Are we going to create a new and powerful global energy body?
I was not surprised at all when reading the news leaked from the recent Brisbane meeting of the G20 Summit that the world’s top political leaders were seeking to lay the foundations for a new global energy body.
It is a long overdue effort, but not an easy one to achieve, given the already crowded chessboard of international “governors” and institutions with competing and overlapping objectives.
A central part of the G20 plan – including commitments on the security of energy supply, transparency of pricing, limits on energy subsidies, emphasis on energy efficiency and precluding embargoes – would be an institution to sit above OPEC and the International Energy Agency (IEA). These talks have not been concluded yet and could drag on for a while, but the good news is that the process has finally started.
The game-changers in world energy dictate that the old order’s “business as usual” structures are not possible to sustain. The game, the players and the rules of the game have changed beyond recognition. Hence, there is recognition to adapt the existing global energy architecture to the whims of these changing circumstances so as to effectively respond to the aspirations and needs of the planet’s population and resources.
No doubt, energy is vital and remains the backbone and critical artery of the world economy more than ever. Its trading, impact on the competitiveness, productivity, pricing, investment, taxation and repercussions on the global climate change profoundly affect all of us. However, there is no “one global energy” as this precious commodity is divided into many industry and sub-industry commodity segments, including not only traditional fossil fuels such as oil, gas and coal, but also electricity, nuclear and renewable energy sources.
There is no global government yet in energy. There are many, and often disconnected, bodies. Neither is there an intergovernmental treaty applying itself unilaterally to global energy (energy lies largely outside of the World Trade Organization). Further, the manner in which inter-governmental actors engaged in global energy governance have evolved during the past decades has lent itself more to the creation of a landscape full of “governors” – with highly diverse policy objectives – rather than any form of international energy order or “governance.”
OPEC and the IEA have been joined by other energy organizations. Interdependence and regionalization of gas markets has led to the emergence of new governance institutions, such as the Gas Exporting Countries Forum (GECF), as well as supra-regional legal frameworks intended to protect energy trade and investment such as the Energy Charter Treaty (ECT).
Adding further to the need for different “governors” are issues relating to climate and environmental concern, which has led to the establishment of governing institutions such as the United Nations-driven UNFCCC. Then, International Renewable Energy Agency (IRENA) was created to help promote cleaner energy corridors around the world.
Energy governors now not only include intergovernmental bodies and agencies, but also international industry associations, nongovernmental organizations (NGOs), environmental and climate oriented groups and informal bodies.
The World Energy Council (WEC), for example, was established in 1923 – well before OPEC and the IEA – and has national committees in some 93 countries.
The lack of priority (and clarity) for the objectives of any forms of collective energy security or oneness in global energy governance impedes effective coordination and communication between governors.
Global power distribution has changed substantially in the present day international order, which is now far more multi-polar than it has been since at least the mid-20th Century.
International energy governance has not kept pace with today’s major energy policy challenges: the “emergence” of major developing nations; changing relations between oil producers and consumers; the emergence of climate mitigation as a central energy policy issue; and with the technological revolution now required to address some of these challenges.
There is already a 76-member country gathering of the International Energy Forum, which outlines the framework of the global energy dialogue. It covers all six continents and accounts for around 90 percent of global supply and demand for oil and gas. It is unique in that it comprises not only consuming and producing countries of the IEA and OPEC, but also Transit States and major players outside of their memberships, including Argentina, China, India, Mexico, Oman, Russia and South Africa.
A more realistic case study for present-day global energy governance reform may yet be found in the example of one of the less hard hitting, albeit long-present “global governors,” the Energy Charter. The Energy Charter dates back to the early 1990s, when it emerged as an ambitious “international energy cooperation” project.
As a pilot project of global energy governance reform, Energy Charter modernization that will be completed by May 2015 in The Hague could have resonant implications for the wider international governance landscape and therefore deserves attention.
Reform of the current landscape is highly desirable, if not badly needed. For any serious revamping of the global energy governance, the U.S., Russia, China, India, Brazil and Saudi Arabia need to be at the epicenter of such a pioneering effort as we look for a low carbon economy and energy supply and demand security across the world.
Perhaps this organization can be transformed into the world’s new and powerful energy umbrella body, alongside the Energy Charter, which is the only legally binding arrangement in the world’s energy governance.
Now as G-20 chair and host to future WEC and WPC summits and active in the IEA and IEF, Turkey is well positioned to sit on the board of the world’s new energy order as a large consuming, investing, transit and regional hub country if it responds to the needs of such a role in a proactive and constructive manner.
The tricky question remains: How will such a drastic reform be achieved – with an amalgamation of the existing energy organizations or the creation of a new global energy body? More importantly, what concrete actions will be expected from it that current organizations cannot deliver?