Why This Energy Transition is Different

Today’s shift to carbon-free power is commonly called “the energy transition,” yet the label can suggest that this is the first, or only, transformation of its kind. Throughout history, societies have moved from one dominant energy source to another, with each transformation bringing profound economic, social, and environmental change.

On the podcast, we explore how today’s energy transition compares to those of the past, while noting that—despite decades of investment and policy support—we’re still in the early stages of moving toward a net-zero carbon system.

Why is this transition taking so long? Why does it feel more politically and socially charged than previous ones? And are our current anxieties about energy jobs, community impacts, and planetary livability really new?

Cutler Cleveland, associate director of Boston University’s Institute for Global Sustainability, brings a historical lens to energy systems and explores what makes this moment in energy history both familiar and unprecedented.

Full Transcript

Andy Stone: Welcome to the Energy Policy Now podcast from the Kleinman Center for Energy Policy at the University of Pennsylvania. I’m Andy Stone.

Today’s shift toward carbon-free power is commonly referred to as “the energy transition,” yet that label can suggest that this is the first or only transformation of its kind. In fact, it’s the latest in a series of profound changes to our energy system that have unfolded over centuries and which have come with increasing frequency over the past 200 or so years. On today’s podcast, we’ll take a look at the current energy transition in the context of those that came before. This is the longest running transition to date, yet despite decades of growing investment and supportive policy for clean energy, we still find ourselves in its early stages, at least if a net-zero carbon energy system is our ultimate goal.

So why does this transition seem to be taking so long? Why might it feel so much more politically and socially contentious than transitions in the past? And has the anxiety we now feel about energy jobs, community impacts, and the livability of our planet all been seen before?

Here to help us make sense of where we stand is today’s guest, Cutler Cleveland. Cutler is a Professor in Boston University’s Department of Earth and Environment and is Associate Director of BU’s Institute for Global Sustainability. His work explores the links between energy, climate change, and sustainability, frequently placing them in historical context. As we talk, he’ll guide us through past energy transformations with the hope of better understanding the path we’re on today. Cutler, welcome to the podcast.

Cutler Cleveland: Good morning, Andy. It’s nice to join you. I’m happy to join this distinguished line of guests on your podcasts.

Stone: It’s great to have you here. Before we get into today’s conversation, I want to point out that in addition to the positions you hold at Boston University that I just introduced, you are also Director of the Visualizing Energy Project, which I have to say is a truly amazing resource that puts much of the historical changes that have taken place in the energy sector and that we’re going to be talking about today into context. To get us started, could you tell us a little about that project and your goals for it?

Cleveland: Sure, I’d be happy to. Visualizing Energy was borne of a motivation of mine to communicate the often times neglected or misunderstood importance of energy in human existence. Now that may sound like a ridiculous statement because all of us are familiar with various types of the energy system in our everyday experiences — our monthly utility bill or global headlines about oil passage through the Strait of Hormuz in the Middle East or filling up our gas tank or recharging an electric vehicle for transportation. But it goes much deeper than that. Energy really connects across every current and historical aspect of civilization. It fuels economic growth. It is a key driver of public health, particularly in the form of air pollution. It underpins a lot of current and historical geopolitics. It is an instrument of global finance. It is a great source of inequity in the world, in terms of who gets impacted by the pollution from the combustion of fossil fuels, all the way to who has access to clean energy. It underpins every aspect of our lifestyle.

So the idea behind Visualizing Energy was to take that broad, interdisciplinary view of energy and distill it into short data stories that are driven by engaging visualizations, that use data about those various aspects of energy to tell simple stories about how energy has driven the evolution of society and the environment to date, and what’s happening now, in terms of our current energy transition. It’s meant for a broad general audience. All the information and data are open access, and another key attribute from my perspective as an educator is that a lot of the work is done by students at Boston University who generate, gather, and clean data and help produce the visualizations and edit the stories that I write.

