Is net zero possible by 2050? This CEO says yes, but governments will really have to push for it

But, he adds, it’s going to take significant work by the world’s governments. The conversation also covered the production of green and blue hydrogen, when it’s worth going against your company’s board, and why 80-year-old Ghasemi, who works seven days a week, hasn’t taken a vacation since 2004.

Listen to the episode or read the transcript below.

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Transcript

Alan Murray: Leadership Next is powered by the folks at Deloitte who, like me, are exploring the changing rules of business leadership and how CEOs are navigating this change.

Welcome to Leadership Next, the podcast about the changing rules of business leadership. I’m Alan Murray.

Michal Lev-Ram: And I’m Michal Lev-Ram.

Murray: Michal, we have a really interesting guest this week that I’ll bet many of our listeners have never heard of, even though he runs a giant company, Air Products. His name is Seifi Ghasemi.

Lev-Ram: Yeah, I had not heard. You think we would know every single Fortune 500 company, Alan.

Murray: I stay up at night and memorize them.

Lev-Ram: Yes, that’s right. In order. Every year we have to redo it. It’s really hard. No, but I’ll admit, there was so much that I learned from this. I was very ignorant. Just as an example, on green versus blue hydrogen, did you know about this?

Murray: Yeah, I’ve been paying some attention to this. You know, Air Products provides all sorts and has for a long time, provides all sorts of gases to all sorts of industries. It is a big provider to the oil and gas industry, but because of their expertise in gases and because of Seifi’s deep personal belief in the need for an energy transformation in order to save the climate, they’ve become a massive investor in green hydrogen, which is hydrogen fuel created without creating any carbon emissions. And blue hydrogen, which is hydrogen fuel created with carbon emissions but you stick all the carbon emissions in the ground so they don’t spoil the environment. Both of them very interesting, and he’s become a leader in both areas.

Lev-Ram: Yeah, and this was a really fascinating conversation to have, especially on the heels of one we had last week with Darren Woods, CEO of ExxonMobil. And Alan, I know you were really, really eager to get some dates from both of these leaders. And when is this transformation, when is this energy transformation really going to happen? Do you feel like you got what you were asking for?

Murray: No. I didn’t get dates from either one. But I think Seifi is clearly more optimistic about getting to the net zero target than Darren Woods was. And let me tell you something else, the other reason I really like this interview, Michal, and this may say something about my own state of mind at this age, Seifi Ghasemi is 80 years old, still going strong. And when he talked about what needed to happen by 2050, he made it sound like he intends to be around to see it through.

Lev-Ram: It’s amazing. Amazing. He also, by the way, told us that he hasn’t taken a vacation in like, I think, a couple of decades at least. So apparently it’s working for him. But yeah, I know it was amazing to just hear the level of, you know, obviously energy and dedication to his field. And he’s had a really impressive career and lots more to come, apparently.

Murray: Let’s just dive in. Here he is, Seifi Ghasemi, the CEO of Air Products.

Lev-Ram: Well, we are going to start here with a really, really tough question for you, which is just tell us what Air Products does.

Seifi Ghasemi: Good afternoon. Air Products was founded in 1940, so we are about 84 years old. And our founding father, what he did was that in 1940 he went to the steel companies and said that, look, you are using a lot of oxygen. Rather than making oxygen yourself, I have a new invention with the oxygen compressor. I can come and invest, make oxygen for you and sell it to you over the fence, just like as if you are buying electricity over the fence. And people liked that and that is how our business got started. Then if you are making oxygen, I mean, how do you make oxygen? You take air and you cool it down and you separate oxygen, nitrogen, and argon, the three elements in the air. So once you have the oxygen, then by default you have nitrogen.

Then we found applications for nitrogen like blanketing in refineries. Now a big use of nitrogen is in big semiconductor plants for blanketing when they are making chips. And then we found food freezing. Nitrogen is a very cold liquid when you liquefy it and therefore we use that to freeze all of the food that you have in your shelves, frozen pizza, and frozen vegetables. And then the argon, we found applications for a steelmaking and then a lot of other things. So that is really the core of our was the core of our business.

