The transition needs more than energy diversification

In an op-ed published at the opening of London Climate Action Week, Michael Bloomberg asks how to solve a global energy crisis and answers: diversify. The piece enters a debate reshaped by repeated shocks and rising strategic rivalry. Supply disruptions and anxieties caused by crises and weaponised dependencies have revived calls for supply-chain resilience and energy security. In this context, the claim that excessive fossil-fuel reliance has become a security risk has gained currency.

Mr Bloomberg adds a familiar portfolio logic. Diversification away from a relatively expensive and volatile asset creates value: high exposure to fossil fuels is difficult to justify when cheaper and safer clean-energy alternatives are available. That conclusion holds even before externalities are accounted for. Once the immediate health costs of air pollution and the rising costs and risks of climate change are included, the case becomes stronger still.

He calls for speeding up diversification, both by facilitating clean investment and phasing out subsidies and policies that tilt markets towards fossil fuels. The global energy crisis, Mr Bloomberg argues, is precisely the moment to accelerate, rather than delay, this diversification.

This is not simply a repurposing of the climate agenda, as opponents of the energy transition may choose to present it. The changing economics of low‑carbon technologies make it fair to present the energy transition not only as energy decarbonisation, but also as energy diversification. Irrespective of its importance for climate-change mitigation, it can increasingly be understood as a strategy for energy systems that are lower-cost, offer greater resilience and strengthen energy sovereignty.

But the diversification framing still needs discipline. It can mean accelerating resilient clean-energy systems. It can also be read more loosely as diversifying fossil-fuel procurement in the name of strategic security. Recent shocks have indeed been used to justify prolonging fossil-fuel assets that should be retired, or even making new expansion investments in gas-fired generation, pipelines and LNG infrastructure, often defended in the name of resilience and autonomy.

While gas may have a limited transitional role in some systems, new investment can also lock in fossil-fuel dependence for longer. Every dollar spent extending fossil-fuel infrastructure risks increasing future climate damages, and is a dollar not spent on clean systems, adaptation, resilience and public goods that are already urgently needed.

Mr Bloomberg’s argument strengthens the case for accelerating the exit from fossil dependence. The task for policymakers is to ensure that the diversification framing is not diluted into a rationale for new fossil-fuel infrastructure.

But Mr Bloomberg’s supply-side story is also insufficient. Cheaper and safer energy is welcome, and cleaner energy is indispensable. Energy, however, is not an end in itself. It powers a wider system of household and government consumption and the underlying productive economy. When that system is already pressing against environmental limits, the question cannot simply be how to clean up energy supply, even if doing so is essential to mitigating climate change.

The harder question is what demand this energy serves, and whether and how it contributes to societal resilience, environmental restoration and human development. That matters because the externalities problem Mr Bloomberg identifies in fossil fuels is more general. Our market and public-governance systems were not designed to produce sustainable abundance. Too often, they treat economic activity as separable from the natural systems on which it depends. Reorienting these systems requires changing the metrics and processes that guide public and private decisions so that they better recognise externalities, notably environmental stress.

Energy use and the wider material throughput of the economy must be directed towards adaptation, ecosystem repair, efficient infrastructure and forms of production that reduce pressure on natural capital. Some activities that offer high private returns may impose unacceptable social and ecological costs. Others that build resilience may remain underfunded because private investors cannot capture the full benefits, while public authorities too often underestimate their social value.

Deciding what to enable, maintain, phase down or constrain may involve technical analysis. But the material scale of these choices and their distributional implications mean they must be treated as questions of political economy. The same logic applies internationally, where equity requires different pathways for advanced and less advanced economies.

Mr Bloomberg is right that energy security now strengthens the case for cheaper, safer and cleaner power systems. But the transition to sustainable and resilient economies will not be secured by clean-energy supply alone. It will require societies to decide which forms of demand growth are compatible with environmental stability and human development, and to authorise those choices politically, within and across countries.