Hoover Institution | Stanford University

TENNENBAUM PROGRAM FOR FACT-BASED POLICY

Energy Policies That Harmonize

Three Securities
Arun Majumdar

Abstract
To develop judicious energy policies, it is critical to consider harmonizing three securities:
(a) economic security, because transportation, manufacturing, information, and almost all
economic sectors rely on energy; (b) national security, because access to reliable and aford-
able energy can be weaponized; and (c) environmental security, as demonstrated by air pol-
lution and climate change. These three securities are not independent, and therefore, many
decisions on energy policy can appear contradictory and in confict. Ignoring any of these
securities would not be sustainable in the long term. Using examples of national security
challenges related to the Russian invasion of Ukraine, as well as the challenges of urgently
decarbonizing our energy system to address climate change, this essay illustrates how energy
policies can be harmonized across all three securities using a framework of short- and long-
term policy measures.

INTRODUCTION

Energy policies are critical to all nations because their economies fundamentally depend on
energy. Transportation, manufacturing, information, mining, agriculture, health, the built envi-
ronment, and many other economic sectors would be signifcantly disrupted if access to reli-
able and afordable energy were somehow compromised. The Arab oil embargo of the 1970s
and, more recently, the Russian hegemony in Europe at the start of its Ukrainian invasion in
February 2022 are reminders of how energy shapes geopolitics. It is also abundantly clear that
how we source, transport, and use energy has signifcant implications for our local and global
environment. Local air pollution and the warming of the earth due to the net increase in atmo-
spheric greenhouse gases that results from using fossil fuels also remind us that energy policies
have profound implications for human well-being, both domestically and internationally. Hence,
judicious energy policies that harmonize across three securities—economic, national, and
environmental—are essential for peace, prosperity, and the well-being of people and our planet.
This three-security framework was proposed by former US Secretary of State George P. Shultz.

A Hoover Institution Essay

September 2024
 Because of the conficting demands of these three securities, decisions and choices made
by a nation regarding energy can ofen appear contradictory. For example, choices made to
address national security alone could confict with those required by the environment at that
moment, and vice versa. However, ignoring any one or more of these securities will make the
choices unsustainable in the long run.

So how does a nation create energy policies that harmonize across three securities? It is
useful to frame the dialogue in terms of time scales. There is the short-term scale: from
now to within fve years. For example, circumstances occurring now, such as in Ukraine
or Europe, require immediate action to prevent major disruptions to human welfare,
economic activity, and national security. The mid-term scale considers the next fve to
ten years, and then we can count the long term as beyond ten years. Energy policies must
be harmonized in such a way that the ill efects of choices made in the short term should be
counterbalanced in the long term, and vice versa. I illustrate this process using the Russian
invasion of Ukraine and the need to address global warming, although the approach could
be more general.

SHORT-TERM ENERGY POLICIES

(NOW TO THE NEXT FIVE YEARS)

To appreciate short-term energy policies, it is important to frst understand the current

global energy supply and demand.

The primary sources of energy are oil, coal, natural gas, biomass, solar, hydroelectric,
geothermal, nuclear, and wind.1 They added up in 2023 to about 183 PWh—a PWh, or
petawatt-hour, is a trillion kWh, or kilowatt-hours, the unit most of us see in our home elec-
tricity bills.2 Note that the United States consumed about 93 Quads (27 PWh) in 2023, which
is roughly one-sixth of the global consumption, and has a GDP of about $27 trillion, which is
roughly one-fourth of the global GDP of $105 trillion. Today, about 80 percent of our primary
energy comes from fossil sources (oil, coal, and natural gas); the remaining 20 percent stems
from biomass, nuclear power, and renewables.

There are three key elements in global energy demand—transportation, industry, and the
built environment—and each accounts for roughly one-third of the total demand. Between
supply and demand lies the conversion of primary energy into secondary energy—electricity.
In 2022, about 28 PWh of electricity was generated: about 30 percent using coal, about
30 percent from natural gas, about 10 percent from nuclear, and the remaining from renew-
ables, such as solar, wind, hydroelectric, geothermal and biomass. It should be noted that
any thermal process to generate electricity—coal, natural gas, nuclear, geothermal, or solar
thermal—loses roughly 50 to 65 percent of the primary energy as waste heat (a requirement
of the second law of thermodynamics), whereas nonthermal sources incur losses of only a
few percent.