Stone: It’s amazing because looking at that site, actually seeing the visualizations, for example, of how the fuel mix — the mix of fuels that we’ve used over the century, the last century-and-a-half — have changed really brings it home. You really see in those visualizations how much change there has been. As you just established, and we’re going to talk about here is that energy transitions are nothing new in what we refer to as “the energy transition” today is really the latest in the series of transitions that have taken place over quite a long history. Could you give us a quick, 101-level introduction? What have been the notable energy transitions, and what has driven them to take place?

Cleveland: I’ll begin by talking about the transitions that have occurred in the US and Western European economies and Japan, which have a lot of commonalities, in that there are some similarities to what’s happened in the large emerging economies in China and India, although those are markedly different in some important ways that we’ll discuss.

Throughout human history, energy transitions have occurred that have really been hinge points in the trajectory of human civilization. The first one is fire. When we learned to control fire, it dramatically changed lives because we could heat ourselves, provide thermal comfort, and most importantly, it transformed our ability to prepare food, which increased food security. And then later, it helped us understand how to smelt metal and make ceramics, which were the building blocks of early civilization.

Then came the transition to using wood as a fuel, and in the United States, if we go back to the Colonial Period, when the European settlers first arrived, a lot of major activity was essentially deforesting most of the Eastern half of the United States over the first century of our existence, and that wood provided heat for cooking and heating of homes and for early industry. Then, beginning in the 19th century, there was a rapid transition, the first major energy transition in which we replaced coal for wood. And so by the time of the First World War, we had shifted to using about 75% of our energy coming from coal. It was a dramatic and pronounced increase, but it took a long time. It took 30, 40, 50 years for coal to fully replace wood. And that is typically what many people view as the Industrial Revolution. So that period when we went from an agrarian, wood-based economy to a more urban manufacturer, industrial-based economy. And that was directly associated with the use of coal and its associated machines, which in technical terms are called “energy converters.” So that means the steam engine, which then used the coal to generate electricity, to run textile mills, to smelt metals, and so on.

Then the second major transition occurred about the time of the First World War through the 1960s, which is when oil and then natural gas replaced coal. So by 1970, oil and gas had almost completely replaced coal, just as coal had replaced wood. By that time, oil and natural gas were supplying about 70% of the country’s energy, and coal had declined in its share, although it was still a primary driver of electricity generation.

Most recently, we now see in-roads being made by renewable energy, particularly wind and solar, which have, in relative terms, increased pretty quickly, but on an absolute scale, still are in the single digits of total energy use by the United States. We are still largely a fossil fuel-driven economy. Of course with that shift from coal to oil and gas, we also had major changes in the types of the energy converters we used. The development of the internal combustion engine and the automobile that includes the diesel engine, and then later the natural gas turbines, which are what powers aircraft and which generate electricity in natural gas power plants.

So you had this hand-in-hand change in the fuel sources and the machines that converted that energy into useful services, like moving people and goods, thermal comfort, refrigeration, and so on.

Stone: What really stands out are these transitions that you’ve just described, going all the way back to fire. They were based upon the new availability of a new energy resource/technology. So it seems like the technologies of the resource availability was the beginning, and then the market took over and pulled these through because these were great new resources that people wanted to use.

Cleveland: Yes, that’s exactly right. One of the keys of what you’re describing there is what drove these transitions. A lot of economic, technological, political, social factors were involved, but at root, it had to do with the attributes of the energy themselves — coal, oil, gas — and the machines that converted those fuels into useful energy services.

So in the case of, for example, oil replacing coal, that was driven largely by the fact that oil is an amazing resource because it has a very high of what we call “energy density,” the amount of energy contained in a pound or kilogram of the fuel, and also the amount of energy contained in a certain volume of that energy, so the amount of energy per liter or per gallon, if you want to think of it in terms of a transportation fuel. Oil has this very unique position, unprecedented amongst all energy sources, that has very high energy density, which makes it feasible and possible to put this little tank of fuel on an internal combustion engined vehicle that weighs a couple of thousand pounds and move it 400 or 500 miles across the surface of the Earth. That is an amazing feat of physics, and it has to do with that attribute of the fuel. Wood, on the other hand, is much lower quality in terms of energy and density. Then if you look at the machines doing the work hand-in-hand, back when we were a wood-based economy and an agrarian economy, what was actually doing all the tasks, the work, in everyday life? It was people and horses.