Then we got fortunate and in the late 1950s when the Russians sent their Sputnik up into the air, the U.S. government decided that, well, we need to have a serious space program. And in order to have that, you needed hydrogen, in order, liquid hydrogen to put these rockets in there. So they commissioned their products, and they were the first company to come up with liquid hydrogen. We developed the technology, and we built a plan to make liquid hydrogen in New Orleans because it was on the water. And you could and that plant is still operating, by the way. So that is how we got into the hydrogen business. So it’s now more than 64 years that we are producing hydrogen. So our business is atmospheric gases. Then hydrogen, which is now a significant part of our business, and we are by far the largest producer of hydrogen. And then we got into the helium business in the late 1960s and helium one of the applications that is, and you needed that was, MRI machines. And then it was used for…

Murray: You’re all over the economy. But if we can, I’d like to dive a little deeper into the hydrogen piece of it because a lot of people think hydrogen may be part of the answer to our energy problem. The energy transition. I know you’ve made big investments in this area. How quickly do you think they’re going to pay off? How close are we to having hydrogen products that can replace the fossil fuels we’re using now?

Ghasemi: Well obviously, the speed with which we move forward depends on the customers deciding when they want to convert. But I just like to say, Alan, that if the world wants to move to taking action to reduce global warming, there is no other option but hydrogen. There just isn’t any other option. Hydrogen has always been and will always be our only source of energy. There is no other source of energy. And if we want to use energy that doesn’t pollute, we need to come up with hydrogen that is low carbon intensity. Right now we produce a lot of hydrogen, but the CO2 goes into the air. So you either need to use hydrocarbons to produce hydrogen and capture the CO2 and sequester it, or you need to make green hydrogen, which is use electricity to break down water to make green hydrogen.

Right now we are executing significant projects both in green and blue. And in terms of the customer base, if you look at the legislation that has been put in place, Europe is definitely in need of green hydrogen. And the legislation says by 27, 28, 29, 30—and by 2030, the requirements will become very significant. And then I’ll be seeing other parts of the world people are putting in legislation in order to either mandate it or in the U.S., with the IRA, trying to kind of encourage it by giving the tax breaks so that we can make the product cheaper.

Murray: And so just a finish up on that, how quickly before green hydrogen is a competitive energy source for the global economy?

Ghasemi: Well, when you say competitive, if you have to use it, then the transition is not an economic transition. This is not as if you are going to go from wood to coal and you say or coal to oil and you say it’s cheaper. Either the world has to do something about the CO2 that they put into the air, and it is a requirement that you cannot put CO2. Or if you put CO2, there is a significant tax. That is what is going to drive this thing, because you cannot sit back and say, I want clean hydrogen which competes with dirty hydrogen or dirty fuel. It’s just not going to happen. So you have to have a mechanism to justify the additional cost because of the benefit, which is…

Murray: And by a mechanism you mean subsidies or taxes, basically. These are the mechanisms.

Ghasemi: We are not going to go to a low-carbon world if you do not have the support of the governments to encourage using it. It’s not going to happen by itself.

Lev-Ram: And on that note, I mean, you brought up both the IRA and incentives government incentives, and also some of the mandates that we’re seeing in other parts of the world. You operate globally, obviously. What are you seeing as most effective? Which of those approaches?

Ghasemi: Well, the change that we are seeing around the world is very encouraging because if you look at the legislation, which is already in place in Europe, the demand in Europe will become really significant. You know, right now legislation in Europe says that in 2030, 1% of all the fuel made in the European Union has got to be made with green hydrogen. If you multiply the numbers, you’re going to come up with more than 20 plants the size of what we are building in Saudi Arabia, which is very big. So the rules that are in place are going to require a significant amount of green hydrogen in Europe and a significant amount of blue hydrogen in Japan, Korea, and all of that. And in the U.S. right now, there is significant demand in California. Today we sell what we can claim to be either blue or green hydrogen in California, and we take a significant premium for it because of the LCF legislation that already exists.

