than 200 mayors. A “G6” statement omitting the USA in the recent G7 leaders’
communiqué reaffirmed their commitment.
China and the EU, the first and third largest
emitters in the world, are set to announce a
new partnership on climate action. India,
the fourth largest emitter, has also reconfirmed its commitment to Paris.
The decision has obvious implications
for global emissions, but the impact might
not be as large as expected for three reasons. First, even if the USA had decided to
remain in the agreement, it would probably
not meet its emissions pledge, which
President Trump has criticised. It is, after
all, non-binding. Second, much American
policy and regulatory action on climate
change happens at the state level, and
many states remain committed to emissions reduction. Third, emission reductions
are increasingly the result of market forces
rather than national targets. Republican
Texas produces a quarter of all US wind
power because it makes economic sense.
Shale gas has squeezed coal out of the US
power mix because it is cheaper.
The second trend reshaping the nature of
international energy cooperation can be seen in
the policy encouragement for lower-carbon
options. This is occurring alongside dramatic
technological advances and declining prices,
which in turn are driving the transformation of
energy markets and investments, changing the
terms of energy choices. The most notable
transformations are the shale revolution in the
USA, the falling cost of renewable energy, and
digitalisation of the electricity sector. For
instance, the technology-driven shale revolution
in the USA has enabled oil production to more
than double, from a low of 4.3 mb/d in
September 2008 to 9.6 mb/d in July 2015. Output
dipped as the oil price crashed in late 2014, but at
the start of May 2017 production stood at 9.3
mb/d. The well-known decline in solar photovoltaic prices continues, with prices in India
down almost 40% between 2016 and 2017.
This transformation of energy markets and
investments is driving the third key shift, from
molecules to electrons. With emerging electricity
network expansion, electric vehicle (EV) and
storage capacity growth are likely to complete a
self-reinforcing circle, and drive new patterns of
trade, new vulnerabilities and new interdependencies. Further, EV lithium-ion battery manufacturing capacity is set to increase more than
sixfold between 2016 and 2020, with manufacturers selling new lithium-ion batteries into the
stationary storage market at low prices.
These three structural shifts or drivers are
challenging traditional conceptions of energy
security and shifting the focus of energy policymakers. These can be separated into four areas,
although in practice they are highly
interconnected:
• from fuels to technologies: in light of the
technology revolution in shale, renewables
and, on the demand side, the focus on competitiveness, are as much about technology
access and leadership as about securing fuel
supplies;
• from molecules to electrons: a growing focus
on efficient and resilient electricity systems
that can manage variable production from
renewables, integrate battery storage and
EVs, and deliver investment in grid
infrastructure;
• access to other minerals and metals: the shift
in materials needed for low-carbon energy
will raise new questions for energy and
resource governance. Examples of key materials include lithium, cobalt, rare earth elements and precious metals; and
• digital disruption: as in other sectors, digital
technology promises to deliver new opportunities for efficiency, from demand-side management to autonomous vehicles. In parallel,
it has also increased concerns over cybersecurity in the energy sector.
Special Report 5: International Energy Cooperation and Governance
605
communiqué reaffirmed their commitment.
China and the EU, the first and third largest
emitters in the world, are set to announce a
new partnership on climate action. India,
the fourth largest emitter, has also reconfirmed its commitment to Paris.
The decision has obvious implications
for global emissions, but the impact might
not be as large as expected for three reasons. First, even if the USA had decided to
remain in the agreement, it would probably
not meet its emissions pledge, which
President Trump has criticised. It is, after
all, non-binding. Second, much American
policy and regulatory action on climate
change happens at the state level, and
many states remain committed to emissions reduction. Third, emission reductions
are increasingly the result of market forces
rather than national targets. Republican
Texas produces a quarter of all US wind
power because it makes economic sense.
Shale gas has squeezed coal out of the US
power mix because it is cheaper.
The second trend reshaping the nature of
international energy cooperation can be seen in
the policy encouragement for lower-carbon
options. This is occurring alongside dramatic
technological advances and declining prices,
which in turn are driving the transformation of
energy markets and investments, changing the
terms of energy choices. The most notable
transformations are the shale revolution in the
USA, the falling cost of renewable energy, and
digitalisation of the electricity sector. For
instance, the technology-driven shale revolution
in the USA has enabled oil production to more
than double, from a low of 4.3 mb/d in
September 2008 to 9.6 mb/d in July 2015. Output
dipped as the oil price crashed in late 2014, but at
the start of May 2017 production stood at 9.3
mb/d. The well-known decline in solar photovoltaic prices continues, with prices in India
down almost 40% between 2016 and 2017.
This transformation of energy markets and
investments is driving the third key shift, from
molecules to electrons. With emerging electricity
network expansion, electric vehicle (EV) and
storage capacity growth are likely to complete a
self-reinforcing circle, and drive new patterns of
trade, new vulnerabilities and new interdependencies. Further, EV lithium-ion battery manufacturing capacity is set to increase more than
sixfold between 2016 and 2020, with manufacturers selling new lithium-ion batteries into the
stationary storage market at low prices.
These three structural shifts or drivers are
challenging traditional conceptions of energy
security and shifting the focus of energy policymakers. These can be separated into four areas,
although in practice they are highly
interconnected:
• from fuels to technologies: in light of the
technology revolution in shale, renewables
and, on the demand side, the focus on competitiveness, are as much about technology
access and leadership as about securing fuel
supplies;
• from molecules to electrons: a growing focus
on efficient and resilient electricity systems
that can manage variable production from
renewables, integrate battery storage and
EVs, and deliver investment in grid
infrastructure;
• access to other minerals and metals: the shift
in materials needed for low-carbon energy
will raise new questions for energy and
resource governance. Examples of key materials include lithium, cobalt, rare earth elements and precious metals; and
• digital disruption: as in other sectors, digital
technology promises to deliver new opportunities for efficiency, from demand-side management to autonomous vehicles. In parallel,
it has also increased concerns over cybersecurity in the energy sector.
Special Report 5: International Energy Cooperation and Governance
605