Episodi

  • Rapid advances in artificial intelligence (AI) are helping the energy industry accelerate the transition to a low-carbon future. The Energy Podcast explores how AI is being used today and discusses how to unleash its potential.

    Presented by Eno Alfred-Adeogun. Featuring Kate Kallot, founder and CEO of Amini, Bob Flint, CEO of Mirico and Amy Challen, Shell’s global head of AI.

    Additional reporting by Claire François and Berry Mulder.

    The Energy Podcast is a Fresh Air Production for Shell, produced by Annie Day and Sarah Moore and edited by Eno Alfred-Adeogun.

    00:00:00

    Eno Alfred-Adeogun: Today on The Energy Podcast.

    00:00:07

    Audio: I will be working alongside humans to provide assistance and support and will not be replacing any existing jobs.

    You sure about that, Grace?

    Yes, I am sure.

    00:00:20

    Eno Alfred-Adeogun: That’s Nurse Grace speaking at the world's first robot press conference last year. And yes, she’s a robot. Powered by artificial intelligence this humanoid can diagnose illness, deliver treatments, and even offer patients emotional support. Impressive, right? Well, yes, but she’s just one of many examples of AI-enabled machines designed to address some of the world's biggest challenges; social care, disease, hunger, and probably sooner than you think. Consider how deeply AI is already entwined in so much of our daily lives. From work commutes …

    00:01:03

    Audio: You’ve arrived at your destination.

    00:01:04

    Eno Alfred-Adeogun: ... to virtual learning …

    00:01:07

    Audio: (foreign language).

    00:01:07

    Eno Alfred-Adeogun: ... to, " Alexa, what’s on my to- do list?"

    00:01:11

    Audio: Subscribe to The Energy Podcast.

    00:01:14

    Eno Alfred-Adeogun: A global AI revolution isn’t coming, it’s already here. So, could this rapidly advancing technology also tackle the pressing challenge of lowering emissions? Hello, I’m Eno Alfred-Adeogun, and today on The Energy Podcast we ask, can AI get the world to net- zero faster?

    Joining me to discuss this is Kate Kallot, founder and CEO of the African tech startup Amini. Bob Flint, CEO of methane emission monitoring company Mirico. And Shell's global head of artificial intelligence, Amy Challen. It’s really great to have you all on the episode today.

    Now, before we delve into the world of AI, a really helpful place to begin is defining what it actually is. Because by the number of definitions I found when researching this episode, that's actually harder to do than it sounds. So let’s briefly see if we can reach a consensus of what it actually is. Kate, coming to you first.

    00:02:20

    Kate Kallot: For me, I have one simple definition of AI, which is going to literally take one sentence. It is the science to make computers think and take actions like humans.

    00:02:30

    Eno Alfred-Adeogun: Love it. Brilliant. Brilliant. Amy, what about you? Can you add to that?

    00:02:34

    Amy Challen: I think I’m going to give a more boring answer. I often think about it compared to software. In software, we write the rules. We say, " If this happens, then that happens," and we define what that rule is. But AI works differently. We give AI a load of historical data, and we say, " You tell us what happens based on the patterns you've observed in the past." And so it can be a bit of surprise what it comes up with. The other thing to watch out for is that if our historical data is biased, if the world has changed, then we're going to see that in the model. So we have to be quite careful.

    00:03:10

    Eno Alfred-Adeogun: Okay. Bob, no pressure. We’ve got two great answers. Do you have anything to add onto the definition?

    00:03:16

    Bob Flint: Yeah, I get to go last. I think all of the above, plus extending into areas where humans aren't necessarily good, which is looking at huge volumes of data. So being able to process all the bits and bytes that come from sensors from the real world and floods of information like you would find in an oil and gas company and process that in super high speed.

    00:03:40

    Eno Alfred-Adeogun: Okay, so now that’s clear, we can turn our attention to how the energy sector is actually harnessing the power of AI. So, Bob, your company, Mirico, it monitors emissions, and then companies can pair the data that you gather with AI, which can then help to combat the emissions found. Can you share some good examples of this pairing in action?

    00:04:06

    Bob Flint: What we do is primarily we address the issue of methane emissions from energy. And methane is about 30 times worse than carbon dioxide for global warming, so it’s something that we all should be concerned about. The good news is if you stop emitting methane, the world starts to cool pretty much immediately because methane just decomposes in the atmosphere. So that’s why it’s so important. So we scan an area, say, an oil and gas facility, for those emissions. Measurement leads to action, leads to reduction, and we can then put that data into one of Shell's systems of record, say a digital twin.

    00:04:48

    Eno Alfred-Adeogun: On the digital twin, because that's another concept I feel like I've read a lot about as well. Could you just expand on what that is?

    00:04:54

    Bob Flint: A digital twin would be a replica of something in the real world, a refinery, a rig and it sits in silico, in a computer rather than in the physical world. So that would enable you to, for example, start making predictions or what-if type of questions on what might happen in the real world in circumstances which you wouldn't want to see. So you might predict what happens if I change temperatures and pressures in a way that might be dangerous. Well, I can do that in a computer. I wouldn’t want to do that in the real world.

    00:05:30

    Eno Alfred-Adeogun: Now, considering the ambitious climate targets that have been set worldwide, it's really no wonder that people are looking to AI for solutions. Amy, what would you say are the main ways that AI is enabling a low-carbon energy system?

    00:05:47

    Amy Challen: I think there are four main ways it’s already doing this and is going to continue in the future. Firstly, it can improve the efficiency of everything we're already doing. Whether that’s renewables or hydrocarbons, a couple of percentage points of efficiency can make a difference to the productivity of our energy system and can reduce CO2 emissions and methane emissions. The second one is I don't think we're going to enable a widespread renewable system without having really excellent forecasting and optimisation, two things that AI is incredibly good at. Because renewables like wind and solar, they're intermittent. Sometimes the wind blows, sometimes the sun shines, sometimes it doesn't, and it's not entirely predictable. So, you use AI to predict when that will happen and to optimise how you use your battery, how you buy and sell energy to make sure that we always have the energy supply when we need it.

    The third way is through everything we can do in lab sciences, in research and development there, and in design of a new energy components and systems. So for example, with the lab sciences, you have a whole process of research you go through. You look at papers and patents to have an idea of what to research on. AI can really speed up your search there and find the right things to be looking at to make suggestions. And finally, it’s got a big role to play in monitoring. If we don’t know what the current situation is in terms of working out where methane emissions is, then we don't have a baseline, and we can't track. And that’s hugely important to be able to know what's effective, what's not, and where are we going.

    00:07:25

    Eno Alfred-Adeogun: Kate, you’re based in Africa, so it'd be really, really good if you could paint a picture of the role AI is playing on the continent, if at all, in different energy systems.

    00:07:37

    Kate Kallot: Africa is still the most data- scarce continent. We think about the data scarcity affecting many different places, whether it's having billions of people that are still unconnected, whether it's having data scarcity when it comes to satellite imagery, when it comes to meteorological data. So when we think about the transformative role of AI in Africa a little bit more broadly, there's still step one that needs to be fixed, which is the data scarcity.

    Now, when it comes to where AI can be applied, it's important to remind everyone that AI is just a tool, and it's not going to come and transform everything and make everything better – it’s a means to an end. It’s not actually the end. So when we think about the solutions that AI will enable to build, we always have to go back to the foundation, which is what problem we're trying to solve.

    00:08:28

    Amy Challen: And could I build on something Kate just said as well, which is there's no AI without data, absolutely foundational. But also, AI and data, they're not the answer to the energy transition. They’re both mega-enablers of it, but fundamentally, you have to have the physical and chemical technologies and a huge change in the way we work and the way we live in order to make that happen.

    00:08:50

    Eno Alfred-Adeogun: There’s an old adage, but don't ask me to quote where this came from. But I bet you might have heard of this, that you can't manage what you can't measure. So, with that in mind, Bob, how important is it to not only track greenhouse gas emissions, but to do so accurately?

    00:09:11

    Bob Flint: As you say, you stand no chance of understanding what to do if you don't know what the baseline is. And actually, maybe people think emissions often come from leaks, a flange that isn't quite tightened properly. In many cases, emissions like methane just come from the way that an asset is being managed. And actually, you can start to manage the asset in a different way if you know why emissions are happening. You can start to maybe change the way in which it's loaded and unloaded or even cleaned. And then the last piece where AI could really help in emissions is helping to optimise. So in that digital world, if you have got a digital twin and you're able to run some sophisticated algorithms, you can start to say, " Well, I'm not going to tolerate last year's emissions. This year, I’m going to make less. And I’m going to set myself a target, and I'm going to meet or exceed that target.

    00:10:04

    Eno Alfred-Adeogun: Now, with the speed at which technology is advancing, the potential solutions that will arise through AI are vast. And when it comes to the energy sector, we're already seeing that potential turned into reality. Take for instance the drone parked in a box at Shell's Energy and Chemicals Park Rotterdam in the Netherlands, where crude oil is processed. Claire François is with Shell’s robotics expert, Berry Mulder, to find out how the drone uses AI to monitor the site and detect leaks.

    00:10:36

    Berry Mulder: So, there’s actually no one on site to fly the drones. They’re sitting remotely, and the drones go around a few times a week to scan for emissions, to check on rooftops, and all the other things that operators typically go around for.

    00:10:53

    Claire François: Well, we’ve just seen the drone fly off. Can you tell us what it's doing now?

    00:10:56

    Berry Mulder: Looking at the tanks from above, so basically saving us many hours a day to, well, not walk up to the tanks every time. It just brings us the pictures. So, the people, the operations, they look at the pictures as if they would walk around and then interpret what needs to be done to the top of the tanks.

    00:11:13

    Claire François: And so how is AI part of this process?

    00:11:17

    Berry Mulder: Right now, people are still looking at the pictures because it's a learning process for all of it. We expect that AI machine vision analytics will help us to analyse our pictures faster and better in the near term, but just spotting the differences, the anomalies, corrosion or things that broke or emissions leaks similar to what we do with the ground robots right now.

    00:11:38

    Claire François: Can you tell us how a drone like this and your other robots in the field are helping to detect methane emissions or broader emissions?

    00:11:46

    Berry Mulder: So really having additional sensors on the ground and in the sky to detect leaks while they're still small, and so we can fix them while they're still small and not big. And that’s where having additional noses fly and drive around really helps us if you take it to the AI part. It’s also eventually sort of making correlations. Where are the sources coming from? Where is it building up faster? We expect it will even help us in emergency responses, try to detect the plumes, the concentrations faster than we do today.

    00:12:23

    Eno Alfred-Adeogun: As Berry just demonstrated, technical solutions to help reduce emissions already exist. But despite that, according to the United Nations, the world is falling short of its climate goals. How can AI be a better companion to existing digital technologies, Bob, to drive progress more quickly?

    00:12:44

    Bob Flint: Most operating companies would have vast data sets already. AI can play a role in just mining that data for information and then surfacing that so that it can be acted upon. The other thing I just want to point out is that the emissions challenge, and we heard something of that drone solution in that clip, is really about deploying lots of different solutions.

    There’s no single silver bullet in that measurement journey. So, you’ll probably have some satellite systems, some drone systems, some ground sensors, maybe even some robots. And bringing all those diverse data sets together is a big challenge, and AI can really help us do that. So, build one picture of what's happening in the real world from a set of very disparate data sets and then using that to drive decision- making. That will be a wonderful application.

    00:13:43

    Amy Challen: And that’s essentially what a digital twin is at the end of the day. It’s a combination of all these different data sources. So, like you say, Bob, your laser- based detection of methane using machine vision techniques to do that, and then all the other collection of data about, say, the operation of an asset, and you pull that together. And as Berry in the extract just said, you're going from quick detection of leaks, which you can shut down as quickly as possible, to prediction of leaks. So, you’re much less likely to happen because you can fix things in advance, you can work out where there's risk, and you can do preventative maintenance, so it doesn't have to happen. And that’s the aim at the end of the day, is how you can act in advance to reduce emissions rather than just react quickly.

    00:14:23

    Eno Alfred-Adeogun: Now, we haven't touched on an important group I think that we need to consider in this conversation, and that's energy customers, both businesses and the public. What benefits could AI offer that will encourage them to reduce their own emissions? Bob can I ask you that?

    00:14:41

    Bob Flint: Yeah, I think whether it's consumers or businesses, actually, energy is unfortunately a topic that's quite hard to get people to engage with. And one of the methods of doing that is price. We all feel energy is something that is visible when we get the bill. But in order to be energy efficient, maybe change our behaviours takes quite a lot of effort, and I think AI can really help us with taking away some of that friction by giving us maybe some price signals, “Here's a discount if you do something." Like maybe in the US, there are demand reduction programs, which are run by businesses for businesses, encouraging people to switch off their refrigerators and air conditioning systems for an hour during peak times. And it could even start to automate some of those interventions, turn things off automatically. So, taking away some of the pain of acting responsibly for people who want to do the right thing but who are busy and need to find the time to do it, I think AI will play a huge role in that.

    00:15:48

    Eno Alfred-Adeogun: AI may be helping to find solutions to reduce emissions, but we also need to consider the vast amount of energy that's used to develop and run it, which risks increasing the world's emissions. I’m thinking particularly about the huge amount of energy that's used to run data centers. What do you think is the most important action that the tech industry must take to prevent AI from contributing itself to global warming, Kate?

    00:16:23

    Kate Kallot: The technology has made so much advancements today that you don't actually need to build large scale data centres everywhere to be able to run the amount of compute that you need. There are new ways to do it. They’re decentralised ways, power- efficient ways. The industry is heading towards the right direction, but I think there's still a lot of work to do when it comes to understanding what that really means on the ground.

    For example, understanding that most of the compute that you need, you need it for the training. When it comes to deploying AI systems, it doesn't require that amount of compute. So, can you find innovative ways to share the computes between countries, between industry, between companies? Can you find innovative ways to build decentralised data centres or decentralised computing infrastructure where you have smaller amount of compute in different regions that are linked together, and different actors can get access to that compute at different times or different days?

    00:17:21

    Eno Alfred-Adeogun: Amy, is there any way we can stop AI becoming a monster in itself?

    00:17:27

    Amy Challen: Absolutely agree with Kate. Even more fundamentally, though, you can also ask yourselves, "Do you need to train this model?" So I think what I see externally is the technology companies in particular, they're in a kind of arms race to get the best generic large language model. Do we need 10 of them or do we just need a couple? Within Shell, certainly, I really challenge everyone, do we need to do this? And to Kate’s point, it's a lot more effort to train a model than just to deploy it. So if you’ve already got a really good core model, which you can just adjust slightly, whether through fine-tuning or prompt engineering, let's do the minimum we have to because that will save a lot of energy.

