caroline: from bloomberg headquarters in new york, i am caroline hyde. energy giants, chevron, exxon, a surge, record rally, positive results, leaders of economies gathering in rome to discuss clean energy, a major factor, casting shadow over talks,

recent prices, the spotlight of energy security and transitio risk when alternatives are not ready to pick up the slack. we are focused on old versus green energy. in bird speaking earlier with the seat -- bloomberg speaking earlier with the ceo of chevron and he discuss rising costs and the company is not feeling those rising costs. >> we are not seeing higher costs. we are below pre-covid capacity. steel tied to the general economy, but energy-specific infrastructure, we are not seeing it. even if we are increases, they are well below where they were pre-covid, so costs are under control. caroline: let's dig into big oil earnings. our guest is with us.

it's worth saying chevron has been making steps towards a transition, investing in new energy, but first and foremost, with oil on the tear, was there anything to dislike in these numbers? >> no. they were hitting on all cylinders. better pricing upstream. better demand downstream. chemicals put together a solid quarter. across the board, the old world fossil fuel industry, chevron's efforts, they did well. >> what about their capital return plan. should they be giving more money back to shareholders? >> i think it is a great question. that is where they are heading. they spent a lot of effort on capital allocation this year on debt reduction. this windfall they enjoyed with oil prices moving up rapidly is

throwing off a tremendous amount of free cash flow, because capex levels remain discipline, so you will see more capital allocated to share buybacks, perhaps some dividends. i don't think they want to paint themselves into the corner by putting too much into dividends, just in case energy prices relapse. >> talk to us about that discipline. we were doing a stock of the hour around 2:40. some comments made were there are more costs with oil at $80 a barrel then when it was over $100 a barrel. is the technology getting more efficient, the capital discipline getting better, what do you see as the reason behind that? >> that is a great question. the biggest issue at this point

where profitability is so much better than a decade ago is that the cost sensitivity is higher. when shale oil was, oil was routinely $90, $95 a barrel, any project was going to be possible. saudi arabia took away the punch bowl in 2014, and for seven years, this industry had gone through repeated instances where they had to try to trim costs out of the system, so what you have now with oil prices almost back to square one, pre-2014, you have a cost basis that is better than a decade ago, so the free cash flows reflect that. caroline: as there is perhaps a desire by some to see research and development, maybe just drilling for more oil at this price point, but there has been

discipline, particularly in the permian basin and among u.s. producers. is there discipline because of political pressures? we saw the dressing down yesterday that u.s. big oil ceos. they must be feeling the heat in terms of having to transition, whether shareholders or politics demands it. >> you are right. there is pressure from two fronts. one is political. we saw that yesterday. for the last couple of years, there has been discipline provided by investors who told companies like chevron, stop telling us about growth plans, but tell us how efficient you will be, how much cash flow you would generate, and it starts with capital discipline, so that industry has gotten accustomed to really tapping the brakes hard on capital spending at the drill bit, and the folks that

have stepped out of line in recent times have gotten their hands slapped and watch their stock prices get hammered, like chevron, like others, exxon, they have all taken steps for the most part for the last couple of years to be disciplined about how much they are spending. >> we appreciate your time. caroline, you had a good point with research and development within drilling, but the pitted to esg in the research and development coming without? we'll go there next, discussing how companies and governments are managing the transition agree energy with the founder of the consulting firm focused on renewable energy projects next. this is bloomberg. ♪

caroline: today, we are focused on old energy and green energy, as the world faces tighter energy supplies. taylor, how have clean energy stocks been performing? taylor: everyone wanted to label bonds esg bonds because they thought it would boost likability, but you have not seen the return. we will pivot to the equity market. for a while, going green did not pay off in the equity market. that story is starting to change. take a look at this. this is the bloomberg goldman sachs global clean energy index. that is relative to the s&p and s&p energy index. that is the big outperformance you have seen.

