Just over a year ago, the launch of President Joe Biden’s $369bn Inflation Reduction Act (IRA) pushed the US into a new era of climate and energy policy.
As country negotiators try to hammer out preliminary agreements ahead of the UN COP28 climate summit in November, US climate envoy John Kerry has been keen to emphasise the significance of this change in direction for the world’s biggest oil and gas producer — and the wave of green investment the legislation has ushered in.
The FT recently interviewed Kerry at an editorial roundtable in London, following his address in Edinburgh to launch a lectures series, known as the Scottish Global Dialogues.
In the discussion, the former secretary of state called for the oil and gas industry to “come to the table” to commit to action at COP28. But he appeared frustrated at the continued burning of so-called “unabated” fossil fuels (those burnt without the capture of emissions) — and concerned about the influence of oil and gas industry lobbyists on the US political process.
Ultimately though, he was optimistic about the role of the private sector in driving forward the transition to green energy.
FT journalists present at the roundtable were Alec Russell, Simon Mundy, Emiliya Mychasuk, Attracta Mooney, Martin Wolf and Aime Williams.
FT journalists: At the Brics summit in Johannesburg, in August, we learned that two of the big petrostate countries were going to join the bloc of emerging markets countries: Saudi Arabia and the UAE. What effect do you think this might have on your big mission?
Following the success of our monthly Economists Exchange and Tech Exchange dialogues, the FT has launched Climate Exchange: conversations between FT reporters and the business leaders, innovators and top academics in the fields of sustainability, energy and the environment. The dialogues are in-depth and detailed, focusing on the challenges of tackling climate and changing our energy mix.
John Kerry: I don’t think it will have any negative effect. We’re working with Saudi Arabia already, and the UAE. Obviously, we have a very close relationship, we’re working very diligently with them.
I think President Biden feels everybody has a right to associate with whoever they want to. I don’t think there’s any threat in nations co-mingling strategic interests.
It’s not new to us that some countries are dealing with China [China is pushing to remake the Brics group into a counterweight to the G7]. I think the key is for the US and Europe [among others] to make sure we’re engaged in aggressive efforts to promote our values and help other people to be able to embrace them.
The only message to me is: make sure our foreign policy is as powerful as it needs to be, as focused and as relevant as it needs to be. I have perceived a global south-north tension over the course of the last couple of years I’ve been doing this. I think you have to be honest about it and just admit that you know that it’s there.
FT: We have reported that at the G20 meetings [in India], both Saudi Arabia and China have been obstructing a subject that’s very close to your heart, about unabated coal power plants being stopped. How does that play into this global south alliance?
Kerry: I was just in China, and I thought I had constructive meetings [Kerry and his Chinese counterpart, Xie Zhenhua, formally reignited bilateral climate talks between the US and China in July]. But the differences that exist on other issues, and there’s a long list, obviously — ranging from North Korea, the South China Sea, Taiwan, nuclear, Hong Kong, to cyber spying and theft — means that climate change, which requires a global strategic approach, has unfortunately been tethered to the engagement and resolution of some of those other issues. And that’s a problem.
FT: A lot of the north-south tensions on climate that you’ve been referring to turn on the question of financing, and financing for the developing world. What do you see as the priorities?
Kerry: Well, every aspect of finance is urgent. We cannot possibly effect this transition fast enough to meet the goals and targets that the IPCC and scientists have given us in time to avoid the worst consequences of the crisis.
What’s been frustrating me, to some degree, is that there is — in some parts of the world — just a lack of reality about that. This is not a complicated challenge to understand. It’s really simple; no politics in it; there’s no ideology in it. It is mathematics, physics, chemistry, science. The choice is: do you act on the science in a way that we learned to do 300 years ago during the Enlightenment? Or do you go backwards into a new era of ‘flat earth’ and complete disregard for science? We still have deniers, we still have procrastination.
This is broader than politics. This reaches deep into the financial structure of the world. It reaches deep into ‘business as usual’ attitudes and into the question of accountability within the business world.
You have a bunch of CEOs, some of the biggest companies in the world, smart people who are still focused on ESG, pushing for their companies to deal with scope one and scope two [direct emissions and emissions derived from energy that they purchase] and then they’ll figure out how they’re going to do scope three [indirect emissions in the value chain]. But the fact is, not enough are doing that. There’s too much business as usual.
And money is essential because, everywhere I go, when I talk to the president of a country or the finance minister, they say, ‘you know, we’d love to not have to buy more coal or build a coal fired power plant. But we don’t have an alternative’. The technology, they think, is still too expensive with respect to wind power. It’s not actually, but it’s a painstaking process . . . to be able to work on a bespoke deal one by one.
The Indonesia deal [in which rich nations offered the country $20bn to help pay for a shift away from fossil fuels] took us a year and a half, two years. We’re working with Vietnam now [with a $15.5bn deal] to get new transmission lines in place. They have wind turbines that have been up for several years and they’re sitting there, they’re not turning.
