Presentation on theme: "Timothy Meyer University of Georgia School of Law"— Presentation transcript:
Timothy Meyer University of Georgia School of Law
Climate governance has as one of its chief objectives changing energy consumption patterns Roughly 65% of greenhouse gas emissions are from the energy sector Climate regimes try to put a price on carbon Pricing carbon incentivizes switching to lower-carbon fuels
No! There are a wealth of energy institutions that attempt to influence the price of various fuels ◦ OPEC, IEP & IEA, IAEA, IRENA, GECF, ECT, WTO Often institutions are single fuel-specific Climate regime is a late arriver Fragmentation: the proliferation of overlapping and non-hierarchical institutions How does the climate regime interact with incumbent energy regimes?
The ability to influence the short and medium term price of oil turns on spare production capacity Investments in fossil fuels require a long lead time to bring new capacity online Price increases thus cannot be addressed in the short term by building new capacity
In the middle of the 20 th century the U.S. state of Texas, acting through the Texas Railroad Commission, effectively regulated the price of oil by holding up to 25% of production capacity in reserve
In conjunction with a U.S. inter-state agency, the Interstate Oil Compact Commission, and the major oil companies, the so-called Seven Sisters, the Texas Railroad Commission was an early example of public-private regulation of an international market
OPEC was formed in 1960 in response to a collapse in global oil prices Early on, OPEC was focused less on production issues and more on renegotiating concession agreements with the Seven Sisters Part of a larger effort by the developing world to assert sovereignty over natural resources By early 1970s, OPEC nations had effectively nationalized int’l oil companies
By 1972, Texas was producing at full capacity When the Arab-Israeli War resulted in the Arab oil embargo, Texas was unable to increase production and global prices soared Regulatory power had shifted to OPEC
OECD nations responded by signing the Agreement on an International Energy Program ◦ Aimed to coordinate emergency response measures among oil-consuming states ◦ Imposed reserve requirements (60, then 90, days) ◦ Created the International Energy Agency
Three types of linkages ◦ Institutional linkages OPEC & IEA have observer status in the UNFCCC Montreal Protocol contains trade sanctions for non- parties ◦ Bargaining linkages OPEC countries link demands for financial assistance to support for climate change measures ◦ Functional linkages Regulation in one area affects, e.g., consumption or production patterns in another area A carbon tax might induce fuel switching and change investment patterns
Largely within the control of the parties Can create value by creating mutually- supporting cooperative regimes ◦ Using trade mechanisms to enforce environmental obligations Individual states may be able to create linkages to the disadvantage of other states ◦ OPEC’s insistence on financial assistance in exchange for support for climate change objectives ◦ The creation of the WTO and the TRIPs Agreement
Functional linkages are not within the control of the parties The effect of functional linkages between issue areas is that cooperation in one area can either support or undermine cooperation in another area Climate change institutions basically seek to raise the cost of carbon Energy institutions have more complicated objectives
Oil prices rose to US$127/barrel of Brent crude during Libyan civil war IEA members released oil from strategic reserves, triggering a 7.4% drop in the price of oil What does this sort of incident mean for climate change?
Energy initiatives can interfere with each other ◦ OPEC and the GECF could increase production or reduce prices to defend market share & crowd out investment in renewables ◦ National fuel efficiency measures can cause the collapse of prices in carbon markets ◦ Emergence of the GECF and supplier dynamics could deter switching to natural gas
How do we manage functional linkages between energy and climate? Issues of jurisdictional scope ◦ Single organization allows coordination of policies ◦ But increases transaction costs to setting policy Issues of organizational detail ◦ Climate change is a pluralistic organization ◦ Energy institutions tend to be more technocratic Incentives to comply?