The Palgrave Handbook of the International Political Economy of Energy

Perhaps not since the 1970s has energy policy, technology, and security been so intensely discussed as today. Whether it is the race for energy resources in the Arctic, roller-coaster oil prices, the transition toward low carbon sources of energy, or concerns over nuclear safety, energy continues to make international headlines. Today’s pressing energy challenges have opened up an incredibly vast research agenda. Sadly, political scientists and other social scientists have lagged behind their colleagues from science, engineering, and economics in addressing these issues. While some researchers directed their focus to energy matters and, especially, oil during the turbulent era of the oil shocks, the attention was short-lived. Only recently, after two decades of relative neglect, have political scientists began to rediscover energy as a major area of inquiry (Hughes and Lipscy 2013; Falkner 2014). Given the sheer magnitude, social pervasiveness, policy salience, and long-term nature of today’s energy problems, their interest is likely to persist.

The global political economy of energy is marked by a fragmentation of actors, institutions and frames. The goal of this chapter is to map and critically interpret this fragmented landscape of energy governance. First, it provides a deconstruction of the global energy challenge, arguing that the world does not face a singular energy problem but in fact multiple energy-related challenges. Which energy problem merits attention depends very much on the worldviews and values that one subscribes to. Second, the chapter argues that effective governance is needed to overcome the world’s energy challenges and it lays bare the fragmented nature of energy governance at the national, regional and global levels. Third, the chapter zooms into some of the relations between elements in this fragmented governance landscape, identifying the most prominent gaps, overlaps and interactions in global energy governance.

This chapter reviews the general history of Organization of the Petroleum Exporting Countries (OPEC) and evolution of models explaining its role in the world’s oil market in the context of key events. OPEC’s varying conduct over time implies that no single model fits its behaviour. OPEC’s behaviour and pricing power cannot be generalized—it is dynamic and context-specific and is influenced by market conditions, the internal dynamics within OPEC, its interactions with non-OPEC producers, and the strategic objectives of its key member, Saudi Arabia. It concludes that although OPEC believes that oil will continue to play a role in the world’s energy mix, there is a clear recognition that in the face of climate change policies, economic diversification remains the only viable long-term response.

This chapter analyses first the very humble presence of energy in the United Nations (UN) during the organization’s first seven decades. Norm development and institutionalization of energy are described along four themes: energy for the nations, energy for development, energy for the environment and energy for human well-being. For each theme, the chapter describes the major issues of consensus and contention, the major actors and the development of the theme over time. The analysis of the leaps forward that energy has made on the UN’s agenda in the first decade of the twenty-first century is the focus of the second half of the chapter, with a particular focus on the emergence and evolution of a dedicated Sustainable Development Goal on energy. While there was widespread support for such an energy goal, agreeing on the contours and details of the content was a difficult challenge. Many elements and specific words were kept out of the text and yet it became the most explicit global norm on the kind of energy production and consumption that has been adopted. Some final reflections discuss the link between legitimacy and power—in terms of changing perceptions of what role global governance would be legitimate to have for energy.

The World Trade Organization is by many accounts the most successful international organization in history. Yet it has been slow to address head-on the problems in one of the largest sectors of the global economy—energy. Indeed, fuel exports alone constitute roughly 18% of global merchandise exports, the single largest category. Historically, this reluctance to engage with energy can be explained partially by the fact that many major fossil fuel-producing nations were outside of the GATT. Today, however, most such nations are WTO members. While the WTO dispute settlement system has become an active tool for regulating government support of the renewable energy sector, active WTO regulation of the fossil fuel sector remains limited. This chapter presents an overview of WTO rules and how they apply or might apply to the energy sector. It further argues that this differential treatment between fossil fuels and renewable energy reflects (a) the greater number, and the identity, of nations that aspire to be “producers” of renewable energy, and (b) the expected growth in renewable energy in years to come.

With a rapidly expanding market, renewable energy is accounting for a significant share of recent trade disputes, both at the World Trade Organization and through unilateral trade remedy measures. This chapter analyses various industrial and trade policy measures, which have contributed to protectionist outcomes and resulted in clean energy trade disputes. It examines the dispute settlement process to inquire whether it has provided adequate legal guidance to maintain open markets for clean energy. It discusses proposals for alternative mechanisms, from revisions in WTO rules to separate treaties altogether for sustainable energy. It concludes by outlining three areas of further inquiry: identifying winners and losers; the implications of pricing of energy and externalities for trade disputes; and the role of institutions in mediating trade conflict.