    00:18:06

    Eno Alfred-Adeogun: Now, before we close, I'm going to put each of you on the hot seat. I don’t know if you've already been feeling like you were on one, but it's about to get hotter! Because I want each of you in no more than 20 seconds to say what you think the most exciting development in the energy sector you expect or want to see AI transform in the future. Bob, let’s start with you.

    00:18:30

    Bob Flint: Ooh, okay. Great question. I think the bit we haven't really got to yet is thinking about energy as a system. How do we interconnect the traditional bits of that system, like the fossil parts with the new parts, like renewables and storage and hydrogen, to create a whole new ways of working? I think that’s really one of the areas where AI is going to have to be deployed if we're going to break down some of those barriers. Look at complex new areas like hydrogen, and use them most effectively.

    00:19:06

    Eno Alfred-Adeogun: Okay. Kate, same question to you.

    00:19:09

    Kate Kallot: I’m going to be a bit biased because I run a climate tech company, but for me is around exploration. So, making sure that using AI actually to better understand and assess the reserves, but also avoiding the destruction of more biodiversity.

    00:19:26

    Eno Alfred-Adeogun: And, Amy, what do you think?

    00:19:28

    Amy Challen: I think I’ll say it’s this use of AI in research and development and in design that I think we're only scratching the surface in how quickly we could speed up the advancement of development of materials, advancement of development of new chemical solutions, and in designs for better, more efficient assets.

    00:19:51

    Eno Alfred-Adeogun: Kate Kallot, Bob Flint, Amy Challen, thank you all so much for your incredible, insightful, and thought-provoking contributions today. Really great. You’ve been listening to The Energy Podcast brought to you by Shell. Be sure to follow and subscribe for free wherever you get your podcasts, so you don't miss a single episode. The Energy Podcast is a Fresh Air production, and the views you've heard today from individuals not affiliated with Shell are their own and not Shell PLC or its affiliates. I’m Eno Alfred- Adeogun. Thank you for listening. Goodbye.

    See omnystudio.com/listener for privacy information.

  • As countries across the world strive to reach their climate targets, they must make sure that the move to a cleaner energy system supports economic growth. The Energy Podcast explores this difficult balancing act.

    Presented by Julia Streets. Featuring Dr Rob Charnock of the Metis Institute for Climate Strategy, climate scientist and advisor Dr Yvonne Maingey-Muriuki and Shell’s chief economist Dr Mallika Ishwaran.

    The Energy Podcast is a Fresh Air Production for Shell, produced by Annie Day and Sarah Moore, and edited by Eno Alfred-Adeogun.

    Episode Transcription:

    00:00:00

    Julia Streets: Today on The Energy Podcast.

    00:00:07

    Speaker 2: Economic growth and developmental sustainability are not mutually exclusive.

    00:00:13

    Speaker 3: With a strong talent pool of young entrepreneurs and qualified engineers, we are pressing forward with solutions in climate-smart agriculture, water conservation, clean energy innovations, and more.

    00:00:29

    Speaker 4: Let us come together to build resilient, sustainable and green businesses, communities, and countries of the future.

    00:00:39

    Julia Streets: The dust has settled on COP28, and the main takeaway was clear; the world is falling short of its climate targets. But as the leaders who gathered at the conference highlighted, there remains an appetite to do better while simultaneously ensuring economies keep turning. The question is, how? The climate summit showcased diverse approaches. Some nations prioritised boosting the supply of lower carbon energy to meet demand and remain competitive. Others advocated for increasing funding in renewables to attract investment and spur the creation of more jobs. And while some countries pushed for a complete phase-out of all fossil fuels, others favoured a phase-down, where coal, oil, and gas usage is reduced rather than eliminated as a more economically viable plan. The reality is, different solutions will be needed in different places, and countries will move at different paces to achieve net- zero.

    Hello, I'm Julia Streets, and today on the Energy Podcast as we look ahead to 2024, we ask: how can economies thrive while the world cuts carbon? Joining me today are guests, Dr Yvonne Maingey-Muriuki, who is a climate scientist and strategic practitioner to organisations operating in Africa. Dr Rob Charnock who is director of the Metis Institute for Climate Strategy, and Shell's chief economist, Dr Mallika Ishwaran. Now, before we look ahead to what this year and beyond may have in store, let's take a moment to reflect on where things currently stand. Rob, I'm going to come to you. How would you rate the current global progress in cutting carbon?

    00:02:27

    Dr Rob Charnock: I think what was incredibly interesting to see at the recent COP, was that it's the first global stocktake, so we really get a sense of how close we are to being on track towards the targets set out in the Paris Agreement. And what I thought was very encouraging is, previously we thought we were on track for somewhere between 2. 7 to 3.6 degrees of warming, but as we get more and more commitments coming through that are updated as well after a few years, we see that we're getting closer. Now, that's not to say we're on track for 1. 5 or even well below two degrees at the moment.

    00:02:58

    Julia Streets: Some areas of the economy are more challenging to decarbonise than others. I mean, I think particularly industry and transport as well, but they are central to economic growth. I'm curious to think about what's the way forward, and Mallika, I'd love to come to you for your thoughts on that.

    00:03:16

    Dr Mallika Ishwaran: So what we are seeing is there's a sector by sector difference in how the different sectors are progressing in the transition. I think you can see the evidence is there that power is decarbonising, renewables are coming in at scale and really are changing and disrupting the system. But there are other sectors. I would put passenger EVs as part of the transport segment as something that is changing rapidly. But there are other bits of the transport segment not transforming as easily, and these are areas that require either high heat or they require dense energy molecules, and you can't do that with electricity unfortunately. So they're requiring things like hydrogen or sustainable biofuels, and these are taking a little bit longer to bring to market and to commercialise. So they're still quite a bit more expensive than the fuels we use today. And so the key there is, how do we accelerate the process of commercialisation of these kinds of fuels so that the whole world is changing and transforming to low carbon at pace at the same time by 2050.

    00:04:17

    Julia Streets: Rob, I'd love to get your thoughts on this. The incentives that are needed in order to encourage consumers to choose lower carbon goods and services that will drive down cost and also increase adoption.

    00:04:29

    Dr Rob Charnock: Over time we've heard this narrative that low carbon might be more expensive, but as time goes by, you quickly find that the cost profile decreases rapidly, and frankly beyond the forecasts as well. So, I would say, even the economic reason for shifting consumer demand is already coming online in most segments, and this will continue to do so. I also think shifting customer preferences and shifting demands suggest, if you are not properly tackling the carbon profile of your products or even the recyclability of those products afterwards, there is going to be a significant shift away from what you're selling.

    00:05:05

    Julia Streets: There's clearly a sense, we need to move at pace and we need to move at scale. I'd like to return to COP28, because one of the key topics was about phasing out fossil fuels versus the phasing down of fossil fuels, but the final deal made no mention of either. And instead, we note that the pledge talked about the transitioning away from fossil fuels. So not phasing out, not phasing down, but transitioning away.

    And Yvonne, I think particularly of a remark made by Ruth Nankabirwa who is Uganda's energy minister. She had a very interesting take on this, and let me just read what she told journalists during COP28: “To tell Uganda to stop fossil fuels, it is really an insult. It is like you are telling Uganda to stay in poverty." I'd love to get your thoughts on that. How would you respond to that?

    00:06:00

    Dr Yvonne Maingey-Muriuki: I mean, it's a really sort of difficult position to be in. I think on the one hand, African governments, and I'm speaking specifically about the Kenyan government, have made their intentions very clear; we are going to foster low carbon resilient development pathways. If you look at Kenya as an example, where I'm based, where I'm from, 80% of our energy is already renewable. We're looking at more geothermal, hydro, solar. The majority of our grid is actually already quite green. The opportunity within the continent is quite significant to focus on it and to drive renewable energy to power our economy. On the other hand, it's important to think about how Africa is powered specifically, because this is where the root cause of the problem is. About 43% of the total population in Africa lack access to basic electricity. This means that about 600 million people right now do not have access to energy.

    I think the first question for the African continent is just ensuring that we have access to energy first. But, we have to contend with the reality that African economies for the first time, some of which have just discovered oil, I'm talking about Kenya, looking at one of the most impoverished parts of the country, Turkana, which discovered oil four, five years ago. And expecting some of these local economies to not exploit this resource, I think is a bit rich, particularly from the developed countries. But then we also have to think about in the context of what is the actual contribution to emissions. Look at Tanzania, another great example where they have natural gas deposits, which they have on many occasions shown a desire to develop and to exploit. But when we look at the calculations, Africa already accounts for maybe less than 4% of global greenhouse gas emissions. If Tanzania was to develop all of their natural gas deposits, you are looking at an increase of about 0. 4 to 0. 6% of global emissions. These are economies that do have access to these resources which they have an interest to develop, which they have a right to develop, and which is why we talk about a just transition.

    00:08:00

    Julia Streets: Rob, how realistic is it to expect developing nations to leapfrog traditional fossil fuels?

    00:08:08

    Dr Rob Charnock: To me, the critical point in that is how they're going to pay for it. Where is the financing going to come from to look at alternatives? And I think what's really interesting that we've seen from the Asian Development Bank recently is a project in Southeast Asia called the Energy Transition Mechanism. And this recognises that countries have already invested quite heavily in fossil fuel infrastructure, and the expected life of those assets, those coal-fired power stations, is always decades.

    So what the Asian Development Bank has done through the Energy Transition Mechanism, is provide the financing of the incentives to retire those assets early, and to replace that energy generation with renewable alternatives. Now, the critical piece in this as well is that when you retire a coal-fired power plant, for example, that often supports a community nearby or several communities. So the key piece is to retrain those communities as well to transition them into new jobs, potentially green jobs linked to the renewable energy sector as well. So it's not just about new energy capabilities being invested in, but also retiring fossil fuel, carbon-intensive assets, and replacing those with renewable.

    00:09:17

    Julia Streets: Mallika, how would you respond to that?

    00:09:19

    Dr Mallika Ishwaran: I think it's worth dividing the world up in this regard. We have advanced economies who've grown up, if you like, on traditional fossil fuels, and have a lot of infrastructure built around that, and that will take effort to change and to transform. But I think these are economies that have reached an advanced stage of economic development, have the financial resources to be able to do it. We also have another group of countries who are, if you like, on the development trajectory. And I think here there's a real opportunity for them to leapfrog over fossil fuels, and put in place infrastructures and other technologies that are low carbon to start with. So they don't start down the path of fossil fuel development, but leapfrog to something that's better and more sustainable.

    00:10:03

    Julia Streets: Yvonne, we can't have a discussion about this without referring to the question of carbon markets. So a two part question to you. Number one is, what are they, and secondly, how important are they?

    00:10:15

    Dr Yvonne Maingey-Muriuki: A carbon market is essentially an opportunity for organisations, companies, countries that have net- zero ambitions and targets to meet them by offsetting their emissions on a global market. So they pay to pollute. Essentially that's what the carbon market is. Is it a significant opportunity? Absolutely, particularly if you are coming from a continent like Africa, which is rich in natural resources, and we have opportunities to remove carbon from the atmosphere and we can actually be paid for those services, it absolutely presents an opportunity for the continent to generate much-needed finance for adaptation.

    00:10:53

    Julia Streets: I wonder if I could push the conversation on a little bit, because one of the energy solutions of choice is increasingly liquefied natural gas or LNG, which is produced by cooling gas. And such is the case in India where the number of customers using LNG is growing. And let's find out why. Dhirendra Mishra is Shell's LNG terminal manager at its site in Hazira in India.

    00:11:20

    Dhirendra Mishra: I'm speaking to you from the seawater area. You can hear the seawater pumps running in the background. What we do here is, we receive LNG in large LNG cargo ships, and this cargo is received at minus 160 degrees Celsius. At this temperature, it is transferred from the LNG cargo to the shore-based LNG tanks where it is stored. From these tanks, with the help of multiple booster pumps, we supply this LNG to LNG vaporisers, which use seawater to vaporise the LNG. Now, this regasified LNG is transferred through a 14-kilometre pipeline to a metering station, and it is supplied to various grids.

    We are connected to all the grids in the country, so we can reach to any customer who is connected to the grid. We are an integral part of the gas infrastructure and supply chain of India that supports various industries, like city gas distribution, steel manufacturing, fertiliser, refinery, chemicals, and other manufacturing sectors. Now, with the government of India's vision of increasing the share of natural gas in the fuel mix, and this coupled with the high growth of Indian economy, we expect the gas market to grow. And with this, we expect to supply more and more LNG fuel to the country in the coming years.

    00:12:52

    Julia Streets: As Dhirendra was just saying, the demand for LNG in the country is continuing to rise. What role, if any, do you see LNG playing globally in future energy systems? Mallika, can I come to you?

    00:13:09

    Dr Mallika Ishwaran: Yes, thank you. Great question. I think the key here is to acknowledge the fact that this transition is not going to happen overnight. You're changing an entire energy ecosystem. So it's not just the supply, you're also changing the infrastructure, you're changing patterns of demand, and that's going to take time to happen. And I think in that transition, there is a role for natural gas. We see that in our Shell scenario outlooks, we see it in the outlooks from other groups, like the International Energy Agency. And it's worth noting that within natural gas, LNG or liquefied natural gas provides a much more flexible source of gas, because you're not tied to pipelines going from point X to point Y. LNG is able to respond and be moved around where demand is, so it provides a more flexible way of delivering gas.

    Now, gas itself can help lower emissions during the transition, particularly in sectors like power generation where it could potentially displace coal. It could also help increase energy security of the new low carbon energy system by complementing renewables and the intermittent nature of their generation. So in both of these instances, gas provides a lower carbon alternative to, for example, coal. Now, it is important in the longer term to drive down emissions from gas itself, for example, through carbon capture and storage, as well as reducing methane emissions from the production transport and use of natural gas. And of course, Shell is very active in this space.

    00:14:42

    Julia Streets: So let's look ahead to the future. Some critics would caution against relying too heavily on technological innovations as a means to bridge the gap between economic growth and carbon reduction. Rob, love to get your thoughts on that.

