CONVOCO! 0000

1. Do you expect that the Iran conflict and the resulting rise in fossil fuel prices will accelerate the build-up of renewable energy?

Yes, and it’s already happening. Oil prices spiked within days of the bombing on February 28^th, and fuel costs remain high and volatile. The ripple effects are already being felt in form of “fossilflation,” and they’re going to feed through into broader inflation in the coming months.

I’m old enough to remember our last bout with that “fossilflation” – four years ago, after Russia’s invasion of Ukraine. That, too, happened in February, and we saw a massive spike in inflation over the summer months. It was also then that Isabel Schnabel at the European Central Bank introduced the world to the term fossilflation.

Of course, there are differences between now and then. This time it’s oil and liquefied natural gas, not piped gas from Russia. That magnifies the impact in the sense that LNG was supposed to be part of the answer to the 2022 bout with fossilflation.

There’s also some hope. Even four years ago, renewables and especially batteries were still more expensive than they are today. The difference to the Arab oil embargoes of the 1970s, of course, is even more dramatic. Back then, solar power cost at least 500 times what it does today, and electric vehicles, heat pumps, and induction stoves weren’t available. Today, they are the one clear answer.

Yes, there’s also what Isabel Schnabel called “greenflation”: when demand for solar panels and heat pumps suddenly spikes, and outpaces supply, leading to long wait times and higher prices. But the solution to greenflation is the same as the solution to fossilflation: produce more of the climate technologies that move us off fossil fuels faster.

2. You distinguish between fossil fuels and renewables: fossil fuels need to flow while renewable energy should be seen as infrastructure. How should this be understood?

This is a key distinction that I think is widely underappreciated. Fossil fuels are commodities that must continue to flow – extracted, shipped, refined, burned, repeat. When that flow gets interrupted, as when oil shipments through the Strait of Hormuz are cut off, the consequences reverberate almost instantly through global commodity markets. Yes, on February 28^th, there were some 2 billion barrels floating in ocean tankers. But those supplies run out quickly.

Renewables are fundamentally different. Technologies like solar, geothermal, and batteries are almost exclusively about capital investments. They are infrastructure. Once I install a solar panel on my roof, it delivers electricity for years, even if the physical supply chain for new panels gets cut off.

That’s an enormous difference for energy security. Fossil fuel dependence means permanent exposure to the next geopolitical crisis and the next price spike. Shifting to technologies that can only get cheaper and better over time is an investment in both geopolitical and price stability.

3. Norway uses fossil fuel revenues to decarbonize its economy. Is this hypercritical? While Microsoft just announced that it will reduce its investment in decarbonization. What is your view on decarbonization?

I don’t think Norway is hypocritical at all – I think other oil exporters should follow its lead. Norway has all but banished petrol cars from its dealerships. Nearly all vehicles registered there this year are fully electric. And it’s not even close. Of the 15,000 or so registered during the first three months of the year, something like a dozen weren’t electric. Think construction equipment, or other specialty vehicles, and yeah, there, too, it’s only a matter of time.

At the same time, yes, Norway remains a leading oil exporter. It profits from others buying its oil and uses some of those proceeds to decarbonize its own car fleet and economy. That’s not hypocrisy so much as it is a smart strategy to be mimicked. But – or I should say “and” – of course, that’s a limited time offer.

It’s also what makes me rather hopeful. Yes, Norway is in the lead. But yes, Exxon or even Saudi Aramco(!) have net-zero strategies. All of them are about decarbonizing their own operations. So it’s easy to point fingers and say that’s not enough. But, of course, if everyone thinks they can – and should – decarbonize their own operations based on simple economics, the dominos begin to fall.

Microsoft is a different story. They had a wildly ambitious commitment – not “just” decarbonizing their own operations but about sucking enough CO₂ back out to make up for all the CO₂ they had emitted in the lifetime of the company. Carbon removal, too, is needed, but it’s indeed an extra commitment above and beyond decarbonizing one’s operations, or even one’s entire supply chain.

4. Renewable energy depends on critical minerals like lithium, cobalt, and rare earths. Is limited supply and China’s dominance slowing the transition?

I hear this objection constantly, and I take it seriously – but it isn’t an excuse for delay. Yes, building an EV requires around six times the minerals that a petrol car does. But that comparison misses the huge physical footprint of fossil fuels required to propel that petrol car over its lifetime. That direct comparison is fraught for a number of reasons, but rough order of magnitude, oil takes roughly 200 to 400 tonnes of material to produce one gigawatt hour of energy, compared with less than 50 tonnes for solar power or batteries.

And here’s the point that connects back to the flow-versus-infrastructure distinction: those minerals go into a technology you build once, and it works for years. Fossil fuels you burn and they’re gone – you need the next shipment tomorrow. Developing mining and manufacturing capacity and building globally diversified supply chains is important work, absolutely. But saying that we can’t decarbonize because we need mines is really just an excuse – no surprise, it’s one the fossil industry likes to play up, while playing down its own, much larger footprint

5. Looking at the global political development – is the dependency on China a high risk for Europe and the US? Can supply chains be diversified to reduce dependence on China? Or can recycling and new technologies reduce dependence on these minerals?

China’s dominance over the climate technology supply chain is a real national security concern – it extends from critical and rare-earth minerals all the way through to manufacturing of solar panels, batteries, and other technologies. It’s also the age-old tradeoff between resilience and efficiency. Narrow economic forces alone will almost always favor efficiency and try to lower costs. Policies, of course, need to take the resilience angle seriously, and invest in domestic supply chains for all sorts of reasons, not least national security.

Interestingly, we like to talk a lot about the “green premium,” and how that’s sometimes too expensive – it’s why Microsoft took a step back from its own spending on carbon removal. It’s subject of the famous Gates memo. Meanwhile, the “national security premium,” of course, is often much higher. Tanks are produced domestically, at a massive price premium, and for good reason. Only a small fraction of that security premium would pay for decarbonizing domestic supply chains many times over. Yes, there are upfront investments. The dividends, of course, pay for themselves many times over.