2 ARUN MAJUMDAR U ENERGY POLICIES THAT HARMONIZE THREE SECURITIES

The type of energy used by the diferent demand sectors varies signifcantly. Transportation
depends largely on a single fuel: oil. Hence, any disruption to the oil supply chain can have a
signifcant impact on human and freight mobility. In contrast, the built environment globally
is largely sourced equally by electricity, natural gas (for heating and cooking), and biomass
(heating and cooking). Finally, industrial energy demand is largely generated by chemicals,
steel, cement, and other manufacturing, which is roughly equally supplied by coal, natural
gas, oil, and electricity.

This landscape of diferent energy sources and demands is not static but is changing
rapidly. For example, although solar and wind energy produced only about 13 percent of
global electricity in 2023 (solar and wind produced about 4 PWh out of total electricity
production of about 30 PWh), they are the fastest-growing segments. Fossil fuels received
roughly $1 trillion of global investments, whereas renewables—mostly solar and wind,
and energy efciency—will have received almost $2 trillion in 2024, with the gap likely to
increase in the future.3

Dramatic changes in energy supply occur when the cost of a new source becomes competi-
tive or lower than a traditional one. Around 2010, the cost of production of unconventional
oil and gas via the technology of horizontal drilling and hydraulic fracturing (ofen called
fracking), respectively, decreased to the point where it became competitive with traditional
approaches. The abundance of shale resources and the ability to produce oil and gas cost
efectively have led to signifcant energy security for North America (the United States, Canada,
and Mexico) and for our allies in Europe. Yet, we need to address not only fugitive emissions
of natural gas but also the CO2 emissions resulting from burning these fossil fuels and their
impact on climate change. I discuss this later.

There are several other such “game changers.” The cost of producing solar and wind electric-
ity has also decreased over the last two decades to the point that they are now the cheapest
methods to produce electricity and are a major vector to decarbonize the power sector and
address climate change. However, the grid was never designed for fuctuating sources, such
as solar and wind. Today, most of these fuctuations are handled by ramping up and down
natural gas, and new long-duration solutions are being scaled up to become cost competitive.
The cost of LED lighting has also decreased to the point where it can almost compete with
incandescent lamps, which are signifcantly less energy efcient. Perhaps the most dra-
matic shif is occurring within the US automobile industry. With the decreasing cost of lith-
ium batteries over the last two decades, the price of a battery pack is expected to dip below
$100/kWh by 2030, allowing the range and cost of electric vehicles (EVs) to compete against
those of gas vehicles, without any subsidies. This is a tectonic once-in-a-hundred-year shif
in the automobile industry, and over the next twenty years—the typical time scale for feet
renewal—we expect the signifcant global market penetration of EVs. We need to keep these
game changers in mind because they can be leveraged to create energy policies over difer-
ent time scales.

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 LESSONS FROM UKRAINE
Clearly, any disruption to the current oil and gas supply would disrupt the economy and
be a major national and economic security challenge. This is exactly what Europe faced
at the beginning of Russia’s invasion of Ukraine in February 2022. The top oil-producing
countries today are the United States (12 mbpd; million barrels per day), Saudi Arabia
(roughly 9.8 mbpd), and Russia (about 9.5 mbpd), with unconventional oil and gas making
the United States the global leader in oil production.4 In turn, the United States, Europe, and
China are the largest consumers of oil. It is worth noting that, although one may conclude
that the United States is energy independent because it produces as much as it consumes, it
is not. US refneries are not constructed for the light oil that is produced in the United States
today; they are designed for heavy oil, which comes from other parts of the world such as
Canada, Venezuela, Saudi Arabia, and Russia.