With Egypt, we worked to close 11 gas turbines. We took 5GW of gas power off the line and [in exchange] they agreed to build out renewable power. We had to find concessionary funding, which took the risk out of the deal and gave confidence to the private sector.
There’s three deals I just talked about. We don’t have time to do it that way. We urgently need reform in the multilateral development banks — we need the World Bank to step up and create a greater lending capacity.
We’re working with [US Treasury secretary] Janet Yellen and the administration to try to help make that happen. That can be part of the concessionary funding. I have also advocated, although this remains somewhat controversial, for the voluntary carbon market. I believe it is essential to have some component of the voluntary carbon market, because it’s the only way I see that we’re going to get the kind of levels of concessionary funding we need to be able to entice the private sector money.
We can take the political risk away, take the insurance risk away, the currency risk away and so forth. The president wants this and supports the Energy Transition Accelerator [a carbon credit system in which buyers use carbon offsets to compensate for their emissions].
My hope is that we’re going to be in a position to deploy it by the time we get to this COP. It is a targeted offset that would be given only for the closing of a coal plant or another fossil fuel burning plant, that would then also be accompanied by a deployment of renewables.
It’s very easy with the naked eye to see if it’s happening. You don’t have a lot of enforcement challenges — it’s harder to greenwash. You don’t get the credit until you’ve done the build. But that concessionary funding is not going to come from any other source that I can identify. You know, up on the Hill in Washington, you mention the word climate and people run.
Why do we have climate change? Because unabated fossil fuel emissions are going up in the atmosphere and staying there. We know this and we are still doing it. That is why the unbated thing is so critical. We have to get the fossil fuel industry at the table. We have to bring them to this effort and they have to join in by being responsible. I’ve talked to CEOs, several who say ‘yeah, I believe it, I know it’s happening and yes, we have to step up’, which is why more and more of them are now putting funding into carbon capture and storage [CCUS].
FT: Some people are getting the sense, when it comes to COP28, that the unofficial slogan is ‘it’s not fossil fuels that’s the problem, it’s emissions’, and that there’s going to be a really concerted push from the UAE and from Saudi Arabia and others to push forward that agenda for CCUS. But is there a risk that it could go too far and become a distraction?
Kerry: There’s a risk that it won’t be able to get the job done. I’ve been very blunt with those CEOs. What I said is ‘hey, what happens when we get to 2030 and you’ve got your 30 per cent to 50 per cent reduction. But when you get to 2030, that’s not good enough?’ If you’re going to continue to burn that gas, you’ve got to be able to not put emissions in the atmosphere.
They are doing carbon capture today in places. The question is, can you bring it to scale? Can you get CCUS to work well enough and big enough so that you are in effect staying on the Paris Agreement curve [for a temperature rise limited to 1.5C] that has to get down to net zero by 2050 or better? And that, I think, is very much at issue now.
But the scientists . . . they will confirm to you that you just don’t get there, and keep to 1.5 degrees, without some measure of carbon capture between now and 2050.
FT: Do you feel that you, as representing the US, are seen as a credible interlocutor on climate change? Everybody knows that your country is deeply divided on this topic. And is it possible for the US to contribute in any substantial way to the financial requirements which you mentioned?
Kerry: Absolutely. I believe we are credible. I’ve been around the world meeting with people on this, and there’s nobody that has ever questioned the sincerity of President Biden, myself, or the current track that we are on. Now, I’ve had China ask me and a few other people say, ‘are you going to be able to meet your goals, etc?’
Well, take a look at the IRA — historic legislation, and we are now seeing the consequences of that in a myriad of ways.
I believe, in the next months, you will see some revisions, globally, of the demand for fossil fuels. And that’s going to have a profound impact on Wall Street, and the investors, the analysts who are going to sit there and say, ‘whoa, something is happening’.
You’re seeing a massive deployment of electric vehicles which, inevitably, if we get to the targets that we’ve set, are going to reduce demand for gasoline, and that is going to have a profound impact on people’s judgments about the long-term viability or demands for those industries.
It will also raise the profile of alternatives and renewables. We are deploying it at an incredible rate: 90 per cent of all the new energy in the US that we are putting online is coming from renewables.
You’d be mad, if you’re a CEO, to suddenly turn around and say, ‘we’re going back to internal combustion engine cars’. Not going to happen.
Apple, Boeing, Delta, United and Salesforce have joined together to say that 5 per cent of all their flying activities are going to be done with sustainable aviation fuel. There’s not enough of it yet, but they’re paying for it at a higher premium. So the demand signals are being sent right now. We need more companies to join in that.
With the IRA we’re seeing other benefits that will flow to the rest of the world. For instance, one tonne of carbon reduction in the US in a year is producing 2.4 tonnes of reduction in the rest of the world, because the technology is driving the price down, we’re helping people to get hold of that technology.