This chapter assesses the role that energy plays in the Transatlantic Trade and Investment Partnership (TTIP) negotiations and the growing importance that energy security is acquiring in the US–European Union (EU) political agenda. It analyses the potential effects that the liberalization of trade in energy and raw materials is supposed to exert in both economies and the way in which the so-called US shale gas revolution will drive major changes in the commercialization of energy products. The chapter illustrates the main problematic aspects currently under discussion regarding the application of the TTIP to the energy sector. Lastly, it discusses how divestment campaigns might constitute a valid instrument of sociopolitical pressure to induce energy companies and governments to adopt more ethical and environmentally friendly policies.

The prices quoted for the value of oil are the daily trades in barrels of West Texas Intermediate (WTI) in the US, or a barrel of Brent in Europe. Yet there are actually other measures for the value of oil as some countries engage in petro-barter, and sometimes offer concessionary prices on their oil to some states. Those prices do not necessarily correspond to the trading price of WTI or Brent, which are largely determined by supply and demand. Natural gas is usually priced by long-term agreements that tie the price to the price of oil. The US is an exception to that, as it has a futures exchange for natural gas and lets the market set that price based on the same principles as the futures exchanges that trade oil.

This chapter explores competing accounts of the nature and development of carbon markets. We combine ideas about the performative nature of carbon markets and the techniques and modes of governance required to allow them to operate with political economy readings of the relations of power which give rise to and characterise them. We do this in order to account for what has been referred to as the ‘zombie’ phenomena: the apparent contradiction between the seeming failure of carbon markets to date and ongoing support for them among state and corporate elites. We cover both the pre-history of carbon markets and their subsequent evolution and what this tells us about the ‘nature’ of market-based responses to climate change more generally.

Energy subsidies are an important tool through which governments can support domestic energy production and protect energy consumers. However, the exact size of these subsidies in many countries remains unclear. More importantly, energy subsidies have a variety of positive and negative economic, environmental and social effects, and it remains unclear how and under which political conditions negative effects stemming from energy subsidies could be mitigated. This chapter addresses these issues by examining the reasons why countries choose to subsidise energy production and consumption, the scope and effects of energy subsidies, and options for reform. The chapter also highlights the roles played by various international institutions in governing energy subsidies. It concludes with outlining areas for further inquiry.

Energy transitions are understood as structural long-term transformations of the way energy needs are met. The ongoing energy transition poses significant challenges for analysis and theory building. It is characterized by a high degree of uncertainty and complexity, a key role for public policy, strong vested interests and lock-in, simultaneous changes of technologies, organizations and institutional structures, and a variety of possible transition pathways. This chapter discusses how insights from two so far disconnected strands of literature, transition studies and international political economy, can be mobilized for addressing these challenges when studying energy transitions. The chapter also briefly introduces the other chapters in this section.

Carbon capture and storage (CCS) is often presented as an important element in strategies to reduce greenhouse gas emissions and avoid dangerous climate change. However, recent progress in getting large-scale CCS demonstration projects off the ground has been slower than expected and concentrated in just a handful of countries. In this chapter, we review international progress in demonstrating CCS between 2010 and 2015 and conventional explanations offered for its limited progress. Taking a political–economic approach we identify a number of additional factors that have shaped CCS deployment and consider the difficulties CCS presents from a transitions perspective.

Ratinen and Lund analyse the political and economic actors behind sociotechnical transitions in the electricity industry. Focusing on seldom-analysed dimensions of transitions, democracy, and inclusion, the chapter presents a typology for analysing the policy inclusiveness on transitions. In a case study, Ratinen and Lund compare governing traditions and the inclusion of the public and large firms in Denmark, Germany, Finland, and Spain. The inclusion of the public in Denmark and Germany is the highest, and in Spain and Finland the lowest. The same countries have the most and the least renewable and consumer-owned generation. Ratinen and Lund conclude that inclusiveness increases democracy in policy processes and outcomes that seems to result in more extensive transitions than if policy inclusiveness is low.

This chapter addresses the question of whether nuclear power can be a part of a sustainable energy transition by examining the present state and future prospects of nuclear energy. Currently nuclear power constitutes only a small and declining share of global electricity. This is a result of the dual challenges of high economic costs of nuclear power and negative public attitudes toward it. The chapter then describes some of the strategies adopted by the nuclear industry and its supporters to maintain and expand nuclear power in the face of this reality, including actively courting developing countries, offering new reactor designs, and extensive use of propaganda. It concludes that despite this contestation, nuclear power does not fit well into a world based on sustainable energy.