    00:14:54

    Dr Rob Charnock: I suppose my thought is that the critics are quite right. If we put too much emphasis on technological solutions and don't explore all other options available to us, that's a huge risk to take. I think my attitude with tackling climate change is that it's not about one solution, it's much more about solutions on all fronts, and making steady progress on all fronts. Whether we can deploy technology at the scale that's needed across the entire globe, is very much in question.

    00:15:21

    Julia Streets: It's been phenomenal hearing all three of you and your points of view on this, and I think there's one undeniable thread that runs through all of this, which is the question of cost. I'm curious to get your views on how important it is for countries to build lower carbon energy systems that are secure and are affordable, without compromising economic competitiveness and arguably growth. Mallika, I'm going to come to you first as the chief economist.

    00:15:48

    Dr Mallika Ishwaran: If you want to have an energy transition that is sustained, and this is not something we want to do for one or two years. We need to sustain this level of effort over the next almost three decades. And in order to do that, you have to have a proposition where there is an economic benefit to countries from undertaking this. Clearly there are benefits from addressing the impacts of climate change, but I think what we are seeing now is that increasingly countries are seeing the economic benefits and the opportunities in the low carbon space for manufacturing the new kinds of solar panels or wind turbines that are needed, or the electrolysers, and becoming the manufacturing workshop for low carbon equipment, goods solutions. And that could be a basis of driving economic growth in a country, creating new types of jobs, and at the same time, you're creating a better natural environment in which citizens can thrive.

    00:16:42

    Julia Streets: It's been a phenomenal conversation because we've discussed this from so many different points of view. To close us out today, I would like to ask each of you in 20 seconds or less to share one key development, however big or small, that needs to happen this year to address this question of cutting world carbon emissions. Yvonne, your thoughts.

    00:17:02

    Dr Yvonne Maingey-Muriuki: Higher price on carbon. I think if we are able to achieve that and we can charge more for polluting entities, then we'd have a great incentive for them to stop.

    00:17:12

    Julia Streets: And Rob, your thoughts.

    00:17:12

    Dr Rob Charnock: I think to me, it's really critical to see how the Loss and Damage Fund is operationalised by the World Bank. This is a fund specifically about compensating developing nations who are already feeling the impacts of climate change, as well as needing to put adaptation measures in place.

    00:17:32

    Julia Streets: Mallika, can I come to you?

    00:17:34

    Dr Mallika Ishwaran: I would like the global stocktake to have impact, and I would like to see countries nationally determined contributions increased this year.

    00:17:43

    Julia Streets: My thanks to today's guests, Dr Yvonne Maingey- Muriuki, Dr Rob Charnock, and Dr Mallika Ishwaran. This episode marks the end of an amazing series where we've delved into some fascinating and some really challenging topics. From electric vehicle infrastructure to the future of oil and gas, from carbon markets and the impact of global tensions in cutting carbon. This season has demonstrated there are many lanes on the roads to net- zero.

    And if you've missed any of those or any previous episodes, you could still go back and download them for free wherever you get your podcasts. And don't forget to hit follow so you don't miss any future episodes. You've been listening to The Energy Podcast, brought to you by Shell. The Energy Podcast is a Fresh Air production, and I must remind you that the views you've heard today from individuals not affiliated with Shell, are their own and not Shell PLC or its affiliates. I'm Julia Streets. Thank you for listening and goodbye.

    See omnystudio.com/listener for privacy information.

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  • As the world grapples with the urgent challenge of climate change, the energy industry is working to reduce greenhouse gas emissions while continuing to deliver the secure and affordable energy people need today. Is switching to renewables the answer, and do oil and gas have a role to play?

    Presented by Julia Streets. Featuring Dr Bassam Fattouh of the Oxford Institute for Energy Studies, Sian Lloyd-Rees of Mainstream Renewable Power and Shell’s Zoe Yujnovich.

    The Energy Podcast is a Fresh Air Production for Shell, produced by Annie Day and Sarah Moore, and edited by Molly Lynch and Sophie Curtis.

    TRANSCRIPT

    Shell The Energy Podcast
    Season 4, Episode 4

    00:00:00
    Julia Streets: Today on The Energy Podcast.

    00:00:07
    Bassam Fattouh: If oil and gas is to remain part of the energy mix, the key issue then becomes how to reduce greenhouse gas emissions from hydrocarbon related activities.

    00:00:16
    Sian Lloyd-Rees: If we want to achieve net- zero by 2050, we all need to adopt that 2050 mindset now, making the decisions today that are consistent with the future that we want.

    00:00:26
    Zoe Yujnovich: The journey to net-zero must be achieved whilst at the same time providing a stable and reliable supply of energy.

    00:00:34
    Julia Streets: The science is clear and the world is in a fight to avoid the most serious effects of climate change. Energy and the use of it is one of the biggest contributors to global greenhouse gas emissions. And this means that the oil and gas industry, which supplies much of that energy, is under pressure like never before. Many countries are working to achieve net- zero carbon emissions by 2050, while continuing to meet the demand for secure and affordable energy.
    The impact of the war on Ukraine on the global energy market has shown just how delicate the balance is to maintain. Some critics argue that only a drastic scale back from oil and gas will do, advocating for actions like an immediate end to the development of new oil and gas fields. Others believe that the global economy cannot be decarbonized without the constructive participation of the oil and gas industry.
    On one thing, there is broad agreement that business as usual is no longer an option. How can the world manage the balancing act of meeting demand while investing in the energy of the future? Does it need to go further and faster? Hello, I'm Julia Streets, and today on the Energy Podcast we ask; is there a role for oil and gas in the journey to net- zero? With me to discuss this are Dr. Bassam Fattouh, Director of the Oxford Institute for Energy Studies, Sian Lloyd- Rees, the UK Managing Director for Mainstream Renewable Power and Shell's Integrated Gas and Upstream Director, Zoe Yujnovich. So, Bassam, let me start with you. How does the world get its energy today?

    00:02:10
    Bassam Fattouh: Based on the latest statistics for 2022, hydrocarbons, that means oil, gas and coal, accounted for the bulk of primary energy consumption. Oil accounted for more than 30% of primary energy consumption, followed by coal, which still account for more than 25%, and then the share of natural gas is not far away, standing at around 25%. The share of renewables in the form of solar and wind has been rising fast and accounted close to 10% of primary energy consumption, surpassing nuclear energy and hydroelectricity. But Julia, it's important to focus not only on the shares, but also the growth rates. For instance, if you take coal, the growth rate between 2012 and 2022 was close to zero, whereas renewables grew more than 12% per annum during the same period. So the energy mix actually can evolve faster than implied by historical standards, which is needed if we are to meet our climate targets.

    00:03:12
    Julia Streets: So in support of the UN Paris Agreement's ambition to limit the global temperature increase to 1. 5 degrees centigrade, above pre- industrial levels, many countries have set net- zero targets and I'm curious to know what does that mean for the energy industry? Sian, can I come to you?

    00:03:28
    Sian Lloyd-Rees: As Bassam’s just talked about, the energy mix today includes a number of different energy sources and to achieve net- zero, we need to grow our cleaner energy mix going forward, but that's going to take time and it's going to take a balance of different things. From my perspective, as a wind developer, we are focused on trying to accelerate the uptake and the introduction of wind powered energy and solar energy on a global basis. But there are challenges.
    When we look at the wind resource in the world, a lot of it lies in the northern- hemisphere, the greatest need is in the southern- hemisphere. It lies far from offshore in quite deep waters, and that requires different technologies, floating technologies, to be able to access it. We then have the challenge of transporting that wind energy, once we've managed to deliver it at an affordable price, to different parts of the world. So we have technology challenges, we have geographical challenges. We also have the challenges around the supply chain and the materials that we need in order to be able to ramp up in terms of renewables. Yes, we need to grow our renewable energy percentage in terms of the mix, but we also need to focus on the energy sources today and we need to decarbonize those. Oil and gas today needs greater decarbonization, but so do many other heavy industries as well around the globe.

    00:04:39
    Julia Streets: And Zoe, perhaps I could bring you in here. I'd love to get your thoughts as well about what all this means for the energy industry.

    00:04:44
    Zoe Yujnovich: The journey to net- zero must be achieved whilst at the same time providing a stable and reliable supply of energy. Whilst the global energy mix is changing, demand for energy services will continue to grow and it'll need to be met by a combination of different types of energy. It's certainly going to be critical that we don't dismantle the current energy system faster than we can build the clean energy system of the future. We are very focused on trying to understand how to change the demand patterns and indeed how we therefore supply alternative energy into those different demand hubs.
    Oil and gas will continue to play a crucial role in the energy system for decades to come, but of course we will see that demand reducing gradually over time. The other thing I think I would say is of course it's also very critical that we actually lead by example in how we drive that energy efficiency. And we are very focused on cutting emissions from the existing operations. So in short, it's absolutely essential that the energy mix will change, we must reduce emissions from our own operations and also find those profitable sustainable ways to transition to net- zero.

    00:05:56
    Julia Streets: Just building on that, there's some warnings from environmental groups. The continued investment in oil and gas infrastructure can risk the making of the transition to cleaner energies even more difficult or even too expensive. And I'm really curious to hear from our guests today whether they think that is fair. Sian, can I come to you first?

    00:06:16
    Sian Lloyd-Rees: Yes, and there is a lot of discussion around the concern that infrastructure decisions and investment today shape the energy future that we'll get. So from our global wind developer perspective, we look carefully at government policies and the subsidies and investment areas they prioritize. And the UK move faster than many countries in focusing its fiscal incentives into renewable development with a contract for different commercial mechanism, which they initiated, which guarantees a long- term contract certainty for wind developers. Likewise, in the USA, we're seeing the Inflation Reduction Act focused on attracting investors and infrastructure developers into the renewable energy space, and the EU has got a similar mechanism.
    So we certainly are seeing a subsidy reallocation trend in favor of renewable energy sources and the growth which all helps to address the argument around renewables being more expensive or not fit for purpose. But overall, if we want to achieve net- zero by 2050, we all need to adopt that 2050 mindset now, making the decisions today that are consistent with the future that we want. And this is what we look for when we engage with governments in different parts of the world in terms of where their future investment is going.

    00:07:23
    Julia Streets: Bassam, can I bring you in here, because I'm curious what would be the impact of stopping new investments in oil and gas altogether?

    00:07:30
    Bassam Fattouh: Well, at this stage of the transition where we haven't seen a fundamental shift in demand and in fact demand for oil and gas continues to rise, the impact of stopping investment will be higher and more volatile prices for the simple fact that by not investing, not only there will be no new oil and gas supplies, but also existing supplies will start declining. And high oil and gas prices have multiple effects. It raises the issue of affordability and governments will have to put in place packages to protect consumers, which will affect their fiscal balances. Also, energy transition policies may lose support from the general public if this results in high energy costs. That is why it's key to have an orderly and just transition. But there are also other unintended consequences. For instance, higher gas prices can result in substitution from gas into oil and coal which have higher emissions.
    In fact, the Russia- Ukraine war revealed these types of substitutions. In Europe as a result of high gas prices, we saw a substitution from gas into diesel, fuel, oil and coal in power. In some developing countries, which were priced out of the gas market, particularly the LNG market, we saw increased reliance on coal. Some developing countries' access to finance is extremely limited and they face high cost of borrowing and don't have in place the appropriate regulatory framework to attract investment in renewables. Also has been chronic underinvestment in distribution and transmission networks, which actually could limit the rapid deployment of renewables.

    00:09:09
    Julia Streets: There's one other element to the finance investment discussion, which we must bring forward, because the profits of oil and gas companies regularly hit the headlines. And following from the energy crisis brought about by the invasion of Ukraine, energy costs for households have soared across the world. Meanwhile, companies like Shell have reported record gains. So I suppose my question is shouldn't oil and gas companies use more of their profits to fund the transition? And of course Zoe, I have to come to you with that question.

    00:09:38
    Zoe Yujnovich: As we mentioned earlier, today's energy system is still overwhelmingly comprised of fossil energy and whilst recognizing the need to continue to decarbonize that energy, many of the oil and gas reserves have a natural decline. So we have to continue to invest to essentially ensure that we can have that stable production over time.
    Over the last 15 years, as well as maintaining our core business of oil and gas, we have been investing in a wide range of low carbon energies, from hydrogen production to de- risking carbon capture and storage, biofuel production, electric vehicle charging, as well as wind and solar generation. We have invested in 2022, about 8. 2 billion in low carbon energy and non- energy products. This is about a third of our total capital expenditures, and of that about 4. 3 billion went into low carbon energy solutions.

    00:10:38
    Julia Streets: Bassam, I'm keen to get your voice on this discussion about the use of profits as well. Your thoughts?

    00:10:43
    Bassam Fattouh: Well, in this current environment, international energy companies are generating very healthy cash flows. Part of these cash flows will be directed towards investment in oil and gas project, because the demand for oil and gas is still rising. But there are also expectations that companies must allocate much larger part of their cash flows and capex budget to clean technologies. And I think the amount of capital allocated to renewables has become a key metric for many investors and NGOs. The challenge really is how to allocate cash flows to these projects at an accelerated rate, while achieve attractive returns to their shareholders as some of these technologies, such as green hydrogen and CCS is yet to scale up. If the alternative opportunities in the clean technology space are limited and evaluations are inflated and large investments in hydrocarbons are not particularly rewarded by investors, because of fears that investment in new project increase the risk of stranded assets, then companies will use these high cash flows to reduce debt, return money to shareholders through buybacks and dividends.
    Actually a trend that we have seen in this cycle, this has the attraction of making the energy firms more resilient in terms of lowering their leverage ratios and making these companies more attractive for investors and shareholders. But of course for many investors and perhaps observers, this is a signal that companies are not doing enough to decarbonize their activities and they are not transforming their activities and operations fast enough. But from company's perspective, this is seen as ensuring that capital is not destroyed in projects that don't meet their profitability criteria and where scale has not yet been achieved.

    00:12:28
    Julia Streets: So, how is the oil and gas industry driving down emissions from its existing operations?

    00:12:34
    Bassam Fattouh: If oil and gas is to remain part of the energy mix, the key issue then becomes how to reduce greenhouse gas emissions from hydrocarbon related activities. And this requires heavy investment in areas such as electrification of platforms, reducing venting and gas flaring, CCS and the development of low carbon fuels in the aviation and transport sector. This also requires developing and harmonizing standards for measuring, monitoring, reporting and verifying emissions. And although there has been progress made in this area, I think the landscape remains very fragmented, which make it difficult to measure performance over time and compare between companies and countries. So that's why the efforts really should be concentrated on how to reduce the emissions of hydrocarbon related activities while demand is still there.