this, as we push forward with concerns about global warming, and may be the investments are starting to pay off, given demand, which will push prices higher. let's do more on clean energy transition with the founder and president of a consulting firm focused on renewable energy projects in clean energy projects. are you seeing a real shift? , been talking about clean energy, solar, wind, burning cleaner fuel for a while but it feels like the narrative has started to change. do you feel that as well? >> yes. publicly, it has become more prevalent. you have seen decades of work behind the scenes, both wind and solar, all renewable energy technologies, but decades from markets to private markets,

technical and regulatory barriers. once you get there, it is a matter of getting the value to scale up. wind hit that about 2000, two gigawatts, 40 within a decade, over 120 now, and 100 more gigawatts in the pipeline. solar is either behind. there were smaller residential systems, but it did not start until 2010. the value hit. they started taking off. they went from two gigawatts a decade ago to over 100 gigawatts, and there are 400 gigawatts in the pipeline, so it really has been something in the works since the 1970's and now out of the gate, and you have so much moving forward. taylor: solar still has a ways to go, right? so what are the challenges when

it comes to solar adoption that needs to be cleared up? >> right now, we are only 3% solar across the country. however, california is ahead of the curve at 22% energy, giving us good information on how to handle this we can get higher levels of penetration. they have seen they end up with an excess of energy in the middle of the day. that's great. solar is handling most of the load, but when the sun goes down from the wind does not was below in the sun does not always shine , other resources have to ramp up quickly. one thing you are seeing is battery technology, battery storage has come a long way, especially electric vehicles. that is now being used in the hybrid with solar systems and a lot of the new systems in california bring that, because the market value has dropped

because the excess energy, but if you can shift when you're providing that energy, you can provide more value at competitive costs. caroline: the u.s. has been beating the curve in terms of that battery innovation, ensuring there is a way of storing excess capacity. europe is in the midst of an energy crisis. for example, the u.k., terrible scenes to a large extent, a perfect storm when it comes to petrol and gas prices, they are turning to greener energy. is there a risk there is a negative feedback loop in the transition is not being handled well enough, because you can't just flip a switch, move from oil, nor should we overnight, but how then ensuring the transition remain such that we don't have any energy crises going forward? >> that is a good point.

in the electricity market and overall the energy market, people tend to be conservative. when something goes wrong, it goes very wrong. you mentioned the u.k. as a recent example. what needs to happen quickly, and it is hard for governments to vocus on -- focus on the long-term energy policy when they don't have a crisis, but not something that can be solved quickly. it is one of the things i have worked with in the government here has worked with. we work with folks around the globe in terms of setting yourself up and looking at how you make that transition, how you work with new technologies, there is a learning curve, but it can be done. there are countries with high percentages of renewables and 100% renewables clean energy as possible in the future, but the most important thing right now is learning how to integrate all

our energy systems. as we moved to electric vehicles , we have mobile batteries running around the country and expect to have millions of those soon. you have got the ability to take the renewable energy systems, the natural gas systems, transportation systems, and there is research on how to integrate those so it is the most efficient and most reliable you can get? taylor: let me take us more international and talk about china. i am curious about how we solve these problems in china will not get on board. as we push forward to that united nations agreement, china is refusing to limit to mature increases, digging in over coal and saying no. how do you make change if everyone is not on board? >> that is the ongoing diplomacy.

there is some consistency that every country runs into. we see that both domestically and overseas. it does not mean you can't move forward, because moving forward energy efficiently with clean energy can be some of your best economic choices in the long run , and so if you make choices that make sense anyway and you really move forward without, and even though china may be not meeting that commitment, they got into the panel game in a big way and help to bring down costs and had a lot to do with where that has gone. some people were upset with them undercutting prices come of it they are recognizing where some of the future profits in the industry may be going. caroline: really great to have some time with you. thank you so much. we wish you a great weekend. coming up, rome, world leaders

meeting for climate talks. we will bring you the latest next. this is bloomberg. ♪ ♪

