You’re out of free articles.
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
Sign In or Create an Account.
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Welcome to Heatmap
Thank you for registering with Heatmap. Climate change is one of the greatest challenges of our lives, a force reshaping our economy, our politics, and our culture. We hope to be your trusted, friendly, and insightful guide to that transformation. Please enjoy your free articles. You can check your profile here .
subscribe to get Unlimited access
Offer for a Heatmap News Unlimited Access subscription; please note that your subscription will renew automatically unless you cancel prior to renewal. Cancellation takes effect at the end of your current billing period. We will let you know in advance of any price changes. Taxes may apply. Offer terms are subject to change.
Subscribe to get unlimited Access
Hey, you are out of free articles but you are only a few clicks away from full access. Subscribe below and take advantage of our introductory offer.
subscribe to get Unlimited access
Offer for a Heatmap News Unlimited Access subscription; please note that your subscription will renew automatically unless you cancel prior to renewal. Cancellation takes effect at the end of your current billing period. We will let you know in advance of any price changes. Taxes may apply. Offer terms are subject to change.
Create Your Account
Please Enter Your Password
Forgot your password?
Please enter the email address you use for your account so we can send you a link to reset your password:
The world’s biggest, most functional city might also be the most pedestrian-friendly. That’s not a coincidence.

For cities that want to reduce the number of cars, bike lanes are a good place to start. They are cheap, usually city-level authorities can introduce them, and they do not require you to raise taxes on people who own cars. What if you want to do something more radical though? What would a city that genuinely wanted to get the car out of its citizens’ lives in a much bigger way do? A city that wanted to make it possible for most people to live decent lives and be able to get around without needing a car, even without needing to get on a bicycle?
There is only one city on Earth I have ever visited that has truly managed this. But it happens to be the biggest city on the planet: Tokyo, the capital of Japan.
In popular imagination, at least in the West, Tokyo is both incredibly futuristic, and also rather foreign and confusing. Before I first visited, in 2017, I imagined it to be an incredibly hectic place, a noisy, bustling megacity. I was on holiday and trying to escape Nairobi, the rather sprawling, low-height, and green city I was living in at the time, and I picked Tokyo largely because I wanted to get as far away from Africa as I could. I needed a break from the traffic jams, the power cuts, the constant negotiation to achieve anything, and the heat. I was looking for an escape somewhere as different as I could think of, and I wanted to ride trains around and look at high-tech skyscrapers and not worry about getting splattered by mud walking in the street. I was expecting to feel bowled over by the height of the buildings, the sheer crush of people, and the noise.
Yet when I emerged from the train station in Shibuya, blinking jetlagged in the morning light after a night flight from Amsterdam, what actually caught me off guard was not the bustle but rather how quiet the city is. When you see cliched images of Tokyo, what invariably is shown are the enormous crowds of pedestrians crossing the roads, or Mount Fuji in the background of the futuristic skyline. I expected something like Los Angeles in Blade Runner, I suppose — futuristic and overwhelming. From photos, Tokyo can look almost unplanned, with neon signs everywhere and a huge variety of forms of architecture. You expect it to feel messy. What I experienced, however, was a city that felt almost like being in a futuristic village. It is utterly calm, in a way that is actually rather strange.
And it took me a little while to realize why. There is simply no traffic noise. No hooting, no engine noise, not even much of the noise of cars accelerating on tarmac. Because there are so few of them. Most of the time you can walk in the middle of the street, so rare is the traffic. There are not even cars parked at the side of the road. That is not true of all of Tokyo, of course. The expressways are often packed. Occasionally, I was told, particularly when it snows, or during holidays when large numbers of people try to drive out to the countryside, jams form that can trap drivers for whole days. But on most residential streets, traffic is almost nonexistent. Even the relatively few cars that you do see are invariably tiny, quiet vehicles.
Among rich cities, Tokyo has the lowest car use in the world. According to Deloitte, a management consultancy, just 12 percent of journeys are completed by private car. It might surprise you to hear that cycling is actually more popular than driving in Tokyo — it accounts for 17 percent of journeys, though the Japanese do not make as much of a big deal out of it as the Dutch do. But walking and public transport dwarf both sorts of vehicles. Tokyo has the most-used public transport system in the world, with 30 million people commuting by train each day. This may sound rather unpleasant. You have probably seen footage of the most crowded routes at rush hour, when staff literally push people onto the carriages to make space, or read about young women being groped in the crush. It happens, but it is not typical. Most of the trains I rode were busy but comfortable, and I was able to get a seat.
And what makes Tokyo remarkable is that the city was almost entirely built after the original city was mostly flattened by American bombers in the Second World War. Elsewhere in the world, cities built after the war are almost invariably car-dependent. Think of Houston, Texas, which has grown from 300,000 people in the 1950s to 10 times that now. Or England’s tiny version, Milton Keynes, which is the fastest-growing city in the country. Or almost any developing world city. Since the advent of the automobile, architects and urban planners worldwide have found it almost impossible to resist building cities around roads and an assumption that most people will drive. Tokyo somehow managed not to. It rebuilt in a much more human-centric way.
It may come as a surprise that Japan is home to the world’s biggest relatively car-free city. After all, Japan is the country that gave the world Mitsubishi, Toyota, and Nissan, and exports vehicles all over the world. And in fairness, a lot of Japanese people do own cars. Overall car ownership in Japan is about 590 vehicles per 1,000 people, which is less than America’s rate of about 800 per 1,000, but comparable to a lot of European countries. On average, there are 1.06 cars per household. But Tokyo is a big exception. In Tokyo, there are only 0.32 cars per household. Most Japanese car owners live in smaller towns and cities than the capital. The highest rate of car ownership, for example, is in Fukui Prefecture, on the western coast of Honshu, one of Japan’s least densely populated areas.
And car ownership in Japan is falling, unlike almost everywhere else on Earth. Part of the reason is just that the country is getting older and the population is falling. But it is also that more and more people live in Tokyo. Annually, Japan is losing about 0.3 percent of its population, or about half a million people a year. Greater Tokyo, however, with its population of 37 million, is shrinking by less than that, or about 0.1 percent a year. And the prefecture of Tokyo proper, with a population of 14 million, is still growing. The reason is that Tokyo generates the best jobs in Japan, and it is also an increasingly pleasant place to live. You may think of Tokyoites as being crammed into tiny apartments, but in fact, the average home in Tokyo has 65.9 square meters of livable floor space (709 square feet). That is still very small—indeed, it is less than the size of the average home in London, where the figure is 80 square meters. But the typical household in London has 2.7 people living in it. In Tokyo, it is 1.95. So per capita, people in Tokyo actually have more space than Londoners.
Overall in fact, people in Tokyo have one of the highest qualities of life in the world. A 2015 survey by Monocle magazine came to the conclusion that Tokyo is the best city on Earth in which to live, “due to its defining paradox of heart-stopping size and concurrent feeling of peace and quiet.” In 2021 The Economist ranked it fourth, after Wellington and Auckland in New Zealand, and another Japanese city, Osaka. Life expectancy overall is 84 years old, one of the highest levels of any city on the planet. A good part of this has to do with the lack of cars. Air pollution is considerably lower than in any other city of equivalent size anywhere in the world. Typical commutes are, admittedly, often fairly long, at 40 minutes each way. But they are not in awful smoggy car traffic.