    00:13:24
    Julia Streets: Zoe, keen to hear your thoughts.

    00:13:26
    Zoe Yujnovich: There are many things that we're doing recognizing that it's critical that we take action now on those things that we control, while also of course influencing the way demand will evolve for our customers. When we look at carbon emissions, we've been able to reduce ours from our own operations by 30% at the end of 2022, compared with 2016, which is our reference year, and this takes us more than halfway toward our target, a 50% reduction by 2030. For several years we've also been transforming our remaining integrated refineries into low carbon energy and chemical parks. But we also recognize that when we make new investments, we must hold a really high bar to ensure that they're not just economically resilient, but they're carbon resilient as well. So for example, we just recently brought online Timi in Malaysia, our first wellhead platform in the country that's powered by a solar and wind hybrid power system.
    We're also growing our liquified natural gas business that will play a critical role in a balanced energy transition in the way it also compliments renewables production. Liquified natural gas can be easily transported to places where it's needed most and that picks up on Sian's point that not all countries will be endowed with natural resources, whether they be hydrocarbons, wind or solar. And so it allows you to actually move that energy to where it's best needed. And of course, on average, natural gas emits about 50% less carbon emissions than coal when used to produce electricity, making it the natural lower carbon substitute in the near term.
    And we also are trying to look at ways in which we can re- scope the way we do our engineering. In our US Gulf of Mexico, we have Vito, a completely redesigned platform. We see by actually bringing new technology and integrating the way our scope is reviewed, that we've been able to reduce by 70% the lifecycle cost from the original host concept, a true demonstration of how we can really challenge ourselves to improve carbon and fiscal returns and how they can really work together in a complimentary way.

    00:15:36
    Julia Streets: So on the subject, let's go offshore to hear what's happening on Shell's newest deep water platform, Vito. Vito is in the Gulf of Mexico and has been especially designed to deliver greater energy efficiency. Operations Maintenance Coordinator Rodney Townsend is there to show us around.

    00:15:53
    Rodney Townsend: My name is Rodney Townsend and I'm currently standing on Shell's offshore platform Vito, Shell's 13th deepwater development. I'm around 150 miles southwest of New Orleans in the blue waters of the Gulf of Mexico. Vito is an amazing facility, four bright yellow cylindrical columns hold up the top sides, which are home to vessels, separators, pumps, generators, and compressors, all the processing equipment and support systems that we use in oil production.
    Vito is like a remote island made of steel and floating in the water. I'm one of 60 people in the Vito family currently offshore, where we work and live for 14 days at a time. The platform I'm standing on today is different than the original plans for the facility. In 2015, Shell began redesigning the Vito Project to take advantage of the latest technology and make it more cost- efficient while, reducing its CO2 footprint. It's about a third smaller than the previous platforms we've built, consumes less electricity and features energy efficient gas turbines, compression systems and more. These measures, along with others, resulted in a reduction of approximately 80% in CO2 emissions over the lifetime of the facility. Vito's simplified and replicable design is a blueprint for future deepwater projects.

    00:17:24
    Julia Streets: So, could the world switch to a hundred percent renewable energy tomorrow? And if not, I'm curious, why not? Sian, what do you think?

    00:17:33
    Sian Lloyd-Rees: The statistics on what percentage of the overall energy mix renewables makes up varies, but let's say it's currently contributes up to 25% of global energy demand, and that's taken us 40 years to get to that point. But we are now seeing a rapid increase in seabed leases for offshore wind being allocated and more solar and hydrogen developments as well. We're also seeing government subsidies and investment prioritizing renewable energy uptake. So good progress, but as I've mentioned previously, there remain challenges. And different parts of the world are addressing routes to market for the energy in different ways.
    In the UK, we're seeing some shorter term challenges for sure with inflation. The cost of development has increased. There's global supply chain challenges, and today we are actually seeing wind developers put their field development plans on hold, based on them being unaffordable at this point. And then you marry that with the fact that the average time to take a wind development to market is 10 years. Now solar is much quicker, but wind and solar both will need to be included in the energy mix. And similarly, hydrogen will play a key role, but the demand for hydrogen and the routes to market for hydrogen derivatives are yet to be fully understood. The industry and governments are working together on how they can also accelerate the policies, the fiscal measures that they put in place that attract the inward investment that we see going forward. So I think we can pick a pace and scale, but I'm not sure we can do it overnight.

    00:18:57
    Julia Streets: Zoe can I bring you in? I'd love to hear your thoughts.

    00:18:59
    Zoe Yujnovich: Yeah, I think about this in terms of perhaps three time horizons. In the first instance, it is about looking for ways to increase electrification, and so we've globally rolled out a significant footprint of EV charging. We're second to Tesla. And we also look at things like biofuel production, which can be drop- in fuels, which can use existing infrastructure and help to reduce the carbon intensity. So that is where you see things like sustainable aviation fuel, which is also helping to reduce the footprint of aviation.
    We then look at areas like carbon capture and storage. We have projects that are actively sequestering carbon in Canada, and in Australia. And we continue to look at additional opportunities to grow and scale that, recognizing it's such a critical part of decarbonizing the existing energy system. When you couple something like carbon capture and storage with liquified natural gas for example, you get blue hydrogen. And that perhaps brings us to the third horizon, which is in hydrogen, which today isn't seen as competitive, but there is an enormous amount of work that clearly we're doing around how we could de- risk that.
    And perhaps the best example to bring that to light would be Holland Hydrogen 1, where indeed it'll be Europe's largest renewable hydrogen plant once it's operational. It's currently in execution, it's a 200 megawatt electrolyzer, it's expected to produce about 80,000 kilograms of renewable hydrogen per day. So I think the time horizons will vary, much of which will be influenced by things like demand, but I think it's critical nonetheless that we do de- risk all of these time horizons together.

    00:20:34
    Julia Streets: Bassam, can I bring you in here? Because I'd love to get your thoughts about the role of policymakers when it comes to this journey to net- zero.

    00:20:43
    Bassam Fattouh: Well, the energy system has always been transitioning and as people discovered more efficient sources of energy, they switched from the less efficient, the higher cost energy to the more efficient, lower cost energy. I think this transition is different in a key aspect that many of the fuels we are using are efficient. The infrastructure around them has been built over many years and many of the assets are still economical and operational. But of course there's the issue of externality associated with emissions that need to be taken into account. And that's where governments play a very, very important role, because this needs to be priced either through carbon taxes or emission trading systems.
    But not only that, we need to achieve a decarbonized system fairly quickly. This would need, for instance, early retirement of assets. If you leave it to the private sector and without governments putting in place incentive through subsidies or taxes, this will not take place, at least not at the speed needed. Also, some of the technologies that we need to rely on, to reach our net- zero targets, need to be scaled up, so we could achieve the cost reductions. Again, I think governments need to play a key role here. Of course, this does not mean that the private sector shifts all the risk to governments. That's not what I'm saying at all. But there must be some reasonable allocation of risk to enable investment in new technologies and fuels to achieve scale, cost reduction, but also bankability of projects.

    00:22:14
    Julia Streets: And Sian, your thoughts on this?

    00:22:16
    Sian Lloyd-Rees: Well, let me just add, I think strong policy certainly encourages the investment that's needed. And again, we can look at the UK as this is a good example. Very early policy on wind encouraged that inward investment. It's why the UK currently has a hundred gigawatts of wind under development. Sweden moved quickly, they also have the same amount. And then of course we saw different policies in different parts of the world. In South Korea, there was a very strong policy in terms of local content provision as part of the seabed leases and the encouragement of technology to be developed. So South Korea will never be the largest wind development region in the world, but certainly they've moved very quickly to establish a very strong supply chain that can flourish as it serves global markets. So we do see policy as being a good signal for where the government's priorities are and how fast they want to move and how it differs in different parts of the world.

    00:23:06
    Julia Streets: And Zoe, what are your thoughts on this question?

    00:23:09
    Zoe Yujnovich: When we look at different policies, as we mentioned a bit earlier, we have seen quite a change in things like how the Inflation Reduction Act has really stimulated opportunities that might have previously been on the fence, but are now more interesting because of the tax credits that are being provided. And then perhaps just to bring it to life in terms of how we think collaboration can work, if we take an example for LNG Canada, which is an asset that we are partners in, it's on the west coast of Canada. It's on track for being commissioned by the middle of the decade. And having worked with customers, predominantly across Asia, who still rely on a significant aspect of gas in their energy ecosystem, we are able to produce, with new technology, a plant that actually has 60% lower emissions than the average facility that's currently performing today. And so an example of how collaboration with customers, with the governments, both federal and provincial level, enable us to develop an ecosystem that provides the right incentives and really drives change at a faster pace.

    00:24:15
    Julia Streets: But I wonder if we could just look ahead a little. I'm curious to hear your thoughts and Sian, I'm coming to you first of all, what do you think the energy mix will look like by 2050?

    00:24:26
    Sian Lloyd-Rees: So my preference would be that the energy mix in 2050 resembles where we start from today, which is to have an ambition of around 80% renewable energy in the mix by 2050 and certainly the remainder much cleaner. And I do believe we'll take a mix of cleaner energy from the use of carbon capture, use of hydrogen, et cetera, but also in terms of the uptick in renewable energy, predominantly in wind and solar as the primary sources.

    00:24:53
    Julia Streets: And Zoe, can I ask the same question of you? What do you think the energy mix will look like by 2050?

    00:24:59
    Zoe Yujnovich: I hope it's radically different to the one that we see today. I do hope that where hydrocarbons are part of the energy mix, they're largely decarbonized, both because of the emissions in the creation of the hydrocarbons, but also in the way that we can couple that with things like carbon capture and storage for customers. I hope that technology will play a really significant role in ensuring that that's affordable and scalable. And I also hope that we do so in a way that's quite thoughtful in the way that the transition is navigated, so we don't see these volatile moments that we've experienced that are incredibly painful for the world to endure as we've seen over the past 12 to 18 months.

    00:25:40
    Julia Streets: Well, it's been a fantastic discussion. Thank you for all your thoughts, because in a really short period of time, we've talked about supply and demand, supply and value chains, security, affordability, technology, and innovation. We've thought about policy and also ultimately the need for collaboration in the ecosystem. This is all about action to achieve the ambition. So my thanks to Dr. Bassam Fattouh, Sian Lloyd- Rees and Zoe Yujnovich. You've been listening to The Energy Podcast brought to you by Shell. Listen and follow for free wherever you get your podcast, so you don't miss a single episode. The Energy Podcast is a Fresh Air Production, and I must remind you that the views you've heard today from individuals not affiliated with Shell are their own and not Shell PLC or its affiliates. I'm Julia Streets. Thank you for listening and until next time, goodbye.

    See omnystudio.com/listener for privacy information.

  • The electric vehicle (EV) market is booming and widespread adoption of EVs is critical if countries are to realise their climate ambitions. But every new EV on the road increases the demand for convenient, affordable charging. The Energy Podcast investigates how the world is meeting this infrastructure challenge. Presented by Julia Streets. Featuring Elizabeth Connelly of the International Energy Agency, Lucie Mattera from ChargeUP Europe, Ingrid Malmgren of Plug In America and Shell’s Istvan Kapitany.

    The Energy Podcast is a Fresh Air Production for Shell, produced by Annie Day and Sarah Moore, and edited by Molly Lynch and Sophie Curtis.

    TRANSCRIPT

    Shell The Energy Podcast
    Season 4, Episode 3

    00:00
    Julia Streets: Today on The Energy Podcast…..

    MUSIC BED COMES IN

    Istvan Kapitany: When this is becoming really the global way of mobility, finally, we really need to be sorting out public charging.
    Ingrid Malmgren: Through deliberate planning and innovation and organic growth, we're going to have chargers where we need them, when we need them, and we'll have a cleaner, more sustainable equitable transportation system.

    00:29
    Julia Streets: There can be little denial that the electric vehicle revolution is upon us. According to the International Energy Agency, sales of Electric Vehicles, or EVs, exceeded 10 million worldwide in 2022, and the global market is predicted to grow even further this year. This is good news for the nations relying on widespread adoption of EVs in helping them to realize their climate ambitions. If global carbon emissions are to reach net zero by 2050 in line with the Paris Agreement, there will need to be 300 million EVs on the road by the end of this decade.
    Such rapid growth intensifies the need for EV infrastructure, namely access to reliable, affordable charging. Ensuring that EVs match the cost and convenience of running a conventional fuel vehicle is crucial, not just for existing owners, but also in convincing more drivers to make the switch. Governments and businesses across the world are grappling with the infrastructure challenge created by the EV boom with varying degrees of success.
    Hello, I'm Julia Streets, and today on The Energy Podcast we ask, are roads ready for EVs?

    MUSIC ENDS

    With me to discuss this are Elizabeth Connelly, transport analyst at the International Energy Agency. Lucie Mattera, Secretary General of the infrastructure industry association, ChargeUp Europe. Ingrid Malmgren, policy director at Plug In America, and Shell's Executive Vice President for Mobility, Istvan Kapitany.
    I'm delighted that you're all with me today. Elizabeth, when you think about EV infrastructure, what's the global outlook?

    02:16
    Elizabeth Connelly: One thing to note about charging infrastructure right now is that most charging of electric cars occurs at homes, but a lot of the attention is around public charging, of course, because this helps enable people to own EVs that don't have access to home charging. Looking at the picture today, worldwide there are about we estimate 17 million home chargers for electric vehicles and that's compared to about three million public EV chargers.
    In terms of who's leading the way with charging infrastructure, I don't want to say any one country is doing better or worse, because I think it really depends a lot on the setup of homes and whether people are living in detached homes or in multi- unit dwellings. So for example, in the US I think around 80% of EV owners live in single family homes and so it's really easy to charge at home and there's less pressure for there to be public charging infrastructure, at least in these early stages. While on the other hand, in China only about 50% of charging occurs at home.
    So I think there are factors that make it very different across different regions around what is the right level of public charging infrastructure. For example, China accounted for 50% of electric light duty vehicles last year but 65% of the public charging infrastructure. So I think in that way China's leading, but I think there's also factors that make it you need to be leading in terms of public charging.

    03:45
    Julia Streets: I've heard some people talk about having quite deep- seated concerns about what they might call range anxiety, in terms of will you be able to get the mileage, the kilometrage that you are looking for.