People are relatively inefficient energy converters. We can’t do physical work very quickly. Horses, on the other hand, are six times more powerful than humans, and so when we learned to domesticate horses, that was a major transition. The amount of time it took for a person to till an acre of land was reduced six-fold when we developed the ability to use horses. So think about what that meant. All of a sudden, the average farmer was six times more productive, which freed people from having to grow food. So people were then able to start to move to cities or early towns, and it opened up the possibility for diversification of the economy. They could become merchants. They could become artists. They could become whatever — something other than growers of food.

Then as you move through the progression of these new machines, you move to the early water wheels, which were very powerful and could saw wood or grind grain way faster than a horse turning a millstone. And then the steam engine, and then the internal combustion engine and the gas turbines, and now you’re talking about machines that can do work compared to those early energy converters, hundreds of thousands or millions of times more powerful.

So the combination of these higher quality fuels and these new devices that converted that energy into useful services enabled the economy to spin much faster. And that’s what enabled economic growth to occur to the extent that it did. It’s no surprise that the rapid expansion of the economies in Europe and the United States occurred in the 19th century, then particularly much more quickly in the early 20th century because it was physically possible to do so because of the changes in the energy system.

Stone: So you’re talking about how energy has charged the economies of the world, made growth happen much more quickly. You have said that the world is now “full.” What exactly do you mean by that, and how does that condition the nature of today’s energy transition, particularly in comparison to what we’ve seen in the past?

Cleveland: I use the term “full world.” Actually it’s a term borrowed from Herman Daly, one of the founders of ecological economics, to describe in a relative sense how today is different than these early energy transitions. So when the transition from wood to coal occurred, for example, there was a relatively a small number of people on the planet, relative to today, and a relatively small number of what Daly called our “artifacts.” So these are things that people have built. These are roads, bridges, buildings, durable goods like cars, and homes and appliances, and also all the other goods and services that we produce and consume.

We are now facing a full world. The world is full of people, still growing, although at a much smaller rate. The world is full of our artifacts. The world is full of all the pollution that we have created by using all this energy. The atmosphere in our land and our water has been degraded by the pollution, and we have transformed about one-third of the non-ice land surface of the planet into some type of human-dominated ecosystem. So we can no longer ignore the impacts of living in a full world. We simply cannot use the atmosphere as a dumping ground for our pollutants. The case of carbon dioxide and climate change is the penultimate example of that. So that is a constraint that we face, that is new, relative to all these previous energy transitions.

Stone: That gets to the next point here. We live in a world where this world is full. That implies environmental pressures, constraints, as you just said. And that gets us to the current energy transition, which has been driven, as I understand it, unlike earlier transitions, not by technologies per se, but by environmental externalities, which in this case have created a need for new technologies to meet the current challenge.

Cleveland: That’s right. That’s one of the biggest differences with the current energy transition. I would say we’re in the very nascent stages of an energy transition, relative to the past. I’d say there are two different constraints and drivers that we face today, relative to the past. The first one, as you mentioned, is externalities, which is an economic term, which essentially means the cost associated with the production and delivery and use of energy that are not borne by the users of that energy. So we burn fossil fuels, carbon dioxide goes up into the atmosphere and causes climate change. Those impacts spill across the planet. And so the users of fossil fuels at a given place and time impose costs that all of us suffer. The market does not do well with those types of external costs.

Dealing with internalizing those costs into market transactions is needed to send the appropriate signals to developers of new energy sources, producers of energy including electricity, and users as to what the real costs associated with that are. The second difference, I would say, is equity. There are tremendous inequities in the world writ large, and we’re aware of many of those. Many people think of that in terms of income, but there are very important inequities associated with energy. The first is historic inequities associated with who is exposed to the historic impacts of pollution associated with the fossil fuel energy system? Those show a distinct inequity across class, race, income, and almost any other indicator of social standing that you want to use.

