Report recommends a fresh look at global energy governance groups
The International Energy Agency and other global organizations that were created in response to crude-oil supply disruptions in the 1970s may need to be refocused and reformed, a recent Atlantic Council report suggested.
The International Energy Agency and other global organizations that were created in response to crude-oil supply disruptions in the 1970s may need to be refocused and reformed, a recent Atlantic Council report suggested. Dramatic supply-demand balance changes in the wake of significant technological breakthroughs and the emergence of China, India, and other economic growth powerhouses have created new issues to be addressed, the report said.
Growth of renewable and alternate energy sources and their potential applications to parts of the world currently lacking reliable resources also should be considered, speakers agreed during an Apr. 18 discussion at the Council’s Washington headquarters where the report was released. As should finding ways to attract foreign investments to build systems in remote regions more effectively, they added.
“Oil and, increasingly, natural gas are strategic commodities,” said David L. Goldwyn, president of Goldwyn Global Strategies LLC and a former international energy security coordinator at the US Department of State who co-chaired the taskforce that prepared the report.
“Stability of foreign governments still matters. Terrorism prospers where there are uncovered spaces,” Goldwyn said. “The energy transition is a big thing. It can’t all fall on the US, but this country needs to stay at the table as a major participant. The rule of law and appropriate financial frameworks will help countries with new oil and gas resources serve their citizens. All of this has happened because we’ve shared the ideas and burdens to make these institutions work,” he said.
Phillip Cornell, the taskforce’s other co-chair and a nonresident senior fellow at the Council’s Global Energy Center who was a special policy advisor to IEA’s executive director during 2011-14, said, “We looked at international structures and asked if they’re still effective because there have been so many major changes. It’s all-the-more necessary to look at these institutions before we’re faced with a crisis.”
The report said the future global energy governance priorities will need to address:
• Markets. The new landscape provides the US major opportunities to supply technology and digital management tools as well as hydrocarbon commodities to global customers. “Fostering open trading systems to assure fair access to overseas markets, free trade in energy, and utility of strategic stocks will serve national prosperity,” it indicated.
• The environment. Emerging problems need to be addressed more fully not just in terms of global climate change but also local air and water pollution. “Propagation of clean energy technologies and clear domestic plans to address pollution issues can enable social welfare and supply security,” the report said.
• Terms of trade. Managing projected growth and emerging trade routes will be increasingly important—and questions about institutional efficacy are pertinent. One might be whether the moribund Energy Charter Treaty, which was designed to settle disputes and regulate trade compliance in Eurasia, could provide a model for similar arrangements elsewhere—essentially an energy World Trade Organization—as LNG, electricity, and crude oil markets become increasingly global.
• Nuclear power. The traditional model of a few large players linked to national governments is giving way to high growth in China and other emerging economics and to small modular technologies that can empower independent suppliers. “Are traditional international safety, security, and risk management regimes sufficient to manage this transition?” the report asked.
• Cybersecurity. Technological changes increase digital technologies’ role in energy production and transportation. This is tying transnational networks together more tightly and exposing them to risks which need to be managed with international cooperation.
“The US needs to sustain its commitment to international energy engagement,” Cornell said. The IEA has changed significantly while maintain its core energy supply and data gathering missions under Executive Director Fatih Birol’s leadership, but its requirement that member countries need to be members of the Organization for Economic Cooperation and Development needs to be reconsidered since China, India, and other major new economies aren’t OECD members, he added.
There’s also a relationship between investments and energy governance that the US shale oil and gas success has highlighted, a third speaker said. “Investments are both short and long-term now. The oil markets have changed, but we don’t know what they have become,” said Neil R. Brown, who directs policy and research at the KKR Global Institute in New York and formerly was senior staff director of the US Senate Foreign Relations Committee when Richard G. Lugar (R-Ind.) was its chairman.
“Volatility has led to underinvestment and the possibility that supplies won’t be as secure at the end of the decade as they are now,” Brown said. “Shale’s footprint is so much larger than that of conventional exploration and development. The US has a huge advantage now, but if our government is not at the table helping set the rules with the private sector and civil society, we could be left behind.”
Improving global energy governance within fiscal and regulatory frameworks means understanding what regulators worldwide are doing, a fourth speaker maintained. Cynthia L. Quarterman, who joined the Council’s Global Energy Center as a distinguished senior fellow in 2014 after leading the US Pipeline & Hazardous Materials Safety Administration, recalled how the US, Norway, and Great Britain formed an offshore regulators’ forum in the late 1980s when she was the US Minerals Management Service’s director.
The group now has grown to more than 20 members, partly due to the US State Department help’s in bringing countries in as they began to develop their own offshore oil and gas resources, she told the Council audience. “It used a bottoms-up approach where they tried to develop underlying policies that provide more certainty to attract investments,” Quarterman said. Sharing more information also can facilitate transparency and discourage corruption, she said.
Asked about where US participation in international energy forums might change under the administration of President Donald Trump, Brown conceded that there are signs there are persons at the White House now who may be skeptical. “Appointments matter, however. The new Secretary of State came from ExxonMobil [Corp.], where he gained international trade experience. Elsewhere, the team is being brought out slowly,” he said.
US energy policy appears to be focused on regulatory relief, which is a tacit acknowledgement that the government has little to say about facilitating supplies, Brown said. “President Trump has forced us to reexamine our positions and assumptions. That can be a very good thing if it leads to a thoughtful evaluation of our policies. But it will be necessary to recognize that governance and control by governments are two very different things,” he said.
Contact Nick Snow at email@example.com.