    03:57
    Elizabeth Connelly: Sure. So at least in terms of cars, and I think trucks as well, range anxiety is a real concern. We see automakers in the car industry, and I think also in the truck industry, really looking at how they can increase EV range, especially in ways that maybe don't require larger and larger, heavier and heavier batteries. So thinking about these in-route charging, whether it be highway fast chargers like we've already seen across highways around the world or thinking about for trucks in particular rest stops, how long the rest time is and building in infrastructure that can facilitate charging in whatever amount of time. I think the US and the EU have different regulations on how long driver breaks should be for these long haul trucking segments. So really thinking about how the operations need to work in order to design the adequate infrastructure in a way that could help reduce as much as possible the power demand on the grid.

    04:55
    Julia Streets: Lucie, from your point of view, at ChargeUp Europe, what are your thoughts?

    04:59
    Lucie Mattera: So on range anxiety, what we are finding that this is a factor that is less prevalent today in terms of sort of slowing down the switch to EV charging. There was a recent consumer survey that was commissioned by the European Commission and what they found was the primary obstacle for the switch to EV was actually the price of the car rather than the range anxiety or the lack of infrastructure. So in terms of what came up first as an obstacle for a driver that's considering the switch to e-mobility, that was firmly on the top of the list.

    05:32
    Julia Streets: Ingrid, what do you think?

    05:34
    Ingrid Malmgren: I think that with regard to passenger vehicles, since so many people charge at home in the United States, for most people's day- to- day driving, range anxiety is not a huge issue. Most people drive around 30 miles a day and new EVs have ranges well over 250 miles a day. So many people only need to charge up every several days or once a week.

    06:00
    Julia Streets: Istvan, can I bring you in here? How important in the big debate about whether a motorist will make the switch to EV is the question of infrastructure?

    06:10
    Istvan Kapitany: It's very, very important and we are already charging in 30 countries in the world. So we are pretty much one of the biggest operator in terms of the reach. The United States is very different than China. So in China we have already well over 20,000 public chargers. Most of the people, of course, are not having the ability to charge at home, so we really need to be catering for that immediately.
    In the United States, in different parts of the United States, you have the picture very different. And in Europe, we just did a survey now, whilst a year ago it was basically 33% of the people who didn't have charger at home, this is now 44% of the people who are driving EV cars do not have charger at home.
    Why is it happening? Of course, after the early adapters it is becoming more and more mainstream activity, which is great. We see that people are buying this for commuting and therefore public charging is becoming a very important part of this equation. At the early stage, many people thought, oh, it's going to be all home charging. It is just not possible. We are in 84 markets and 90% of the people who fill up at Shell wouldn't be today with electricity or with fuel but wouldn't have an ability to charge at home. So when this is becoming really the global way of mobility, finally, we really need to be sorting out public charging.

    07:30
    Julia Streets: There's a huge element here about the growing availability of charging needed in convenient locations, whether they're from forecourts and streets to workplaces, retail car parks. I just want to pick up on this because we're going to take a quick trip to Germany where Carlo Cumpelik, Shell's network delivery manager for Germany, Austria, and Switzerland, has been at an EV charging site in Berlin.

    7:53
    Carlo Cumpelik: I stand here in Berlin at Konrad -Wolf -Street at the parking lot next to the REWE Supermarket. REWE is one of Germany's leading food retail companies. This location is the very first REWE Supermarket where we installed our recharge charge posts.
    In the beginning of this year, Germany crossed the magic number of over one million fully electric cars registered in the country. The German government expects 15 million electric cars on the streets by 2030. With this number of electric vehicles growing, our aim is to enable as many people to drive as many electric kilometres as possible, whether that is at home, at work, or on the go.
    REWE opened their shops at our service stations in the Czech Republic and in Austria. In Germany, REWE asked us to deliver a fast charging experience for their customers at REWE Supermarkets and Penny Discounters. Currently, we already operate our charging solutions at 10 supermarkets and we plan to install Shell recharge charging posts at a minimum of 400 REWE Supermarkets and Penny Discounters across the whole of Germany.

    09:15
    Julia Streets: Carlo Cumpelik.
    I suppose one of the things that we're thinking about is we talk about private charging and we talk about public charging, I'm wondering about almost what you might call municipal charging. I'd be really curious will we see some infrastructure innovation in terms of roads and road infrastructures, almost like the railways providing some charging capability.
    Elizabeth, I'd love your thoughts on that.

    09:40
    Elizabeth Connelly: Sure. So I think a lot of the conversation around charging infrastructure has tended to be about light duty vehicle charging, but obviously electrifying trucks is I think much more complicated and will require some new innovative solutions. So in addition to the traditional box cable charging points that we've been talking about, I think particularly for these heavy duty vehicle segments for long haul trucking or even just medium- sized delivery trucks, there could be a place in the future for electric road systems.
    So that could be either wireless inductive charging built into the road or it could be something that is a throwback where we have overhead cables that you've seen in trolley buses of the past. These things can help reduce demand on the grid from cable charging and spread out the power demand over the journey of the vehicle extending its range without needing these megawatt- scale fast chargers.

    10:37
    Julia Streets: So I wonder if we could change the conversation and look at it from a slightly different point of view, which is the obstacles, the hurdles to infrastructure, because this ultimately really matters when it comes to adoption. Ingrid, where do we see the biggest hurdles?

    10:51
    Ingrid Malmgren: The big issue in the United States is for charging for people who don't have access to home charging. People who live in multi- unit dwellings or multi- family dwellings. It's not just an accessibility issue, because it's far less convenient, but it's also an affordability issue.
    For people who can't charge at home, they need to use public chargers, which typically cost between three and four times as much per kilowatt hour as your home charging rates. It's definitely a cost issue. So there's definitely an equity issue there, and that I think is the biggest hurdle that we're facing right now, particularly in cities.
    Obviously, the distance between chargers is an issue and having access to public charging in places where there's far less demand for it. That tends to be the issue in rural areas. And then there's always an income issue. So if you rent in the country and you don't own your home, you're less likely to be able to install a charger. You'd have to get permission from your landlord. You wouldn't be able to recoup that money. So the income issue definitely can be exacerbated.
    I think EVs could go either way. They could make transportation more equitable or, if they're not implemented well with charging, it could make it less equitable.

    12:11
    Julia Streets: Lucie, I'd love to hear your thoughts about where some of the hurdles may exist.

    12:16
    Lucie Mattera: In Europe, you will find some similar difficulties as Ingrid mentioned. It's about how do you make it a little bit more democratic for people who do not live in detached house but in multi-family buildings. You have examples of good practice across Europe to basically make that easier.
    In France, you have a right to plug. Basically a tenant in a building can request to have a charging station installed in the building. You can also prescribe some electrification requirements for buildings that are being renovated so that it doesn't cost a fortune when you come in as a new tenant to get your EV charged at home.
    On the point that you were making, Ingrid, indeed, the infrastructure will go where the demand is, and so you will have some of that imbalance between areas where you have a lot of EVs and areas where you have fewer EVs. The way Europe is trying to address that is by setting targets by law. So those targets are both capacity based and distance based. So they are dynamic, which means they will increase over time as the uptake of EVs increase, and again, as the number of EVs on the road increases, you'll see more charging infrastructure.
    Adding to that a distance based target, which means you need to have enough infrastructure at a reasonable distance. They've set that both for HEVs and for EVs and that's coming into force next year and hopefully will address some of the difficulties or inequality in the spread of EV charging infrastructure we're seeing today across Europe.

    13:47
    Julia Streets: Istvan, I'd love to get your thoughts are on what are the main issues for businesses like Shell?

    13:52
    Istvan Kapitany: I see three main issues with EV for the society to deal with. One is it has to be available. Really need to be giving and offering all the support for the different kind of commercial ventures to build out. We order now more EV chargers at Shell Mobility than petrol pumps. That always surprises people. So we are obviously great believers of letting the business to make sure that it is becoming something which is a commercial venture that you can make money out of it.
    Because if you build a system up on regulation too much, it's not going to be effective and not efficient. Therefore, it has to be commercially oriented. It has to be reliable, because that's our main job to make it a reliable experience for customers.
    I was recently in a conference and I asked put up your hand if you had a problem with filling up with petrol. Nobody put it up. Put up your hand if you have a problem with using a public charger. Almost everybody put up their hand.
    Finally, it has to be investable. So it has to be a business case which is making it profitable. Because if you're not able to make this business profitable at a normal price which people can afford, it's going to be very difficult to maintain.

    15:05
    Julia Streets: I'd love to bring in Elizabeth at this point. From a public sector versus private sector point of view, what more can policymakers and businesses do to help?

    15:14
    Elizabeth Connelly: Sure. Well, I think, I'm not going to say regulations are bad in this case. There can be carrots and sticks, but I think policymakers can do a lot to help ensure that there will be a business case.
    So take for example the EU's alternative fuels infrastructure regulation. This is basically saying we need a certain coverage of charging infrastructure while at the same time they've passed CO2 standards that are really pushing forward zero-emission vehicles, including electric vehicles. So it's taking a kind of comprehensive approach, a suite of policies that help build demand for charging as well as putting in place metrics for how many chargers there need to be to ensure certain levels of utilization, and of course ensure that that drivers are able to recharge their vehicles.
    So I think policymakers play a big role in helping push businesses to deploy infrastructure, invest in different types of infrastructure. So I think taking this really comprehensive approach, we've seen it not just in the EU, I think more recently with the IRA in the US. China's been doing it for ages. We've seen it in India with different schemes there. I think a lot of countries are really seeing how this works well and I think it's something that can really compliment businesses as well.

    16:29
    Julia Streets: Istvan, could you give us some examples of where you think businesses and policy makers are working well together?

    16:35
    Istvan Kapitany: I think the examples that Elizabeth used are very, very good examples. So basically to provide the policy framework is fantastic, and you use the example of the United States, the European Union, and it is really good because this is basically incentivizing you to do the job.
    Where really business should be coming in is that then the playing field should be really levelled and we should be very, very careful with not over incentivizing or disincentivizing different kind of players. That is I think very important going forward.
    The other area where I think business and policy makers, but particularly governments, should work together better is really areas like grid capacity, electrification. We do have over 150,000 chargers in the 30 countries where they are operational, but as we speak, we have hundreds of chargers that we cannot connect because there is no grid capacity available in that area. In some instances we are waiting as long as 18 months to two years because somehow that thing is really lagging behind.
    Two areas I think we need to improve the game is the grid capacity. It's almost every country, so it's not country specific. Also, of course, which is another very important element for us, because we clearly would like to achieve our target to be an net zero company by 2050, that also the electricity that we are supplying is more and more renewable energy based. Because in some of the markets, the electricity grid and the electricity production is not green, it's quite far from it. So we need to be working on that as well and incentivizing that it happens.


    18:12
    Julia Streets: Lucie, would you agree with that and are there any other challenges you'd anticipate?

    18:16
    Lucie Mattera: Istvan is making a very, very good point about the grid connection and the need for grid upgrades. All of our CPOs are telling us this is the number one bottleneck for the deployment of EV charging infrastructure today. I'm talking about Europe. Istvan was talking about delays of 18 months up to two years, you have some markets in Europe where that can go up to three years to get your connection and permitting. So that of course is not acceptable in a context where you're trying to deploy as fast as possible, and of course, there’s a cost associated.

    18:45
    Julia Streets: I'm really curious to think about what we believe our roads will look like by 2050. Ingrid, I'd love to get your thoughts on this. What do you envisage?

    18:57
    Ingrid Malmgren: If I think ahead to 2050, I think that we won't give much more thought to driving electric and thinking about charging stations than we do now to driving on gasoline and pulling into a gas station. I think that through deliberate planning and innovation and organic growth that we're going to have chargers where we need them, when we need them, and we'll have a cleaner, more sustainable equitable transportation system.

    19:29
    Julia Streets: Elizabeth, your thoughts on what we think the roads will look like in 2050?

    19:34
    Elizabeth Connelly: The idea is that by 2050 almost everything is going to be electrified on the roads. But I think I want to take this opportunity to mention also the importance of reducing private vehicle ownership and moving to this public and shared mobility as a way to help moderate electricity demand. The kind of challenges we're talking about with building out the grid and the charging infrastructure can really be addressed by reducing the demand for electricity for transport in terms of using buses. I think this will be really important for transport in the future.

    20:08
    Julia Streets: Lucie.

    20:09
    Lucie Mattera: The broader context is climate neutrality by mid- century and that is now firmly in the books. So e-mobility, which has become even more mainstream, it is becoming more mainstream today, but it would be so mainstream by 2050 we won't even notice it anymore, it would just be the new normal. Greener cleaner roads and a brighter future for all of us.

    20:31
    Julia Streets: Wonderful. Thank you very much, Lucie. Istvan, your thoughts about what the roads will look like by 2050?

    20:37
    Istvan Kapitany: I agree with everybody who was saying that electric vehicles, whether it's passenger cars or heavy duty vehicles, will be playing a big part of the mobility system by 2050, and it has to be friction free and easy to use. More and more smart city solutions, more and more ride-sharing, car-sharing activities we will be seeing of course in the future.
    But the one point, and the last point I would make, it has to be in the context of 200 countries in the world, not only just 40, and therefore we need to be ready for different kind of solutions all around the world to cater for every customers in this mobility journey.

    MUSIC BED COMES IN

    21:18
    Julia Streets: Well, I have to say it's been a phenomenal conversation, because in a really short period of time we've thought about the ambition, we've thought about the infrastructure, the dynamics of delivering infrastructure. We've also thought about some of the challenges, some of the hurdles. Clearly the opportunity is there, what the future may hold.
    My thanks to Elizabeth Connelly, Lucie Mattera, Ingrid Malmgren, and Istvan Kapitany.
    You've been listening to The Energy Podcast, brought to you by Shell. Listen and follow for free wherever you get your podcasts so you don't miss a single episode.
    Next time, we'll be discussing what role can oil and gas play in the energy transition?
    The Energy Podcast is a Fresh Air production and I must remind you that the views you've heard today from individuals not affiliated with Shell are their own and not Shell plc or its affiliates.
    I'm Julia Streets, thank you for listening. Until next time, goodbye.

    MUSIC ENDS

    See omnystudio.com/listener for privacy information.

  • Carbon markets are advancing on a global level, following the first country-to-country trades at COP27. The Energy Podcast investigates how carbon pricing works and examines what role it can play in the race to reduce greenhouse gas emissions.

    Presented by Julia Streets. Featuring Dr Hasan Muslemani from the Oxford Institute of Energy Studies, Andrea Bonzanni from the International Emissions Trading Association and Shell’s senior carbon pricing policy advisor, Dr Malek Al-Chalabi. With additional contribution by Stephen Kansuk, Head of Environment and Climate Change at the United Nations in Ghana.