Murray: You make it sound like it’s baked into the economic system, but I notice that the stock market has been giving your stock a hard time recently. And my understanding is it’s partly because people think you’ve gotten too far ahead on some of these hydrogen questions.

Ghasemi: Well, that is what the market thinks. The market punished us for two reasons. One was because we delivered numbers which are better than last year, but lower than our estimate. But the second reason is that, yeah, they are skeptical that you are making all of these investments. Show me that where the, a contract. Well on that one, we are not in a hurry to sell this stuff because we believe right now and…consumers are under the impression that they have a lot of choices, that there are 600 hydrogen companies, as I’m sure you have seen everybody wants to be a hydrogen company. So if you are a buyer, Alan, you sit back and think, why do I need to negotiate with these guys? I’ll wait until there are other projects coming on stream. But we believe that that is not the case.

Murray: You just think the investors are wrong? In the long term, they will make more money if they stick with you.

Ghasemi: Yes. Of course.

Lev-Ram: So is this why you’ve said that investing in clean energy is like playing a game of chicken, is that what you were referring to? Or is it something else?

Ghasemi: I should not have used that word, but I got too emotional in getting ahead of myself in terms of what I was saying. But that is exactly right.

Murray: I mean, the other point there was the badly named Inflation Reduction Act in the United States actually put massive subsidies in place for your business.

Ghasemi: Yes.

Murray: I assumed when I saw you make that remark about a game of chicken, that part of what you were talking about was the possibility those subsidies go away.

Ghasemi: First of all, the subsidies are a U.S. phenomenon. If the subsidies in the U.S. go away, so we make this stuff for Europe and…

Murray: Which has regulations forcing them.

Ghasemi: Already in place. But these subsidies in the U.S. with the IRA, IRA is an act of Congress, it is not a presidential executive order. So for it to be reversed, you need to go back to both houses of Congress. It’s a little bit like trying to reverse Obamacare.

Murray: Which didn’t happen. So you don’t think it’s you don’t think the IRA is going?

Ghasemi: I think it’s going to be extremely difficult because I genuinely think there is enough support, that people believe global warming is real and therefore I think you will act on it.

[Music starts.]

Murray: I’m here with Jason Girzadas, the CEO of Deloitte US, who had the wisdom to sponsor this podcast. Thanks for joining me, Jason.

Jason Girzadas: It’s a pleasure to be with you, Alan.

Murray: Jason, the pace of technological change is mind boggling these days and it’s really hard for people and human organizations to keep up with it. So how should CEOs prepare their teams for this pace of constant change?

Girzadas: Well, the impact on the workforces of organizations is profound as it relates to technology. And there’s probably nothing more important for CEOs, no matter what organization they’re leading to really be thinking about technology’s impact on our workforce. It’s really a function of how do you think about technology in concert with your workforce. We at Deloitte talk about it as the age of with, the age of technology with your workforce. And really embracing this idea of the codependency of technology and workforce. We’re also in an environment of a very tight workforce where there’s a scarcity of top talent and an increased pressure on a diversity of top talent. That’s going to be the challenge for organizations to demonstrate to top talent that they can grow and evolve the work that they do, working with leading technology in a very aligned way. Finally, it’s what top talent really wants in an organization is to learn and grow and to be part of an organization that’s supportive of them actually embedding technology in their work.

Murray: Jason, thanks for your perspective and thanks for sponsoring Leadership Next.

Girzadas: Thank you.

[Music ends.]

Lev-Ram: Can you talk a little bit about your own energy transition, how this one is different from previous ones and also, I mean, nothing is 100% clean, right? So talk a little bit about with hydrogen, what are some of the flaws, I guess, and the difficulties that you still have?

