one of them is the electric cars you mentioned. This is very true. Together with the solar energy going there. But the second one is the... it may seem a bit simplistic, but I think very important, which is the air conditioners. In India, in many Asian countries by far the number one driver of electricity demand growth is air conditioners, which is very normal in the United States, 90% of the households have air conditioning, in Japan 95% of the households, but in Asia it is less than 20%. So with the increasing income levels, they will buy air conditioners. But today in India, or Indonesia, to provide the same thermal comfort an everage air conditioner needs three times more electricity because you know the efficiency standards in many of those countries for air conditioners, for manufacturers, you know that we put a lot of emphasis on energy efficiency. I am thankful to you that you were a member of our High Level Global Commission on Energy Efficiency, which was chaired by the prime minister Varadkar, former prime minister of Ireland, Mr. Varadkar. And one of the recommendations of you and other high level members was to engage with the emerging countries and to make sure that they put strong (...) mandatory measures for air conditioners, and other household equipments. This is, I think, critical. For India, leapfrogging can go through first, electric car (...). And solar. Make the most out of solar, which is the cheapest source of electricity generation in India now. And energy efficiency is a key policy instrument. 

ML  26:02 

And I'm very delighted to see that that work of the Energy Efficiency Commission feeding into things like presumably the net zero plan and IEA outputs. How do you deal, while we're talking about the developing world, though, how do you deal with critics who say, particularly I'm thinking of, maybe not the middle classes getting a car or air conditioning, but maybe the very poor. Are they being disadvantaged by you know... If we say, you know, Africa, really should leapfrog, never go down the route of the fossil emitting energy industry, that means leave your gas in the ground, leave your coal in the ground, leave your oil in the ground, and do the right thing. And these are very poor people. How do you respond to that? 

FB  26:51 

So fairness is a key issue, I completely agree. Justice is a very important issue. And when you look at Africa today, when you look at the cumulative emissions around the world, Africa is responsible for less than 3% of the cumulative emissions, global emissions, but at the same time, it is one of the regions, perhaps the region, which will be hit the most. But in Africa, if I recommend the African ministers, I just talked with the Senegalese minister, to push for solar, it is not necessarily or primarily because of the "saving the planet", which is true, but it is the cheapest source of electricity generation there. Now, think about this. Another very frustrating number I want to share with you, when you look around the world, the amount of solar radiation around the world: the highest in Sub-Saharan Africa, in terms of the quality of the solar. And yet, in Sub-Saharan Africa, the installed capacity of power plants, solar is five gigawatts, which is, in your esteemed country, in the United Kingdom, it is three times higher than that. And I'm sure you will agree with me that Sub-Saharan Africa has more sun than UK, at least most of the time. And yet it has so little installed solar power capacity. So it is the reason I believe it makes sense from an economic point of view, leave aside the fairness issue. We are not telling the Africans: you should make these investments in order to save the world, we tell them: you should make these investments to provide your people first: access to electricity and second: the cheapest source of electricity generation, easier to build easier to install. 

ML  28:53 

So let me do the following. I want to come with some of the sort of critiques of this vision which you're laying out, which is a rapid net zero or rapid transformation scenario. And taking that as the jumping off point, solar - it's fabulous, but the sun doesn't shine at night, and you have maybe rainy seasons, you don't have such a pronounced winter in Africa, but in other parts of the world, you have seasonal challenges when we talk about very cheap wind power, which is very real in the northern, the northern parts of the inhabited world. But of course you can have two, three weeks without wind. How do you deal with the intermittency question? I mean, it's all very well to do the easy bits with cheap wind, cheap solar the cheapest electricity ever, but how do you provide reliable power using those technologies? 