So how has Tokyo managed it? Andre Sorensen, a professor of urban planning at the University of Toronto, who published a history of urban planning in Japan, told me that Japan’s history has a lot to do with it. Japan’s urbanization happened a little more like some poorer countries — quickly. At the start of the 20th century, just 15 percent of Japanese people lived in cities. Now 91 percent do, one of the highest rates of urbanization in the entire world. That rapid growth meant that Tokyo’s postwar growth was relatively chaotic. Buildings sprawled out into rice paddies, with sewage connections and power often only coming later. Electricity is still often delivered by overhead wires, not underground cables. And yet somehow this haphazard system manages to produce a relatively coherent city, and one that is much easier to get around on foot or by public transport than by car.
Part of the reason, Sorensen explained to me, is just historical chance. Japanese street layouts traditionally were narrow, much like medieval alleys in Europe. Land ownership was often very fragmented, meaning that house builders had to learn to use small plots in a way that almost never happened in Europe or America. And unlike the governments there, the government in postwar Japan was much more concerned with boosting economic growth by creating power plants and industrial yards than it was with creating huge new boulevards through neighborhoods. So the layouts never changed. According to Sorensen’s research, 35 percent of Japanese streets are not actually wide enough for a car to travel down them. More remarkably still, 86 percent are not wide enough for a car to be able to stop without blocking the traffic behind it.
Yet the much bigger reason for Tokyo’s high quality of life is that Japan does not subsidize car ownership in the way other countries do. In fact, owning a car in Tokyo is rather difficult. For one thing, cars are far more enthusiastically inspected than in America or most of Europe. Cars must be checked by officials every two years to ensure that they are still compliant, and have not been modified. That is true in Britain too, but the cost is higher than what a Ministry of Transport test costs. Even a well-maintained car can cost 100,000 yen to inspect (or around $850). On cars that are older than 10 years, the fees escalate dramatically, which helps to explain why so many Japanese sell their cars relatively quickly, and so many of them end up in East Africa or Southeast Asia. On top of that there is an annual automobile tax of up to 50,000 yen, as well as a 5 percent tax on the purchase. And then gasoline is taxed too, meaning it costs around 160 yen per liter, or about $6 a gallon, less than in much of Europe, but more than Americans accept.
And even if you are willing to pay all of the taxes, you cannot simply go and buy a car in the way that you might in most countries. To be allowed to purchase a car, you have to be able to prove that you have somewhere to park it. This approval is issued by the local police, and is known as a shako shomeisho, or “garage certificate.” Without one, you cannot buy a car. This helps to explain why the Japanese buy so many tiny cars, like the so-called Kei cars. It means they can have smaller garages. Even if the law didn’t exist though, owning a car in Japan without having a dedicated parking space for it would be a nightmare. Under a nationwide law passed in 1957, overnight street parking of any sort is completely illegal. So if you were to somehow buy a car with no place to store it, you could not simply park it on the street, because it would get towed the next morning, and you would get fined 200,000 yen (around $1,700). In fact, most street parking of any sort is illegal. There are a few exceptions, but more than 95 percent of Japanese streets have no street parking at all, even during the day.
This, rather than any beautiful architecture, explains why Tokyo’s streets feel so pleasant to walk down, or indeed to look at. There are no cars filling them up. It also means that land is actually valued properly. If you want to own a car, it means that you also have to own (or at least rent) the requisite land to keep it. In rural areas or smaller towns, this is not a huge deal, because land is relatively cheap, and so a permit might only cost 8,000 to 9,000 yen, or about $75 a month. But in Tokyo, the cost will be at least four times that. Garages in American cities can cost that much too, but in Japan there is no cheap street parking option, as in much of New York or Chicago. Most apartment buildings are constructed without any parking at all, because the developers can use the space more efficiently for housing. Only around 42 percent of condominium buildings have parking spaces for residents. Similarly, even if you own a parking space, it is almost never free to park anywhere you might take your car. Parking in Tokyo typically costs 1,000 yen an hour, or around $8.50.
This is a big disincentive to driving. Sorensen told me that when he lived in Tokyo, some wealthy friends of his owned a top-end BMW, which they replaced every few years, because they were car nuts. But because they did not have anywhere to park it near their home, if they wanted to use it, they had to take public transport (or a taxi) to get to it at its garage. As a result, they simply did not use their car very much. In their day-to- day life, they used the trains, the same as everybody else, or took taxis, because that was cheaper than picking up the car. This sort of thing probably helps to explain why the Japanese, despite relatively high levels of car ownership, do not actually drive very far. Car owners in Japan typically drive around 6,000 kilometers per year. That is about half what the average British car owner drives, and less than a third of what the average American does.
Parking rules are not, however, the limit of what keeps cars out of Tokyo. Arguably, an even bigger reason is how infrastructure has been funded in Japan. That is, by the market, rather than directly by taxes. In the 1950s and ’60s, much like Europe and the United States, Japan began building expressways. But unlike in Europe and America, it was starting from a considerably more difficult place. In 1957, Ralph J. Watkins, an American economist who had been invited to advise the Japanese government, reported that “the roads of Japan are incredibly bad. No other industrial nation has so completely neglected its highway system.” Just 23 percent of roads were paved, including just two-thirds of the only highway linking Osaka, Japan’s historical economic hub, to Tokyo.
But unlike America, the idea of making them free never seemed to cross politicians’ minds, probably because Japan in the postwar era was not the world’s richest country. Capital was not freely available. To build the roads, the national government formed corporations such as the Shuto Kōsoku-dōro Kabushiki-gaisha, or Metropolitan Expressway Company, which was formed in greater Tokyo in 1959. These corporations took out vast amounts of debt, which they had to repay, so that the Japanese taxpayer would not be burdened. That meant that tolls were imposed from the very beginning. The tolls had to cover not just the construction cost, but also maintenance and interest on the loans. Today, to drive on the Shuto Expressway costs from 300 to 1,320 yen, or $2.50 to $11 for a “standard-size” automobile. Overall, tolls in Japan are the most expensive in the world — around three times higher than the level charged on the private autoroutes in France, or on average, about 3,000 yen per 100 kilometers ($22 to drive 62 miles).
What that meant was that, from the beginning, roads did not have an unfair advantage in their competition with other forms of transport. And so in Japan, unlike in almost the entire rest of the rich world, the postwar era saw the construction of enormous amounts of rail infrastructure. Indeed, at a time when America and Britain were nationalizing and cutting their railways to cope with falling demand for train travel, in Japan, the national railway company was pouring investment into the system. The world’s first high-speed railway, the Tokaido Shinkansen, was opened in 1964 to coincide with the Tokyo Olympics, with a top speed of 210 kilometers per hour. That was almost double what trains elsewhere mostly managed. From 1964 to 1999, the number of passengers using the Shinkansen grew from 11 million annually to more than 300 million.
Sorensen told me about how in the 1950s and ’60s, the trains were a huge point of national pride for the Japanese government, a bit like car industries were elsewhere. “And justifiably! It was a fantastic invention. To say we can make electric rail go twice as fast. What an achievement.” Thanks to that, the railways ministry became a huge power center in government, rather than a neglected backwater as it often had become elsewhere. In rail, the Japanese “built up expertise in engineering, in bureaucratic resources and capacities, and political clout that just lasted,” he told me. “Whereas the road-building sector was weak.” Elsewhere, building roads became a self-reinforcing process, because as more was poured into constructing them, more people bought cars and demanded more roads. That did not happen in Japan. Instead, the growth in railway infrastructure led to growth in, well, more railway infrastructure.
If you visit Tokyo now, what you will find is that the most hectic, crowded places in the city are all around the train and subway stations. The reason is that Japan’s railway companies (the national firm was privatized in the 1980s) do not only provide railways. They are also big real estate investors. A bit like the firm that built the Metropolitan Railway in the 1930s in Britain, when Japan’s railway firms expanded service, they paid for it by building on the land around the stations. In practice, what that means is that they built lots of apartments, department stores, and supermarkets near (and directly above) railway stations, so that people can get straight off the train and get home quickly. That makes the trains more efficient, because people can get where they need to go without having to walk or travel to and from stations especially far. But it also means that the railways are incredibly profitable, because unlike in the West, they are able to profit from the improvement in land value that they create.