Which countries and regions import Russia’s crude oil? In 2021, Russia exported about
7.4 mbpd of crude oil and condensates: 3.3 to the EU, 0.6 to the UK and US, 0.2 to Turkey,
1.6 to China, 0.5 to OECD Asia, and 0.1 to India. By 2023, total Russian exports declined
marginally to roughly 7.3 mbpd,5 while the export landscape changed dramatically: 0.6 to
EU (82 percent reduction), about 0 to the UK and US (100 percent reduction), 0.7 to
Turkey (250 percent increase), 2.3 to China (44 percent increase), roughly 0 to OECD
Asia (100 percent reduction), and 1.9 to India (1,800 percent increase).

Two key lessons can be drawn from this data. First, when Russia invaded Ukraine, the west
(US, UK, and EU) had promised to eliminate imports of Russian oil. As the data suggests,
whereas the United States and United Kingdom were able to do so largely because of their
domestic oil production, the EU could not completely eliminate Russian imports within two
years, although it was able to dramatically reduce its imports by more than 80 percent. The
shortfall was replaced by increased imports from the United States and from Saudi Arabia,
which has spare capacity. Hence, a diversifcation of supply and geopolitical partnerships
with countries with spare capacities are critical for national and economic security.

The second lesson learned is that the total Russian exports of crude oil declined only mar-
ginally, with the reduction of imports by the EU replaced by increased imports by Turkey,
China, and India that did not participate in western sanctions but rather leveraged them for
their own national interests.

It is important to make a distinction between oil and gas, because oil is used for transporta-
tion only, whereas gas is more fungible and is used in electricity generation, heating of homes
and buildings, and in industries, especially in steel, cement, petrochemicals, and food pro-
cessing. Hence, changes in natural gas supply afect multiple economic sectors. The shale
gas revolution in North America has enabled the United States to increase its natural gas
production from about 4,983 TWh (1 TWh of gas is equivalent to 34.12 billion cubic feet, or
94.8 million cubic meters; it is also equal to a billion kWh) in 2005 to more than 10,353 TWh
in 2023, making it the largest producer of natural gas in the world by a huge margin.6 In com-
parison, Russia produced 5,864 TWh, Canada 1,903 TWh, and Qatar 1,810 TWh in 2023.

4 ARUN MAJUMDAR U ENERGY POLICIES THAT HARMONIZE THREE SECURITIES

The United States and Qatar are the only two countries whose natural gas production has
increased since 2005; the production of other nations has remained fat.

Global natural gas consumption was about 40,000 TWh in 2023, with the leading regions
being North America at roughly 11,000 TWh (with the United States contributing about
9,000 TWh); Asia-Pacifc at roughly 9,400 TWh the fastest-growing region, the EU at
4,600 TWh, and the Middle East at 5,800 TWh.7 At the start of the Russian invasion of
Ukraine, EU27 countries8 were importing roughly 320 TWh per month (3,840 TWh per year);
by January 2024, that consumption had declined to 285 TWh per month (3,420 TWh per year),
largely through energy efciency measures in homes and industry, renewables deployment
for electricity, and the use of heat pumps for heating.9 These demand-reduction eforts are
critical when facing a national and economic security challenge and can be achieved in the
short term.

But the source of imports has signifcantly shifed. Although the EU27 was unable to turn of
Russian gas to the EU27 completely, it did reduce its imports of Russian gas from roughly
10 billion cubic meter per month (10 bcm/month is 105 TWh/month, or 1,260 TWh/year) in
January 2022 to 4 bcm/month in January 2023, a 60 percent reduction in one year.10 This
was largely a reduction in piped gas from Russia to the EU.

How did Europe replace its natural gas imports from Russia? It was largely achieved
by imports of liquefed natural gas (LNG), mostly from the United States, and increased
Norwegian pipeline gas: these two sources account for 50 percent of all the European
imports. US LNG exports more than doubled from 2.6 bcm/month in December 2021 to
5.9 bcm/month in April 2024. This increase resulted from short-term policies, implemented
beginning in February 2022, that focused on how to minimize Russian imports as a national
and economic security issue. But these policies could work only because the US government
had approved the construction of LNG export terminals in the early 2010s when it was clear
that the country would transition from an importer to an exporter of LNG due to the shale rev-
olution. Although the increased use of natural gas may seem contradictory to achieving cli-
mate goals, it had to be done in the short term to avoid disruptions to human welfare and the
economy: Europe needed time to develop new infrastructure to enable natural gas to replace
electricity. This development can be accelerated, but it is difcult to complete in two years,
and perhaps even in fewer than fve years.

