The World Trade Organization (WTO) has
been of little use in managing supply security as
it is focused on avoiding import restrictions
rather than avoiding export controls. Article XI
of GATT 1994 requires that exports should not
be subject to quantitative restrictions “other than
duties, taxes or other charges”—but it does not
fix a maximum level for border taxes, except for
those countries which accepted them within their
accession agreements (including China). Article XI has been interpreted as not prohibiting
export taxes, which explains why “more than 1/3
of notified export restrictions are in resource
sectors, where export taxes on natural resources
appear to be twice as likely as export taxes in
other sectors”. In recent years, several key raw
material suppliers have used export controls.
Indonesia has introduced a ban on exports of
unprocessed ores. Vietnam has also imposed
restrictions on iron ore and copper, and export
taxes have recently been debated in Brazil and
India. In 2012, the USA, the EU and Japan
lodged a complaint with the WTO over Chinese
export quotas of rare earth minerals, and the
quota system was withdrawn in late 2014. There
have been various proposals for voluntary
avoidance of export restrictions in times of crisis
or extreme price volatility, which such restrictions tend to exacerbate.
Data is also an important area for cooperation.
Markets that are less transparent tend to be more
prone to instability, as market participants have
less confidence in fundamentals and so are more
prone to erratic behaviour such as panic buying
or hoarding. Governance arrangements to
improve transparency and accessibility of data, in
particular on stocks, in oil markets have emerged
from the International Energy Forum in the form
of the Joint Organisations Data Initiative—an
approach that has been mirrored in soft commodity markets with the Agricultural Market
Information System. As the shift from molecules
to electrons continues, and energy interdependencies become increasingly linked to
data-intensive electricity grids, data will become
increasingly fundamental to energy cooperation
and governance.
5.5 Cross-Border Externality
By its very nature, a cross-border externality
cannot be resolved without cooperation. The
text-book example of cooperation and governance to resolve a cross-border externality is the
Montreal Protocol to deal with ozone-depleting
gases (see Appendix). Climate change has proven more challenging, essentially because of the
initial lack of readily available low-cost substitutable technologies and the greater entanglement
of high-carbon (as compared to high
chlorofluorocarbons, CFC) activities within
economies. The politico-economic challenges of
action on climate change have been eased significantly by rapid falls in low-carbon technology
costs and growing awareness of the co-benefits
of low-carbon policies. This facilitates an
approach that allows governments to unilaterally
determine national ambition based on domestic
circumstances within a multilateral framework
for transparency and reporting (see Appendix).
Post-Paris, there is growing momentum
around cooperation on carbon pricing as a
market-based mechanism to internalise the
externality. Linking carbon pricing mechanisms
provides a means to broaden coverage, reduce
decarbonisation costs and minimise carbon
leakage.
Box 9: Carbon pricing
The Energy Transitions Commission,
along with many other commentators, view
carbon pricing as an essential component
to drive the energy transition. Around 13%
of global CO 2 emissions are covered by
carbon pricing in one form or another.
Typical prices are around $10/tonne.
Coverage and prices are likely to rise in the
coming years. By the end of 2017 it is
anticipated that 30% of global emissions
will fall under carbon pricing systems, with
countries such as Canada ratcheting floor
prices up to $25/tonne or more within the
next five years.
As many of the emission trading systems (ETS) have experienced low and
Special Report 5: International Energy Cooperation and Governance
631
been of little use in managing supply security as
it is focused on avoiding import restrictions
rather than avoiding export controls. Article XI
of GATT 1994 requires that exports should not
be subject to quantitative restrictions “other than
duties, taxes or other charges”—but it does not
fix a maximum level for border taxes, except for
those countries which accepted them within their
accession agreements (including China). Article XI has been interpreted as not prohibiting
export taxes, which explains why “more than 1/3
of notified export restrictions are in resource
sectors, where export taxes on natural resources
appear to be twice as likely as export taxes in
other sectors”. In recent years, several key raw
material suppliers have used export controls.
Indonesia has introduced a ban on exports of
unprocessed ores. Vietnam has also imposed
restrictions on iron ore and copper, and export
taxes have recently been debated in Brazil and
India. In 2012, the USA, the EU and Japan
lodged a complaint with the WTO over Chinese
export quotas of rare earth minerals, and the
quota system was withdrawn in late 2014. There
have been various proposals for voluntary
avoidance of export restrictions in times of crisis
or extreme price volatility, which such restrictions tend to exacerbate.
Data is also an important area for cooperation.
Markets that are less transparent tend to be more
prone to instability, as market participants have
less confidence in fundamentals and so are more
prone to erratic behaviour such as panic buying
or hoarding. Governance arrangements to
improve transparency and accessibility of data, in
particular on stocks, in oil markets have emerged
from the International Energy Forum in the form
of the Joint Organisations Data Initiative—an
approach that has been mirrored in soft commodity markets with the Agricultural Market
Information System. As the shift from molecules
to electrons continues, and energy interdependencies become increasingly linked to
data-intensive electricity grids, data will become
increasingly fundamental to energy cooperation
and governance.
5.5 Cross-Border Externality
By its very nature, a cross-border externality
cannot be resolved without cooperation. The
text-book example of cooperation and governance to resolve a cross-border externality is the
Montreal Protocol to deal with ozone-depleting
gases (see Appendix). Climate change has proven more challenging, essentially because of the
initial lack of readily available low-cost substitutable technologies and the greater entanglement
of high-carbon (as compared to high
chlorofluorocarbons, CFC) activities within
economies. The politico-economic challenges of
action on climate change have been eased significantly by rapid falls in low-carbon technology
costs and growing awareness of the co-benefits
of low-carbon policies. This facilitates an
approach that allows governments to unilaterally
determine national ambition based on domestic
circumstances within a multilateral framework
for transparency and reporting (see Appendix).
Post-Paris, there is growing momentum
around cooperation on carbon pricing as a
market-based mechanism to internalise the
externality. Linking carbon pricing mechanisms
provides a means to broaden coverage, reduce
decarbonisation costs and minimise carbon
leakage.
Box 9: Carbon pricing
The Energy Transitions Commission,
along with many other commentators, view
carbon pricing as an essential component
to drive the energy transition. Around 13%
of global CO 2 emissions are covered by
carbon pricing in one form or another.
Typical prices are around $10/tonne.
Coverage and prices are likely to rise in the
coming years. By the end of 2017 it is
anticipated that 30% of global emissions
will fall under carbon pricing systems, with
countries such as Canada ratcheting floor
prices up to $25/tonne or more within the
next five years.
As many of the emission trading systems (ETS) have experienced low and
Special Report 5: International Energy Cooperation and Governance
631