FB  29:43 

This is an extremely critical point. Because if we can push the clear energy transitions, and if we forget the security of electricity, then this may well delay the clean energy or electricity transitions. Because if there's an incident, if there's a problem as a result of the intermittency issue, that you don't have solar all the time, we don't have wind all the time. So there are a few areas that we are working, I'd say a key issue in the IEA, when I took over, as the head of the IEA, one of the first things is that I build a unit, which we call the System Integration of Renewables. How to make sure that on one hand, we push the clean electricity, but on the other hand, we make sure that electricity is always there, because people want electricity 24/7. So, there are some areas from system design, the batteries are coming, hydro power potential, I see a big hydro power potential which can be used as a storage. And we may make use of the technologies which are always there, when we push the button, this can be, depending on the country, this can be nuclear power, this can be something else, hydro power, whatever. So we should not forget the electricity security aspect. It is the reason why I want to come back to what I said: it is not only pushing the button to send a tweet that will happen immediately. It is a this a very well thought design of the energy systems which are very, very complex.  

ML  31:24 

Indeed. And, you know, I find myself in a funny position, because although I've been, as you know, enthusiastic about wind and solar for as long as you and I have known each other, which is some time, but I'm also very aware that these are real challenges. There is a real problem if there is two weeks with no wind in northern... if the UK builds its 40 gigawatts of offshore wind and there's no wind for a few weeks. And then another sort of, I don't know, critique, there are those out there who say: oh, well, the answer has to be nuclear. But you can't use nuclear just for two weeks a year, can you? 

FB  31:59 

No, you can't use nuclear two weeks a year and some people say you shouldn't use nuclear at all. There are also views on that. In our view, the systems should be designed in a way that it secures the electricity for the citizens 24/7, it should be affordable, but it should be clean as well. And at the IEA, we do not exclude any clean energy technologies that are available today and those will be available tomorrow. And I can tell you, with the current clean energy technologies, we cannot solve all the problems we need nuclear energy technologies to be part of the equation. Our numbers show that we need huge emission reductions in 2050. And half of those emission reductions need to come from technologies which are not ready for the market yet today. So therefore, innovation is a very important issue. And I have high expectations from many countries, many governments, including the upcoming US government. And as you know, better than me, the United States has been one of the key drivers of the innovation in the energy technologies. And of course together with the US it is also, it may be India, it may be somewhere else, but we cannot solve all of our problems only with solar and wind today. 

ML  33:26 

I don't want to project but I'm assuming that is a whole bunch of different industrial sectors, aviation, shipping, steel, cement, but also this question of longer term storage. Is that a fair characterization? Or are there other big areas where we still need complete new breakthroughs? 

FB  33:45 

This is a perfect definition, perfect summary. Yeah. 

ML  33:49 

Are there any of those that you think are easier or more difficult? 

FB  33:54 

To be honest with you, we at the IEA, we are a number driven organisation. When I look at the numbers, I don't see any easy a sector, but some of them are harder. For example, aviation is one of the hardest sectors. We are working on many areas on the aviation sector, ranging from the electric solutions to bioenergy and others with some aviation companies. But there are some easy ones, which is, as we talked, electricity generation where we have all the available technologies which are cheap, which are affordable, solar and wind. And they don't come without any problems. Intermittency is definitely one of them. And in some countries in Europe, there are also some social objections, to be honest with you, for example, wind in some European countries, including Germany, we see some challenges there and they don't want, the rural people don't want to see wind built next to their villages. So there are definitely challenges. And this is the, you know better than me, Michael, one of the flows of energy, as I told you several years ago when we were enjoying a glass of wine in the, Terminus was the the name of the very nice restaurant close to Gare du Nord where goes Eurostar. One of the things which makes the energy sector very interesting is there are no easy solutions, there are always 'buts'. It is good, 'but'. So therefore, it makes our work much more dynamic, much more interesting, but at the same time, much more difficult. So it is not so easy with the 140 something characters, we cannot solve the problems. 

ML  35:53 

That's right, I always tell students it's the most fantastic area to get into, is that you can be an expert on anything from decision science, anthropology, physics, chemistry, you name it, politics, communications, you're going to be busy 24/7 in energy. 