    The Energy Podcast is a Fresh Air Production for Shell, produced by Annie Day and Sarah Moore, and edited by Molly Lynch and Sophie Curtis.

    EPISODE TRANSCRIPT:

    00:00
    Julia Streets: Today on The Energy Podcast...

    MUSIC BED COMES IN

    Andrea Bonzanni: Emissions must be reduced globally irrespective of where they take place. The atmosphere is one at the end of the day. Article VI allows reducing emissions where it’s more efficient.

    Dr Hasan Muslemani: We have solutions that are being praised as the holy grail of net- zero… The issue is that we need all the solutions that we can get because in the fight against climate change, we are really in a race against time.

    Julia Streets: The cost of climate change. It's a phrase commonly used by governments, companies, and campaigners across the world when discussing the need to limit global warming to well below two degrees Celsius. Quantifying the exact cost of far- reaching effects of climate change is not an easy task. But putting a price on emissions is viewed by many as an effective means to help drive down levels of CO2 in the atmosphere. The idea is simple. Putting a price on carbon emissions creates a financial incentive to reduce them.
    Carbon markets have existed for decades. There are many carbon pricing systems around the world, but at present, it is estimated that only a quarter of emissions are priced. That could soon change. At last year's COP27 climate conference in Egypt, the first country- to- country carbon trades took place. Could this pave the way for further uptake of carbon trading and what impact could that have in the fight against global warming?

    Hello, I'm Julia Streets, and today on The Energy Podcast: How can carbon markets limit climate change?

    MUSIC ENDS

    With me to discuss this are Andrea Bonzanni, who's the international policy director at the International Emissions Trading Association, who you may well remember from a previous episode of The Energy Podcast. He is joined by Dr. Hasan Muslemani, who is the head of Carbon Management Research at the Oxford Institute for Energy Studies. And our third guest is Dr. Malek Al- Chalabi, who is a senior carbon pricing policy advisor at Shell.

    Hasan, perhaps I could start with you. For the benefit of the audience, would you just mind explaining what we mean when we talk about carbon markets?

    02:18
    Dr. Hasan Muslemani: The fundamental concept behind a carbon market is really to put a price on carbon, or in other words, to quantify the cost of damages that emissions will cost our society over time. To do this, we have, at the heart of carbon markets, what is called carbon accounting or greenhouse gas accounting. This represents a set of standards and methods that help us quantify but also verify the impact that each business creates on the environment, and this impact is reported in terms of tons of CO2 emitted.
    Now, something that I really want to emphasize here is that today, we speak of carbon markets, but we need to differentiate between two different types of markets. The first is what we call a compliance market, which is a market that is heavily regulated and corresponds to a specific region or jurisdiction, and where companies within that jurisdiction have to take part in the market. The other one is a voluntary one. This is a lot less regulated and where participation is voluntary, as the name implies. The voluntary carbon market is based on the concept of offsetting. That is where a company wishes to mitigate or neutralize its own emissions. So, it goes out and invests in projects which are reducing equivalent amounts of emissions elsewhere in the world.

    03:30
    Julia Streets: Can you talk to us a little bit about how they work in practice in everyday terms?

    03:36
    Dr. Hasan Muslemani: Starting on the compliance markets, and the objective is really to put a price on carbon, there's two different ways to do this. The first one is carbon taxation, which should be a simple concept. We have countries like Norway and Denmark, which would impose a specific tax on every ton of CO2 that a company would produce within those countries. The key here, really, is for that carbon tax to be high enough to incentivize businesses to change behavior or to move to greener production. This is essentially a stick form of regulation where businesses have to lower their emissions or face an additional cost.
    The other mechanism, which is a cap and trade mechanism, which is the more familiar one, and in this system we have an authority, say, the European Commission, which sets a cap on how much emissions can be generated as a whole within the continent, within Europe, and then allocates a number of allowances or carbon credits to European countries and companies for them to trade amongst each other. Here, each carbon credit or allowance is representative of one ton of CO2.
    This allocation process, what I want to note, is done using the historical emissions of each one of these companies. This is a process that we call grandfathering. The overall cap is reduced each year in order to meet a certain European climate target in the future. The way this works is where companies that have lowered their emissions below their targets, now they have surplus of allowances, which they can go into the market and sell to companies that did not do so well and will require to buy credits. So, this mechanism really is sort of a carrot but also a stick sort of regulation.

    05:12
    Julia Streets: Thank you for explaining how they work. I suppose my next question, is how effective are they proving to be?

    05:19
    Dr. Hasan Muslemani: The longest running and actually the biggest ETS in the world, that is the EU ETS or emission trading scheme. This has started in 2008 and has gone through different phases over the years. But I do want to mention that it has suffered from a number of setbacks over those years. To give an overview, the carbon price at the beginning was around 30 euros per ton, but that price has crashed to less than 5 euros around the financial crisis of '09. This was most likely because of two main reasons. The first one is that companies had to report their emissions in such a regulated manner that they have not done before, and so they might have overestimated how much emissions they emit and hence how much allowances they eventually received from the system. But also, because of the financial crisis itself, it meant that business offices aren't lit, emissions aren't as high as usual, so they did not need to surrender as much allowances at the end of the compliance phase, which eventually meant there's an oversupply of credits in the market, and so the price has crashed.
    The good news is the EU ETS has gone through sort of a recovery mode over the past 10 years, and today the price has not only recovered but reached the level which is believed to incentivize most sectors to lower emissions, and that level is around 100 euros per ton.

    06:41
    Julia Streets: It's been so helpful to get a sense of progress, thinking about the dynamics of the market since launch, and also to think about the market share.
    Andrea, let me bring you in here because this is about the world's attempts to limit global warming to well below two degrees Celsius, in line with the Paris Agreement. Are we likely to see the growth of carbon markets in pursuit of this great ambition?

    07:03
    Andrea Bonzanni: Well, we know that meeting the goals of the Paris Agreement requires a radical transformation of many areas of our economies and our lives, and for the reason outlined by Hasan, carbon markets and carbon pricing in general are one of the tools that governments are increasingly considering. Carbon markets are spreading from a core of rich runs economies such as the EU, California, South Korea, and New Zealand, to middle- income and emerging countries. This year, we had Mexico and Indonesia launching their emission trading systems, and the two schemes are expected to expand and evolve over time. There are other countries in Southeast Asia and Latin America that are implementing carbon markets, and even some African countries are starting to consider them.

    07:45
    Julia Streets: Andrea, when we last spoke, you would just at COP27. As I mentioned in the introduction, that's when the first country- to- country carbon trade took place. Could you tell us a bit more about that and what happened at COP27?

    07:58
    Andrea Bonzanni: Sure. At COP27, Ghana authorized the transfer to Switzerland of certified emission reductions. This transaction was the first of its kind under Article VI of the Paris Agreement. There were emission reductions generated in Ghana thanks to the implementation of enhanced rice production techniques that avoided CO2 and methane emissions. These emissions will be counted towards the climate target of Switzerland. In turn, Ghana commits to apply a corresponding adjustment to its emission account.
    Mechanisms like this have vast potential to generate investment flows in climate change mitigation and sustainable development from the Global North to the Global South. Article VI is still a small, nascent market, but we expect it to grow and countries are looking to buy and sell emissions to each other.
    In addition to Ghana and Switzerland, after COP27, another transfer was authorized, this time from Thailand to Switzerland. A country like Japan has 26 bilateral agreements with countries around the world and is looking to import emission reductions in the near future. Countries like Singapore, South Korea, New Zealand and Canada are all looking to purchase carbon reduction from abroad. Many countries around the world, mostly developing countries, are preparing and getting ready to become sellers in this market.

    09:20
    Julia Streets: Andrea, just picking up on one of the comments you made there. One project being implemented under the Ghana- Switzerland, Article VI carbon pricing deal is a UN initiative that aims to reduce greenhouse gas emissions from rice cultivation by training local farmers in sustainable agriculture practices. Rice cultivation currently accounts for over 10% of global methane emissions, and this is because the main method of rice farming involves flooding the fields, which prevents oxygen from penetrating the soil, causing a buildup of bacteria. This bacteria emits methane into the atmosphere, contributing to global warming.
    The United Nations Development Program aims to promote climate- smart rice cultivation for Ghanian farmers, leading to a significant reduction in methane emissions. Stephen Kansuk, Head of Environment and Climate Change at the United Nations in Ghana, speaking from the capital Accra, told us more….

    10:18
    Stephen Kansuk: In Ghana, rice is cultivated as both food and cash crop. Research shows that in 2020, Ghana's total rice consumption was about 1. 4 million metric tons. To support rice farmers to reduce methane emissions in Ghana, the United Nations Development Program, the Ministry of Environment Science Technology Innovation, the Ministry of Food and Agriculture, and the Environmental Protection Agency, all in Ghana, and the future office for the environment in Switzerland are implementing a climate- smart rice project.
    The project is supporting over 7, 000 rice farmers across Ghana to adopt an alternate wet and drying technology in rice cultivation to reduce methane emissions. This project is one of the initiatives under a partnership between the government of Switzerland and Ghana. The agreement is to allow public and private institutions to collaborate to invest in climate change mitigation interventions in Ghana and exchange carbon credits with Switzerland for payments.
    In terms of benefits with this climate smart rice project, our target is to achieve about 1. 1 million tons of carbon dioxide equivalents, emission reduction targeted by 2030. The project will also provide extra incomes for the farmers as a carbon revenue through a performance bids payment system, and this will help increase their resilience. The project is also helping to create a number of jobs at the rural level so that they will be able to adapt effectively to the impact of climate change.

    12:14
    Julia Streets: Andrea, I wonder if I could bring you in because there has been some reaction that has accused governments of rich countries of outsourcing their emissions reductions to governments of developing countries. Is that fair?

    12:27
    Andrea Bonzanni: Emissions must be reduced globally irrespective of where they take place. The atmosphere is one at the end of the day. Article VI allows reducing emissions where it's more efficient, deploying capital where it can abate or remove more emissions. Researchers have quantified the cost savings of meeting climate targets used in Article VI will be up to 250 billion US dollars a year by 2030.
    There is a perception out there that projects reducing emissions abroad replace strong climate action at home. But I don't think there is evidence supporting this thesis. In the longer run, achieving net- zero means that every ton of CO2 emitted must be compensated by a ton of CO2 removed from the atmosphere. It is not rational to believe that all countries, especially European ones, can get to net- zero without using international carbon market mechanisms. International carbon markets deploy investments in things like natural climate solutions or emission removal technologies, such as direct air captures, bioenergy with CCS, and then deploy the capital where these projects are feasible. Not all geographies, not all jurisdictions have the potential to scale these solutions and achieve net- zero within their borders.
    Rich countries need strong climate action both at home and abroad, and we need carbon markets. We need well- designed one. 80% of countries in their nationally determined contributions said that they're planning to use carbon markets to meet their goals. So, we should start implementing carbon markets soon and let investment flows from rich countries into developing countries.

    14:02
    Julia Streets: So we've explored this from the point of view of what are carbon markets. We've thought about this from an international global sort of point of view, and whether or not this is fair from a jurisdiction point of view. We've also heard about a real case study and its application of where some of this collaboration comes in.
    Malek, could I ask you, from a corporate point of view, why does this particularly matter to a company like Shell?

    14:25
    Dr. Malek Al-Chalabi: Yeah, thanks. Thanks, Julia. At Shell, we've set a target to become a net- zero emissions energy business by 2050, and our policy positions on climate and energy transition serve as a global framework for Shell's advocacy with governments, international organizations, and associations. This includes supporting government policies that will help the world to achieve net- zero emissions by 2050. A variety of policy tools are required, one of which is carbon pricing, and at Shell, we advocate to put a direct price on carbon emissions as part of a broader policy framework to achieve net- zero emissions. The carbon price, whether through tax, cap and trade, or hybrid system, should apply to as many sectors of the economy as possible and increase over time. Additionally, Shell advocates for greater international cooperation through systems that transfer carbon credits between countries and ensure that international carbon credit transactions have environmental integrity by avoiding double- counting across national inventories. In summary, a carbon price can be an effective mechanism, and success depends on it being part of a comprehensive energy transition policy framework that incentivizes innovation and encourages commercialization of new and clean technologies.

    15:33
    Julia Streets: You talked there about the importance of collaboration. I'm curious, what needs to happen to get more countries trading carbon?

    15:41
    Dr. Malek Al-Chalabi: If we look at the data from the World Bank and look back 30 years, the first carbon prices took place in the 1990s. If we fast- forward today, there's approximately 70 carbon pricing initiatives and, as you've said, covering 25% of the world's emissions, which represents a sizable improvement. But this still means that 75% emissions are still unpriced, and more work needs to be done in this space.
    I think it's important to recognize a tremendous amount of work to operationalize carbon pricing policies has taken place. The International Chamber of Commerce at COP26 focused on global carbon pricing principles that are needed to help deploy carbon markets, and at COP27, a business review was also done to highlight opportunities for decarbonization.
    There are 10 principles which include, but are not limited to, focusing on greenhouse gas reduction as a prime target, creating a reliable and predictable overall framework, promoting the linkage of carbon pricing instruments, and ensuring cooperation for greater consistency globally.

    16:49
    Julia Streets: Hasan, earlier you were talking about some of the market dynamics at play. I would love to get your thoughts on what do we need to do if we want to have an ambition for a global price on carbon?

    17:01
    Dr. Hasan Muslemani: First off, I would say it's probably not easy and may not even be possible to have one carbon price that fits all jurisdictions in the world. This is because what may work for a country or a region or a jurisdiction might not work for another. We might have some that prefer a carbon tax mechanism, but others which might prefer a cap and trade, or an emission trading scheme, or ETS for short. Not only that, but the sectors which are included within these different ETSs in the world that we have today are not the same sectors. Some of them might include cement or steel or oil. Some others might include different sectors.
    To give an example from my own background, which is in steel production in China, specifically. Producing steel in China is much cheaper than in Europe. That's the first thing. The second thing is measures which we have that we can take to lower emissions from steel production in China versus in Europe are different and their costs are different. So, that means that the abatement costs for each company and each country are different.
    The problem with not having a global price becomes important when trading happens between these regions, so if you're importing or exporting steel into and out of Europe. For that reason, I think carbon prices should be complemented with what we now call carbon border adjustments. The EU has already introduced such a mechanism that will come online as of October of this year. Under these adjustments, what happens is any steel that would be imported from China into the EU will have to face the same carbon tax based on its carbon footprint. In that way, the steel manufacturer is now subject to the carbon price in Europe, the EU ETS price, creating what I would like to call an implicit global carbon price.

