Seeking Coherence in Complexity? The Governance of Energy by Trade and Investment Institutions
| DOI | http://doi.org/10.1111/j.1758-5899.2011.00125.x |
| Published date | 01 September 2011 |
| Date | 01 September 2011 |
Seeking Coherence in Complexity?
The Governance of Energy by Trade
and Investment Institutions
Arunabha Ghosh
Council on Energy, Environment and Water, India
Abstract
Trade in energy products and services and investments in the energy sector are central to energy security. Despite the
rhetoric of energy independence, the world’s leading economies inhabit a complex world of energy flows and
institutions that seek to govern them. This article asks: how is energy governed by international trade and investment
institutions and agreements; and how would it be governed by these institutions depending on alternative
governance preferences? Drawing on recent developments, it outlines three sets of tensions – between emerging
multipolarity and existing regimes, between states and markets, and a structural imperative between energy and
climate – that are shaping the context for energy governance. The article then analyses, from the perspective of
energy exporters, importers and firms, how the landscape of multilateral, plurilateral and regional agreements
manages these challenges. The current institutional configuration reveals partially overlapping memberships,
incoherent rules governing state-driven policies and market-led interventions, and inconsistent rules between energy
and environmental concerns. In pursuit of coherence in this complex milieu, the article ends by outlining a schematic
framework for institutional design. The design choices depend on countries’ preferences for greater or lesser
consistency in rules and on more integrated versus fragmented governance across institutions.
Policy Implications
•Given the pressures of energy security, climate change and trade liberalisation, energy trade and investment cannot
be governed through a single institution or regime.
•In order to govern the complex structure of energy trade-related institutions, policy makers need to make two sets
of decisions: making rules more or less consistent across regimes; and adopting more integrated or more frag-
mented institutional designs.
•A realistic outcome is fragmented governance with more consistent rules: policy makers should aim to liberalise
trade in environmental goods and services at the WTO; a climate agreement can offer signals for more low-carbon
investments in the energy sector; and Asian institutions (ASEAN+6; APEC) can promote technology cooperation in
the region responsible for the most increase in energy demand.
•The status quo – fragmented institutions and inconsistent rules – will most likely add to tensions in energy trade:
more disputes on state-subsidised clean tech investments; increased competition to secure exclusive access to oil,
gas, coal and other minerals; and threats of unilaterally imposed environment-related trade barriers.
When a major economy spends billions of dollars to
subsidise its domestic clean energy technology indus-
tries, is it a trade barrier or a contribution to the global
fight against climate change? If a country depends on
electricity transmitted from across its borders, what
guarantee does it have that power will be supplied
without interruption? Are there international mecha-
nisms by which oil-consuming and oil-producing nations
balance each other’s demands for secure supplies and
stable demand? If one country’s polluting energy
sources adversely affect the earth’s climate, can another
country take unilateral steps to penalise the former?
Such questions are of concern to national policy makers
as well as international organisations. But rules govern-
ing trade and investment in energy goods and services
do not have answers to all of the above. How the rules
are interpreted or new ones created will determine
whether states adopt unilateral measures or choose to
work through international mechanisms to secure
energy supplies. This article asks: how is energy gov-
erned by international trade and investment institutions
and agreements; and how would it be governed by
Global Policy Volume 2 . Special Issue . September 2011
ª2011 London School of Economics and Political Science and John Wiley & Sons Ltd. Global Policy (2011) 2:SI doi: 10.1111/j.1758-5899.2011.00125.x
Research Article
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