Reflections from Davos 2025
I spent last week at the Annual Meeting of the World Economic Forum in Davos, and, as in prior years, am writing to offer a few reflections from the many events, meetings and conversations.
This was a LinkedIn post by Jason Bordoff, published 27 January. All images are respectfully borrowed from the original post.
This year’s Davos took place against the backdrop of U.S. President Donald Trump’s inauguration, which happened hours before the conference kicked off. Indeed, President Trump overshadowed the meeting in many ways, with many corporate leaders arriving late after attending the inauguration and the President’s virtual speech being the most attended of the week. The big topics of interest this year were President Trump, artificial intelligence, and geopolitics—all of which will impact energy in significant ways.
President Trump’s election was just one of the factors that seemed to drive a sense of business confidence among the corporate titans at Davos. The same leaders who seemed to celebrate his departure from the world stage four years ago welcomed his return in various panels and speeches. In conference sessions and corporate displays along the Promenade, Davos’ main street, the focus was far more on economic growth and deregulation than corporate social responsibility and ESG. Mixed with optimism in these areas, however, was concern about the potential risks to the global economy of tariffs, geoeconomic confrontation, and geopolitical conflict. The concern about Europe’s economic outlook was particularly acute—with high energy prices being a key driver.
As for energy and climate change, there was a notable shift this year to more of a focus on national security, economic competitiveness, and energy security and affordability as much as - and often more than - issues of sustainability and transition. Key drivers of this shift include President Trump’s victory, renewed urgency to compete with China in the race for AI leadership, and the role that high energy prices have played in economic struggles (e.g., Europe), populist election outcomes, and several recent government collapses. I spoke about these broad trends, as well as how energy would affect the AI revolution (a topic of keen interest at Davos), on a panel hosted by the Economist Impact alongside CGEP Advisory Board members Daniel Yergin and Meghan L. O'Sullivan, moderated by The Economist editor-in-chief Zanny Minton Beddoes.
The shift in U.S. policy and President Trump’s slew of Day One Executive Orders were a top item of interest and discussion—as well as the subject of a new collection of short essays published by our scholars at Center on Global Energy Policy after the inauguration. As I explained on several panels, many of these Executive Orders were intended to generate headlines yet will have only modest impact. For example, opening the federal offshore waters to oil drilling does not mean oil companies will suddenly buy leases to drill off the coast of California or the Atlantic, especially at today’s oil prices. As I told Justin Worland TIME, “The decisions that U.S. companies make about how much to grow oil production are first and foremost going to be determined by market signals.” Lifting the pause on new permits for LNG export projects may affect a handful of projects that will come online post-2030 but does not change the fact that the U.S. was already going to double export capacity in the next few years. And pulling out of the Paris Agreement, while harmful - as I told David Gelles The New York Times pre-Davos - does not change the reality that few countries are on track to meet their Paris emission reduction commitments as it is.
There was significant interest in what the Trump administration’s energy policy would mean for American oil and gas production and exports, as well as how President Trump would approach oil sanctions on Russia, Iran and Venezuela, a topic I discussed on-air with CNBC Dan Murphy.
President Trump also declared a National Energy Emergency—an action that struck many non-U.S. WEF participants as puzzling given that European and Asian natural gas prices are roughly four times that in the U.S., not to mention that African leaders continue to struggle to provide basic energy access to their citizens. For all of the rhetoric around “drill baby drill,” what I found most noteworthy reading the emergency order was how much it focused on electricity and grid reliability along with security of supply for critical minerals, a key sector for energy currently dominated by China.
It is good to see the Trump administration prioritizing modernization of America’s aging electricity grid, as David R. Hill and I recently recommended in Foreign Policy. Trump’s related Executive Order, however, mischaracterized the cause of today’s problems, placing primary blame on intermittent solar and wind power. Indeed, Trump also banned offshore wind leasing, and paused distributions from the Inflation Reduction Act and bipartisan infrastructure law that could affect solar and wind. His emergency order also excluded solar and wind from its definition of “energy,” which is not an encouraging sign for these key sources of zero-carbon electricity.
As I explained in a discussion with Reed Albergotti SEMAFOR about AI and energy, there are reasons for optimism, as well, that the Trump administration’s concern about high energy prices, grid reliability, and rising power demand for data centers can help deliver much-needed permitting reform to make it easier to build energy infrastructure. The Trump administration may also be one of the most pro-nuclear to date, which would be most welcome given not only AI’s need for firm, 24/7 power but that advanced nuclear power will be necessary to achieve our climate goals. Indeed, for all these reasons, nuclear energy was much higher on the agenda in Davos than in prior years.
For more insights about President Trump’s energy policy, I discussed many of these issues on CGEP’s podcast last week with former Assistant Secretary of State for Energy Resources in the first Trump administration Frank Fannon. CGEP Senior Non-Resident Fellow Paul Dabbar, former Undersecretary of Energy in Trump’s first term and head of the transition team at the Department of Energy for the new Trump administration, also discussed Trump’s energy agenda with ABC News last week.
The challenge for tech companies is that they need new firm power capacity very fast, and new nuclear is years away, which is why so many utilities, tech firms, and data center developers are turning to natural gas. Total Energies CEO Patrick Pouyanne posed the same question to President Trump in Davos that I raised in my most recent Foreign Policy column about how the Trump administration will respond to the possible tension between the surge in demand for gas for exports and potentially higher domestic prices.