In many ways, Russia’s invasion of Ukraine and the resulting security challenges are acceler-
ating solar and wind energy deployment for electricity generation, as well as heat pump use
for heating the built environment. Russia’s weaponization of energy may seem to produce
short-term gains for Russia and duress for EU, but it is accelerating the EU’s transition away
from fossil fuels with plans to add signifcant solar and wind power capacity in the coming
years; this is the best possible outcome for addressing climate change. Note that Germany, in
response to the Fukushima accident in 2011, had decided to discontinue nuclear power. This
decision would be worth reconsidering now. The only alternative Germany could be lef with
is to increase electricity from coal plants, which would be antithetical to its climate goals.

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 All these changes will require a signifcant amount of fnancial capital investments, which
cannot be achieved by government investments alone: private sector investments are essen-
tial. Such investments will only occur if government policies create an environment that yields
decent returns over the next twenty years that will attract investors. But any short-term meas-
ures using fossil fuels, driven primarily by national and economic security imperatives must
be accompanied by policies to eliminate CO2 emissions or remove CO2 from the atmosphere,
thereby addressing the mid- to long-term issues of climate change (see the next section).

In summary, to avoid disruption to human welfare and the economy, Europe as a short-term
measure continues to replace Russian oil and gas by increasing imports from other friendly
nations that have spare capacity. Simultaneously, it must also create policies to transition
away from fossil fuel consumption via energy efciency, changes in human behavior, and
the deployment of clean energy alternatives, such as solar, wind, and nuclear energy. Here
are some ideas about how to address the short-term security challenges due to the heavy
dependence on and potential disruptions in access to reliable and afordable fossil fuels.
As explained later, these actions must be simultaneously balanced by climate policies.

TRANSPORTATION

1. If there is a shortfall in domestic oil production and processing compared to consump-

tion, diversify sources of oil imports and build partnerships with nations that have spare
capacity.

2. Develop fnancial (incentives) or regulatory (standards) policies for increasing fuel

efciency of gasoline/diesel vehicles.

3. To reduce oil demand, accelerate electrifcation of transportation and incentivize the

adoption and deployment of charging infrastructure deployment.

4. Invest in electric public transportation and incentivize behavioral changes to reduce the
demand for oil, such as carpooling, increased use of public transportation, and leverag-
ing hybrid and remote work.

STATIONARY POWER AND HEAT

1. If there is a shortfall in domestic natural gas production and processing compared to

consumption, diversify sources of natural gas imports, keeping in mind countries with
spare capacity for production and LNG export.

2. Develop fnancial (incentives) or regulatory (standards) policies for extreme energy ef-
ciency in the built environment and in the industry that use natural gas for heating and
feedstock.

6 ARUN MAJUMDAR U ENERGY POLICIES THAT HARMONIZE THREE SECURITIES

 3. Accelerate solar and wind deployment via fnancial incentives and mandates
(e.g., renewable portfolio standards); incentivize pumped hydro storage ($10/kWh),
as well as innovations and de-risking of new long-duration storage technologies.

4. Preserve current nuclear plants and support the development and deployment of small
modular reactors via a private–public partnership.

5. Incentivize heat pump deployment for heating of the built environment.

6. Streamline and accelerate regulatory approval process for infrastructure development,

such as transmission lines, solar and wind licensing, and nuclear and geothermal power
plant licensing.

MID- TO LONG-TERM ENERGY POLICIES

(FIVE TO TEN YEARS AND BEYOND)

Much of the short-term policies just presented are geared to minimizing disruptions to the
economy and to human welfare, both of which rely on access to reliable and afordable
energy. Because many economies today rely on fossil fuels, these policies have two key
goals: (1) replace sources of fossil fuels in the interest of national and economic security and
(2) accelerate the transition away from fossil fuels. The continued dependence on fossil fuels,
despite a diversifcation of energy sources, contradicts policies required to achieve environ-
mental security and, more specifcally, addressing the need to decarbonize and mitigate cli-
mate change. How does one reconcile and harmonize these apparent contradictions?