♪ >> this is where global omissions are today. -- emissions are today, and this is where global emissions need to get to to stop catastrophic climate change, and this is the emissions gap. closing it might sound simple enough, but time is running out, and the blame game is well underway. ♪

the paris agreement is our best topping the planet on dangerous global warming, but it is just the first step. nearly 200 nations pledged to limit imagers from rising above two degrees celsius, or it is possible 1.5 degrees, in those countries will be debating about who should do what for many years to come. here's the problem. together, the plans are not doing enough to cut greenhouse gases in time. emissions fell dramatically during the pandemic, but carbon dioxide lingers in the atmosphere for hundreds of years , so a temporary drop make much difference to the overall trend. scientists save the world needs to reach net zero emissions by 2050. some nations have already met their goals decades early, but others are dragging their heels, particularly those economies that rely on oil and gas, russia and saudi arabia.

then there are the developing nations like indonesia, bangladesh, who say they can only consider tougher in missions targets -- emissions targets of rich countries help. there is a lot of disagreement over who is to blame for all the emissions in the atmosphere and how some countries already got rich from polluting. china was responsible for a fifth of emissions, but today, the world's largest polluter, so they agreed each country would come up with their own plan about what they thought they could realistically do. these plans are cold nationally-determined contributions. there are no penalties for failing to meet them. countries have targets for 2030 now and have agreed to meet every year to make sure they are on track and raise ambitions. as of now, emissions are still too high, and according to the united nations, we are heading

towards a three degree rise this century. ♪ caroline: on how countries are addressing carbon emissions. climate is one key area for president biden, who is in rome for a g20 summit, then on to glasgow. let's turn to our correspondent on the ground in rome, staying up late. we appreciate that. supply chain headaches, spats over submarines, but climate change is front and center for president biden. >> it is. not just president biden. emmanuel macron just gave an interview to the financial times and said that is the main subject for the g20, eliminating coal. as they worked to draft this communiqué, coal is a big part of this, the financing of

coal, as well as starting to curb domestic coal. they will not name anyone by name. if you look at the data, who has the most, and that is china. china and india are actually starting to use aggressive language when it comes to invoking hard-core climate change policies. >> there headlines that the u.s. will use the meetings to press on higher oil prices. how will that conversation play out? >> there is likely going to be a line in the communiqué about energy security and making sure the transition is one that can be managed. at the same time, you don't have these energy spikes on fossil fuels you are seeing across europe and asia. they want to manage that in a sustainable way so consumers are

not faced with higher prices. they want to make sure they are not blaming the fact you have higher energy prices due to climate change initiatives, but that is a fact of economy shutting down due to the pandemic then turning back on. taylor: i am allowed to ask you one more question to whatever you drink. what are the incentives to get china on board? to close the emissions gap, everyone needs to participate or it will not work. >> it is a difficult question. we know that the special envoy for climate john kerry has had a number of interactions with china, trying to press china. the biden administration is trying to offer a multilateral approach to china to get them on board, but china has a longer time to reach net zero emissions , 2060, alongside saudi arabia,

and we are still unsure if the crown prince of saudi arabia will show up. that is another potential line the u.s. is pushing for, net zero by 2050, 10 years on. potentially, china would want if they're going to offer something big and bold on climate, they want something in return, the tariffs still in place, some easing of language when it comes to what's going on between beijing and washington, but while the biden administration is trying to negotiate with china and talk tough on other issues, human rights, trade, china will use climate as leverage. caroline: go enjoy your friday night in rome. we thank you for staying late. meanwhile, we look towards what will be a busy next week, looking towards the road to cop26, the g20, and monetary

policy in the u.s.. taylor: jobs day friday. uber and lyft reporting, more labor indications. >> don't forget the infrastructure bill. caroline: that is all for "what'd you miss?" have a great weekend. ♪

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