The other important equity is access to clean energy. So there are still more than a billion people in the world who cook with wood and dried animal dung. That has tremendous impacts on the quality of life for those people. A lot of those people live in rural places in China and India and Sub-Saharan Africa. Those fuels are tremendously polluting. They produce a lot of particulate matter which causes a lot of premature mortality in those regions of the world, and they impose a lot of costs on the people, largely women, who have to go out and collect those fuels.

As we look at the developed world, access to clean energy in the form of rooftop solar and electric vehicle charging infrastructure also shows distinct inequities. So people are much more aware and concerned about these equities — well, some parties are. Along with the need to internalize the costs of carbon and other aspects of pollution and to ensure equitable access to cleaner energy technologies are two key drivers that were not there in the past.

Stone: It’s stating the obvious here, but we now live in a political environment in the United States, with the current administration and the current Congress, where equity and access to clean energy and clean energy generally are in the crosshairs. And that brings me to the next issue, which is just kind of building upon what we have been talking about here, and that’s talk about externalities. Markets necessarily aren’t going to address those externalities without some sort of guidance, and that’s where coordinated policy comes into making this transition happen.

So again, this transition is not something that’s happening. I hate to use this word, but I guess it’s the best word that comes to my mind, “naturally,” based upon some new resource, but again, it is driven by environmental externalities, and then it must be pushed forward, at least in good part, by policy.

Cleveland: Yes, so as someone who knows a lot about energy, has talked to a lot of energy experts, you obviously know that the term “coordinated policy” is an oxymoron, at least in the United States because we certainly don’t have that, and certainly that doesn’t happen at the global level, but I get your point. The challenge that we face today, since time immemorial, at least in the modern world: What is the balance between free markets and government intervention? We want to be careful to not have the government — I’m speaking of the United States here because that’s what I know the most about. We don’t want the government clearly picking or having a strong hand in picking winners and losers in the energy technology area because we don’t have a super track record in that.

But markets do need to be steered, particularly when it comes to these carbon and other environmental externalities and equity because the free market doesn’t deal well with meeting those criteria. So if you think those are important, then there is a clear case for the government to be involved and to steer the energy system in a particular direction. There is simply a lot of vested interest in the fossil fuel energy system and the current energy infrastructure who would prefer not to have the government involved and accelerating the transition away from fossil fuels. Of course there are those who are on the so-called “clean energy” side who look at the current situation in terms of climate change and the impact it will have on well-being who say, “We definitely need that steerage role of government policy.”

Stone: One of the things I think is very interesting here as well is we now live in a world in which energy is deeply integrated into our everyday lives. You’ve already started to talk about that. It’s in our phones, in our cars, in data centers, you name it — going up and down the list, right? The plastic in the ballpoint pen that I’m holding in my hand. It’s all from petroleum. And I would imagine that this integration creates additional friction for change. There’s a lot that’s perceived that could be lost or is at stake in this transition. What do you think about that?

Cleveland: There is a lot at stake, but I think one thing we haven’t talked about here, and this is the perfect time to interject it, is the role of fake news and disinformation about energy. Fake news and disinformation is ubiquitous now in society across many issues, and energy is no exception. This harkens back to — I’m dating myself here — back to the 1970s and the Carter administration, when we had severe energy price increases due to geopolitical events in the Middle East, which caused tremendous increases in the price of gasoline and energy in general, and it was driving a significant recession. Jimmy Carter came online in a famous speech and essentially said, “Look, we’ve got a problem here, and the problem is how we use and rely on energy, which makes us vulnerable to energy price increases. And so we need to develop clean energy, we need to — ” I think he actually used the word “sacrifice,” which of course is political suicide in the United States.

Stone: Yes, that didn’t go over so well.

Cleveland: And so on and so forth. And then along comes Ronald Reagan who says, “Ah, there’s no need to sacrifice. We need to unleash the free market to deliver this abundant energy that the planet holds. And that argument won the day. So we have a real challenge in the United States of people painting a picture of shifting to renewable energy, which will cause the price of energy to go up, and we’ll all be sitting in our freezing living rooms, huddled in blankets in front of shuttered television sets because we won’t have enough energy.

