Former Energy Transition R.I.P? – What Should Replace It?

By Stephen V. Arbogast

Every spring CERAWeek comes to Houston.  This gathering of the prominent and mighty of the oil & gas industry is widely associated with the figure of Daniel Yergin, co-founder of Cambridge Energy Research Associates and the CERAWeek.  Pulitzer Prize winning author of the canonical history of the industry, also called ‘The Prize,’ Yergin has adroitly evolved with the times.  Two later books, ‘The Quest’ and ‘The New Map’, introduced Yergin as a chronicler and analyst of the Energy Transition.  Now, coincident with CERA Week 2025, he and two associates come with a new message – a Foreign Affairs journal article entitled ‘The Troubled Energy Transition.’ (see note below on article’s team of authors)

Trust Daniel Yergin to judge the moment right for delivering an unwelcome message but to package that message in a manner making it hard to cancel the author.  Yergin has an interesting style for accomplishing this feat.  He delivers ‘intermediate conclusions’ as statements.  These Yergin then supports with facts and data that are hard to refute – all this to the point where the evidence rises to a level that would support more impactful ‘final’ conclusions.

In this case, Yergin could have said something like – ‘The Energy Transition, as envisioned, probably won’t happen.’  He doesn’t do this.  He avoids the hard conclusions from the case he makes, choosing to offer a few changes and pathways that might make a difference.  Pro-Transition readers are left to hope things might work after all, while those who have always felt that in certain ways the Transition Emperor had no clothes are left with the satisfaction that realities are finally being recognized.

A review of Yergin’s ‘intermediate conclusions’ and his supporting evidence makes for devastating reading.  He begins with this:

“Over the past 15 years, wind and solar have grown from virtually zero to 15% of the world’s electricity generation and solar panel prices have fallen by as much as 90 percent…Yet 2024 was a record year in another regard…the amount of energy derived from oil and coal also hit all-time highs.  Over a longer period, the share of hydrocarbons in the global primary energy mix has hardly budged, from 85 percent in 1990 to about 80 percent today.”

 This is followed by a sobering report card on greenhouse gas (GHGs) emissions:

 * The Foreign Affairs article was authored by the team of Daniel Yergin, Peter Orszag and Atul Arya.

“The International Energy Agency (IEA) projected in 2021 that, for the world to meet 2050 targets (i.e., net zero emissions), greenhouse gas emissions would need to decline from 33.9 gigatons in 2020 to 21.2 gigatons in 2030; thus far, emissions have gone in the other direction, reaching 37.4 gigatons in 2023 (and there’s no reason to think that a 40 percent decline in just seven years will be remotely feasible).

 Even more recent data shows this emissions story is not improving. According to Global Carbon Project, Total CO2 emissions – including both fossil and land-use emissions – will also set a new record at 41.6Gt CO2, reflecting a growth of 2% over 2023 levels.

 Having documented where things stand, and that the Transition as envisioned by IEA, the Biden Administration and a host of European leaders is not happening, Yergin and team then turn to why this is the case.  They make the point that “climate goals do not exist in a vacuum.”  By this is meant that climate risk must compete for attention and resources with other high-profile objectives: energy cost, energy poverty, geopolitical rivalry and its sometimes stepchild, energy insecurity.  Looked at as in competition with these weighty matters, it becomes clearer that the Transition’s heyday (2010-2019) coincided with an unusually benign period in global economic and security affairs.  Since then, events like the Ukraine, Gaza and the return of inflation have brought other energy issues to the forefront.

Let us take each of these competing interests in succession and let Yergin tell us what’s involved. Energy cost has multiple dimensions.  There is the pure cost of energy to customers and consumers.  When costs are high, economies suffer, and political systems come under strain.  This became obvious when the Ukraine war erupted, initiating an end to cheap Russian natural gas into Europe.  European industry was moved from $3/MBTU pipeline gas to $13/MBTU LNG and has yet to recover.  Europe’s economy, and Germany’s in particular, has stagnated.  Unsurprisingly, out-of-power politicians and parties have started to identify high energy costs as a source of current economic malaise.

Behind this is another unpleasant reality – that when measured properly ‘all-in’ the ‘Green Energy’ is more expensive than the hydrocarbons it seeks to replace.  Said differently, Yergin quotes Bill Gates in saying we must pay a ‘Green Premium’ to replace GHG emitting systems with “more expensive lower-emissions technologies.”

Yergin puts emphasis on two other energy cost aspects – the amount of capital required to fund the Transition and the market barriers affecting many nations where investments will be needed.  On the first point, he cites figures provided by the improbably named Independent High-Level Expert Group on Climate Finance who provided this data at the UN’s COP29 meeting in Azerbaijan:

“It is projected that the investment requirement globally for climate action will be $6.3 to $6.7 trillion per year by 2030, rising to as much as $8 trillion by 2035.”

 These are staggering figures, but the sheer numbers tell only half a story.  For starters, they don’t detail what other needs won’t be met when this amount of capital is diverted to Transition funding.  Remember that the Transition involves replacing an existing, functioning energy system that has remaining economic life with new ‘grassroots’ facilities.  In purely economic terms, this is a ‘net negative’ exercise; it must and will divert capital from other uses including spending on health, education and other social needs.