Ghasemi: When we make hydrogen today, we take natural gas, which is CH4 for its hydrocarbons, hydrogen and carbon atoms. We crack it and then we use the hydrogen and the CO2, we don’t capture it. It goes into the atmosphere. When we are talking about blue hydrogen and they have been doing this thing for since, as I said, since the 1960s, we decided ten years ago that, look, the world is going to need clean hydrogen. We are the biggest producer of hydrogen, so why shouldn’t we be the leader in producing clean hydrogen. And the clean hydrogen is two ways, either from hydrocarbons or really clean hydrogen, which means you go wind and solar and produce clean electricity and then clean hydrogen. That is the transition that we’re going to manage because we want to have both products. And the project in Saudi Arabia is for green hydrogen. And the project in Louisiana is for blue hydrogen. When we make green hydrogen, it is 100% green because we use wind, solar, and electrolysers to make hydrogen. So the carbon intensity is almost near zero. When we do the blue hydrogen, we capture 95% of the CO2.

Murray: And you put it back in the ground.

Ghasemi: And sequester it in the ground. So as a result, the hydrogen is not as clean as the green hydrogen, but it is significantly cleaner. The reason we did that is because it is cheaper to make blue hydrogen using hydrocarbons than it is to use green hydrogen. And we think there are applications like ships, they can use blue hydrogen, which will be transformed into blue ammonia. They can use that as a fuel for the ship and then just the carbon footprint significantly goes down.

Murray: So you think the future involves both blue and green hydrogen?

Ghasemi: Yes. I think 100 years from now it will all be green.

Murray: Let me ask you something. We, Michal and I, had a long conversation with Darren Woods, the CEO of Exxon, in our last episode on this subject. He thinks we’re nowhere close to making the transition by 2050, the way regulators believe and the fossil fuels are going to be part of this equation for a long, long time to come. I know he’s a huge customer of your company, but you’re both, he’s both a customer and you’re creating competitive products for the future in a way. So who’s right? I mean, can we make 2050? And, you know, will hydrogen be ready at scale in time for that?

Ghasemi: Well, I think that number one, first of all, I do have a lot of respect for Exxon and especially for Darren as an individual.

Murray: And as a customer.

Ghasemi: Of course. Our biggest customer. But fundamentally, the fact is that we do have the technologies and we do have the ability and we can build the infrastructure to meet that date. It all depends on how fast do the governments want to push that, because pushing that is a big deal because then, what do you do with the trillions of dollars of investment that already exists for the use of hydrocarbons? I think there is room for using the hydrocarbons by capturing the CO2, and I think Exxon is one of the leaders in trying to develop the capability for capturing CO2, and I congratulate them for that because that would significantly help with producing at least blue hydrogen. Now, if the governments are not pushing as fast, then the question of 2050 becomes a question mark. I think in time, just my personal prediction, is that the governments come to the conclusion that in order to meet that, the only way to do that is to put a real carbon tax, global carbon tax, a global carbon tax to solve all of the problems, and it will get us there. But it’s the question of whether people have the political will to do that. But the fundamental economics, Alan, is very obvious. By bringing this energy, it is going to replace a lot of the existing infrastructure, which is obviously in conflict.

Lev-Ram: And getting that political will obviously also requires people and businesses, you know, various sectors pushing for this to happen. So are you seeing that and what do you think it will take to have more, a bigger, more widespread push?

Ghasemi: I am seeing that and I will [hard to hear] since we talked about an oil company, I would like to point you to something that is public information. TotalEnergies is one of the largest energy companies in the world. They have committed that they are going to convert their refineries to green hydrogen. They have actually made that publicly. They have issued a request for quotations.

Murray: Does it have a date on it?

Ghasemi: Well, I’d rather defer that to [TotalEnergies CEO] Patrick Pouyanné to comment on the date. But the indications that we have is that they want to do that before 2030. So that is an example of an oil and gas company who is seeing the future and they want to act on it. Now we are seeing ThyssenKrupp, a steel company in Germany, who has made a public announcement that they were going to convert one of their blast furnaces into green hydrogen. So if Total wants to do what they do by 2030, they require three of the best-sized plants we are building in Saudi Arabia. One blast furnace to replace requires what we are building in Saudi Arabia. So the order of magnitude of the demand is astronomical. And what we are doing is just a very, very tiny fraction of that. But those are good examples.