So that is a spectre that, in various reincarnations, is being viewed today as people suggesting that our very way of life that we so cherish, which was built on cheap, abundant energy, is threatened by a shift to clean energy, which is certainly probably not the case, but it’s certainly very powerful politically.

Stone: There are also the impacts on energy communities, on industries. You’ve talked about vested interests, and I think those concerns are very understandable. Don’t get me wrong on that, but when we’re talking about vested interests, my perception is — and correct me if I’m wrong — that the energy industry in the past, during past transitions, was not as well established as it is today, and the pushback from vested interests with a lot to lose maybe wasn’t quite as strong in the past, as well.

 Cleveland: Yes, I think that’s probably true, and the vested interests who were being replaced — I mean, were the horse and buggy manufacturers up in arms and had power to fight against the internal combustion engine?

Stone: Or the coal industry, when oil and gas came along, right? Would that be a better analogy?

Cleveland: Yes, that’s certainly the case. Of course coal still had a major role and a major outlet, even as the steam engine went away and was replaced by the internal combustion engine. It still played a major role in electricity generation. Coal generated half of the nation’s electricity for more than 50 years, in the early 20th century. But you’re right, they were much less powerful. Now, oil is the lifeblood of modern civilization. Natural gas is closing in, largely due to advances in hydraulic fracturing, which has created an enormous boom in energy in the United States and the ability to transport energy globally now through advances in liquefied natural gas transportation. So we now have these very powerful actors sitting atop a vast store of remaining carbon in the Earth’s crust, who don’t want to see things change at some fundamental level, despite what they say on their websites, most of which is just hogwash.

Stone: What’s interesting is we know incumbent fossil fuel industries have played a role in shaping or slowing the energy transition, and we also know that some of these companies also have tried to become major players in the energy transition. I’m thinking about BP. I’m thinking about Shell here, but at the end of the day, they seem to have withdrawn or retreated from their efforts. What does that say about the compatibility of these legacy industries or vested industries and the clean energy that we’re trying to build for the future?

Cleveland: That’s a very good question. I have a couple of observations on that. One, I would be interested to see what fraction of the total new investment BP or some of these other companies who have dipped their toe into renewable energy, what fraction of their total new investment or R&D budget goes to renewables versus conventional fuels? I bet it’s tiny, very tiny. So how strong has their commitment really been?

I think even more importantly is that, particularly in the case of natural gas and oil, we are awash in these fuels. Fracking — people don’t understand how important fracking has been. The United States is now the leading producer of fossil fuels other than coal. We’re building LNG export terminals. We are producing more oil than any country ever has in the history of the world, and that’s simply due to fracking. And so they are now sitting on this vast store of potential revenue, and so they look at any chink in the armor of the clean energy advocates which relate to economic growth or job security or however it’s politicized as clean energy being bad or threatening to jobs. They will use that to roll back to this fat resource they’re sitting on.

Stone: We talked a little bit earlier about this being a long energy transition. Again, we’re a couple of decades into the aggressive policy in investment stage for this, 20 years, arguably, and we still have a very, very long way to go. In Visualizing Energy, there’s a very interesting chart or graph there that shows that even though the amount of renewables we’re using in this country has grown, fossil fuel is still about 80% of the mix. So that hasn’t budged a whole lot.

There’s this idea that a slow energy transition is a vulnerable energy transition. One that takes decades is more vulnerable over time. Tell us your thoughts about that.