FB  36:08 

I completely agree. But it's also fun. When you when you turn on the television, or when you read the newspapers, the cover page, there are very few news which are not related to energy directly or indirectly. Nowadays, it's a bit different because of the things what's happening in the United States. But normally, a normal day, when you watch television, either through climate change, or the prices or technologies or the... as we have in France, the gilet jaunes, the people who have difficulties with some of the measures that governments take, they're always energy-related. So we are not an abstract science, or a sector, which is very much in the middle of the daily debate as well.  

ML  36:51 

Absolutely. And I'm sure you know, you could even argue that what's happening in the US, if you scratch not too far below the surface, you find energy. But I want to, I don't want to go... we could have a wonderful maybe next time we meet for a glass of wine at the Terminus, we should talk about that. But I want to come to one of the areas of innovation, which is getting a lot of coverage and the valuations have gone crazy. And there's you know, enormous amount of interest in and that is, of course, hydrogen. The hydrogen economy has been, you know, promoted a number of that, there's been a couple of hype cycles. And then I suppose the question is, is it different this time? And if so, why?  

FB  37:27 

So, Michael, I was like you, working on that, and I am working on the energy sector since decades, I have rarely seen any technology that everybody loves. Today, everybody loves hydrogen. But when I go one step lower, deeper, I should say, I am not sure they know what they love. So what is hydrogen, and where and how much and so on. So I am very happy to see that many governments around the world are coming with the hydrogen strategy with commitments, billions of dollars. And I see a role for hydrogen, especially in the industry sector, and so called hard to abate sectors, but even this to happen, we need to create demand. Without creating the demand for the, especially, for example chemical sector, the petrochemical sector, which is very important to decarbonize. But everybody loving the hydrogen doesn't mean that we will have a successful outcome, we need to see how do we create a demand and how the hydrogen will help to decarbonize our energy system. You talk about the storage issue, hydrogen can well be a very good the long term storage throughout the year for, I don't know, for offshore wind, for example, it can play a very important role. So it can, it has to be designed very well for which country for which sectors and what kind of value added it can provide. So our suggestion to governments is, hydrogen is important. But you have to design well, so that it is successful, the love doesn't stay as platonic love, it turns to be real love. And therefore, we need to focus on certain areas, which can create easy value added. 

ML  37:33 

I like your focus on demand because what I see is, a lot of the hydrogen strategies that I've been asked to look at or that I've commented on. It's very easy to promote hydrogen production. But then when people start to talk about demand in heating, which is so inefficient, or demand in vehicles, which again is so inefficient and complicated, instead of focusing on as you say petrochemicals, maybe aviation fuel, shipping fuels, steel, I can see some real needs. And long term storage. But when people start to talk about it in transportation or heating, I gotta be honest, I start really shaking my head. 

FB  40:14 

Sure, governments have to decide where do they put their money. I mean, governments do not have the infinite budgets, where they put their money, and what they get out of this. And hydrogen is definitely one of the options, together with all other clean energy technologies. So therefore, the realistic, pragmatic strategies will be very important. 

ML  40:35 

Let me just touch on another area where I think IEA has come in for criticism. It's again, a very difficult, it's part of this kind of there's nothing is perfect, but carbon capture and storage. There's always a lot of carbon capture and storage in the IEA scenarios. And there are those who say, it's really just a way of keeping the oil and gas industry or the fossil fuel industry happy, the coal as well, and historically perhaps more than now. What do you say to that criticism? 

FB  41:04 

Two things. First, are the carbon capture and storage abatement we have in our scenarios is only a fraction of the IPCC scenarios, IPCC is at least x times more than us. I mean, I'm very sorry that these people who make these critiques or these points do not read, it's good to read sometimes. So they have to read this one, first. Second, as I told you, for me, the important thing is the emissions. Energy is good, emissions are bad. So we need energy. And if we have the zero emission energy, wherever it comes from, I am very happy with it. But CCS is bound with a lot of challenges as well. So you mentioned we talk about hydrogen a lot, but we have very little proven record here, the track record here. The same with CCS, we are seeing recently a momentum in CCS, especially in the context of again industry sector. And I see CCS, if it is going to be successful, I see more chances in the industry sector rather than the power sector.  