Where there is a need for a short-term policy, there is ofen a crisis that requires immediate
response. The Russian invasion of Ukraine is an example. One should never waste a good
crisis because it opens a window of opportunity for change, not only for the immediate short-
term crisis, but also for long-term policies. Therefore, in parallel with the development of
short-term policies, one also needs to create long-term policies that ofset greenhouse gas
emissions or other environmental pollution over the lifetime of the short-term measures.

The world is at a unique moment in history when most of the large nations, as well as more
than 60 percent of the Fortune 500 companies, have made some kind of commitment to
address climate change. Specifcally, nations have committed to create net-zero emissions
economies by a certain year—the United States by 2050, Germany by 2045, China by 2060,
India by 2070, and so on. The transition pathways to achieve these commitments are still
being developed. In fact, nations are supposed to present their pathways at the COP30
meeting in Brazil in November 2025.

The mid- to long-term energy policies must not only address a transition to a clean-energy
economy but also provide pathways that are afordable and options that are least disruptive to
human welfare and the economy. Furthermore, and very importantly, these policies must also

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 ofset the emissions produced by short-term energy policies, as described in the previous
section: this is a key component of the alignment and harmony between the three securities.
Finally, these mid- to long-term energy policies should not increase a nation’s vulnerability
and risk its future national and economic security. It is critical to understand this last point
because supply chains of new materials, such as lithium, will emerge as key issues in this
transition and will create the same security challenges that fossil fuels pose today. Therefore,
lessons learned from the fossil-fuel-based security challenges should inform how we manage
the clean energy transition in the future.

Let us frst understand the magnitude, complexity, and urgency of the climate challenge. The
2015 international agreement between 196 parties to limit the global average temperature
rise below 2°C, ofen called the Paris Agreement, requires not only a signifcant reduction in
greenhouse gas (GHG) emissions (about 50 gigatons of CO2—a GT is a billion metric tons,
or about 1.1 billion US tons—per year by 2050) but also negative greenhouse gas emissions
(about 10 gigatons of CO2 /year by 2050) that will remove carbon dioxide and methane from
our atmosphere on the order of tens of gigatons of CO2 per year.11 Reduction of GHG emis-
sions is an economy-wide endeavor, with the dominant sectors being electric power, agricul-
ture, forestry, industry, transportation, and heating in buildings. Without this transition, the risk
and consequences of climate-induced weather extremes on human welfare and our economy
can be very signifcant.

Today’s global average temperature rise, from preindustrial levels, is about 1.4°C. The Paris
Agreement was created to keep the global average temperature rise below 2°C. The Earth
has a budget of roughly 800–1,000 gigatons of CO2 remaining before it crosses this threshold.12
The annual rate of emissions, however, is now more than 40 gigatons of CO2 /yr and increas-
ing. That means we have fewer than twenty years lef before crossing the 2°C target. Thus,
the next two decades mark a crucial period to address climate change. In addition to decar-
bonization of the economy and atmospheric CO2 removal, we will also need policies for
climate adaptation of communities and nations, given that the risk of exceeding 2°C is reason-
ably high (see the later discussion).

It is important to appreciate the scale of today’s fossil fuel industry. In 2023, the global con-
sumption was 37 billion barrels of oil (5 GT), 4,000 billion m3 of natural gas (2.7 GT), and 8 GT
of coal. To appreciate what “gigaton scale” means, consider this question: What is the total
weight of all eight billion human beings on earth? It is roughly 0.5 GT.

The transition of a $100 trillion global economy with a world population of eight billion from
fossil fuels is unprecedented and can be viewed as the largest transition humanity has ever
undertaken. It involves shifing the paradigm for growth of a fossil-based economy of the
twentieth century to a net-zero emissions economy in the twenty-frst century. Achieving this
in the next twenty years will be enormously difcult and will only be possible, not by extrapo-
lating twentieth-century solutions, but instead by innovating new ones and developing path-
ways for transition. What types of innovations are needed?