Cleveland: Well, first of all, thanks for mentioning Visualizing Energy again. My students who do all the work will be very happy to hear that again. I think the pace of the transition is, of course, one of the key issues, and the pace discussion is driven by those who are looking to the scientific assessments of climate change. The conclusion by the experts across physical and economic and other sciences is that we want to limit future temperature increases to less than 2 degrees centigrade, relative to the pre-fossil fuel world. And the temperature has already increased by more than a degree. Why did they pick that target? It’s imprecise, but if you look at the actual discussions, it’s basically looking at the impacts on rainfall and temperature and drought, and the resultant impacts on agricultural productivity in heat deaths and reduced productivity that above 2 degrees C, the wheels start to come off the bus in some important ways. So it’s a somewhat arbitrary target, but it has some basis — quite a sound basis, actually — in the natural and economic sciences. So that’s where the pace comes in, because if you want to keep warming to that level, you essentially have to get to what’s called “net-zero carbon dioxide emissions from fossil fuel combustion and land use change.” That has to go to zero by 2050. We’re not even anywhere close to that. Global emissions are still increased or maybe have somewhat leveled off. It’s hard to say, but they’re not even close to that. So this requires a radical transition to low-carbon fuels, which could include nuclear power, by the way. We’ve never seen anything even close to that in history, and so that would suggest that we need rather strong or radical government intervention to change the incentives. The longer that transition takes to get to net zero, then the more future temperature increase we’re going to get, and the impacts on people and the natural systems of the planet are going to be much larger. I don’t know if that answered your question about pace, but that’s sort of the broad framing of the pace issue.

Stone: I think it does lead us to the next question. As we look ahead at the energy transition, there are, I guess, maybe two buckets of challenges. One is technical, technical or maybe scale — scaling technologies. And the other is the social and political will. Given that, and given the back and forth that we’ve seen in this country on its commitment to pushing forward for the energy transition for clean energy and related, are there any blind spots in society that our policy-makers are missing right now that could be helpful in creating a sustained push in one direction?

Cleveland: I don’t think there are actual blind spots, for this reason. There’s no technological — in my opinion — no scientific or technological silver bullet out there. If you’re trying to reach this 1.5 or 2 degrees C world, net zero by 2050 or so, then what we need is what we have, and we have a lot of technologies, wind, solar, that are advancing very quickly if we’re going to electrify more of our energy activities. Most climate action plans call for electrification of transport, heating, and cooling. Then we have technologies that can produce electricity that are as cheap or actually cheaper than certainly coal or oil, and cheaper than even many forms of natural gas electricity generation. Now there’s a question of scaling those because they’re intermittent, and the grid needs to be upgraded. We need more battery storage, so there’s one technology that does need a boost. But there’s no discovery of oil and internal combustion engine equivalent that is needed. We have the ability to move quickly now.

So I think that is an important observation, and I think the lifestyle issue, the impact of these changes on people’s perceived impact on their lifestyle is really one of messaging. And here’s where fake news and disinformation have to be addressed. This is one of the motivations behind Visualizing Energy, actually, is to get information out there that shows people that they can still maintain at least some of the important aspects of their current lifestyles with a system based on clean energy. I will say that there is a larger issue associated with — I’m speaking of the United States now, but I think it has implications elsewhere. People equate the so-called “good life” with the consumption of more goods and services, and the qualitative aspects of well-being, connection to community, health and well-being, personal and financial security, which we know through self-reporting by surveys by social scientists, people value very highly, is somewhat disconnected from consumption of goods and services after you’ve reached a certain threshold. How you start getting to steer the conversation in that direction is beyond certainly my skills or understanding, but anyone who can engage Americans in a debate about the qualitative improvements in our existence, as opposed to the quantitative aspects, will go a long way to reducing the amount of energy we need to sustain our lifestyles.

Stone: I think there’s also an issue here, which is the control of the narrative over the energy transition. I think that renewable energy has been framed quite successfully, in a very counter-productive way, as being unreliable because it’s intermittent. Not to understate the complexity of integrating renewable energy, intermittency is a real issue, but there are technological solutions, including co-locating renewable energy with storage, increasing the size and the robustness of the grid that could go a long way to ensuring that a grid that’s highly dependent upon renewables is also an extremely reliable grid.

I see this in so many ways that there is almost this assumption that’s just allowed to fly, that renewables are not reliable because they are intermittent, which is just not true. It’s a more complex problem to solve, but it is solvable if the will is there.

Cleveland: Absolutely, and I don’t want to downplay the technological advances that have to occur to fully integrate intermittent sources into everyday life because there are — utility-scale battery storage is one of them, but that’s moving very quickly. I have no doubt that if we gave those engineers enough money, they’d figure that out very quickly.

