Carnegie Europe hosted a discussion on trade and energy governance. Panelists included Carnegie’s David Livingston, David Crosby of King & Spalding, and Fredrik Erixon of the European Centre for International Political Economy. Carnegie’s Jan Techau moderated. The discussion included representatives from governments, civil society, industry, and relevant international institutions and was held under Chatham House rules.

Discussion Highlights

  • Changing Energy Landscape: Panelists agreed that the world’s energy system looks very different today than in the fifty years following World War II, but added that these changes only serve to highlight asymmetries in the corresponding institutions and norms.
     
    • United States: For example, the world’s leading petroleum fuel producer is now the United States, yet the country maintains a de facto ban on crude oil exports and a less than fully liberalized permitting system for Liquefied Natural Gas (LNG) exports.
       
    • China: China recently became the world’s largest net importer, replacing the United States, which held this position for number of years. Yet China remains outside the most important global energy governance body that was set up after the energy crisis of the 1970s–the International Energy Agency (IEA).
       
    • Environmental Policies: At the same time, there is a growth in environmental policies–first and foremost those related to climate change–that impact trade flows of energy goods and services. The uncertain congruence of such policies with existing free trade commitments is a source of friction in the World Trade Organization (WTO) system and one likely to grow as climate issues take higher priority in policy frameworks.
       
  • New Ideas and Institutions: Highlighting a mismatch between 20th century institutions and 21st century challenges, some panelists called for re-evaluation of the current systems of energy and trade governance, and the drafting of new international agreements, such as one within the WTO system addressing trade, energy and climate change. Others argued that existing rules were sufficient to address any emerging challenges, but that these rules have often gone unenforced. They offered as an example the U.S. crude oil export ban, which most agreed was of questionable compliance with WTO guidelines. To date, no country has had the right mix of incentives to formally challenge the ban at the WTO, but one panelist suggested that this might be changing, with India a potential candidate to raise the issue in the future. All panelists agreed that a proliferation of governance institutions was not desirable, and that instead the reform of existing institutions or the creation of new “umbrella” governance systems would be far preferable. The panelists voiced support for the G20 to play such a role.
     
  • A Global “System of Energy Governance”: Views diverged over whether there already exists a true set of energy governance institutions that apply uniformly to key actors.
     
    • Energy Charter Treaty: The Energy Charter Treaty, for example, was erected in the wake of the Cold War to govern cross-border commercial energy activities as the former Soviet Union was integrated into global energy markets. Some panelists argued that the Treaty’s ambition had exceeded its capacity, however, and that the organization was increasingly irrelevant in the face of a revanchist Russia.
       
    • United Nations Framework Convention on Climate Change and Other Institutions: In the realm of climate change, the United Nations Framework Convention on Climate Change (UNFCCC) is the body responsible for coordinating national-level policy responses, but the UNFCCC has little formalized cooperation with other key organizations such as the IEA, the Organization of Petroleum Exporting Countries (OPEC), the Organization for Economic Cooperation and Development (OECD), or the WTO. 
       
    • Next Steps: The first step to improving this situation, panelists agreed, would be promoting information disclosure and data sharing, which is a pressing issue at both the national and international level. Regulatory harmonization is also an area of growing importance, and will likely be more important than the issue of tariffs in the years ahead.
       
  • Key Questions: Participants engaged with the panelists in a lively discussion during the last portion of the event, with topics ranging from the likely impacts of a sustained low oil price, how the changing shape of investment rules are likely to impact infrastructure decisions with long-lasting consequences, and whether trade negotiations were sufficiently taking into account transformative technologies and trends in the energy and environmental arena. Finally, participants discussed the prospect of an “energy chapter” in the ongoing Transatlantic Trade and Investment Partnership negotiations between the United States and EU. This topic saw diverging opinions over the significance, need, and ultimate content of such a chapter. It was clear that this idea, even if successful, will continue to spark debate over the future of transatlantic cooperation on energy and environment and the role of the two powers in shaping global trade rules.