8 ARUN MAJUMDAR U ENERGY POLICIES THAT HARMONIZE THREE SECURITIES

To address this enormous challenge, we need to accelerate the deployment of the key game
changers discussed earlier—wind, solar, and nuclear electricity; electrifcation of transporta-
tion; and extreme energy efciency—to reduce demand. Although these actions are neces-
sary, they are not sufcient to decarbonize the economy. We need other game changers—a
set of innovations that are essential for the twenty-frst-century economy—that include the
following:

• Multiday grid-scale storage at $10/kWh, which is a factor of 10 lower than the cost of
lithium batteries, at the scale of ~10s of TWh

• Small modular nuclear plants that can be constructed (roughly $3–4/W) at half the cost
of today’s nuclear power plants at the scale of several TW’s capacity

• Refrigerants with zero global warming potential for cooling

• Zero-net energy buildings at zero-net cost

• Net-zero-emissions industrial heat and low-carbon manufacturing of steel, cement, and

chemicals, which will likely require GHG-free hydrogen at $1/kg at the one gigaton of
H2 per year production

• Decarbonization of food and agriculture, especially reductions in deforestation, emis-

sions from meat and dairy sectors, and food waste in agricultural productivity

• A massive efort to remove carbon from the atmosphere and either use it to produce
net-zero energy-dense fuels or store it permanently in the ground

In addition, there is an urgent need to develop net-zero energy-dense fuels at the scale of
fossil fuels (40–50 PWh/yr of coal, oil, and natural gas in 2023) and at a lower cost; these
developments should capture CO2 from the atmosphere and be compatible with today’s
fossil-based energy infrastructure. Developing these energy-dense fuels will be enormously
difcult but must be part of our innovation efort.

The opportunity ofered by this transition is that each of these new technologies would
form the foundation for an $1–5 trillion/year industry that has yet to be developed. Creating
those industries will be enormously challenging and historically unprecedented. It will require
enlightened policies that align innovations in technology, fnance, markets, and regulations
so that they all reinforce each other. While new industries and infrastructures are developing,
it would be undoubtedly prudent to leverage and repurpose existing ones that are already at
the gigaton scale.

Only a few industries currently operate at the GT scale: oil, gas, coal, steel, cement, agri-
culture, and water. Of these, only agriculture involves the net absorption of CO2 from the

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 atmosphere for crop growth. For example, consider crop residues or agricultural waste,
which is ofen burned in many parts of the world. About 5 GT/year of crop residues are pro-
duced worldwide:13 they have a carbon content of about 2 GT of C and absorb roughly 7 GT
of CO2 /year from the atmosphere. Compare this to the total global coal production of about
8 GT/year. The scale of crop residues involves negative emissions roughly matching that of
fossil fuel production. If the crop residues can be converted to a char that has coal-like prop-
erties and at a cost lower than the market price of coal (about $75–$120/ton), it is conceivable
that the char could be used as a net-zero solid fuel instead of coal. And once a reducing agent
such as net-zero coal is available, the chemistry, chemical engineering, and infrastructure
needed to convert that into oil, natural gas, and plastics will be relatively well known.

It is extremely important that we foster and accelerate research into such innovations, with
cost and scale in mind. We ofen do not pay enough attention to scale when designing
research eforts; it needs to be part of R&D policy. Because of its global presence, agriculture
could be transformed not only to achieve more efcient food production but also to leverage
it for a net-zero economy as a cobeneft. For this to happen with the required urgency, busi-
ness imperatives are critical.

Developing these innovations will require a signifcant increase in investments in R&D and
private–public partnerships to de-risk them and make them scalable and bankable, so they
will attract large private sector investments. The Bipartisan Infrastructure Law and the
Infation Reduction Act (IRA) in the United States are a start, but much more is needed. For
example, even though the IRA is the largest US public investment in a clean energy econ-
omy and has catalyzed signifcant private sector investments, it largely involves fnancial
incentives (e.g., tax credits or payments) for critical clean technologies. Although these
incentives are extremely valuable in launching new industries, they are necessary but not
sufcient. Also needed to transform an economy are market-based approaches that price
externalities such as CO2 emissions.