What this adds up to is that Tokyo is one of very few cities on Earth where travel by car is not actively subsidized, and funnily neither is public transport, and yet both work well, when appropriate. However, Tokyo is not completely alone. Several big cities across Asia have managed to avoid the catastrophe (cartastrophe?) that befell much of the western world. Hong Kong manages it nearly as well as Tokyo; there are just 76 cars per 1,000 people in the city state. So too does Singapore, with around 120 per 1,000 people. What those cities have in common, which makes them rather different from Japan, is a shortage of land and a relentless, centralized leadership that recognized early on that cars were a waste of space.
Unfortunately, replicating the Asian model in countries in Europe, America, or Australia from scratch will not be easy. We are starting with so many cars on our roads to begin with, that imposing the sorts of curbs on car ownership that I listed above is almost certainly a political nonstarter. Just look at what happens when politicians in America or Britain try to take away even a modest amount of street parking, or increase the tax on gasoline. People are already invested in cars, sadly. And thanks to that, there is also a chicken-and-egg problem. Because people are invested in cars, they live in places where the sort of public transport that makes life possible for the majority of people in Tokyo is simply not realistic. As it is, constructing rail infrastructure like Japan’s is an extraordinarily difficult task. Look at the difficulties encountered in things like building Britain’s new high-speed train link, or California’s, for example.
And yet it is worth paying attention to Tokyo precisely because it shows that vast numbers of cars are not necessary to daily life. What Tokyo shows is that it is possible for enormous cities to work rather well without being overloaded by traffic congestion. Actually, Tokyo works better than big cities anywhere else. That is why it has managed to grow so large. The trend all over the world for decades now has been toward greater wealth concentrating in the biggest metropolises. The cost of living in somewhere like New York, London, or Paris used to be marginally higher than living in a more modest city. That is no longer the case. And it reflects the fact that the benefits of living in big cities are enormous. The jobs are better, but so too are the restaurants, the cultural activities, the dating opportunities, and almost anything else you can think of. People are willing to pay for it. The high cost of living is a price signal — that is, the fact that people are willing to pay it is an indicator of the value they put on it.
Especially in this post-pandemic era where many jobs can be done from anywhere, lots of New Yorkers could easily decamp to, say, a pretty village upstate, and save a fortune in rent, or cash in on their property values. Actually, hundreds of thousands do every year (well, not only to upstate). But they are replaced by newcomers for the simple reason that New York City is, if you set aside the cost, a pretty great place to live. And yet, if everyone who would like to live in a big city is to be able to, those cities need to be able to grow more. But if they continue to grow with the assumption that the car will be the default way of getting around for a significant proportion of residents, then they will be strangled by congestion long before they ever reach anything like Tokyo’s success. People often say that London or New York are too crowded, but they are wrong. They are only too crowded if you think that it is normal for people to need space not just for them but also for the two tons of metal that they use to get around.
The sheer anger of motorists might mean that banning overnight parking on residential streets proves difficult. But if we want to be bold, some of Tokyo’s other measures are more realistic. We could, for example, do a lot more to build more housing around public transport, and use the money generated to help contribute to the network. According to the Centre for Cities, a British think tank, there are 47,000 hectares of undeveloped land (mostly farmland) within a 10-minute walk of a railway station close to London or another big city. That is enough space to build two million homes, more than half of which would be within a 45-minute commute to or from London. The reason we do not develop the land at the moment is because it is mostly Metropolitan Green Belt, a zoning restriction created in the late 1940s by the Town and Country Planning Act intended to contain cities and stop them sprawling outward. But the problem with it as it works in Britain at the moment is that it does not stop sprawl — it just pushes it further away from cities, into places where there really is no hope of not using a car.
Developing the green belt too would not be popular. People have an affection for fields near their homes, and they do not necessarily want the trains they use to be even more crowded. But there are projects that show it is possible to overcome NIMBYism. In Los Angeles in 2016, voters approved the Transit Oriented Communities Incentive Program, which creates special zoning laws in areas half a mile from a major transit stop (typically, in L.A., a light rail station). This being Los Angeles, it is fairly modest. One of the rules is that the mandatory parking minimums applied are restricted to a maximum of 0.5 car parking spaces per bedroom, and total parking is not meant to exceed more than one space per apartment, which is still rather a lot of parking. But nonetheless, it does allow developers to increase the density of homes near public transport, and it has encouraged developers to build around 20,000 new homes near public transport that probably would not have been constructed otherwise. These are small but real improvements.
Ultimately, no city will be transformed into Tokyo overnight, nor should any be, at least unless a majority of the population decides that they would like it. I am trying to persuade them; for now, not everyone is as enamored with the Japanese capital as I am. But NIMBYism and other political problems can be gradually overturned, if the arguments are made in the right way, even in the most automotive cities.
This article was excerpted from Daniel Knowles’ book Carmageddon: How Cars Make Life Worse and What to Do About It, published by Abrams Press ©2023.
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
Current conditions: The East Coast’s Acela corridor is cooling down this week, with temperatures dropping from 85 degrees Fahrenheit in Philadelphia yesterday to the 60s for the rest of the week • Cape Agulhas is under one of South Africa’s Orange Level 6 warnings for damaging winds and dangerous waves • Floods and landslides in Brazil’s northern state of Pernambuco have left six dead and thousands displaced.
The Securities and Exchange Commission has advanced a measure to formally end Biden-era climate disclosure rules for publicly-traded companies. The regulator sent the proposal to the White House’s Office of Management and Budget for review on May 4, according to a post on a government website first spotted by Bloomberg. The Wall Street watchdog’s 2024 disclosure rule mandated that publicly traded companies report on the material risks climate change poses to their business models, including the financial impact of extreme weather. Some large companies would have been required to disclose Scope 1 emissions, which are produced by the firm’s own operations, and Scope 2 emissions, which are produced by companies with which the firm does off-site business such as electricity. The rule had already been watered down before its finalization to remove Scope 3 emissions, which come from suppliers up and down the value chain and from customers who use a product such as oil.
In an even bigger move, the SEC also proposed scrapping mandatory quarterly reporting for U.S.-listed companies, instead switching to a twice-yearly filing. The idea, which President Donald Trump first floated years ago as a way of getting companies to focus on longer-term goals, “would provide companies with increased regulatory flexibility,” SEC chair Paul Atkins told the Financial Times. “Public companies have an obligation under the federal securities laws to provide information that is material to investors. Yet, the rigidity of the SEC’s rules has prevented companies and their investors from determining for themselves the interim reporting frequency that best serves their business needs and investors.” While cast as part of a larger deregulatory push, the move could actually be a boon to climate action. Supporters of decarbonization have long lamented how quarterly reporting norms disincentivized costly bets that take longer than three months to pan out.
If you have ever body surfed in the ocean — or observed how docks and peers weather over time — it’s easy to intuit why harnessing renewable energy from waves is so tricky. Among experts who often list wave energy along with tidal power as two sources of underdeveloped but potentially promising renewable energy, the latter has long been considered the more commercially viable, with turbines harnessing tidal flows already in operation in France and elsewhere. Wave energy, by contrast, has been perceived as a riskier frontier in the energy industry.
That didn’t stop wave-energy startup Panthalassa from raising $140 million in a Series B round led by Silicon Valley billionaire Peter Thiel this week as the company looks to develop floating data centers that can operate in open ocean. The financing will fund the completion of the company’s pilot manufacturing facility near Portland, Oregon, and speed up deployment of its Ocean-3 series of facilities that “will perform AI inference computing at sea” with power generated from ocean waves.