Oil continues to power the world transport system. While other major consumers, such as electric power generation, tap a diverse range of primary energy sources, some of them renewable, there are as yet no widely accepted substitutes for petroleum in transportation. Currently produced biofuels are imperfect substitutes, and expanded production has led to growing concern over land use, environmental damage, and competition with food supplies. It remains far from certain that advanced biofuels made from non-food biomass, such as agricultural residues or genetically engineered algae, will prove sustainable once full account has been taken of all impacts. Much more innovation will be needed, and success cannot be guaranteed. Policymakers need, quite urgently, better understanding of long-term prospects for sustainable biofuels.

Meierding challenges the popular belief that countries fight over oil resources by demonstrating that most militarized incidents in petroleum-endowed territories are merely ‘oil spats’: mild, brief, and non-lethal confrontations. Countries have only launched major military campaigns, targeting oil fields, on three occasions: Iraq’s invasion of Kuwait (1990), Japan’s invasion of the Dutch East Indies (1941–42), and Germany’s attacks against the Russian Caucasus (1941–42). These conflicts were not intensified oil spats. Instead, countries were fighting for survival; leaders believed that, if they failed to gain control over more oil, their regimes would collapse. By examining the wars for survival and oil spats between Greece and Turkey and Venezuela and Guyana, the chapter concludes that interstate oil competition is not a serious threat to international security.

Russian exports of gas to Europe and countries of the former Soviet Union provide the Kremlin with a useful political lever, and amid the current crisis in Ukraine many in the European Union (EU) would describe this lever as a potential weapon. However, James Henderson argues that any threat is based on commercial and contractual issues, which consuming countries can respond to in kind by diversifying their sources of supply and increasing competition in their markets. As the gas market is becoming increasingly global in nature so dependence on Russian gas can and is being reduced, undermining the potency of any theoretical weapon. Evidence suggests that EU strategy is already working, and Gazprom is being forced to compete in markets where it previously dominated.

Analysis of energy markets has long focused on the concern that fossil fuels might be used as instruments of coercion. In this chapter, we review the state of knowledge on the relationship between energy, coercion, and sanctions. We argue that historical concerns in the major energy-importing countries regarding the potential for coercion have largely been misguided: the structure of energy markets makes it difficult to use the fossil fuels that form the basis of our energy system as instruments of coercion or to enforce changes in target states’ behavior. We suggest there are nevertheless a number of important questions that remain amenable to further research. First, more research is needed to understand the implications of energy supply chains in which production, transportation, refining, and distribution are no longer handled by the same companies or dominated by the same countries. Second, recent sanctions efforts suggest that oil consumers may gain leverage vis-à-vis producers, yet the effectiveness of sanctions against energy exporters remains poorly understood, including sanctions that target the financial activities that underpin their ability to settle trades in oil and gas. Third, scholars interested in energy could also profitably study the relationship between the energy sector and interest groups politics, both in targeted countries and those seeking to impose costs through the manipulation of energy markets.

While some countries have developed robust economies and high standards of living, along with stable and democratic political systems, others languish in poverty and are bedeviled by endemic corruption, authoritarianism, and violence. What explains this variation? The notion that there is a resource curse is perhaps the most counterintuitive and controversial hypothesis that has been tendered to address this question. Early work on the idea that oil and minerals doom countries to underdevelopment was largely inductive, building from observations made about Middle Eastern nations that experienced economic and political dysfunction in the face of bountiful resource endowments. The second wave includes authors who built stronger theories centered on the fiscal contract model of state building. The third wave saw scholars looking to establish the external validity of past claims about the resource curse using large-n data and statistical inference. Entries in the fourth wave share a strong focus on establishing causal inference. Within this set, a relatively recent group of scholars argues against the prevailing wisdom altogether. They cast doubt on the very existence of a resource curse.

This chapter first briefly discusses definitions of political economy, political ecology, and social justice. It then presents five different theoretical concepts or lenses that offer a novel way of evaluating and assessing energy systems. Political ecology research attempts to understand conflict over energy resources. Tyranny, dispossession, and peripheralization research seeks to investigate the sacrifice of one group over another more powerful group in energy decision-making. Global production networks research examines the activities and structures that transform labor, nature, and capital into commodities and services. Enclosure and exclusion research explores the power regimes, processes, or ideologies that enclosure upon resources or exclude agents from access. Energy justice research examines dimensions of fairness and equity in energy decisions and practices. In tandem, these five novel concepts suggest that, firstly, we need to think about energy technology and systems as more than simply hardware, and that secondly, conflict and struggle are part and parcel of the process of the diffusion of new energy technologies and the formulation of energy policies. No matter how noble the intentions of engineers and planners, they have their own inescapable underlying political ecology and ramifications for justice.

