"A tale of two Davoses": Reflections from the World Economic Forum's 2025 Annual Meeting

When you look at the map of Davos, you can see that this Swiss mountain retreat is not actually one village but made up of two parts: Davos-Platz, which is busier and more touristy, and the quieter Davos-Dorf, where most of the locals reside. Like this geographic divide in Davos, it felt there were also two versions of this year’s WEF Annual Meeting; two versions or views we are sometimes led to believe that are mutually exclusive choices, whilst the reality couldn’t be further from the truth.

The first version of Davos I experienced was mostly around the “promenade”, where the largest (tech) corporates were, fueled by the US election outcome, sharing their visions for the future. Here it was all about AI, Robotics, Health tech and the limitless potential that these technologies would bring; supported by robot dogs and self-driving delivery buggies moving up and down the promenade.

The second version, away from the promenade, took place in hotel meeting rooms and exhibitions centers where I spoke to political and business leaders many of whom, including executives of US tech companies, were deeply concerned about the impact of the new US administration across many geopolitical topics including, of course, climate change. It almost seemed as if some people were living in the "Tech & Growth" Davos and others in the "Climate Action" Davos.

As the week progressed, I reflected with others on this phenomenon of two Davoses and what that means for the world. Does the desire for growth mean we have to compromise on climate action? Does every country and corporation now need to decide which path they choose: competitiveness or sustainability? ?Even though these two themes in the public opinion seem to “clash”, I actually don’t think they present us with a choice at all, but in reality they are heavily intertwined. Here is how I see it:

1. The energy transition is good for long-term growth, because climate change is really bad for long-term growth: the transition away from fossil fuels will cost money in short-term, but every degree the globe warms up will cost us even more (-12% of the global economy per additional degree, according to some speakers in Davos). Investing now to slow the heating of the planet is therefore the economically sensible thing to do, regardless of how much the earth has warmed up already.?
2. Tech led growth requires a lot of additional sources of energy:?as Vickie Hollub, CEO of Occidental the O&G company, pointed out in one the sessions: less and less oil and gas was discovered in recent years (it’s a finite resource and the easiest and cheapest are already getting depleted) and with additional conflicts and tariffs, these products flow less efficiently. With developments like AI, the world needs an incredible amount of additional energy for data centers. According to Goldman Sachs >700 TWh more energy is needed by 2030 (just for datacenters!!), equivalent to almost 30% of total EU power consumption today. This combination of significant additional demand and limited ability to grow fossil production requires us to build new sources of (renewable) energy supply, even in the US. ?
3. The energy transition is good for long-term independence and stability of energy importing economies: In the short-term it might be cheaper, for Europe and other Importers like Japan, to rely on (US) oil and gas. In the longer run, it is very clear that the energy transition will lead to much less dependency on others. Europe has been relying too much on cheap and imported fossil energy before, so in a world where one of your biggest allies and supplier of energy threatens you with tariffs, it makes a lot of sense to invest in local energy production, irrespective of how much you care about the environment and climate change.
4. U-turns are bad for (any) investment and growth.?A lot of US and European corporates, including oil and gas companies, have been setting targets, investing in the transition and leveraging some of the money from the Inflation Reduction Act towards energy transition. With the new US administration now sowing doubt, there is a risk that some of the good work and momentum will be destroyed and perhaps even more importantly, it increases the uncertainty for all businesses (including the O&G industry). This "flip-flopping" makes it difficult to make long term investments in energy (fossil or renewables), potentially creating even bigger problems down the road.

Most people I met in Davos agreed with me that we should continue to accelerate the energy transition. If we are truly serious about this, we also need system solutions and can’t just rely on voluntary action alone. ?Environmental market mechanisms have proven to be very effective system solutions (e.g. EU emissions are down >30% since the inception of EU ETS) and are much better aligned with the goal of efficiency and competitiveness versus a regular carbon tax or subsidies as it enables the decarbonization to take place at the right pace and in those places where it can happen most efficiently.

That’s also an important reason why increasingly more governments have very recently decided to implement Emission Trading Schemes. In the last three years alone, ?China, Colombia, Brazil, India, Philippines, Vietnam, Indonesia and Japan, along with the US states of Washington, Oregon, Colorado, New York, ?announced an ETS. These countries and markets cover more than half of the world’s population. In addition, there is already legislation in place that ensures existing environmental market mechanisms such as EU ETS or RED III will become even more effective as they are expanded into new sectors; free allowances are being phased out; and blending mandates are set to increase.

I left Davos, despite all the headlines, with a sense of optimism as I realized that most global leaders understand and agree that we can’t sustainably grow the economy unless we address the problem of climate change where environmental markets and products will have to play an instrumental role in making this happen.