“There are three sources of energy on the planet with tens of terawatts of new capacity potential: solar, nuclear, and the open ocean,” Panthalassa CEO and co-founder Garth Sheldon-Coulson said in a statement. “We’ve built a technology platform that operates in the planet’s most energy-dense wave regions, far from shore, and turns that resource into reliable clean power. We’re now ready to build factories, deploy fleets, and provide a sustainable new source of energy for humanity.” The deal, per the Financial Times, values the company at about $1 billion. “The future demands more compute than we can imagine,” Thiel said in a press release. “Extra-terrestrial solutions are no longer science fiction. Panthalassa has opened the ocean frontier.”
The company has some competition. Earlier this year, the San Francisco-based Aikido Technologies launched a new line of floating platforms for deep-water offshore wind turbines that include data centers built into the ballasts.
Allow me to give you a glimpse into the anxious mind of a young father: Sometimes, I distract myself from my fear over what global weather patterns might look like by the time my one-year-old daughter is my age with my more urgent terror over what particulate matter is entering her perfect little lungs and what microplastics sneak into even her home-cooked meals. Well, worry not! Turns out the two aren’t mutually exclusive. In theory, I knew this was always the case, since the rise of plastic pollution is at least somewhat spurred on by oil and gas companies making big money off the feedstocks for the cheap, single-use plastics that break down into dangerous tiny particles in our environment. But new research shows that microplastics in the atmosphere are actually magnifying the effects of climate change. In a new paper published in the journal Nature Climate Change, scientists in China and the U.S. outlined how tiny, colored plastic bits absorb sunlight as the wind blows them around the world, trapping heat and adding to temperature rise. “The plastic problem is not just in our blue oceans, it is also in the invisible skies above us,” Hongbo Fu, a co-author of the study and an atmospheric scientist at Fudan University in Shanghai, said at a press conference, per Bloomberg. “Climate models need to be updated.”
Sign up to receive Heatmap AM in your inbox every morning:
Like wave and tidal power, geothermal was once a sleepy corner of the clean energy world. But next-generation startups that promised to use new drilling techniques to harness geothermal energy in more places than ever thought possible are radically upending an industry that saw its largest power station — the Geysers in California — built in the 1960s and hitherto hadn’t aimed higher. Until a few years ago, next-generation geothermal drilling was esoteric even among energy nerds. But things change quickly in the modern energy business. Fervo Energy, the first major next-generation startup to prove that fracking technology could be used to revolutionize geothermal power, is now eyeing a $6.5 billion valuation. That’s according to a document the company filed with the SEC this week as it prepares to raise more than $1.3 billion in an initial public offering of its stock.
Fervo sees a big market. As Heatmap’s Matthew Zeitlin wrote last month when the company first filed to go public, Fervo told investors its reviewed leases represent over 40 gigawatts of energy. That’s equal to about 15% of all installed solar capacity in the U.S.

The United Arab Emirates already ranks as the world’s seventh-largest producer of crude, and could ascend as the country’s exit from the Organization of the Petroleum Exporting Countries frees Abu Dhabi to pump for oil. The UAE’s debut atomic power plant — the four-reactor, Korean-built Barakah station in Abu Dhabi — set a new standard for nuclear construction in a Western-aligned nation and vaulted the federation of monarchies to the forefront of global discussions about fission. Now the UAE is making a big move on solar. Abu Dhabi’s state-owned renewables developer Masdar has signed a deal with Emirates Water and Electricity Company to deploy more than 30 gigawatts of solar capacity and 8 gigawatts of batteries. “As the driving force behind the UAE’s energy transition, EWEC is at the forefront of a global shift towards sustainable, utility-scale power and water production,” Ahmed Ali Alshamsi, the utility chief in charge of the Emirates Water and Electricity Company, told PV Tech. “This CFA with Masdar is a pivotal strategic tool that empowers us to accelerate this transformation and meet 60% of Abu Dhabi’s total energy demand from renewable and clean sources by 2035.”
Norway led the world in electric vehicle adoption. It’s now at the forefront of autonomous vehicle adoption. Europe’s first self-driving bus without a supervisor onboard is set to be rolled out in the southwestern city of Stavanger following a recent regulatory change. While the bus still requires preparation by a human before operating, the project has been underway since 2022 and represents Europe’s most advanced public deployment of the technology.
Rob talks with the billionaire investor and philanthropist about how energy, Chinese EVs, and why he’s “very optimistic” that Congress will pass permitting reform this year.
If you work around climate or clean energy, you probably know about John Arnold. Although he began his career as a natural gas trader, Arnold has since become one of the country’s most important clean energy investors. He’s the chairman of Grid United, a transmission development firm undertaking some of the country’s most ambitious power line projects, and he is an investor in the advanced geothermal startup Fervo. He and his wife Laura run the philanthropic organization Arnold Ventures.
On this week’s episode of Shift Key, Rob talks with Arnold about the current energy chaos and what might come next. They discuss Arnold’s first trip to China, whether Congress might pass permitting reform this year, and what clean energy companies should learn from the fossil fuel industry.
Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap News.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, or wherever you get your podcasts.
You can also add the show’s RSS feed to your podcast app to follow us directly.
Here is an excerpt from our conversation:
Robinson Meyer: What needs to change or what needs to happen between now and, say, the end of the year for [a permitting deal] to actually get done?
John Arnold: So I think on an election year, it's very unusual for any big piece of bipartisan legislation to get passed, really, the whole year. And so what we're really looking at is most likely is that it would get passed after the election in the lame duck period. And so you start working backwards from there and really need to have language that's agreed upon in the next 45 days. It's hard to work over the summer. Congress scatters. Everybody scatters. Then you come back. There's a little bit of work time in September, and then everybody's focused on the elections. So the bill needs to get written today. And then again, in the next 45 days, and there's a lot of work happening behind the scenes. So again, sometimes it's hard to know exactly where it is, but everybody's saying the right things. There's been fits and stops to date, particularly when the administration hit the pause on offshore wind. They've made some changes. They brought Senator Whitehouse back to the negotiating table, for instance. So again, everything I think is looking good, but getting anything passed in D.C. these days might be a long shot.
You can also find a complete transcript of the episode on Heatmap.
This episode of Shift Key is sponsored by Salesforce.
Salesforce is the No. 1 AI CRM, where humans with agents drive success together. We invest in bold climate technologies and leverage agentic AI to accelerate nature-based solutions that benefit people and the planet. Learn more. You can also learn more about Salesforce's investments in watersheds here.
Music for Shift Key is by Adam Kromelow.
This transcript has been automatically generated.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, or wherever you get your podcasts.
You can also add the show’s RSS feed to your podcast app to follow us directly.
Robinson Meyer: Hello, it's Wednesday, May 6th, and the Strait of Hormuz is still closed. In fact, both the United States and Iran claim to control the strait, and energy traders around the world, not to mention policymakers and the general public, are trying to understand the situation.
So today, I want to welcome someone who's made billions of dollars understanding and monitoring situations a lot like this one. John Arnold has a good claim to be the best energy trader of all time. He began his career when he was 21 years old and working in natural gas trading at Enron. He later established Centaurus Advisors, LLC, a hedge fund specializing in energy in Houston.