But when you talk about the grid, it’s really about regulation of politics. We need to be much more effective at moving power around the grid, in ways that don’t require — there are some technologies that have to be developed in power engineering to help that happen, but it’s really about how we regulate the grids. In the United States, at the federal level, the Federal Energy Regulatory Commission and the regional independent system operators in every state department of public utilities. And so there’s tons of research that shows that better regulations will help wield power much more effectively and get it from where it’s going to be generated by intermittent sources to where it’s needed. So that is entirely political will at every scale of governance.

Stone: So Cutler, obviously we’ve got a long way to go in this energy transition. I want to ask you a final or nearly final question here. To get a sense of how much needs to still be invested in the energy system to get to the type of low-carbon system that we’re aiming for, and how does that compare with the amount that has already been invested in the infrastructure that we have, fossil or otherwise?

Cleveland: That’s a good issue to explore, because it is connected to the arguments of those opposed to clean energy that, “Well, all this new infrastructure is going to just raise the prices of electricity, and it’s just something that’s going to hit everyone, every household in the pocketbook.” So let’s back up to see what the scale of this transition that we’re talking about is in financial terms. And these are estimates that are derived from the International Monetary Fund and the World Bank and the International Energy Agency. I think they are big numbers, and they need to be just bounded in general terms. So the total amount of money that we’ve invested in the existing global fossil fuel infrastructure, which is coal, oil, and natural gas production and all the refining and pipelines and power plants associated with them is on the order of about 20 trillion dollars. So in terms of renewable energy infrastructure, we’ve invested on the order of 5 trillion dollars. This is solar, wind, hydropower, geothermal, and battery storage. We’ve invested another roughly 20 trillion dollars in global electricity generation assets, so these are power plants, wind farms, and all the transmission system that gets that power to people and industries, so these are substations, power lines, and transformers.

Those are big numbers, so clearly if we’re going to accelerate the transition to renewable energy infrastructure, we’re talking about investments in certainly the tens of trillions of dollars, which seems like a daunting number, and it is. But you have to put this in a perspective of what the total size of the financial assets of the world are. Is it really going to drain investments away from other things that we need, like hospitals and new highways and charging stations?

To give you a sense of that, the global economic output of the world economy is about 100 trillion dollars. So it’s an order of magnitude larger than these investments that we’re talking about.

Stone: And that’s annually.

Cleveland: That’s annually. So GDP is a flow. It’s churned out every year, whereas these values of assets are stocks; they are things that are actually sitting there. So they’re a little bit of apples and oranges. But just to give you a sense of the scale, we spend 2 trillion dollars a year on global military spending, and another 10 trillion dollars a year on global health spending. So if you think about the amount of money that’s needed to build this new energy infrastructure, it’s very large, but I don’t think it’s outsized relative to what the world economy can absorb, and it certainly is not going to divert investment away from other things that people need and want.

Stone: It’s also the source of new economic opportunity, manufacturing — everything that goes along with it.

Cleveland: Oh, of course. My mind immediately goes to the United States and to other issues that we’ve talked about, about how this is being spun. Where is a lot of the new clean energy infrastructure being built in the United States? Where are the new investments from the Inflation Reduction Act, which the Biden administration implemented and which the Trump administration hates and has tried to dismantle? It’s in a lot of so-called “red states,” right? The leading clean energy producer in the world with wind energy is Texas, and Oklahoma is number 2 or 3. Where are new electric vehicle and battery factories being built? They’re being built throughout the South and in the coastal Eastern United States. So there are lots of jobs to be had in this clean energy transition. Not every oil rig worker is going to be replaced by someone building solar cells. No, but there’s a lot of crossover. People who do cement jobs on drill rigs can also be used to pour large concrete pads for wind farms. So there are tremendous economic opportunities in this clean energy transition, as well.

Stone: Cutler, thank you very much for talking.

Cleveland: Absolutely. Thank you so much, Andy, and it was great to join this conversation.