How Climate and Geopolitics will shape the west's energy policy

How Climate And Geopolitics Will Shape The West’s Energy Policy

A discussion between Ezra Klein and Daniel Yergin dated March 22, 2022

I recently listened to an amazing and enlightening podcast interview about the energy markets and the world that aired on March 22nd.  The participants were Ezra Klein the inquisitive and extraordinary interviewer from the New York Times and Daniel Yergin who may be the world’s most authoritative energy expert. I wasn’t quite prepared for how lively this discussion would be.

Here is a link to both the transcript and the actual podcast.

Ezra Klein Podcast Interview

There were several highlights that were discussed that I found to be fascinating and insightful.

Russia's Energy Influence is Declining

As the title of the podcast suggests, Yergin believes that Russia’s days as an energy superpower are winding down. Much of the discussion looks at the historically global role of oil and gas and how it has changed over time, especially most recently during the current geopolitical crisis.

It was pointed out that today’s sanctions are being used to “to unplug Russia from the global economy” and that “it turns out there are lots of cords that connect Russia to the global economy. And of course, oil and natural gas are among the most important”.

One of Putin’s main objectives was to undermine NATO but he did the exact opposite. 

Europe's Changing Energy Plans

Germany and much of Europe are changing their policy. They are building facilities to take in and utilize more L.N.G. from the US. “But the Europeans have said, we’re done. We’re out of here. Now, they’re not going to get out of it as fast as they think. But we do not want to depend upon Russian gas to the degree we have. We’re going to bring it way down, and we’re going to try and do the same on oil.”

According to Yergin, “you back up a year, and Germany is shutting down nuclear plants and building a new natural gas pipeline with Russia. And now as the situation has changed, as their estimation of Russia has changed, what you’re hearing from Europe is that the future is not just to be less dependent on Russian energy, but towards decarbonization.

Where Does this Leave China?

One large looming consequence is that China will have to decide. Do they want to align their future with Russia, or do they want to align themselves with the West? Yergin made an interesting reference to the China-Russia relationship which was “once based on Marx and Lenin but is now grounded in oil and gas.” But Yergin also points out the incredible interdependence and mutual reliance between the US and China”.

Opportunity for the United States

Energy policy is foreign policy and always has been. A main theme was “how does the world become less reliant on carbon-based energy given the fact that the world moves over 100 million barrels of oil a day”.

“In 2008, the U.S. imported on a net basis 60 percent of its oil. Today, we’re basically self-sufficient, if you look on a net basis. And we’re the world’s largest oil producer. And this was unthinkable a decade and a half ago.” That the US becoming a net exporter of energy over the last several years has been a game-changer and that it was to a great extent about the shale revolution and our ability to export L.N.G (liquid natural gas). This energy self-sufficiency has become an enormous geopolitical asset.

According to Yergin, “there was some time in January, for instance, when the U.S. L.N.G. going to Europe was actually greater than the volumes of gas that Europe was getting from Russia”.  If the US was not exporting L.N.G., Europe would be in a much worse position and would have more difficulty withstanding the pressure from Russia.

The Role for Renewable Energy

They then discussed the intersection of renewables not only being important for climate but also for national security. Europe sees this clearly. The US does too, but Europe (except for Norway) doesn’t produce oil or gas.  They are more vulnerable to their energy needs and we can’t forget the fact that Europe shares a border with Russia and was directly affected by both World Wars, as compared to the US which is separated by a large ocean.

Where this may lead us is that much of the World will need to cooperate in the short and medium-term to figure out current energy needs which will include more reliance on carbon. But in the long run, the big picture is that many governments and society will be highly motivated to increase the contribution of renewables and to develop better batteries and other sources of clean energy like hydrogen. This train isn’t stopping.

On March 8, the European Commission outlined this plan to make Europe independent from Russian fossil fuels well before 2030. That required tripling renewable energy capacity. Germany’s finance minister recently called renewable energy “freedom energy.”

It is so interesting to see the mounting pressure on the West to move away from carbon and towards renewables which will be better for both our climate and foreign policy.

Unfortunately, in the short run, we may need to take a step back.

Reliability of Data. The information set forth herein has been obtained from sources which we believe to be reliable, but this data has not been independently verified and we cannot guarantee its accuracy. CCM shall not in any way be liable for claims and makes no expressed or implied representations or warranties as to the accuracy or completeness of the information provided.

Acknowledgements. CCM wishes to thank Lee Strongwater and Steven Ellis for their contributions to this article.

Lee Strongwater, Senior Financial Advisor
Senior Financial Advisor

An entrepreneur and world traveler, Colorado Capital Management vice president and co-owner Lee Strongwater brings a global perspective to investments and life planning.

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Jason Black, Financial Advisor (CFP)

Jason Black, CFP ®

With a drive to live purposefully and passionately, Jason focuses on helping clients to live in abundance.