Some climate activists argue these impacts will be bearable, because Transition spending can be funded out of oil & gas investments no longer needed.  There is less to this argument than meets the eye.  Oil & gas are depleting resources.  Even if the forecasts of major declines in their usage come true, significant investments will still be needed to replace much of the depletion in existing reserves.  Moreover, as Yergin points out, IEA and others’ forecast 2050 demand for oil and gas to be little different in volume terms from today (reference case outlooks).  This implies a need for continued oil & gas investment to replace depletion and sustain current reserve levels.

Yergin’s other cost point concerns the financing challenges facing specific regions whose actions on energy will be critical to accomplishing a Transition. He writes:

“It is further estimated that the global South countries will account for almost 45 percent of the average incremental investment needs from now to 2030, and they have already been falling behind in meeting their financing needs, especially in sub-Saharan Africa…If global South countries are largely exempted from these financial burdens, global North countries would have to spend roughly ten percent of annual GDP – for the United States, over three times the share of GDP represented by defense spending and roughly equal to what the U.S. government spends on Medicare, Medicaid and Social Security combined.”

 There is much to unpack here.  Financing won’t readily flow to the global South due to concerns about repayment and issues of project execution and corruption.  Yergin cites the IMF as reporting that “56 percent of low-income countries are ‘at high levels of debt distress.”  Meanwhile, how will global North electorates react to a major diversion of funds to ‘outsiders’ and in return for ‘climate benefits that are undefined in terms of timing, extent or certainty.?’

Having brought the global South onto the Transition stage, Yergin turns to energy poverty as another barrier.  The South, especially Africa, is both demographically fertile and energy poor.  Yergin writes:

In Africa…whose population has been projected to increase from 18 percent of the global population today to 25 percent by 2050 – almost 600 million people live without electricity, and roughly one billion lack access to clean cooking fuel…As Africa’s population grows, more people will require food, water, shelter, heat, light, transportation and jobs, creating further demand for secure and affordable energy.”

 The fundamental nature of these needs causes the leaderships in global South nations to take a radically different view of where Energy Transition stands in their priorities.  Yergin quotes Malaysian prime minister Anwar Ibrahim saying:

“The need for transition must be balanced against the need to survive, to ensure that our present policies eliminating poverty in providing education, health and basic infrastructure are not frustrated because of the dictates of others that do not place adequate consideration on what we have to face.”

 Yergin follows this message with the daunting observation that three billion people annually use less electricity per capita than does the average American refrigerator.  Because of the urgent demands of energy poverty, “carbonizing” will thus have to precede “decarbonizing.”

So far Yergin has been discussing macro-fundamentals, i.e., the costs and funding of Transition, global demographics and the energy needs of the global South.  Layered on top of these concerns are aspects of the politics of the day – geopolitical rivalry and energy security.  Yergin reminds readers that governments cannot tolerate supply disruptions or sharp price increases.  Letting any of those happen leads to what Yergin refers to as “greenlash.”  He writes:

“Assuring that citizens have access to timely supplies of energy and electricity is essential for the well-being of populations.  That means recognizing that oil and gas will play a larger role in the energy mix for a longer time than was anticipate…which will require continuing new investment in both hydrocarbon supplies and infrastructure.”

 As for geopolitical rivalries, Yergin notes China’s already dominant position in the mining and processing of minerals essential for renewable energy infrastructure.  This has led the US to respond with industrial policies and import tariffs, some of which may address security concerns, but much of which will elevate the costs of everything from essential metals to solar panels and EVs.

Yergin caps off his list of challenges by noting the “electrical surge” unfolding around the Transition:

“This is the result of a quadrupole piling on: a coming surge in consumption arising from ‘energy transition demand’…reshoring and advanced manufacturing…crypto mining and the insatiable energy appetite of data centers powering the AI revolution…Even as renewable energy generation grows, natural gas will play a larger role for a longer period to help meet the growing demand for electricity.”

 Daniel Yergin doesn’t draw the conclusions that are obvious from the arguments he presents – namely that the Energy Transition envisioned by IEA, the Biden EIA and most academics who work on energy – that Transition seeking Net Zero global emissions by 2050 is extremely unlikely to happen.  It is also unlikely to happen even in the U.S. or Europe.  Yergin implies as much when he says, as noted above, that reaching the IEA’s 2030 emissions target is ‘extremely unlikely to happen.’

Rather than pronounce the current version of Transition RIP, Yergin instead resorts to a complicated and conditional message:

“The scale and variety of the challenges associated with the transition mean that it will not proceed as many expect or in a linear way: it will be multidimensional, proceeding at different rates with a different mix of technologies and different priorities in different regions.”

 This conclusion is unarguable as far as it goes.  All the points Yergin makes in the article powerfully support the statement.  But these words beg the question – is this Transition, in all its multidimensional, non-linear character, a sufficient response to Climate risk?

Judging by the limited nature of the suggestions he makes for change, Daniel Yergin is not overly optimistic that a sufficient response will be forthcoming.  This is not a comfortable resting place for the discussion.  We need to see Daniel Yergin’s epitaph for the initial vision of Transition as both a call for deeper thinking and an opportunity to address longstanding, fixable obstacles that have impeded needed progress on emissions.  The list of these obstacles that comprise the opportunity is quite long.  Many of them are also cost effective and exportable.

The details of this opportunity will thus be the focus of our next paper on “The Transition is dead, long live the Transition.”