Given that large hyperscalers such as Google, Meta, Amazon, and Microsoft have large capital budgets and also take their green commitments seriously, they have an opportunity to ensure new natural gas generation projects include carbon capture and removal, which could be the catalyst for investments that sharply reduce the cost of these technologies. Nearly every net-zero scenario shows that carbon management technology will be needed at very large scale.
Even as AI will require a lot of energy, I also talked about why AI will be such a powerful tool to improve energy efficiency, bolster grid security and reliability, and help advance clean energy solutions. CGEP’s David Sandalow and colleagues have written about this extensively and will discuss later this week in a webinar.
CGEP hosted its annual Davos roundtable in partnership with Boston Consulting Group (BCG) Center for Energy Impact to discuss the geopolitical implications of not only energy for AI but, more broadly, the coming “Age of Electricity”, as the International Energy Agency (IEA) Executive Director Fatih Birol who joined the meeting, has termed it.
In my comments at the roundtable, I talked about two aspects of the energy needed for AI that could shape geopolitics. First, unlike most energy others demands for energy, such as for transportation fuels or electricity for households and businesses, energy sources for AI can be located in places far removed from population centers. While moving molecules and electrons can be difficult and costly, moving light and bytes is far easier. Rather than super-chill gas molecules to move LNG on tankers halfway around the world, it may make much more sense to simply locate data centers near cheap energy sources, like remote sources of hydropower or geothermal energy. This attribute of data centers resembles aluminum, the smelting of which requires vast amounts of electricity and led firms to locate plants where power was cheap. Of course, the importance of AI to economic and national security means the potential to access a broader geographic set of energy options will be affected by concerns about latency, data security and privacy, rule of law, and national approaches to AI sovereignty.
Second, discussion of electrification has typically focused on zero-carbon energy sources in recent years because the driver was presumed to be decarbonization, as it is widely understood that a net-zero economy will be a more electrified one. Yet when the driver of rising electricity demand is data centers for AI—or simply economic development and growth (the IEA, for example, notes power demand growth for air-conditioning will exceed that of data centers by three times by 2030, for example)—the electricity need not be low-carbon. Those sources of power demand growth risk causing gas and coal use to continue rising unless strong policy actions continue to drive economies toward lower-carbon energy investments.
Critical minerals were also a subject of much discussion at Davos, including in a small discussion with several energy ministers about how to mobilize capital for clean energy investment in Africa, which is a key priority for CGEP’s Energy Opportunity Lab. With the Development Finance Corporation coming up for reauthorization this year, President Trump’s concerns about reducing dependence on China and bolstering America’s energy security argue for strengthening DFC.
Particularly with regards to President Trump’s tariff threats, economic fragmentation was also a top concern at Davos. I was pleased to participate on a panel discussing the intersections of trade and energy, a major focus of our work at CGEP through our Trade and Clean Energy Transition initiative, and join World Trade Organization Director-General Ngozi Okonjo-Iweala for a discussion of these issues. The need to counter China’s cleantech dominance risks exacerbating trade tensions as many countries turn to tariffs to protect domestic jobs, encourage domestic manufacturing, and reduce dependence on Chinese products. At the same time, policies aimed at encouraging stronger climate ambition, such as Europe’s Carbon Border Adjustment Mechanism, also risk retaliatory trade measures that could worsen current protectionist trends. As I wrote recently, “Contrary to today’s protectionist trends, the best antidote to concerns about China’s cleantech dominance is more trade, not less.” Tariffs are just one aspect of the growing use of a range of economic warfare tools, including sanctions, that are the focus of an excellent new book by CGEP’s Eddie Fishman, which comes out next month.
While more subdued than in prior years, the climate crisis remained an important area of focus on the WEF agenda this year. Last year was officially the warmest in recorded history, and global temperature increase officially exceeded the goal of 1.5 degrees Celsius. WEF last week identified extreme weather as one of the top global risks. Still, I heard repeatedly in conversations about climate change that the clean energy revolution was unstoppable—a view that warrants some skepticism, in my view, given that oil, gas, and coal use are all still rising, along with greenhouse gas emissions.
With an increased focus on security and competitiveness, this reset in the narrative and discussions about energy and climate change at Davos can now point in one of two directions. On one path, some will argue that being realistic about the importance of keeping energy prices low, countering China, meeting AI’s power needs, and expanding energy access for the world’s poor means the clean energy transition needs to move at a slower pace. On the other path, this reset can allow for a more pragmatic and productive conversation about the very real challenges, hard tensions, and immense difficulty of moving to a low-carbon energy system, not to abandon ambition but rather to focus on the stronger policies and technological innovations that will move the needle the most to achieve our myriad energy policy objectives of security, economic growth, and sustainability. Delivering evidence-based analysis and solutions toward that goal is what motivates our work at CGEP every day.
Despite all the complexity and uncertainty in Davos this year, one lesson remains clear. As in past years, by far the best way to get around the traffic-clogged streets continues to be an electric snow bicycle. Although this year, my wonderful colleague and I learned there’s actually one faster way to get around Davos—at least when going downhill.