The Architecture of International Energy Governance

Abstract

The study of international energy governance is in its youth. This fact may seem somewhat paradoxical. Many international energy institutions, such as the International Atomic Energy Agency (IAEA) and the Organization of Petroleum Exporting Countries (OPEC), have existed for fifty years or more. Energy has long been a major driver of global crises and national politics. The memory of the Arab oil embargo of 1973-1974 casts a long shadow over global energy debates, and American politics, to take but one example, continually return to the question of the appropriate balance between environmental protection and natural resource extraction. Yet despite energy's centrality to global and national politics, international energy governance--as distinct from national energy policies and international energy politics--has resisted the multilateral governance trend of the past several decades. There is no global World Energy Organization (the International Energy Agency (IEA) is an OECD agency and as such is not open for accession to most nations), and many of the major multilateral legal institutions such as the World Trade Organization (WTO) deal with energy only incidentally. Perhaps for this reason, it is only with surging demand for energy and the problems such demand creates for traditional areas of international cooperation, including trade and climate change, that energy governance has itself become an object of study again. In my remarks, I want to address three questions: Why is international energy governance so fragmented? Why is that fragmentation a problem? And what do we do about it? WHY IS INTERNATIONAL ENERGY GOVERNANCE SO FRAGMENTED? An alphabet soup of international agreements and organizations deals in some way or another with international energy: the WTO, the United Nations Framework Convention on Climate Change (UNFCCC), the Energy Charter Treaty (ECT), OPEC, the Gas Exporting Countries Forum (GECF), the IAEA, the International Energy Program (IEP) Agreement and IEA, and the International Renewable Energy Agency (IRENA), to name but a few. This list includes only intergovernmental organizations and neglects regional institutions such as the European Union or the North America Free Trade Agreement that influence international energy cooperation. The fragmentation in energy governance arises in large part because of path dependence. At no time did negotiators ever sit down and think about what an ideal international energy institution would look like. Instead, institutions were created to deal with issues and crises as they arose. Energy institutions thus tend to have mandates and powers shaped, not by considerations of desirable energy governance, but by historically contingent governance problems. The development of institutions dealing with oil illustrates the role of contingency. In the early 20th century, the most important governmental institution dealing with oil was the Texas Railroad Commission, which was able to influence global oil prices by regulating production levels in Texas. (1) In part to combat the influence on prices of U.S. authorities and multinational oil companies (the so-called Seven Sisters), oil-exporting states formed OPEC with the goal of renegotiating concession agreements with the multinational oil companies. (2) OPEC was wildly successful in this goal, and by the 1970s OPEC (and in particular Saudi Arabia) had emerged as the key swing producer of oil, capable of influencing global prices. Arab members of OPEC deployed this ability during the Arab oil embargo of 1973-1974. That crisis prompted oil-consuming nations to sign the IEP Agreement, which created the IEA and aimed to coordinate emergency response measures in the event of an oil price shock. As the development of oil institutions illustrates, the fragmentation of international energy governance is a result of the fact that many energy institutions have been created to respond to specific contingent governance problems, rather than long-term governance challenges. …