But since 2008, he and his wife, Laura, have led Arnold Ventures, which is one of the most interesting and I would say one of the most effective philanthropic organizations out there. They work on criminal justice reform, lowering drug prices, reining in sports betting, and for our purposes, how to build more housing, transportation, and infrastructure in the United States, including how to build more electricity infrastructure. For that reason, they've been at the forefront of the permitting reform conversation. In fact, I'd say they helped to drive it, in part because John is also a clean energy investor. He's a co-founder and chairman of Grid United, which is building some of the most ambitious transmission projects in the United States. And he's an investor in the advanced geothermal company Fervo, which we talked about on a recent episode.
So many of the topics, in fact, that we work on or talk about at Shift Key come down to topics that John Arnold thinks about every day.
One goal of Shift Key, in fact, I think is to step back from the news cycle from time to time and have bigger conversations with guests like John. And so today for the first episode in our new occasional “big interview” series, I'm talking to John Arnold about how he reads the current moment in energy, about what he learned during his recent trip to China, where he went to EV factories — it was the first time he'd ever been to that country — and about what clean energy companies can and should learn from fossil fuels. I'm Robinson Meyer, the founding executive editor of Heatmap News, and it's all coming up on ShiftKey, Heatmap's podcast about decarbonization and the shift away from fossil fuels. John Arnold, welcome to Shift Key.
John Arnold: Great to be here.
Robinson Meyer: So my colleague is reading Lloyd Blankfein's memoir and found out in the memoir, he confesses he still trades every day, that he can't get away from it. You're one of the great energy traders. Are you still trading on a day-to-day basis?
John Arnold: I do not trade on a day-to-day basis. I still follow the markets on a day-to-day basis. I think I've become every year a little bit more separated from what's actually going on. And what I don't even know, I don't know increases. I will trade a few times a year.
Robinson Meyer: Do you feel in moments like this one, or in I don't know, March 2020, did you feel the pull to get more involved? Were you like, Oh, my gosh, there's stuff happening. I have to be there. Or was it like, Oh, no, there's too much. I can't possibly trade in this moment.
John Arnold: Oh, for sure. I think, you know, in moments of panic, I think is when the best opportunity exists, particularly for somebody who's not in the day-to-day of it. And so you really have to choose your spots about when that chaos comes in and the market might get mispriced. And that's the opportunity for someone like me at this point.
Robinson Meyer: Speaking of which, let's talk about the current moment. So how do you read this current moment in global energy? I would say in oil specifically, then we can get to natural gas and maybe crucially, is the way the oil market is behaving in response to the Strait of Hormuz's closure and this kind of prolonged ceasefire that may be breaking down literally as we record this, should oil be higher? And is the movement of oil confusing you or do you think kind of makes sense?
John Arnold: Yeah, there was this market chaos whenever I think there was the understanding that the Strait was going to be closed for some period of time. And that's when you saw Brent shoot up to $120 plus, at least intraday, and really had the whole panic because this is what the oil market has been fearing for decades. And obviously, in retrospect, that move had gone too far. I think a few things happened. One was it's three weeks to get cargos from the Middle East to either East Asia or to Europe. It took three weeks for the end user to really stop receiving new cargoes. The market was already soft at the time, so there was some kind of looseness in the market. The commercial inventories were healthy, and the steeply backward-aided curve created a tremendous incentive for anybody with those inventories to try to sell them onto the market.
Strategic reserves started getting sent out. There was a little bit of demand destruction. You had the administration was making all sorts of rhetorical claims that this would end soon or that there was a way to open up the strait. So I think that the whole combination of things has been weighing on the market.
The Saudis and others found ways to reroute a number of the barrels. But now, you know, you're a little bit more than two months in to the strait being closed. And you still have this kind of 10 to 12 million barrels a day that's off market. And that's really starting to add up. And the commercial inventories are being worn down. The three weeks is up, so people are not receiving their cargoes that they were expecting. And so I've made this comment before, but each day that goes by that there's not a settlement, that the straight is not open, the fair value of oil goes up. And it's not going to be a straight line up. It's going to bounce around. It bounced up today, bounced down on last Friday. But you are on this upward trend and i think the problem gets harder with each passing day and that's that's you know not a controversial opinion but i do think it is it just starts getting to be the real dilemma especially with both sides thinking that they can play the waiting game and neither side really has a good card to play as to what to do next what's.
Robinson Meyer: What do you think is the most plausible endgame? You just observed that basically neither side, I think, feels like it's winning or losing — it's a real stalemate — but meanwhile the physical market is deteriorating what maybe what are the scenarios you're thinking through in your head
John Arnold: It has to end with a negotiated settlement. I think it's easy to say, but it's very, very difficult to imagine how that happens, especially how emboldened I think both sides are. This notion of Iran's access to nuclear material that can be used to make a bomb has been a stickler for the West for now decades. And you've had many, many administrations saying that Iran cannot be allowed to get the nuclear weapon. And so the question is, how does this end in a better spot with respect to access to nuclear material than when it started, especially with how emboldened that Iran feels today? And I think that is kind of difficult to imagine. And if I had the answer to this, I would maybe be on National Security Council. But we're kind of in this spot where I think had one war gamed this out beforehand, and there was some probability you get to this point, and you would probably say, like, let's just hope that we don't end up there, because there's no easy way out.
Robinson Meyer: I was talking to a few foreign policy people who worked in the past administration over the weekend. And one of them said something like, you have to say the president has somewhat succeeded here in managing the market so far. Because when Russia invaded Ukraine, Brent went to 140 on fears of a supply disruption. But then a supply disruption never really materialized to the same extent that it has today. Well, today, obviously, we're losing 10 million barrels a day. There is a real supply disruption. And, you know, prices are like flirting with Brent, in this case, is flirting with 110. It kind of goes up to 120, comes back down. But do you think that the administration, the president kind of deserves credit for managing prices or is this all going to backfire as this continues and we don't see a supply response from, say, the U.S. because prices have remained depressed?
John Arnold: Yes and yes. So I think he has done a good job of talking down the market to date. And you hear the open the straight or we're going to blow you to smithereens, open the straight or we're going to blockade, open the straight or we're going to escort friendly ships through. There's the we're very close to a deal that gets talked about oftentimes these statements get released on sunday before markets open and so in that sense you know i think those who are along the market live in fear of one bad headline and you lose ten dollars and there's just an air gap in the market and so i think that provides a level of fear and maybe the risk averse are less comfortable in trying to bid up supplies. That being said, the purpose of prices is to allocate scarce resources. And to the extent that we need higher prices in order to create more demand destruction, we're not getting it today. And again, each day that goes on, the market gets even tighter and tighter physically.
And those who had commercial inventories that they drew down, or they bought them back a month or two deferred in the financial markets because you could make a $7 or $10, $15 by just playing the curve. But then you get to the point where, okay, now you want your barrels. And so to some extent that gets met by the release of strategic reserves. I think countries get more hesitant over time to put out those barrels, but you do end up with, I think keeping prices lower in the short term means higher in the medium term if we get there.
Robinson Meyer: We're getting into kind of full-on oil analysis territory, but like, when would higher prices begin to fetch more supply? Because I was at Sierra Week a few weeks ago, and it seemed like part of the issue the administration faces is that even if we were to bring more supply onto the market, it wouldn't arrive till late, till after the midterms. It's a salient political touchpoint, but in the back half of this year, the very end of this year and the beginning of next year.
John Arnold: Exactly. And I think that's what makes energy markets fascinating is that they're relatively inelastic, both supply and demand in the short term. You have to raise gasoline prices to very high levels to get people to change their driving habits. You have to raise jet fuel prices to high levels to get that to start changing, you know, am I going to go on that plane trip or not? And so demand destruction is limited and very inelastic, as well as the ability to bring new supplies on. Plus, the forward curve now is starting to give that real price signal to producers. But for, you know, the first four or six weeks of this, the curve was in steep backwardation. And so a producer would be looking at it and say, you know, it's still WTI $70 or below for when I'm actually going to get that oil that I'm investing a new CapEx in today. And so that wasn't that appealing, even though the short end of the curve was at the 90, 100 plus level.
