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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
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Linkages between Climate Change Institutions and Energy
Institutions
Timothy MeyerUniversity 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
Climate Change Regimes as Energy Regimes
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?
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
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
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
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
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
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
The Agreement)
Other 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
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
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
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
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
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