By Kieran Cooke
Existing bodies overseeing the global energy sector are inadequate and have failed to adapt to widespread changes in energy supply and demand, says a new report.
A shake-up of global energy institutions is urgently needed – and nothing short of a technology revolution is called for in order to tackle the twin challenges of rising energy demand and climate change mitigation.
The report, The Reform of Global Energy Governance, by Neil Hirst at the Grantham Institute for Climate Change at Imperial College, London and Antony Froggatt of the London-based think tank, Chatham House, outlines how the energy market has changed in recent years.
The most developed OECD countries traditionally made up the bulk of world energy demand but now account for less than 45% – a share which is continuing to decline. The developing nations are the new big players on the block.
Governing bodies are having to adapt to a world where traditional world powers are being replaced by countries like China, India, Brazil and Indonesia
China is now the world’s largest energy consumer and also its largest CO2 emitter.
World oil demand, largely driven by the so-called Bric countries, increased by 24% between 1990 and 2009 and is set to go up by a further 12% by 2025.
These profound and far-reaching changes in the global energy scene are having a big impact not only on the way economies develop but on the climate.
Yet the institutions which oversee an energy trade that is worth about $2.3 trillion per year – or 16% of all international trade – belong to another era.
Different priorities
The main player in global energy governance, the International Energy Agency (IEA), does not even have the Bric countries as members, with institutional rules and structures standing in the way of any change. This, says the report, is “a serious problem.”
Profound differences persist between the OPEC countries, who are committed to production quotas, and the IEA countries, who value open energy markets above all else.
The energy scene is increasingly dominated by national oil companies who scramble round the world investing their dollars in energy resources. The oil market has become highly volatile and unstable.
Governments juggle with questions of security and cost of supply, the national and global environment, economic growth and development, jobs, poverty eradication, import dependency, resource income, technological leadership and diplomatic relations.
“The collective outcome of these decisions determines, to a large extent, the rate and limits of global warming…” says the report.
Meanwhile “the shale gas revolution” that has taken place in the US has already had a significant effect on world energy markets. A “golden age of gas” is already under way.
The report’s authors point out that while gas can contribute positively to climate mitigation where it replaces coal, it’s by no means all good news on the climate front.
“For instance, although the substitution of gas for coal in the US has reduced American carbon emissions, it may also be contributing to increased US coal exports and lower international coal prices.”
Avoiding disaster
Both energy provision and climate change are issues that can be addressed only at a global level, says the report. A revolution not only in the way the energy market is run but in energy technology is needed. Low carbon development strategies have to be found.
“Only through a revolution in energy technology can we meet the increasing demand for energy services without a disastrous increase in energy-related CO2 emissions,” it reads.
“The world has changed, and global energy governance will also need to change to meet the energy policy challenges of today.”
This article was produced by the Climate News Network