Robinson Meyer: Stepping back, looking beyond oil, how are you thinking about the energy fallout from this conflict so far, and especially in its long-term implications? I think folks like Fatih Birol have talked about this as an inflection point in energy, as a moment when a number of countries, I think especially in Southeast Asia, are going to look at the energy security implications of relying on seaborne oil. There's a story about Chinese EV sales surging. Do you buy that story, or do you think there's more inertia in the system than we realize and things will snap back basically once the street reopens? And there might be some change in stocks, but this is not the 1970s all over again.
John Arnold: Right. And I think the challenge here is that energy system is enormous. It is long-lived assets that take a long time to build anything new. And things happen at the margin. And so if you just think about what would it take to increase EV market share of cars on the road globally, it's an enormous amount of effort that would be required an enormous amount of time until that starts to become material. The whole stock versus flow issue, even if you're selling 50% market share of EVs, you're still competing with all the autos on the road today. And I think that metaphor is broadly true across much of the energy industry. You can think about the U.S. generation fleet. And while the vast majority of new generation that came on last year was solar and batteries, you know, solar is still a relatively small percentage of the total U.S. System, right? And so that stock versus flow thing, you're not getting away from. And that being said, I think every country is going to value energy security.
John Arnold: In an increasing manner going forward. Now, what that actually means in practice is a little bit harder. And as you said, this is long-term ramifications. This is not how's the energy system going to change in six months or even in a few years. We're talking about how the decisions that get made today that start showing up in any material ways kind of in the five to 10-year window.
Robinson Meyer:So you recently went to China for the first time. Lots of people, when they go to China for the first time, they have a kind of eye-opening experience. Were you expecting an eye-opening experience? What did you expect and what did you encounter?
John Arnold: Yeah, I mean, the reason I went, and I had been kind of embarrassed that I hadn't been previously. I travel a lot, I go international a lot, and just never had the strong desire or the need to go to China, and so I hadn't. But I was growing interested in China as it was starting to be at the technological edge on many things. And so if you think about just kind of the industrialization of China, you know, it's kind of went up from low value to medium value. It was producing lower quality goods even 10 years ago. If you mentioned any type of good from China or most goods from China in the West were deemed to be of inferior quality. And over the past 10 years, particularly over the past five years, I think that's started to flip. And you see a number of industries like EVs, like batteries and solar panels, telecom equipment, et cetera, where China is now on the leading edge, bleeding edge of technology. And they're enormously cost competitive. And so you're starting to see both the world open their eyes to the quality of many Chinese made goods today, as well as the fact that they are often cheaper than one can produce domestically.
And I think this industrial policy challenge that many countries, including the U.S., face are very real. How do you compete with China on EVs given the technological advancement they have today, their relatively inexpensive labor costs, the automation in the factories, these very robust supply chains that they have, cheap cost of capital, willingness to subsidize or run at zero profits, the industry for a long time. And I think that's true not only of the EV industry, but of many other industries going forward. And what's the right response from the West to China that now looks like that?
I thought that was an interesting question that I couldn't answer. I'm not sure I can answer that today either.
Robinson Meyer: So those are all the questions in your head when you went. Then what did you see? Were you surprised? I mean, were they even more advanced? Were things even more advanced there than you expected? Or did you feel like you were kind of adequately prepared by the discourse, but still, you know, it was striking to see it in person?
John Arnold: One of the things that I was expecting was less automation. You should see more automation in places and industries where you have high labor costs. And China seems to be on the forefront of automation and the robotics revolution. So that was kind of a head scratcher, especially if one of the goals, strategic goals of the country is employment — that they've either been long-term planning there to understand that if you're just going to labor your way through this, you're going to be disrupted at some point. But that China is willing to both invest in the robotics and automation, as well as try to create jobs for its citizens, I think is very forward-looking by the country.
I was also trying to just understand where capital comes from. Where's the risk-taking capital come from? And what are the incentives both kind of within the province level as well as from any private capital sources? Who is funding this EV industry that has massive overcapacity and it doesn't seem to be making any money or clearly is not making any money with the exception of maybe BYD. And I think that's true of other industries as well.
So just trying to understand, where's the capital coming from? Are there investment opportunities? Are there sourcing opportunities for the West, particularly on the electrostack that China is so strong in and that the West, particularly in the United States, now has real shortages of any type of power equipment, the transformers and switch gears and all of that. And China has extra capacity there. And in some sense, we are in this race with China on AI. You need a lot of power in order to do that. The supply chain of the power industry is very constrained in the United States right now. There is spare capacity in China should we be utilizing that as a country in order to try to beat them on the AI side I've.
Robinson Meyer: I’ve heard where we kind of are at this point is, whether we like it or not, as the data centers expand, the kind of quotient of where maybe the government or like companies are willing to allow Chinese technology is creeping closer and closer to the chips themselves.
John Arnold: Yes. Yeah. The best I could tell was that American policymakers were okay with Chinese equipment at the edge of the grid. They did not want it kind of on the backbone of the grid such that if it ever got turned off, that the downside was fairly limited.
Robinson Meyer: Where did you see automation in China? What's an example?
John Arnold: So it went to the Nio auto factory. Nio produces one of the higher end EVs, generally in the kind of $50,000 to $100,000 range. They've also been at the forefront of the replaceable battery. I think there's a different phrase from that, but one that you can pull into a charging station if the machine removes the battery from the bottom of the vehicle and puts in an already charged battery. So it's a three-minute in-out process to get a fully charged battery. They had finished a new plant a couple years ago. I think it took them 17 months from breaking ground to having the first car coming off the line, which is just remarkable.
Robinson Meyer: That's crazy.
John Arnold: And was also just surprised that, you know, going through there and touring it, how much automation there was, how few employees there were in the plant.
Robinson Meyer: Okay, so I'm also in the never been to China, but find myself talking about China all the time, kind of embarrassed camp. And it's going away. But this idea that China is competitive because of low cost labor is one that I feel like we're gradually realizing is not true. I mean, it's part of the picture, but it's a much there's a much wider set of capabilities in Chinese manufacturing. Now than there were even 10 years ago, as you were saying.
Did you wind up thinking that that the consumers are different, too, or that maybe the Chinese EV industry has been able to thrive because it addresses a very different need than the American EV industry? I think one thing I've been trying to figure out in my thinking about China is how much the U.S. Still has in dollar terms, the world's largest market or it's up. It's close. But there's more consumers. There's far more people in China and they all buy a version of the thing. Many of them buy cars, right? And that then creates more capacity for learning to scale. Did seeing some aspect of the economy make you realize how difficult or potentially solvable the challenge is?
John Arnold: I think what was striking was, I had a hard time identifying where the weak spot was for Chinese industry, given that they have a highly educated workforce, low cost of labor, that there is risk capital that's provided. A lot of it comes from the government, but then flows through to venture capital groups who are making roughly similar decisions with some constraints on where they can invest to the end of the industries and the geographies as American ones. Talk about the size of the domestic market, the supply chains there, that they are close both in geography and culturally, you know, without having to do cross-border supply chain management. Seeing that and then trying to understand how other countries compete on the electrostack going forward was very challenging. And I walked away saying, I'm not sure if China would be a good investment or not for somebody from the West. I'm not sure those companies are ever going to make money, but I would be very hesitant to invest much in manufacturing companies in the West that are competing with China. I think the auto manufacturing industry is fascinating for a number of reasons, but most countries that have a domestic manufacturing industry for autos view that as strategic. It's a lot of jobs. There's kind of this pride of making cars. And so there's always been a lot of export hurdles and kind of fences being built around countries of various heights. And America.