A direct price on carbon is a carbon tax that creates a market mechanism to address climate
change. Secretaries of State Shultz and Baker promoted for several years a revenue-neutral
price on carbon, starting at $10/tCO2 and slowly increasing it to $50–100/tCO2 within ten to
ffeen years, with the revenues being returned to the citizens to avoid a fscal drag on the
economy.14 To put it in perspective, the extra $2 to $3 we pay for a gallon of gas compared
to prices fve to ten years ago is equivalent to a carbon tax of $200–300/tCO2. Reaching
political agreement on a carbon tax, especially during a time of high oil prices, may be unre-
alistic. However, alternatives exist; for example, a clean energy standard ofers a regulatory
approach and options for the states to choose their decarbonization pathways, which some
states may fnd attractive. This regulatory approach introduces an indirect price on carbon.
It does not have the appeal of a market-based solution and is not conducive to creating inter-
state infrastructure, such as the electric grid and CO2 pipelines, but it is attractive from the
viewpoint of state rights. Regardless of whether a direct or indirect carbon price is adopted,
it seems impossible to achieve an economy-wide gigaton-scale impact without a price
on carbon.

10 ARUN MAJUMDAR U ENERGY POLICIES THAT HARMONIZE THREE SECURITIES

Aggressively addressing climate change in the next twenty to thirty years also requires the
development of massive infrastructure at an unprecedented speed. Today, many of the bar-
riers for the rapid deployment of clean energy lie not in the availability of the technology, but
rather the regulatory approval processes needed to deploy them. To address climate change
urgently requires reimagining the regulatory process; perhaps a one-stop shop is needed to
align federal, state, and local policies to expedite the regulatory process for infrastructure,
supply chains, and manufacturing.

The International Energy Agency has estimated that the investments needed for this global
energy transition will be roughly $4 trillion per year for the next thirty years. These invest-
ments are likely to occur only if there are business imperatives for economy-wide transition.
as well as a streamlined regulatory process for rapid infrastructure, supply chain, and man-
ufacturing development. In many ways, this development would constitute a major business
opportunity for economic growth for any country in the future.

Although the goal of these mid- to long-term energy policies are to address climate change
and align with the Paris Agreement, we must acknowledge that the global average tempera-
ture rise may exceed 2°C: that could introduce unprecedented climate-induced weather
extremes, such as heat and cold waves, excess precipitation, or severe drought, with poten-
tially signifcant impacts on human welfare and the economy. Reacting to such events can be
expensive. It will require energy and climate policies that focus on adaptation and resilience of
our communities and infrastructure, such as the electric grid, water, food supply chain, public
health, and the migration of humans and disease vectors. Our policy framework is woefully
inadequate for climate adaptation, which needs to be elevated to the same level of impor-
tance as decarbonization policies.

In summary, the mid- to long-term (fve to ten years and beyond) energy policies must focus
on a combination of the following:

• Signifcant investments in innovations and the de-risking of new clean energy tech-
nologies and energy efciency via research, development, and demonstration (RD&D),
combined with fnancial incentives (reduced over time) for these new technologies to
become market competitive

• A sufciently high economy-wide direct or indirect price on carbon to create the busi-
ness imperative for the gigaton-scale transition of our economy and to ofset lifetime
emissions produced from short-term energy policies focused on national and economic
security

• Sensible regulations where markets don’t work (e.g., building energy efciency is rela-
tively inelastic to price change), such as in energy efciency

• A streamlined regulatory process to rapidly develop infrastructure, supply chains, and a

clean manufacturing ecosystem

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 • Using lessons learned from fossil-fuel based security concerns, develop fnancial and
regulatory policies to accelerate domestic sources and supply chains for a clean energy
economy and to diversify international sources and supply chains needed for critical
materials and feedstock

• Policies to address adaptation and resilience against weather-extremes-induced

climate change for our communities and infrastructure

CONCLUSION

Using national security challenges related to the Russian invasion of Ukraine, as well as the
challenges of urgently decarbonizing our energy system to address climate change, this essay
illustrates how energy policies can harmonize across economic, national, and environmental
securities using a framework of short-, mid-, and long-term policy measures.