Murray: That raises a really interesting question that kind of gets to the core of what we talk about here on Leadership Next. On the one hand, you do have some government action out there. You talked about the regulations in Europe that force companies to do certain things. You talked about the subsidies here in the U.S. that incentivize companies to do certain things. How much of this is at the discretion of the company? I mean, you’ve been very aggressive about this. You’ve pushed far further than the market wants you to push. How much is it within the control of companies to push this energy transition forward?

Ghasemi: One hundred percent. A company like us, we had a, I mean, it’s not easy to go and convince your board that I’m going to invest eight-and-a-half-billion dollars in Saudi Arabia and I don’t have any customers. So we discuss these things very openly. And the fundamental thing is if we turn out to be right, that is then we are the leader and being…

Murray: And they will make a lot of money, maybe not next year, but ten years from now.

Ghasemi: Well, absolutely. And the best example of it is I was involved in these discussions 20 years ago about electric cars because my company was making lithium for electric cars.

Murray: Previous company.

Ghasemi: A previous company. And every time I talk to investors at that time, it’s you know, electric cars that’s a dream. And they would go and talk to Mercedes and GM who were telling them that is no. And besides that, if electric cars are going to happen, it’s four wheels and a motor, we can do it better than somebody else. Now we are 24 years later and we had a company with a market cap of 500 billion. And those people who said it’s not going to happen have a market cap of 50 billion. And by being the first mover, they have developed the brand and all of that. So we think that in business, if you never take a risk, you never do anything. So you have to make a judgment. You have to have a what you guys call a vision. And then put your resources and make it happen.

Murray: And you have to tell your shareholders to just get in line and trust me.

Ghasemi: Well, that’s more difficult to do but that is exactly. We are taking a calculated risk. It’s not as if we are going on top of the building that I’m going to jump out the parachute because trust me, we have a lot of good reasons doing what we are doing. But fundamentally, Alan, the way I argue with this is that if hydrogen is the only solution and we are the largest hydrogen company, it is our responsibility to do that. I mean, who else is going to do that? If we don’t do that, then who is going to do it?

Lev-Ram: You mentioned your background in metals and materials and thinking ahead to what’s next to EVs, but for you personally, what was the kind of the catalyst, the moment that you really realized that this is not just an economic opportunity, but that the climate crisis is real and that you’re moving forward pretty aggressively because of it?

Ghasemi: Well, for me, it was something like in the middle of the 1990s when—I’m an engineer by training, I’m very curious in technology and technical stuff—at that point I was with another industrial gas company called BOC Group, and I was reading these things all about climate change. I got very interested in that. I got deep into the science of it and I became convinced that humanity, if we don’t do anything about global warming, we will have serious problems. So I became a believer in the fact that mankind needs to do something about it. The first opportunity that I had to actually as an executive to do something about that was in 2002 when I was working for Henry Kravis, as in discussing about what should we do. And one of the things was, look, I believe, I believe very strongly that the first phase of energy transition will be the easy one, which is go electric cars. That immediately solves the pollution in the cities and it also helps with global warming and all of that. Therefore, we got in the business of creating the world’s largest lithium company, and it turned out to be a very, very successful business. And everybody who invested in that company made a lot of money. So that was my conviction.

And then in 2013, really the main reason that I decided to join Air Products, because at that time we have sold my old company, Rockwood, and I was looking for something to do. I had a lot of different options, but I decided to work for Air Products, which was one fifth of the size of the some of the other companies that I had an opportunity because I knew that Air Products has their core competency of hydrogen. And I was convinced that hydrogen is the only solution for the future. Therefore, I decided to join Air Products, although it was a much smaller company at that time. At that time, Air Products’s market cap was less than 20 billion. So that was my conviction. And then I knew that being the chairman and CEO, I can push the agenda, and that’s we have started on this journey of hydrogen, blue and green hydrogen in 2014, ten years ago. And that is where we are today where we are actually building some of these plants because we have had to develop the technologies, we have had to develop the projects, we have had to assemble the people. This is not something that somebody, a project developer, wakes up one morning and say, IRA, I want to become a hydrogen company. It doesn’t work that way.