Jason is a partner and senior advisor at Colorado Capital Management.  He brings more than 15 years of varied experience working in the financial services industry. He joined CCM after a long search to find the perfect firm that aligned well with his values and mission. Jason is passionate about helping individuals and families live abundant and intentional lives. He is proud to be part of a Certified B Corporation, doing meaningful financial and investment planning for clients, while also focusing on socially responsible business practices and making a positive impact. As a Chartered SRI CounselorSM, Jason has a strong background and keen interest in sustainable investing and enjoys helping clients understand the merits of this approach. Jason is also a Certified Financial Planner™ and has a bachelor’s degree in business administration from the University of Colorado. 

Before joining CCM, Jason worked with Jackson National as a consultant for financial advisors. He helped create meaningful connections with families, creative asset allocation strategies, and tax-advantaged retirement-income solutions. During his tenure there he worked with over four thousand financial advisors across the country, was recognized multiple times as consultant of the year, and also managed a team of twenty-five individuals. 

Jason is happily married to his wife, Bridget, of thirteen years, who he met while in college at CU. Together they have a son and daughter, and a Frenchie named Coco Disco. They live in the Whisper Creek neighborhood of Arvada. When Jason is not at work, he and his  family can often be found making turns in Summit County, wakesurfing in Glendo, WY, cooking, dancing and traveling.

Erica Loughrey, Associate Financial Advisor

Erica Loughrey

Erica is passionate about providing purposeful advice to help clients enjoy a meaningful life.

Erica is an advisor at CCM. She joined the firm in 2021, fulfilling her desire to work for a values-based company with a deep commitment to making an impact. She moved from her hometown of Anchorage, Alaska and quickly fell in love with the sunny and beautiful state of Colorado. She brought with her prior experience as a para-planner and is delighted to be engaged in a profession that empowers individuals to flourish financially. She believes strongly in exceptional client service and creating lifelong generational relationships.

In 2022, she accomplished two of her major career goals, finishing her master’s degree in financial planning (MSFP) and earning her Certified Financial Planner™ designation.

Erica enjoys spending time outdoors and traveling to exotic locales. In her free time, you can find her out skiing, hiking, scuba diving, practicing yoga or jetting off to new places to explore. She has a never-ending list of travel plans, having already visited over 20 countries, and feels lucky to have so many wonderful opportunities and adventures.

Lee Strongwater, Senior Financial Advisor

Lee Strongwater, WMS

An entrepreneur and world traveler, Colorado Capital Management vice president and co-owner Lee Strongwater brings a global perspective to investments and life planning.

For more than 15 years, Lee has passionately assisted clients with their financial planning and portfolio management needs. He especially enjoys helping them live more meaningful lives and invest in ways that are aligned with their values. Lee holds a bachelor’s degree in political science from the University of Colorado and a master’s degree in international affairs from Columbia University. He also holds the Wealth Management Specialist (WMS) certification.

Before joining Colorado Capital Management, Lee was a managing partner at Strongwater-Schott, a fee-only investment management and financial planning firm in Denver. Prior to that, he was an entrepreneur who helped start and manage several small firms, including a children’s product company that went public in 2007.

Lee is an active volunteer for several organizations. He is a past President and current member of the Board of Directors for the Boulder Jewish Community Center, an organization that is highly respected on both a local and national level. Lee is also on the Investment Committee of Girl Rising-Global Education, a venture philanthropy fund that invests in social entrepreneurs with culturally-relevant ideas. The fund’s investments promote gender equality and improve educational outcomes for girls and boys living in poverty in Kenya and India.

Lee is married and has two daughters. He enjoys hiking, skiing, traveling—mostly to Mediterranean countries—and trying out new recipes from his journeys. When he’s not on the go you can find him engrossed in a book.

Steve Ellis, Senior Financial Advisor

Steven Ellis, CFA

Steve Ellis has spent his career making an impact, so it’s not surprising that Colorado Capital Management’s founder and president launched the firm’s entry into impact investing.

He brings over 30 years of experience as a financial advisor to high net worth clients. His early work included teaching college courses in accounting and finance, consulting for a major accounting firm, and researching and acquiring investments as the chief due diligence officer of a leading national financial planning firm. Since 1989, he has advised individual and institutional investors on the management of their wealth. Steve is a Chartered Financial Analyst (CFA), holds a business degree from the University of Colorado, magna cum laude, and a master’s degree from Cornell University.

Steve launched the firm’s entry into impact investing in 2012 and is committed to helping build the field. Steve is a passionate speaker on the topic. He has taught about impact investing at various conferences and classes around the country, including as a past faculty member at Middlebury Institute of International Studies. He is listed in the Who’s Who in Impact Investing.

Steve is married, with two daughters, enjoys hiking, biking, skiing, tennis and bridge, and is actively involved in the community. He has served on numerous boards and committees for a wide array of nonprofit organizations, including the Boulder JCC, Rose Community Foundation, Jewish Family Service, and Friendship Bridge. His passion for impact and community service helped lead Colorado Capital Management to become a Certified B Corporation and to build a strong culture of volunteerism and philanthropy.