This set of energy policies, if achieved, will likely help unleash trillions of dollars of private
sector investments needed for this global energy transition and constitute a major opportu-
nity for economic growth.

NOTES
1. Hannah Ritchie, Pabo Rosado, and Max Roser, “Energy Production and Consumption,” Our World in
Data, 2020, https://ourworldindata.org/energy-production-consumption; International Energy Agency,
World Energy Outlook, 2023, https://www.iea.org/reports/world-energy-outlook-2023.
2. Equivalently, 624 Quads, where 1 Quad is equal to 293 billion kWh.
3. International Energy Agency, World Energy Outlook, 2024, https://www.iea.org/reports/world-energy
-investment-2024/overview-and-key-fndings.
4. US Energy Information Administration, “Petroleum and Other Liquids,” 2024, https://www.eia.gov
/petroleum/.
5. International Energy Agency, “Average Russian Oil Exports by Country and Region, 2021–2023,” https://
www.iea.org/data-and-statistics/charts/average-russian-oil-exports-by-country-and-region-2021-2023.
6. Our World in Data, “Gas Production by Country,” 2024, https://ourworldindata.org/grapher/gas
-production-by-country.
7. Our World in Data, “Gas Consumption by Region,” 2024, https://ourworldindata.org/grapher/natural-gas
-consumption-by-region.
8. Austria, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany,
Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal,
Slovakia, Slovenia, Spain, and Sweden.
9. Samantha Gross and Constanze Stelzenmuller, Europe’s Messy Russian Gas Divorce, Brookings
Institution, June 2024, https://www.brookings.edu/articles/europes-messy-russian-gas-divorce/#:~:text
=Despite%20the%20war%2C%20Russia%20continues,the%20volume%20delivered%20in%202021.
10. European Gas Hub, “Russian LNG Exports to Europe Overtake Piped Deliveries,” 2024, https://www
.europeangashub.com/russian-lng-exports-to-europe-overtake-piped-deliveries.html.

12 ARUN MAJUMDAR U ENERGY POLICIES THAT HARMONIZE THREE SECURITIES

11. T. Gasser, Celine Guivarch, Kaoru Tachiiri, C. D. Jones, and P. Ciais, “Negative Emissions Physically
Needed to Keep Global Warming below 2°C,” Nature Communications 6, no. 1 (2015): 1–7; National
Academies of Sciences, Engineering, and Medicine, Negative Emissions Technologies and Reliable
Sequestration: A Research Agenda (Washington, DC: National Academies Press, 2019).
12. Pierre Friedlingstein, Michael O’Sullivan, Matthew W. Jones, Robbie M. Andrew, Luke Gregor,
Judith Hauck, Corinne Le Quéré, et al. “Global Carbon Budget 2022,” Earth Systems Science Data 14
(2022): 4811–4900; National Academies of Sciences, Engineering, and Medicine, Negative Emissions
Technologies and Reliable Sequestration: A Research Agenda (Washington, DC: National Academies
Press, 2019).
13. Vijesh V. Krishna and Maxwell Mkondiwa, “Economics of Crop Residue Management,” Annual Review of
Resource Economics 15 (2023): 19–39; 5 GT/year of crop residues.
14. George P. Shultz and James A. Baker III, “A Conservative Answer to Climate Change,” Wall Street
Journal, February 7, 2017, https://www.wsj.com/articles/a-conservative-answer-to-climate-change
-1486512334.

HOOVER INSTITUTION U STANFORD UNIVERSITY 13

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 ABOUT THE AUTHOR

ARUN MAJUMDAR
Dr. Arun Majumdar is the inaugural dean of the Doerr School of Sustainability
at Stanford University, where he is also the Jay Precourt Provostial Chair
Professor, a faculty member of the Departments of Mechanical Engineering
and Energy Science and Engineering, a senior fellow and former director of
the Precourt Institute for Energy, and a senior fellow (courtesy) of the Hoover
Institution. He chairs the Advisory Board of the US Secretary of Energy.

About the Tennenbaum Program for Fact-Based Policy

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