Linkages between Climate Change Institutions and Energy Institutions

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Linkages between Climate Change Institutions and Energy Institutions Timothy Meyer University of Georgia School of Law [email protected]

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Linkages between Climate Change Institutions and Energy Institutions. Timothy Meyer University of Georgia School of Law [email protected]. Climate Change Regimes as Energy Regimes. Climate governance has as one of its chief objectives changing energy consumption patterns - PowerPoint PPT Presentation

Transcript of Linkages between Climate Change Institutions and Energy Institutions

Page 1: Linkages between Climate Change Institutions and Energy Institutions

Linkages between Climate Change Institutions and Energy

Institutions

Timothy MeyerUniversity of Georgia School of Law

[email protected]

Page 2: Linkages between Climate Change Institutions and Energy Institutions

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

Climate Change Regimes as Energy Regimes

Page 3: Linkages between Climate Change Institutions and Energy Institutions

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?

Is the climate regime the only one influencing the price of fuels?

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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

International Oil Governance

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In the middle of the 20th 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

Texas Railroad Commission

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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

IOCC & the Seven Sisters

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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

Organization of Petroleum Exportng Countries

Page 8: Linkages between Climate Change Institutions and Energy Institutions

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

Arab Oil Embargo

Page 9: Linkages between Climate Change Institutions and Energy Institutions

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

International Energy Program and the International Energy Agency

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The Agreement)

Other Energy Institutions

Page 11: Linkages between Climate Change Institutions and Energy Institutions

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

Linkages

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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

Institutional & Bargaining Linkages

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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

Functional Linkages

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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?

Coordinated Emergency Response Measures

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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

Interaction

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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?

Questions