Has this decision to make of, do we try to compete with Chinese cars globally, or do we build this big wall around our country and say, you have to make it here with American technology?
And I think the risk is what you're seeing in Canada. So the Canadian and American car industries were kind of tied at the hip since forever. And you saw a lot of car parts flow back and forth across borders. The assembly might be done in Canada, but it would use some combination of Canadian and American parts, be done with an American manufacturer, et cetera. You know, the United States is increasingly saying that we don't want that of cars to be assembled in Canada.
And so then Canada's starting to question what should its domestic manufacturing industry look like? And if America is not going to be a good partner, would somebody else? And China's raising their hand saying, try us. And so there was a deal recently in the past maybe six months, where Canada started allowing a certain number of Chinese imports that were essentially with tariff-free, very low tariffs. And the way I read it, I think the way others read it was, that China is testing the market? Is there demand for the product? And if so, then I think China is going to make a very significant investment in Canada. And Canada is protective of its jobs, its domestic industry. And if America is not a good partner for it, maybe China is.
Robinson Meyer: But it doesn't sound like you walked away. I mean, you kind of said this, but it doesn't sound like you walked away with like, okay, there's a clear way that American manufacturing? Because it's more than just auto industry, right? It's kind of this whole set of technologies around electricity at the bleeding edge that I think American policymakers would consider strategic. And I don't know, I would consider strategic, but it doesn't sound like you walked away with a clear sense of what America could do to compete in those industries.
John Arnold: Correct. I think the challenge of industrial policy is that it can end up being zero-sum, right? If one country starts doing it and then the next country says, well, if they're doing it, then I have to do it. And you can end up in a end state where there's very significant subsidies coming from each state and nobody's necessarily better off. And that seems to be where we're headed now.
And the justification that we're having in America to this is, well, China's doing it. And this was part of the rationale for WTO in trying to standardize what the trade rules were and what subsidies and supports a state could give to industry. And to try to really minimize that has always been tough. There's many, many ways that a state can support an industry. But there's been fights about that. And it was relatively stable. It may have been going up slowly. But I do think that China now being a very already healthy competitor in a number of these areas that are deemed to be the future, including things like drones and motors and magnets, et cetera, that there is that question that's happening. And I'm not sure what the answer is for the United States besides either we're going to do this as well. We're going to show supports for our industries that we deem strategic and or that the world's going to build these new alliances with high walls around it. And we have these trading alliances that get created and there's a lot of trading within those alliances and very little that goes across those alliances.
Robinson Meyer: I think it's hard because it's we kind of knew industrial policy had this race to the bottom or zero sum aspect. But what's new is that it works. What's new is that China seems to be doing it in a way that is working and outcompeting Western companies. It was easy for economists to say, oh, we shouldn't do this industrial policy when it didn't seem to work because they could say, oh, it's a race at the bottom and it doesn't work. Well, in that case, who wants to do it? But if China's doing it and it seems to be working, then suddenly we have real issues because an entire set of policy tools that I think both create real negative dynamics in the global market, but also have like huge strategic implications for the US suddenly seem like they're back on the table, but also... Not fit for our current global trading system.
John Arnold: Yeah, I think that's exactly right. It's an economist will give a hundred reasons why the five-year plan should not work and should end up leading to terrible inefficiencies and tremendous waste. But China has five-year plans in recent times have seemed to have been working pretty well.
Robinson Meyer: Yeah.
John Arnold: And so America is moving a little bit more in that direction than China is moving towards our direction.
Robinson Meyer: Exactly. To be continued, speaking, I guess, of the electrostack. So you're involved with a number of companies around electricity, Fervo, Grid United. On the scale of it's a nuisance to it requires a Manhattan project-like effort, how worried are you about the grid? Yeah.
John Arnold: I think there's a limited number of technologies or solutions that seemingly don't have any trade-off. And you can think about the goals of the energy system, and oftentimes you think about something and there's a trade-off, right? And you have trade-offs between affordability and reliability, or trade-offs between the environmental sustainability versus affordability or reliability, for instance. And there's a limited number that have really kind of no obvious trade-offs, at least with respect to the goals of the energy system. And I think about the goals as a lot of people talk about the four of reliability, affordability, sustainability, and security. I would add, I think, good jobs and I think scalability. So if you want to bring on a data center, can you provide power for that? And building out a more integrated grid helps on every one of those six factors.
I think doing things like demand management also doesn't have obvious trade-offs for it. I think adding batteries to the grid is another one of those solutions without the trade-offs. And those are the technologies I think I'm most excited about — again, because if we're in this fight about, you know, the trade-offs, and yes, it's good here, but it has this trade-off — those things are hard to scale or they are very fragile as you change administrations and the prioritization of those goals changes every four or eight years. But if you truly have solutions that are just a net positive then i think they're much easier to scale much more durable.
Robinson Meyer: Have you become convinced that any one grid in the U.S. or area of the U.S. could have does this right as compared to other parts or other grids?
John Arnold: ERCOT is this interesting example. Everybody loves to examine and analyze ERCOT. It's very good on the scalability of the system, which is one of the reasons why so many data centers are now being built in Texas. That was not the case even a few years ago. I think they were going in many different places, but that you can add demand and add the corresponding generation relatively easily in ERCOT, and that you don't have these very long timeframes for grid interconnection, I think is very positive. But what we're trying to do at Grid United is really go across the seams. So accident of history, we have these three grids in the United States. There's almost no connection across them. The benefits of trade that you get of increasing reliability and affordability just by making the system more efficient, more optimized are very real. And so that's really where we're focused.
Robinson Meyer: The Arnold Foundation, you know, your team is very involved in permitting reform. Are there particular policies you would like to see or that you think would solve these issues relatively quickly or at least provide a big boost?
John Arnold: Yeah. So, you know, it's really kind of a question of how do you get your permit? The certainty that you have once you've received your permit. And you want a system where people have the ability and right to object, that those objections are heard in a timely manner. A decision is made and the project's either greenlit or killed. And that certainty of how that process happens is very important to developers. And then maybe even more important is once you have that permit, that you have real certainty that it's not going to get tied up in the courts, right? That judicial review period is set. And again, that the objections get heard, But after the decision's been made, that it's final and we're moving forward. And there's a saying that time is money. It is very true for development, that the best way for an objector of a project to kill it is just to keep the delays. And the judicial system, as it currently works in practice, allows for some types of projects, this never-ending series of delays that happen. And so developers don't even start.
You see this not only with energy, you see this with any type of linear infrastructure, whether it's pipelines or highways or broadband. And you see this in housing as well. We have less housing because developers know in certain geographies that even though they should have their permit in three months, it's going to take them three years. And the cost of capital makes the project go from a profitable one to a money that was never even started. And so certainly today with the growth in demand and power, we need to be able to build again in this country. And if we're still on this trend of, and it's harder and harder to build each project, which makes it longer to bring on and more expensive, then we're never going to meet the goals of the energy system. It's this remarkable moment where I think almost everybody on the political spectrum recognizes that and recognizes the principles of energy permitting. And they're trying to write the fine print today, but I've never seen this issue have so much bipartisan support.
Robinson Meyer: Do you feel like we're going to get a deal this year? Or give me the probability that you think there's a deal this year.
John Arnold: Yeah, so if I go to the prediction markets, what am I going to see?
Robinson Meyer: Yeah, exactly. I haven't even looked to see if there's a Kalshi market.
John Arnold: There probably is.
Robinson Meyer: I'd be too inclined.
