Governing energy at the global level

There appears to be a gap between the trajectory of developments at the international level (whether in terms of firms, markets or environmental effects) and the capacity of governments to exercise control over their domestic manifestations. There is a mismatch between nation states and global challenges. Yet, the problems surrounding the development of sustainable energy policy need to be resolved as much at the global level as at the regional, the national or the local levels. Energy policy, in other words, needs to take account of the principle of 'subsidiarity' - essentially the principle that policy should be made at the most appropriate level for the problem being addressed. However, putting subsidiarity in practice is easier said than done (Begg et al., 1993).

It is clear that many of the problems are just too big for governments to manage individually. However, while the problems may need an international response, in many ways the feasibility of action becomes more limited as the number (and the diversity) of nation states increases. And while each state may recognise a need for international action, they are ultimately caught in a prisoner's dilemma: how far should a government act knowing that other governments may not reciprocate. Put another way, what is to prevent short termist, electorally minded governments from avoiding difficult decisions and free riding on others' policies in the environmental arena and competing with each other for scarce resources in ways that are zero-sum and self defeating?

There is, in other words, a profound challenge of collective action at the international level. Governments' de facto sovereignty in many areas, but perhaps more acutely on energy and climate matters, has been eroded. However getting states to surrender or pool their de jure sovereignty through binding collective actions (or by delegating responsibilities to international organisations) has been difficult. There are clearly some successes in the areas of energy and climate change policy at the international level as well as further initiatives that could be developed. However, the picture is very uneven and incomplete in terms of the scope of action, the impact of institutions and the commitment of governments. Moreover, there is something of a mismatch between the energy and climate aspects, particularly at the global or multilateral level.

At the global level, energy is a good example of 'governance without government' (Rosenau and Czempiel, 1992; Pierre, 2000), where the management of energy markets, the development of technologies and so on are largely left to firms (as suppliers or consumers). The role of international authorities here is limited at best: private actors and arrangements (such as energy multinationals, cartels and long term contracts) are more important than international rules set by governments. By contrast a global climate regime is emerging, and to some extent is in place, but there are problems in securing enough commitment from states to make it effective.

How far do international rules 'govern' energy? The role of global organisations in energy is rather limited and spread across the family of international agencies. There is no dedicated United Nations (UN) energy organisation of the sort found in other areas (for example the World Health Organization, the Food and Agriculture Organization, the International Civil Aviation Organization or the International Maritime Organization). While there is an International Atomic Energy Agency, its responsibilities cover much more than just the use of nuclear power as a source of energy. That said, there has been an attempt by the UN system of agencies to coordinate their various activities in the energy field.

UN-Energy (an initiative to 'ensure coherence' in the work of the many components of the UN) was established following the UN Conference on Sustainable Development in 2002. The Conference had set out an ambitious agenda for multilateral action on energy which was compatible with the environmental and social objectives of sus-tainability (UN-Energy, 2005; 2006). On the back of this agenda, and in other contexts, there have been proposals for international agreements or agencies promoting energy efficiency and renewables, but so far these have not translated into multilateral reality (UN Economic and Social Council, 2007; Hirschl and Petschow, 2005; EC, 2006a).

There are other multilateral agreements on energy which have global ambitions, but these stop short of a global endorsement because of the frameworks in which they are agreed. There is of course an International Energy Agency, but it has a limited membership (embracing mainly Western governments with others as observers) and, arguably, a modest role. Originally established in the 1970s to manage oil stocks in the event of supply disruptions, the IEA has evolved mainly as a forum for sharing information and ideas on energy supply and consumption. It serves primarily as a think tank on how a variety of energy policy challenges should be addressed, allowing member states to draw upon each other's practices and identifying problems in some cases. On some issues the members have agreed to 'codes of conduct' which they then follow-up in national policies. As such, it serves an important function in international policy terms by identifying challenges and solutions and recommending changes to national policies (IEA, 1994; 2004). The G7, which brings together the larger/richer nations (and Russia in the case of G8), has also had energy as one of its preoccupations since it was created in the 1970s, and in recent years it has sought to address energy, climate and development issues. As with the IEA, however, it sets a framework for cooperation rather than brokering binding obligations (Kirton, 2006).

Instead, the most significant impact of 'global' rules and organisations on energy may be rather indirect. National policies, whether for energy or other areas, are subject to the broader international 'rules of the game' - the principles which govern how domestic activities interact with obligations relating to international trade or finance. Those international rules exercise an indirect, more than a direct, influence on government policy, and in some cases may be more potential than actual in their impact. For the future, moreover, if concerted actions on energy and climate are to be taken at the international level, those rules have to be adjusted in recognition of the new priorities, or they may serve as a constraint on what can be done. Four subsections below discuss international institutions' roles in four energy policy-related areas: trade, finance, development and climate.

2.1.1 Trade

Over its history, and that of its predecessor the General Agreement on Tariffs and Trade, the World Trade Organization (WTO) has presided over the steady opening up of global commerce, and the corresponding reduction of government barriers to such liberalisation. So far the WTO's rules have not had much direct impact upon the priorities and procedures of international energy trade (WTO, 1998). However, their influence is increasing. WTO rules have informed the work of other international agreements on energy trade such as the Energy Charter Treaty (Bamberger et al., 2001), and the issue of how energy markets might be opened up to international trade has been on the agenda of the 'Doha Round' of global negotiations.

The way in which WTO rules impinge upon government action, in terms of such measures as tariffs, taxation, subsidies and government purchasing, may well limit the repertoire of policies available to national authorities. Attempts to promote the development of renewable energy or to protect local industries facing competition from exporters unencumbered by environmental regulations (the 'border tax' being an example) can fall foul of international trade obligations (Sell et al., 2005; Selivanova, 2007). Indeed the issue of how environmental policy obligations can be reconciled with the commitment to trade liberalisation has proved a difficult issue for the WTO. Although there have been discussions about the interaction between trade and environment for a number of years, these have not noticeably resulted in a 'greening' of the international trade regime (Brack, Grubb and Windram, 2000; Charnovitz, 2003). Aside from trade, the main impact of global institutions has been upon the developing world more than the developed world. For the most part, it is the former who are dependent on international agencies for aid and finance, and it is correspondingly those states that find their 'policy space' constrained (Gallacher, 2005).

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