This transition now has $1.7tn at least that is being invested globally in these new technologies, from batteries to hydrogen to ammonia to direct air carbon capture and so forth. And everybody knows we’re driving that.
And they also know the IRA has had a profound impact. And we’ve said to everybody: do the same thing.
Some people forget that, when Donald Trump was president for four years, he pulled us out of the Paris Agreement and he never funded anything for climate [to help other countries]. So, when Biden came in 2021, when he comes in and takes the oath, he’s dealing with the Trump budget. And, for the first year, there was no money in the budget. So he puts it in his  budget.
We had to start from zero. And I think our credibility is growing because of our engagement on this, because I’m running around countries meeting with these people. And they’ve seen that we’re serious. There’s also reason to take optimism that if we go more, and hit harder, we can actually win this battle. This is not a moment for quitting or for pessimism.
FT: But, if [at the next election] the White House changes hands, then for all your credibility now, a lot of this may go in reverse.
Kerry: I constantly answer this question, and I believe my answer is 100 per cent legit. No politician can undo what is happening now. Why? Because the marketplace has made its decision.
We are absolutely, positively going to get to a low carbon, no carbon economy, no question in my mind. You think those CEOs are going to rebuild factories that produce internal combustion? No.
Even while Donald Trump was president, in the US, 75 per cent of our new energy in America was renewable. I doubt Trump knew it, or he tried to stop it, but it happened. And the reality is that that’s going to continue.
Our utilities are moving, everybody is moving. The issue is: we’re not moving fast enough. That’s the challenge and that’s why releasing this funding is so critical. I hesitate to accent this too hard, but the lion’s share of the IRA money is going to so-called red states. And I don’t see my former colleagues turning around saying ‘we don’t like the jobs that come with these new factories that have opened’.
The only issue is: will it happen in time to avoid the worst consequences of the climate crisis? And right now, the answer is no, not at the rate we’re going now. But we can change that.
I’m a big believer in the marketplace. When I left as secretary, I said no government is going to solve this problem. Government can help create structure, provide incentives . . . But the private sector’s going to do this because there’s money to be made, a lot of money. This is the new industrial revolution.
Also, if you look at the costs, all the analyses show we’re going to spend far more money as governments if we don’t do this now than if we do it now.
FT: Aren’t there some worrying signs of backsliding, not only politically but also in the private sector?
Kerry: Yeah, it concerns me to some degree, but not enough to say that this can’t happen. The sooner we get the political world and the civic world to join together to demand accountability from public people, we can get this done.
Don’t forget [the difference between] local and state. Republican governors are not in the same place as those candidates for president. Republican governors have bought into the Renewable Portfolio Act, they have signed it, they’re living it, implementing it.
A new [Republican] president could slow [it down] or something, but you can’t end this because it’s now in the hands of the marketplace. And I think politics is going to change as a result.
If you’re going to deploy electric vehicles, you need charging stations and those are being built. President Biden has committed to building 500,000 new charging stations in the US. And the money is allocated in the IRA. We have all kinds of incentives drawing economic activity to these different areas.
As the energy sector changes and companies become more competitive to meet the standards that are in place, you’re going to see workers locally suddenly working for that transition. It’s going to require electricians and plumbers and cement workers and architects and surveyors.
FT: What would a good outcome look like at COP28?
Kerry: There are three automatic outcomes. One is the adaptation report that is due, which will lay out a pathway for what we need to do to meet adaptation needs and meet that emergency. And I will add, President Biden announced a $12bn five year plan called Prepare, which is in the budget also in order to help countries to be able to adapt.
Two, we have to deliver on the loss and damage fund, it has to be completed. We have draft proposals. We’re on track to hopefully present something to the COP that will be viable.
The third ingredient is the stocktake [of global efforts to limit warming], which is going to be tough. I hope it’s tough — it needs to be real.
Then, we think more has to be done on mitigation. And so we are looking to raise the game universally, particularly from those 20 major economies that are responsible for [almost 80 per cent] of all the emissions. So you have to make a dent there. We’re making progress with a lot of those countries.
The final thing is, it’s really critical that the fossil fuel industry come to the table, join up, adopt the commitments to achieve net zero by 2050, to be supporters of Paris implementation, to make commitments with respect to 2030 that would hopefully encompass scope one and scope two and their allocation of capital with respect to renewables.
My hope is that the industry will recognise that the science affects them, too. Interestingly, in Texas, what really helped them through the heatwaves and the horror of what was happening this summer was renewable energy. Ironically, that really helped Texas get over the hump.
FT: What do you think of the UK backsliding on its climate policy and granting 100 new North Sea oil and gas licenses?
Kerry: What I will say is that’s not our policy. You know, we’re not going to do the ‘last drop’. We’re trying to make the transition.
What the administration is doing is measuring what do we need to do to meet the current economic demand while we transition.
We are the world’s largest oil and gas producer, but President Biden’s made a commitment that by 2035 he wants us to be carbon free in our power sector, period. And we’re driving in that direction.