    18:47
    Julia Streets: Andrea, I'd love to get your thoughts, if you would, about some of the risks and some of the opportunities for Article VI? And what do skeptics say about its limitations?

    18:57
    Andrea Bonzanni: Well, the opportunities generated by Article VI are obvious. They go down to basic economic theory. We have to reduce or remove emissions where it's more efficient because that will allow us to do it faster and to do more at lower cost. So, we need an international mechanism that brings together countries with access to capital and technologies, but without access to cheaper emission abatement options, and on the other hand, countries without capital and technology, but with plenty of opportunities for reductions. So that's, to me, very clear; it's a mechanism that can work.
    Some of the risks around Article VI are related to the complexity of these mechanisms, and this is where the skeptics are coming from. Critics have magnified, in some instances, the cases where carbon markets have not delivered what they promised. They highlighted cases where methodologies to calculate carbon reductions were not robust, or measurements overstated the impact of certain projects. However, the industry is aware that markets need to improve, and there are many initiatives to address market integrity.

    20:06
    Julia Streets: Malek, I'd love to get your thoughts about what are your hopes for the carbon markets in the future?

    20:12
    Dr. Malek Al-Chalabi: I think if I build on what Andrea has said, I believe further operationalization of Article VI country- to- country trades increasing in the future would be a welcome development to take place. I think also, as some may know, Article VI. 4, which is the globally led carbon market by the UN, looking to operationalize in the next one to three years would also be another welcome development to help facilitate carbon markets. But also, as Hasan has mentioned, the growth of compliance and voluntary markets would also be a welcome development where countries can continue to use implicit or explicit carbon pricing mechanisms to help further incentivize low and clean technologies at a price that is helping assist decarbonization efforts.

    21:07
    Julia Streets: Gentlemen, I'd love to come to each of you with your closing thoughts for our listeners.

    21:12
    Andrea Bonzanni: Carbon markets need to grow. Growth, growth, growth is what we need. We need to shift gears, scale up markets, both in terms of coverage and in terms of price levels. We said that about a quarter of emissions are priced nowadays, but the World Bank estimates that only 4% are priced at the level that will allow us to achieve the goals of the Paris Agreement. So, whatever the economic and geopolitical situation, we cannot afford to put carbon markets on hold.

    21:40
    Julia Streets: And Malek, what would be the one thing that you think that the audience should hang onto and really take away?

    21:45
    Dr. Malek Al-Chalabi: I think our message would be that to put a direct price on carbon emissions as part of a broader policy framework to achieve net- zero emissions, and whether it's through a carbon tax, cap and trade, or a hybrid, they should apply to as many sectors of the economy as possible and increase over time.

    22:04
    Julia Streets: Hasan, would you agree with that? What would be your message?

    22:07
    Dr. Hasan Muslemani: I think markets have already picked up momentum, and they are here to stay. The next step is really to ensure integrity of what's being traded and sold in the market. That word integrity has really become the buzzword in the carbon market space lately, where we're seeing a lot of quality frameworks being developed to define what is integrity. We have solutions that are being praised as the holy grail of net- zero solutions, such as capturing CO2 directly from air or other solutions, and they're sort of being put in competition with each other. The issue is that we need all the solutions that we can get because in the fight against climate change, we are really in a race against time. Because this task is so critical to us as a human race, if anything, it's much better to be vaguely right than precisely wrong.

    MUSIC BED COMES IN

    23:00
    Julia Streets: It's been a wonderful conversation because in such a short period of time, we've thought about the dynamics of the carbon markets; we've thought about some real use cases of how there's been some international collaboration; we've thought about why this matters for different people. But we've also been very considerate in terms of where are some of the limitations and perhaps some of the things that skeptics are talking about. But this is about integrity. This is about momentum, and this is about growth. Exactly as you say, this is all about us using all the tools at our disposal to drive change at pace and at scale.
    Andrea Bonzanni, Dr. Malek Al- Chalabi, and Dr. Hasan Muslemani, thank you very much for being with us today.
    You've been listening to The Energy Podcast, brought to you by Shell. Listen and follow for free wherever you get your podcast so you don't miss a single episode. The Energy Podcast is a Fresh Air Production, and I must remind you that the views you've heard today from individuals not affiliated with Shell are their own and not Shell, PLC, or its affiliates. I'm Julia Streets. Thank you for listening, and until next time, goodbye.

    MUSIC ENDS

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  • One year after Russia’s invasion of Ukraine, The Energy Podcast investigates the impact of recent events on the global energy transition, drawing on Shell’s two latest Scenarios: Sky 2050 and Archipelagos.

    Presented by Julia Streets, featuring László Varró, head of Shell’s Scenarios team, and Dr Nat Keohane, President of the Center for Climate and Energy Solutions (C2ES).

    Read more about the Energy Security Scenarios here.

    The Energy Podcast is a Fresh Air Production for Shell, produced by Annie Day and edited by Sophie Curtis.

    EPISODE TRANSCRIPT:

    00:00:00

    Julia Streets: Today on the Energy Podcast...

    MUSIC BED COMES IN

    Dr. Nat Keohane: The energy security concerns from the Russian invasion of Ukraine actually accelerate the pace of the energy transition.

    Laszlo Varro: There was no single global response. Europe is the eye of the storm. It is Europe where the energy crisis had by far the biggest impact. This is a situation where the average European consumer needed no explanation that there is a crisis.

    00:28:41

    Julia Streets: When Russia invaded Ukraine, the world was already facing a challenging set of circumstances with post-COVID- 19 austerity looming, energy prices rising and security tensions growing. The invasion amplified many of these challenges and brought the need for secure supplies of affordable, sustainable energy to the very top of the global agenda. Today, we will be exploring the tensions that have been unleashed just over one year after the invasion, with security issues, global energy supply and geopolitical alliances all in flux. We'll also be discussing how these tensions could be resolved in a world that needs to decarbonize, drawing on Shell's latest scenarios research.

    Hello, I'm Julia Streets and today on the Energy Podcast, can a divided world tackle climate change?

    MUSIC ENDS

    Allow me to introduce my guest today. Our first guest is Laszlo Varro, who joined Shell in 2021 as the VP of Global Business Environment, looking at scenarios and pathways. He joined, after 10 years at the International Energy Agency, where he was most recently their chief economist. In his role at Shell, he leads up the scenarios team, which explores how the global energy system could evolve right the way through to the end of the century. So Laszlo, it's great to have you on the show.

    Laszlo Varro: Thank you very much. It's a pleasure to be here.

    Julia Streets: And joining us today is Dr. Nat Keohane, who is the president of C2ES, the Center of Climate and Energy Solutions. Before taking on that role in July 2021, Nat served for eight years as a senior vice president for climate with the Environmental Defense Fund where he led all of EDF's climates work in the United States and globally. So Nat, thank you so much for being with us.

    Dr. Nat Keohane: Thanks very much for having me.

    Julia Streets: So Laszlo, in the introduction, I mentioned that you lead the scenarios team at Shell. Can you talk us through what we mean when you talk about these scenarios?

    02:34:18

    Laszlo Varro: Scenario analysis came out of Cold War strategic assessments. Shell was historically the first company to use it for strategic analysis, so we are continuing a time- honored tradition. Scenarios have decision makers navigating uncertainties by reflecting on plausible futures. The Shell scenarios are not Shell's predictions, they are not Shell's commitments and they're not Shell's strategy. They are part of the information base that the leadership had navigating through the uncertain world.

    Now in 2022, it's fair to say that history was teaching us some very tragic lessons about uncertainties. Even before the war, there were tensions and fissures in the energy system. The post- COVID recovery in 2021 was exceptionally energy-intensive. Global carbon dioxide emissions stabilized at a level which is entirely unsustainable. Geopolitical intentions were already emerging, and debates were already emerging on the future of globalization.

    Now, on top of these existing tensions, the Russian aggression against Ukraine is not only a human tragedy – most importantly, it is a human tragedy – but it was also a geopolitical energy shock, which hasn't happened since the 1970s shocks of the Yom Kippur War and the Iranian Revolution. It created a new energy reality. Some of the impacts are helping the energy transition, other impacts are hindering the energy transition. There are regionally divergent responses and, basically, we were assessing the regionally divergent political, social, economic responses and asked the question how they can shape the energy system in a direction where humanity would like to go.

    04:27:16

    Julia Streets: So let's explore these scenarios a little further if we may. So there are two that I think are particularly salient today. Could you just talk us through those two scenarios? Then I'd love to bring in Nat for your reaction and your thoughts. Laszlo.

    04:39:29

    Laszlo Varro: We felt that, in the world of 2022-2023, social and political priorities on security are a given. They are just a fact of life. But the two scenarios, the two pathways, are distinguished by what is the actual interpretation of security. What do we mean by security and how do we try to achieve that? In one of the pathways, we call that Archipelagos, security is achieved by sticking to the existing well understood conventional energy system, energy infrastructure and capital stock, and security increases the importance of domestic hydrocarbon resources or hydrocarbon imports from friendly countries. There are signals and signposts in that direction. Last year, we have seen a surge of domestic coal production all around the world. China, for example, expanded its domestic coal production in energy terms by seven exajoules. Just for the sake of comparison, all the oil and gas that Shell produces worldwide is around six exajoules in energy terms. So the increase in domestic coal mining in China last year was more than the entire hydrocarbon production of Shell.

    Now we also designed another scenario - we called it Sky - in which the interpretation of security is very different. In this scenario, society regards the fossil fuel dominated energy system itself as a security risk. Very clearly, the fact that it was Russia, a major oil and gas producer which launched a geopolitical aggression, it reinforced the already existing political and media narrative that oil and gas are the problem and renewable energy is the solution. This is a scenario in which society flees forward and achieves security by an accelerated transformation of the energy system.

    06:41:37

    Julia Streets: Thank you for setting out those two scenarios because what strikes me is that one of them very much starts with the premise of where we are today and where we're headed, and that is the Archipelagos. The second, Sky, as you call it, starts with a future point and then works backwards from that. Nat, I know you've looked at these. I'd love to get your reactions.

    07:05:06

    Dr. Nat Keohane: Any scenarios like this are primarily useful for making comparisons. Any individual scenario is bound to be wrong in the details, so these aren't crystal balls, but by comparing the scenarios and looking at where they have consistent themes and where they diverge, we can learn a lot. So that's how I want to be approaching these.

    So under both scenarios that Shell has released, renewables increase while fossil decreases. The difference is how fast. And because of those dynamics, as well as similar consistent transitions in transport and industry, in both scenarios, we see global CO2, carbon dioxide emissions peaking and starting to decline within a decade. One interesting finding in fact from the Archipelagos scenario that Laszlo mentioned is that the energy security concerns from the Russian invasion of Ukraine actually accelerate the pace of the energy transition.

    It's also important to note this isn't the only evidence we have for this. The International Energy Agency in a recent report and the other oil major BP, and it just published Energy Outlook, both found similar conclusions. In other words, even under projected trends, we're turning the corner on fossil fuel consumption and emissions in the near term. The low carbon energy transition is no longer a matter of if but when.

    And so this is where it's useful to look at the divergence between those scenarios because that divergence points to what we need to do to accelerate that transition much faster than it would otherwise happen. And it's very clear. We need to rapidly decarbonize, clean up the electric grid, even as we expand energy access in developing countries, and even as we shift much of our economy, including transportation and industry to run on electricity. We need to develop new fuels for aviation and new technologies to make heavy industrial products like cement and steel. We need to develop and deploy new technologies from scratch like green zero- carbon hydrogen and carbon removal technologies to take carbon out of the atmosphere and we need to scale them up and we need to transform land use so we store much more carbon in soils and forests.

    All of those things are highlighted in the scenarios. To do all of that, we really need government policies at a much more ambitious scale than we have now.

    09:26:29

    Julia Streets: I'm really curious now to know what the current shifting dynamics are. As I mentioned in my open, we are one year into conflict. And what impact has the war in Ukraine had on the pace of change? Nat, can I come to you first?

    09:42:43

    Dr. Nat Keohane: My sense in terms of what Russia's invasion of Ukraine has done is that by highlighting energy security concerns, it turns out many of the ways to improve energy security align with reducing fossil fuel use, at least in the medium and long term. Not right away, and that's a problem. Right away, we see a bump up in the use of coal in some areas, and if that locks in, we're in real trouble. But at least what the scenarios are showing us is that the shift to a focus on energy security can actually help shift towards more renewables, and so, that's an important additional dynamic.

    10:17:24

    Julia Streets: Laszlo, let me get your reactions to that.

    10:21:26

    Laszlo Varro: I broadly agree with everything that Nat said. We tried to enrich the analysis by going into the regional dimension, because there was no single global response. Europe is the eye of the storm. It is Europe where the energy crisis had by far the biggest impact. Now, Europe mobilized very large amounts of money for the short-term crisis management essentially buying liquified natural gas at whatever price from anywhere around the world and also supporting consumers. But Europe also, as Nat mentioned, very strongly reinforced its clean energy policies. Essentially, the clean energy transition in Europe emerged as the overarching organizing principle of policy.

    And very importantly, this is a situation where the average European consumer needed no explanation that there is a crisis. So last year, there was a warm winter in Europe and a warm winter reduces heating energy demand. That's well understood. But when you statistically analyze the demand data and you adjust with the temperature, it turns out that the demand decline in European heating gas use was around 10 billion cubic meters more than the temperature can explain. So 10 billion cubic meters of gas, which is like switching off the heating in 5 million homes, was delivered by people voluntarily changing their behavior.

    Now you jump over to the United States. So the United States is embarking on a journey to decarbonize a high energy consumption American lifestyle, which requires innovation and requires investment. You could observe the main US policy reaction, the Inflation Reduction Act, primarily focuses on increasing investment in clean energy supply. There is no carbon pricing in the Inflation Reduction Act, but there are very, very strong incentives to build, build and build more and more clean energy supply.

    Again, when you jump further, China. China, up until recently, was largely self- sufficient from coal. Their domestic coal production played an important role in maintaining energy security, but at the same time, in all the relevant clean energy technologies - wind power, solar power, nuclear power - China's investment activity is comparable to Europe and the United States combined. It's a massive scale leapfrogging from domestic coal to domestic solar and from domestic coal to domestic nuclear.