John Arnold: I am very optimistic. And we do a lot of policy work at Arnold Ventures. I know how hard it is to pass laws, especially in this era of political dysfunction. The one thing I think almost every member of Congress I talk to understands is the need to do this. There is support from the administration. There is support from congressional leadership on both sides. There's support from the relevant committee heads. If we can't get this done, then we can't get anything done.
Robinson Meyer: What needs to change or what needs to happen between now and, say, the end of the year for it to actually get done?
John Arnold: Yeah. So I think on an election year, it's very unusual for any big piece of bipartisan legislation to get passed really the whole year. And so what we're really looking at is most likely is that it would get passed after the election in the lame duck period. And so you start working backwards from there and really need to have language that's agreed upon in the next 45 days. It's hard to work over the summer. Congress scatters. Everybody scatters. Then you come back. There's a little bit of work time in September, and then everybody's focused on the elections. So the bill needs to get written today. And then again, in the next 45 days, and there's a lot of work happening behind the scenes. So again, sometimes it's hard to know exactly where it is, but everybody's saying the right things. There's been fits and stops to date, particularly when the administration hit the pause on offshore wind. They've made some changes. They brought Senator Whitehouse back to the negotiating table, for instance. So again, everything I think is looking good, but getting anything passed in DC these days might be a long shot.
Robinson Meyer: Arnold Foundation was involved in the MethaneSAT project. And, you know, methane is an interesting problem. I think natural gas would obviously be a much stronger position on emissions terms if we dealt with the methane pollution problem. Of course, then the administration came in and removed rules that were set to begin regulating methane pollution from the oil and gas sector. Why has methane proven so hard to tackle in the U.S.?
John Arnold: Yeah, I think it's a question of who pays for it. And so that well that, you know, is 50 years old, that's kind of barely economic today. It's leaking a little bit as a standalone well, but in aggregate, the number of very old wells or near end of life wells that are leaking, the title to those wells has changed hands many times over the years. And so the current owner says, right, why am I responsible? I just bought this thing a year ago. And when I bought it, there weren't rules about that I had to pay for it. Otherwise, I would have paid a very different price or wouldn't have bought it at all. So I think that's one. I think the industry probably has some fear of if they lose one fight on this, that there'll be the slippery slope argument on regulation. My argument to industry has been that if you want natural gas to be viewed as a clean fuel, then it actually needs to be a clean fuel. And that there's some low hanging fruit on trying to clean up the industry. And it would be good for you economically to make these investments. Now, that's true of the industry, I think. Again, you get down to, okay, which company is actually paying for it?
Robinson Meyer: I've heard this theory that, okay, the majors might be fine with that. They might say, yeah, sure, we can deal with it, whatever. It's the independents who are going out and killing all of this. And the majors don't mind that the independents are killing it, or the miners are killing it, but they would eat it if they had to. Do you buy this theory? Or if you were to lift the lid on any of these kind of big oil companies that have been more facially supportive of the regulations, they would actually be just as opposed?
John Arnold: I think a few things are true. Number one is that a newer well has lower leaks than an older well. Assuming the infrastructure is built, you know, at times whenever there's flaring, that's not true. But in general, once a well is operational and connected, then the newer it is, especially anything that's been put on the system in this decade, is a relatively low leak molecule. And that the larger companies tend to be the ones that are doing the new drilling. They have the capital. And as wells age, the big companies sell them to the small companies, to companies that have a lower cost of operations.
And so there's that natural trajectory of life of a well. And so I think there is some economic rationale to that. I think the large companies are more concerned about the reputation. I think they're more concerned about what's the long-term value and opportunity for the industry. They have publicly traded stocks that represent what the long-term value of the industry is versus kind of being owned privately and people having a shorter-term focus on the financial return market. And I think you're probably right that the big guys are kind of happy to have the little guys have this fight so they don't have to be criticized publicly.
Robinson Meyer: I guess into the point we know the big guys' names. I couldn't tell you all the names of the independents that would oppose this. What should clean energy companies learn from conventional energy companies or the conventional energy industry?
John Arnold: The conventional industry has, it's mature. It has low cost of capital. It has the robust supply chains. They are well capitalized. Right. Yeah. So they're able to do things, right, that kind of newer industries not able to. Look, the oil and gas sector has become tremendously efficient at scale, right? Scaling anything. So if it works, the oil and gas industry can go scale it. And I back up and just say that's something that happens with time.
Robinson Meyer: Yeah.
John Arnold: And so I'm not sure that the clean energy industry can just say, like, we should be like the oil and gas industry. We just need to copy their ways because they don't have the tools.
Robinson Meyer: I think they would love to say that, actually. Yeah, exactly. You know, I think they'd love the bankability. They'd love the scale. Is there anything they might not think of that they should think about?
John Arnold: I think the political power that the oil and gas industry has. And part of that is also time. If you've been donating to a party or to a candidate for three years, that's very different than if you've been donating for 30 years. Yeah. And so the oil and gas industry just has a lot more political power than the clean energy side does. I think there's just larger policy teams, larger budgets for it. The understanding that collectively, everybody has to participate in those PACs and in the trade organizations that I don't think you're seeing today in the clean energy side.
Robinson Meyer: Your work has been really studiously bipartisan. I think there was a phase in the clean energy industry as recently as a year and a half ago where it was not nearly as bipartisan. Was that a mistake? Should it embrace the kind of more Catholic position of the oil and gas industry, or is it not able to because of the policy landscape?
John Arnold: So it's hard because, again, like the longer an industry has been there, the more ingrained in the fabric of any community it is. And so you still see some Democratic states like New Mexico or Colorado that have oil and gas industries. And because the representatives in those states have to represent their communities, they end up having to get support or they do get support for it. Just because, again, just like the number of jobs that are there, the political organization that they have in those states, the number of companies. And so this takes time. It's like developing and becoming more and more of the fabric. And so the irony is that a lot of the wind producing states, a lot of the solar states are red. But they just haven't been around long enough to really have ingrained themselves into the fabric and into the political institutions in that state. So I think this is just more of a time component.
Robinson Meyer: Last question. So you're a big booster of Houston. And I would say the Houston civic culture. City is growing very quickly, of course, has this long term connection to oil and gas. When people visit Houston, what should they do? Or where should they go to see, not in a tourism sense, but if they're interested truly in what has made Houston different and what makes it different today? Like, what should they make sure they not miss?
John Arnold: The Menil Center is kind of this amazing museum that I think captures Houston's spirit and that the de Menils were part of the Schlumberger founding family that during World War II moved from France to Houston. And so it envelops the cosmopolitan nature of Houston that Houston draws from the entire world, often because of the industry we have here, the energy nature of it, and then the cultural assets that we have here. The Chamber of Commerce likes to talk about, we have the second most number of live theater seats, for instance, after New York. The museums we have, it's not New York, it's not maybe LA, but it's right there after those two. the theater. It's one of maybe four or five cities in the U.S. with a grand opera.
And so it has that cultural component as well as this gritty part of being an industrial city. We build things here, come here for scale. And we like growth. There's a number of communities today that, fight growth, right? They don't want to change. Houston does. Texas does, right? It's a state, it's an area that we want to grow. No politician could take office saying, we want to pause growth. That person would never get elected. And so kind of across the political spectrum, it's maybe, how do you grow? But Houston wants more people, it wants more diversity. It wants more growth, more industry. And that's what's made this community better. It's why people have come here in the first place. And that's what we want to give to the next generation.
Robinson Meyer: Well, there's so much more to talk about, but I'm going to respect your time and leave it there. John Arnold, thank you so much for joining us on Shift Key.
John Arnold: Great being here. Thanks.