The Politics and Institutions of global Energy Governance

Energy is often said to be the lifeblood of modern society. It enables us to fulfill our basic human needs and it powers the world economy. Yet, the energy path we are currently on is clearly unsustainable. Our massive combustion of fossil fuels — that is, oil, coal, and natural gas — unleashes tons and tons of carbon dioxide into the atmosphere, causing the global climate to warm at a destructive pace. Dwindling conventional reserves make these fuels increasingly expensive to extract and force companies to venture into unconventional oil and gas production, which brings with it a host of environmental and social concerns. In addition, the upstream oil and gas sector continues to be associated with corruption, bad governance, and human rights abuses. At the same time, about a quarter of the world’s population lacks access to electricity and to the basic services it provides.

The goal of this chapter is to map the looming global energy crisis and to make the case for why many of the world’s energy problems would benefit from multilateral cooperation. To that end, it begins by describing the global energy outlook, long-term trends, and potential threats to core components of energy security, broadly defined. Having identified the problems, I then search for solutions. More specifically, I identify the main energy-related issues that ought to be governed internationally according to public goods theory and propose some policies that could bring us closer to a sustainable global energy regime.

The aim of this chapter is to provide a broad, macroscopic overview of the emergence and development over time of the energy regime complex or global energy architecture. Building on the analysis of Mommer (2000), Strange (1994), and Victor et al. (2006), I distinguish between four major phases in the development of this regime complex. For a long time, international energy governance revolved around one single issue: securing rents from and access to upstream oil reserves. The first three periods of the development of the energy regime complex are characterized by the dominance of one of the following sets of actors: international companies, their host states, and consuming countries. In each period, the dominant player tries to alter the rules of the game to its advantage by setting up a new governance structure.

The global multilateral energy architecture did not arise spontaneously, nor did it grow out of a single plan. Instead, its emergence was historically contingent and even marked by a certain degree of serendipity and accident. In hindsight, it nevertheless becomes possible to detect the deeper mechanisms by which the energy regime complex has emerged and changed over time. The purpose of this chapter is to uncover these mechanisms and forces that have shaped the design and operation of the global energy architecture. In other words, rather than to search for a hidden plan, this chapter looks for the underlying logic structuring the energy regime complex.

Scholars of global energy governance commonly recognize the key importance of the International Energy Agency (IEA). Founded in response to the 1973 oil shock, the IEA serves to coordinate the energy policies of its 28 member countries, all drawn from the Organisation for Economic Co-operation and Development (OECD). Most observers agree that, despite its limited mandate and membership, the IEA remains the single most important organization for energy-importing countries (Colgan 2009;Kohl 2010;Leverett 2010;Florini 2011).

In January 2009, 75 countries created the International Renewable Energy Agency (IRENA) at a founding conference in Bonn. The creation of IRENA highlights the growing concern over the unfolding energy and climate crises. Fossil fuels provide 80 per cent of global energy while being responsible for almost 60 per cent of total greenhouse gas emissions (IPCC 2007, 36;IEA 2010, 80). Demand for these fuels is set to grow, while the conventional reserves are dwindling, sparking fears of ‘peak oil’. In the wake of the recent shale gas and tight oil revolution, however, those fears have largely been replaced by concerns that fossil fuel abundance, not scarcity, is the most pressing problem, as it could lead us to overshoot our ‘carbon budget’, the amount of carbon dioxide that can be emitted without jeopardizing our chances of staying below two degrees of average global warming (McKibben 2012). Renewable energy sources have thus come into view as attractive alternatives to fossil fuels not only because they are abundant and clean, but also because they can help to bring energy services to the poor, while stimulating economic growth and job creation. Furthermore, when used and produced in a sustainable manner, renewable energy can reduce the pressure on natural resources by helping to combat deforestation, desertification and biodiversity loss (German Federal Government 2008).

The looming energy crisis described in Chapter 2 is very alarming and creates huge problems that require global governance. Equally disturbing is the fact that, in spite of the magnitude of these pressing energy challenges, states have so far failed to muster an adequate multilateral response. Many of the world’s energy governance institutions are either toothless or struggling to remain relevant in an era of rising multipolarity and a profound crisis of multilateralism. The institutional landscape of energy provides a scattered picture of regional organizations, clubs representing particular interests, and institutions dedicated to specific energy sources. These bodies fall short in formulating the necessary cross-cutting policies to address the energy-climate nexus.

Our world is confronted with a plethora of energy challenges, yet a strong multilateral energy regime is lacking. The relatively sparse energy governance institutions that exist are fragmented and lack authority. They form what Raustiala and Victor have called a ‘regime complex’, a Byzantine architecture of parallel, nested, and overlapping institutions. This book has looked at the rationale, origins, development, and reform prospects of the energy regime complex, focusing in particular on the International Energy Agency (IEA), International Renewable Energy Agency (IRENA), and the G8/G20. Here, I will first discuss the results of the study, then draw some lessons for policymakers, and, finally, suggest some areas for future research.