The World Health Organization’s ‘energy ladder’ illustrates the forms of energy found across the globe today, ranging from scavenged animal dung to electricity as fueled primarily by coal, hydropower, and nuclear energy. In this chapter, we argue that this ladder positions catastrophic risks at every rung, including ecological destruction and human warfare. Ulrich Beck theorized how catastrophic risks are engineered into modern western infrastructures, and then denied or falsely made manageable, as we witnessed with the 2010 Gulf of Mexico British Petroleum oil spill and the 2011 Fukushima nuclear crisis. Such catastrophic crises symbolically eclipse the equally significant—yet less spectacular—injustices and environmental degradation wrought routinely across carbon and nuclear supply chains. The concept of [liberal] ‘dispossession’ is adopted from critical social theory to name the conditions of sustained energy injustice found in western civilizations as its powerful energy complexes knowingly deny the scope and severity of externalized costs, thereby discouraging public awareness of needed change for a sustainable future.

Global production networks (GPNs) refer to activities and organizational structures that transform labor, nature, and capital across disparate geographies into commodities and services. The framework is often used to understand economic development and the socio-ecological transformation of natural resources. This chapter describes elemental concepts utilized in the GPN literature such as those used in global commodity chain, global value chain, and supply chain research. It also details the goals, objectives, and debates within the literature. Three case studies related to energy and global production systems—solar photovoltaics, shale gas, and salmon aquaculture—are detailed illustrating what can be learned from the approach.

This chapter examines enclosure and exclusion within emerging forms of energy extraction and uses two case studies to illustrate five intersecting mechanisms that enable these expressions of territoriality. The first case study examines shale gas extraction in the USA. Enclosure and exclusion facilitate extraction through the coordination of historically contingent surface and subsurface ownership rights, extractive technologies, and the materiality of shale gas. The second case study analyzes enclosure and exclusion within recent biofuel promotion in India. Efforts have called for restricting cultivation of lands labeled ‘marginal’ or ‘wastelands’, rendering the commons ‘empty’, and ‘making space’ for biofuel plantations. Showing how mechanisms of enclosure and exclusion intersect, the chapter offers frameworks to contend with the spatial (re)configurations of power within emerging forms of energy extraction.

Energy justice has recently emerged as a new crosscutting social science research agenda. In this chapter, its core tenets are explored: distributional justice, procedural justice, and justice as recognition. Using a case study approach of nuclear waste in Canada, nuclear reactors in the UK, and uranium mines in Australia, the manifestations of energy justice in practice are illustrated from a political economy perspective through analysing the nuclear energy sector. This focus allows us to identify both winners and losers with regard to energy justice throughout the nuclear energy system. Through promoting the application of this triple-pronged approach across the energy system and within the global context of energy production and consumption, recommendations for its operationalisation are advanced. Of significance, the political economy focus highlights the key areas for conflicts and trade-offs amongst the core tenets of energy justice as the concept makes policy ground.

The field of energy poverty and energy justice has received increasing attention over the past couple of decades and there is a strong consensus that efforts to reduce energy poverty and establish energy justice are urgently needed, made all the more pressing by the need to address climate change. The objective of this chapter is to provide an empirically grounded framework for energy justice. First, the chapter establishes a positive, progressive frame that recognizes the current ‘crisis’ is part of an evolutionary process that progressive capitalism has repeatedly, successfully navigated in the past. Second, it offers a comprehensive theory of justice that is consistent with the history of a progressive market economy. Third, the chapter identifies specific policies to achieve justice in the energy sector, while preserving the dynamic economic and social forces of progressive capitalist markets. Sections 1 and 2 establish the fact that energy consumption is not only a primary good and fundamental capability that humans must have to participate fully in daily life in the twenty-first century. It is an enabling resource for many, perhaps even most, other capabilities. Without energy justice, there cannot be social justice. Section 3 supports the policies recommended to advance energy justice in progressive capitalist societies by emphasizing approaches that diminish the tension between progressive policies and economic efficiency. It gives the general prescriptions that one finds in policy analyses specificity by grounding them on welfare economics, which has been informed by the theory of distributive justice in progressive capitalist society.