ML  42:15 

Yes, I mean, cement is a great example. It's very hard to produce zero carbon cement without CCS, right? 

FB  42:20 

Exactly, impossible. How are you going to run the cement just with solar or wind, so we have to be very careful. But again, and again, one of the things that we all have to be careful, we have to study how the energy system works. This is not a, as they say in Germany, you speak German, it's not a Kinderspiel. It's not a small thing to do. It says a serious issue. 

ML  42:46 

These are very challenging problems to solve. I love the idea that, you know, when I brought up CCS and how the IEA has been criticised, you sort of, you mentioned the IPCC scenarios, because you know that I've been doing my utmost best to raise awareness of the IPCC, just how unrealistic the IPCC scenarios are, there's this particular one, RCP 8.5, which is the extreme scenario, which involves the coal industry growing by a factor 7, between now and 2100. When we know, you and I know, that the coal industry is shrinking. But they also build in a lot of direct air capture or BECS or whatever you want to Biological Carbon Capture, and CCS I mean, on a scale, which is heroic, even by comparison to your own scenarios. 

FB  43:39 

I completely agree. So we, in my view, we do not have the luxury of excluding any clean energy technology that is promising. But some of them may well not see the light of the day. But from the beginning to exclude them for this or that ideological reason is not the right thing to do. There are some proven ones - solar, wind, efficiency. I would put efficiency also there. And there are some upcoming ones such as the electric cars moving very strongly, I would even say the batteries are moving very strongly and many others will come. And I wouldn't, Michael, as some people do, I don't see the privilege to exclude fo example nuclear from the equation as well. Because nuclear after hydro power is the second largest source of zero emission technology today. I know the difficulties, many difficulties from the financing to the social problems, but it is the reality of life. Today in United States, about one fourth of the electricity generation, if I'm not wrong, coming from nuclear power. So is Europe, similar in Japan. And if they are gone, if you shut them down, all of them at once, who would guarantee me that they will be all replaced by solar and wind? And what are the implications of that? So I am not pushing any technology. I want to see clear energy technologies and secure, and, of course, affordable. This was a very important, we shouldn't forget the affordability part of this issue.  

ML  45:29 

Yes, and I've certainly written about how, you know, nuclear, we cannot shut down what we've got early because that's, you know, that would consign us to failure essentially on climate. But the challenge of the current generation being the economic challenge, but I'm very, I'm very much in favour experimenting with funding the next generations to see if they can be affordable. The other one I wouldn't write off is geothermal. I did a lot of work on geothermal 10, 12, 15 years ago, and then always gave up because it just didn't seem to... it never popped. But some of the innovation based on the drilling technologies, the closed loop technologies, not even fracking, beyond that. The closed loop advanced geothermal is kind of exciting and potentially scalable. So I would add that to the list. 

FB  46:18 

I would definitely agree with you. There are several countries in the world, especially in Asia, but also in the United States, there is a huge geothermal potential. And this can aid in many areas, including the heat. And this can be definitely a part of the equation. Definitely. 

ML  46:34 

That scenario, I would expect to see more action. So now, Fatih, we're gonna run out of time soon, but I need to bring up one final topic, which is, of course, oil demand. We haven't... we've got all the way through and you started your career with OPEC.  

FB  46:48 

Nobody's perfect. Nobody's perfect. 

ML  46:50 

Yes. But no, no, I didn't say that in a... you walked into the light, you've been moving towards the clean energy and the transformation scenarios, I'm very happy. But you know, BP stunned the world, I think it's fair to say, at the end of last year by coming up with its scenarios, which are now essentially flat and then declining oil demand or declining at faster rates. And that's still not the accepted wisdom. I think all of us have got in the scenarios, some sort of an oil peak, but BP said we may already have seen it, what do you think? 