Murray: Tell us a little bit about your origin story, where you grew up in Iran, you were educated, began your education in Iran.

Ghasemi: Yes, I was educated there and then I went to special school, which was for six years, which was actually the school was in the refinery and we lived in a refinery. That’s why I know the oil and gas business pretty well. And then when I graduated…

Murray: You lived in a refinery?

Lev-Ram: Is that safe?

Ghasemi: Yeah, well, our school was right in the middle of the refinery. In a city of…

Lev-Ram: Wow. Hands on work.

Ghasemi: And the name of the city was Abadan, which at that time, it was the largest refinery in the world.

Murray: And you went to the Abadan Technology Institute, which trained people to work in the refinery.

Ghasemi: The purpose of that school was to train people who knew enough about the refinery to become future manager because it was training the indigenous people to replace the seven sisters who were running the oil company at that time. We are talking about 1950s.

Murray: 1950s. But you left Iran?

Ghasemi: I left Iran in 1966. I came to the United States. I was very fortunate. I went to Stanford University and I loved it. It was a great school. I worked on several graduate degrees in engineering and business and law and all of that. But then I got married and I started working in the United States. And then in 1971, I’m married to a lovely lady, which we are still married for 55 years, and she is from New York and she’s an American. But she was very curious to see the culture in the country I was born. We went there in 1971 and I taught at the university there for two years, which was very interesting. And then I ended up working for the government because oil prices went up significantly in 1973 and at that time the Shah wanted to use the money to industrialize the country. And I was put in charge of developing the steel industry for the country, which was a very exciting job. I did that and then in 1979, when the turmoil happened, that wasn’t the place for me and my wife to live in because my wife happens to be Jewish. And it wasn’t the kind of environment that we wanted to live in. And then I left everything behind and came to the U.S. with nothing and we started from scratch.

Murray: Seifi, I’m not going to ask you how old you are, but I can do the math on that story you just told. Do you ever think about stopping? Going off to play golf or fishing? You seem to be a very driven person and man, there’s a lot of time ahead of you on this climate, hydrogen challenge. Are you going to keep at it?

Ghasemi: I’m absolutely going to keep at it. And I have no issue disclosing my age. By September, I will be 80. I still love what I do.

Murray: But still too young to be president, I think.

[Laughter.]

Ghasemi: I love what I’m doing. I do not have any other hobbies. I really work seven days a week.

Murray: You take vacations?

Ghasemi: The last time I took a vacation was for our 35th anniversary, which was in 2004.

I really love what I’m doing and believe me, I have more energy and I travel more and I work harder than when I was 40 years old. So I don’t think, I don’t think just the numbers tell people this age, but I really enjoy doing what I’m doing and I’m…

Murray: And it’s important, to the world.

Ghasemi: I hope I can make a contribution…

Murray: I’m sorry, Michal, I got caught up on that age thing for very personal reasons.

Lev-Ram: No, no, I’m so, I am amazed and impressed, but I do kind of want you to take a vacation at some point.

[Laughter.]

Ghasemi: I hope my wife is not listening to this podcast.

Murray: This has been such a great conversation on so many levels, and I want you to know we’re going to be cheering for you for the next decade as you make it over the big hydrogen hump.

Lev-Ram: And take a vacation.

Murray: And take a vacation.

Ghasemi: Thank you very much. And I will take you up, ten years from now we have a date.

Lev-Ram: I love it. Thank you so much.

Murray: Leadership Next is edited by Nicole Vergara.

Michal Lev-Ram: Our executive producer is Chris Joslin.

Murray: Our theme is by Jason Snell.

Lev-Ram: Leadership Next is a production of Fortune Media.

Murray: Leadership Next episodes are produced by Fortune’s editorial team. The views and opinions expressed by podcast speakers and guests are solely their own and do not reflect the opinions of Deloitte or its personnel. Nor does Deloitte advocate or endorse any individuals or entities featured on the episodes.