    Last but not least, the developing world outside China, we call them the surfers in our analysis because these are countries that are surfing the waves of opportunity. These are countries which were very badly hit by the European energy crisis. One good example is Pakistan. There was even a European company which defaulted on a contractual obligation to supply gas to Pakistan because even after the penalties, it was more profitable to bring the gas to Europe. Pakistan recently had a gigantic blackout, 200 million people without electricity. And the Pakistani government essentially announced recently that, "We are going to increase our qualified power generation capacity by a factor of four and we are going to dig out our domestic coal and just burn it and maintain security that way."

    So there have been divergent responses, but overall, what we see in our analysis is that even our more conservative, scenario, is actually a considerably lower temperature increase than what was feared just a couple of years ago in the climate assessments. There is no such thing as a business as usual scenario anymore.

    14:09:19

    Julia Streets: What does this mean for the energy transition ambition? Are we going to hit that ambitious target or are we going to fall short?

    14:19:28

    Dr. Nat Keohane: Maybe I can start with just a little bit of context on where we are relative to those global targets. The Paris Agreement on climate change sets that goal of keeping that rise in average global temperatures well below two degrees above pre- industrial levels and striving for 1. 5. The more science we have and the more we learn, the more we realize that 1. 5 is really a much, much safer place to be.

    So where are we? We're at 1. 1 today and the scenarios as we were talking about, the more conservative scenario goes to 2.2. There's a lot of uncertainty. Let's say 2 to 2. 5 degrees Celsius by the end of the century. On the one hand that is a lot of progress since before the Paris Agreement. Before the Paris Agreement, we were looking at 3. 5 to 4 degrees in terms of projected temperature increase. Now we're looking at 2 to 2. 5. Again, everything is uncertain, but 2 to 2. 5 under this conservative scenario.

    Why is that? The technology changes we've talked about, the accelerations in innovation, but also the Paris Agreement gets some credit for that. The Paris Agreement has created a framework for cooperation that is starting to work. And, the theme of the day, we need to accelerate that much faster if we're going to get below 2 and down to 1. 5, all of those things that the scenarios talk about, how are we going to do that? We need to leverage the Paris Agreement and government policies at all levels, national, state, local. We need to leverage them to really accelerate that clean energy transition.

    15:52:20

    Julia Streets: Laszlo.

    15:55:21

    Laszlo Varro: A timely energy transition which satisfies the objectives of the Paris Agreement, and that includes the Sky scenario, which was explicitly designed to satisfy the ambitions of Paris, is consistent with our roughly 2, 3 thousand billion dollars per year increase in average annual clean energy investment. Total capital investment in clean energy globally is thousand billion dollars per year today. A very sizable chunk of that is wind and solar, but biofuels, hydrogen, other technologies also play a role, and this roughly a thousand billion dollars per year, will have to go to, depending on how you model it, somewhere around 4, 000 billion dollars per year.

    Now, in order to achieve that, a couple of things are needed. First of all, the money. Now in the Western financial system in Europe and the United States, there is a very strong appetite for clean energy investment, but 90% of that clean energy investment funding stays in the Western world and only 10% flows to developing countries, where clean energy is critically underfunded.

    So one factor where the two scenarios start differing from each other, that in Sky, the financial system effectively channels that capital into clean energy investment in the developing world. The only way to achieve that is to mobilize the power of modern capitalism and turn the energy transition into a profitable investment opportunity.

    The second thing that you need after you have the money is the equipment. You need the wind turbines, the solar panels, the batteries. You need the metals that they are made from, so you need the copper, the nickel, the lithium. You need the manufacturing capacity and you need value chains which are secure and are trusted from a political point of view. So again, Sky is a scenario in which the scale up of the clean energy value chains and the metal supply is managed appropriately. In Archipelagos, this emerges as a barrier.

    And last but not least, after you have the money and you have the equipment, you need to have a legal permission to build those things and you need to be able to connect them to the grid, and the legal processes and the licensing and permitting environments in many countries in the world are not in line with the need to rapidly scale up green energy investment. So there's a very important task for governments to modernize the regulatory environment and enable this industrial investment to go ahead.

    18:12:21

    Dr. Nat Keohane: I'm really with Laszlo in what he said about the finance that's needed and how we mobilize that. We need trillions of dollars. He said thousands of billions. Trillions. That's the same thing. I just want to underscore that. That's what we need in terms of driving more climate finance.

    Now some of that does need to come from governments. The US, the richest country in the world – we need to be providing more climate finance. It's shameful, frankly, that the US only... It provides a fraction of the climate finance commitments we've pledged. Only a few billion dollars in climate finance a year. That needs to be much greater. And that's talking about billions and we need to be talking about trillions. How are we going to do that with government policies at the national and international levels that mobilize the private sector?

    The scenarios talk about the importance of carbon markets and carbon trading. Article six of the Paris Agreement provides a framework for that. We need to accelerate that. The best policy to align incentives and mobilize capital is always a price on carbon. The European Union has that. Other countries are putting that in place through various market- based approaches. If we can't do that, then we ought to look for other ways to create incentives to drive capital into those new technologies.

    Final point, we've talked a lot about increasing the build out of clean technologies and accelerating innovation in zero carbon technologies like wind and solar and hydrogen and so on. That's really important, but it's not sufficient. We also have to accelerate the phase out of the fossil fuel that we're already consuming, starting with coal plants, but also going to oil and gas. We need to accelerate the phase out of the high-carbon fuels even as we are accelerating the build-out of the clean technologies because we have to do both of those things if we're going to meet our targets.

    22:26:17

    Julia Streets: So let's close out our discussion today by asking you what would you want the audience to do? Nat, can I come to you first?

    20:39:28

    Dr. Nat Keohane: Sure, thanks. We've just been talking about the need for government policy, for well-designed government policies at all levels, national, state, local, international, to drive the clean energy transition and accelerate that phase-out away from the high-carbon fuels. Those government policies rest on a foundation of political will and citizen engagement, at least in much of the world.

    So what I always say is the most important thing that individuals can do is make your voice heard on climate. Make this a priority. When you go to the voting booth, if you're in democracy, if you're in the US, you're elsewhere, make this a priority for your voting. Talk to your friends about it, talk to your relatives. The importance of talking and building awareness about not only the state of play in terms of the climate crisis, where we're headed and how urgent it is, but also the optimism, the note that we can shift that trajectory, that we are shifting it and we just need to accelerate that change. That's where I always start.

    21:36:44

    Julia Streets: Laszlo, what would you want the listeners to do?

    21:41:46

    Laszlo Varro: So as a citizen, you interact with the energy system through three channels. You have three hats. One, as a citizen, you are a participant in a political system, you vote in elections. Second, you are an investor. The financial system channels your money into investment. Third, you are a consumer. It is your consumer decisions which orient a modern market economy.

    When you wear your first hat, be aware that governments will have to implement energy and climate policies that were conventionally thought to be politically impossible. So make it possible. Send a signal to the political system that you want those policies. When you wear your investor hat, ask hard questions from the financial institutions that manage your money and consciously steer your investments toward the green energy space. Last but not least, consumers also play a very important role in creating the market for new low carbon products and solutions. So be there and send a signal towards the modern market economy. The capitalist market economy is incredibly effective to provide you what you demand, but you have to demand it. So use all of your three hats and use all of the three channels.

    23:13:19

    Julia Streets: So Dr. Nat Keohane, thank you so much for being with us and for all your thoughts today.

    23:18:26

    Dr. Nat Keohane: Thanks very much for having me. It's been a pleasure.

    23:20:29

    Julia Streets: And Laszlo Varro, thank you for being with us.

    23:24:31

    Laszlo Varro: Thank you very much. Thank you very much, Nat, for joining us.

    MUSIC BED COMES IN

    23:20:38

    Julia Streets: Another fascinating discussion. We started by laying out two very specific energy security scenarios, one called Sky and one called Archipelagos. Of course, you can find links to those on the episode page. Then we thought about what is the impact of the Russia- Ukraine war because ultimately, we're trying to drive change at pace and scale, but we are not doing this in isolation. We're doing this very much on an international playing field and there are regional and national dynamics and considerations at play. Then of course, we brought it right the way back down to what can we do as listeners of this podcast? What can we all do to play our part? My thanks to both Laszlo Varro and Dr. Nat Keohane for all their thoughts today.

    You've been listening to the Energy Podcast brought to you by Shell, and you can listen and follow for free wherever you get your podcasts so you don't miss a single episode because next time, we're exploring the role that carbon markets can play in keeping global temperature rise below 1. 5 degrees Celsius. The Energy Podcast is a Fresh Air Production, and I must remind you that the views you've heard today from individuals not affiliated with Shell are their own and not Shell plc or its affiliates. I'm Julia Streets.

    Thank you for listening and until next time. Goodbye.

    See omnystudio.com/listener for privacy information.

  • With COP27 closed out, The Energy Podcast hears different perspectives from people who attended the conference in Egypt, and their views on what needs to happen next.

    Presented by Julia Streets. Featuring Rebekah Shirley, World Resources Institute Africa; Susan Shannon, Shell; Eduarda Zoghbi, Global Student Energy; Andrea Bonzanni, International Emissions Trading Association.

    The Energy Podcast is a Fresh Air Production for Shell, produced by Annie Day.

    See omnystudio.com/listener for privacy information.

  • The 2022 UN Climate Change Conference, or COP27, will be taking place in Egypt between 6th and 18th November with a strong focus on Africa. As the conference gets underway, The Energy Podcast takes a look at what to expect.

    Presented by Julia Streets. Featuring Prudence Glorious, Chief Purpose Officer at Tanzanian impact firm PZG PR, and Shell’s Chief Climate Change Adviser, David Hone.

    The Energy Podcast is a Fresh Air Production for Shell, produced by Annie Day.

    See omnystudio.com/listener for privacy information.

  • In the third episode of our series on heavy industry we explore chemicals. From t-shirts and trainers, medicines and mattresses, to cars and computers, phones and TVs, our modern-day lives are filled with products made from chemicals. But the chemicals industry produces a lot of CO2 emissions. What can be done to reduce these emissions? The Energy Podcast investigates.

    Presented by Julia Streets. Featuring Peter Goult from Systemiq, Naoko Ishii from the University of Tokyo and Robin Mooldijk from Shell. Additional reporting by Alexander Mante.

    The Energy Podcast is a Fresh Air Production for Shell, produced by Annie Day.

    See omnystudio.com/listener for privacy information.

  • Steel. It’s strong, it dominates every modern city, and it’s supporting developing economies. But its production generates a lot of carbon emissions. What’s the answer? The Energy Podcast investigates.

    Presented by Julia Streets. Featuring Professor Leora Dresselhaus-Marais from Stanford University and Lene Hviid from Shell’s metals division. Additional reporting by Judith Durkin.

    The Energy Podcast is a Fresh Air Production for Shell. Edited by Claire Daley, production by Annie Day.

    See omnystudio.com/listener for privacy information.

  • Cement… it’s all around us. But producing it generates a huge amount of CO2 every year. So what can be done to take carbon out of the cement-making process? The Energy Podcast investigates.

    Presented by Julia Streets. Featuring Kristin Myskja, Director General of the Climate, Industry and Technology Department at the Norwegian Ministry of Petroleum and Energy, and Audny van Helden, VP Energy Marketing, Sectors and Decarbonisation, Shell. Additional reporting by Judith Durkin.

    You can find out more about the Northern Lights project here: https://www.youtube.com/watch?v=kbPDlZKB5os&t=22s

    The Energy Podcast is a Fresh Air Production for Shell. Edited by Claire Daley. Produced by Annie Day. Exec Producers: Neil Cowling and Michaela Hallam.

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  • From tracking the source of renewable energy to changing the relationship between how energy is produced and consumed, blockchain has the potential to do so much. Three industry experts tell us their experiences of blockchain in action.

    Presented by Julia Streets. Featuring Sophia Rödiger, bloXmove; Jesse Morris, Energy Web and Sabine Brink, Shell.

    Edited by Claire Daly.

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  • What innovations and systems look set to change the energy landscape and is AI ultimately the key to lowering emissions?

    Questions expertly examined at Web summit – one of the world’s biggest technology events held in Lisbon. In case you missed it, here’s the panel discussion in full.  

    Presented by Martina Fuchs, Xinhua News Agency. Featuring Hege Skryseth, Kongsberg; Junta Nakai, Databricks and Dan Jeavons, Shell.

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  • It is earmarked as a front-runner in the quest for lower carbon, but The Energy Podcast explores why all hydrogen may not be equal when it comes to meeting climate goals.

    Presented by Bryony MacKenzie. Featuring Dr Danielle Stewart, National Grid; Paolo Brunengo, KBR; Frank Kiesslich and Nan Liu, Shell Catalysts & Technologies.

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  • Jobs in the energy industry are changing and so are the skills needed to make the energy transition happen. What will it take for the workforce to keep up and who is leading the push for new ideas?

    Presented by Bryony MacKenzie. Featuring Dr Anjlee Prakash, Learning Links Foundation; Mansuri Maryam and Neha Pandey, students and Nxplorers participants and Harry Brekelmans, Shell.

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  • In a lively debate, a panel of experts examine the big issues around lowering emissions by 2050.

    Hosted by Georgie Barrat and featuring Andrea Heins, Chair at the Argentine Committee of the World Energy Council; Jimena Marvan Santin, Executive Director of Chapter Zero México; Thiago Barral, Executive President of the Energy Research Office and Maarten Wetselaar, Shell’s Integrated Gas, Renewables and Energy Solutions Director.

     

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  • The technology is proven but what needs to happen for carbon capture to help the world tackle climate change?

    Presented by Bryony MacKenzie. Featuring Charlotte Hartley, Pale Blue Dot; Dr Nilay Shah, Madhu Datta and Aulia Rahmayanti, Imperial college London; Roger Highfield, Science Museum, London and Syrie Crouch, Shell.

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  • As COP26 approaches, we hear from experts who can make a difference when it comes to sustainable finance.

    Presented by Julia Streets and featuring Hiro Mizuno, UN special envoy on innovative finance and sustainable investments, Huw van Steenis,  Sustainable Finance Chair and Senior Adviser to the CEO at UBS and Jessica Uhl, CFO at Shell

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  • As COP26 approaches, The Energy Podcast explores key themes and speaks to experts who can make a difference.

    Presented by Julia Streets; featuring, Mechthild Wörsdörfer, IEA and Mallika Ishwaran, Chief Economist, Shell.

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