FB  47:27 

I think you are right, BP and some other CEOs of the major oil companies and some leading thinkers, thought leaders said that we have already reached the peak. And my view is, I am sorry, if there are no strong policies, oil demand will rebound before the crisis level. And again, why I say this, people say because teleworking has started, there are some emergency measures as a result of COVID. These are, of course, important, but these are not game changers. If we don't see a big penetration of electric cars, for example, if we don't find a way to address the plastics issue. The petrochemical sector is the main driver today of the global oil demand growth. We will go back there, where we were before the crisis. Again, I come back to China, because China is the first country which is getting out of the COVID crisis. Today, Michael, what confirms what I said several months ago, that we are not, we may not see the peak. It is China's oil demand today is higher than 2019. It is rebounding very strongly. So this is, therefore if we want to see a peak of oil demand in the world, we have to make sure that the governments put policies in place to give a room for the other solutions which are not run by oil. 

ML  49:06 

Yeah. And you've written, IEA has analysed and shown also the impact of SUVs that actually all of the wind, all of the solar in the world, that impact has been absorbed and more by the shift to SUVs. 

FB  49:18 

Yes. Last year, 2020, I mentioned 3% of all car sales are electric cars, and 43% of all the cars sold in the world were SUVs. And this is the it is not only the United States, as you may think, but there's also India, it is also China, it is Europe and elsewhere. So these are numbers that we have to see and therefore take the action accordingly. 

ML  49:49 

Here's a question. You've got all of these, the pressure for net zero and particularly the European oil companies are responding. They're announcing their net zero. And a big part of the response to that strategy is to stop upstream exploration development. In the case of the more aggressive players, they actually have to divest and get rid of upstream because of the commitments they've made. If demand, as you explained, continues to grow, but supply is being constrained by those decisions, aren't we just going to see a huge oil price spike? Does that concern you? 

FB  50:34 

There may be a lot of volatility in the oil markets. So therefore, many of the oil companies in Europe and elsewhere are reviewing their business strategies. And here, for me, key issue is, what will happen to those countries whose economies are directly linked to oil prices and oil economies, those in the Middle East, some of them in Africa, such as Nigeria, Libya, Algeria, some of them in Latin America. Because I can tell you, I can assure you, everybody, that no country or no company, oil company will be unaffected from clean energy transitions. So therefore, they have to find ways to cope with it, if they want their companies, their countries to have a sustainable future. 

ML  51:36 

Yes. And I think on that note, what a place to leave our conversation. We're going to see a lot of volatility. And it's going to be a pretty wild ride, I think we can definitely agree on that. 

FB  51:50 

I completely agree with you. Just to finish, Michael, I thank you very much for all the work you are doing on many clean energy fronts. And the climate challenge is essentially an energy challenge, because the energy that powers our daily lives, our economies, is responsible for 80% of the global emissions. So it is the reason the IEA is very determined, I am very determined to lead global clean energy transitions with the colleagues like yourself and others. I thank you very much for giving me this great opportunity Michael. And hope to see you soon. and preferably in the restaurant Terminus over a bordeaux. 

ML  52:43 

Well, either in the Terminus or at your headquarters or anywhere that I could do anything to help your work. Thank you very much. Thank you. 

FB  52:51 

Thank you. Bye, bye. Thank you. 

ML  52:53 

So that was Fatih Birol, Executive Director of the IEA, the International Energy Agency, talking about how the energy sector globally can deliver on those net zero pledges that most of the world's major economies are making. My guest next week on Cleaning Up is Steven Chu, winner of the Nobel Prize for Physics in 1997. He served as Secretary of Energy during President Obama's first term, and now he's a professor of physics and physiology at Stanford University. Please join me this time next week for a conversation with Steven Chu.