6.2 The G20 as a Forum for Reform
The G20 could provide a suitable forum to promote global energy governance reform. It has a
track record of international organisation reform
(emerging economies used it to reform the
International Monetary Fund following the global financial crisis of 2008) and experience of
establishing new international mechanisms, such
as the Agricultural Market Information System.
The G20’s membership provides a balance of
OECD and emerging economies, and of producers and consumers of fossil-fuel based
energy. It therefore has the requisite critical mass
on key transition issues such as energy consumption and production (23% and 19%
respectively), emissions (30% of global total,
double that of the USA) and energy investment
(21%).
Moreover, many aspects of the current G20
agenda are highly relevant, including the Principles for Energy Collaboration it adopted in
2014 (which included its long-running commitments to fossil fuel subsidy reform), the emergence of green finance under China’s presidency
in 2016, and progress on climate-related financial
disclosures through the Financial Stability Board.
Sustaining a reform process through the G20
would not be without challenges. First, the G20
is an informal club of governments, without a
secretariat to provide support and ensure delivery. Second, and relatedly, the G20 struggles to
sustain focus as its agenda tends to shift with the
priorities of successive presidencies. Consequently, any ambitious energy governance
reform agenda would need to include a strategy
to sustain G20 engagement.
Box 11: Strengthening oil security in
Asia
Asia consumes a third of the world’s oil.
About two-thirds of that are imports of
crude oil.
Only two ASEAN Plus Three countries
(Japan and South Korea) are party to the
OECD-based IEA with its emergency
response mechanism and obligations to
hold at least 90 days of oil imports as
compulsory stocks.
Asia and ASEAN lack mechanisms to
respond to supply disruptions collectively
rather than competitively: major disruptions would lead to a scramble for supplies
and large spikes in international oil prices.
The ASEAN Petroleum Supply Agreement
(APSA) supports, on a best endeavours
basis, member countries experiencing a
supply disruption equivalent to 10% of
consumption over 30 days. These efforts
may include a coordinated stock release,
relying on cooperation between the state
companies of the ASEAN countries.
A major disruption would likely generate
considerable uncertainty over how Asian
governments would respond. Given APSA
is currently set to expire in 2023, and
global oil prices are relatively low, now is
a good time to push for expansion of
regional strategic oil which could calm
markets if there was a disruption to supply.
This expanded APSA agreement could
include;
• increasing
government–controlled
stockholding in non-IEA, ASEAN Plus
Three countries to IEA-equivalent
levels: IEA members Japan and South
Korea hold more than double the IEA
target of 90 days of net imports;
ASEAN countries less than half; estimates for China suggest around
50 days;
• a commitment to coordinate the release
of stocks, to limit free-riders on stocks
released by other countries;
• a commitment to maintain, on a pro rata
basis, exports of products refined during a disruption of crude oil supplies.
Middle East crude is refined in South
Korea, Japan, India and Singapore for
export as product. Without such a
commitment, the product trade would
transmit disruption, resulting in a
scramble for supplies; and
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W. Jigang and P. Webb
The G20 could provide a suitable forum to promote global energy governance reform. It has a
track record of international organisation reform
(emerging economies used it to reform the
International Monetary Fund following the global financial crisis of 2008) and experience of
establishing new international mechanisms, such
as the Agricultural Market Information System.
The G20’s membership provides a balance of
OECD and emerging economies, and of producers and consumers of fossil-fuel based
energy. It therefore has the requisite critical mass
on key transition issues such as energy consumption and production (23% and 19%
respectively), emissions (30% of global total,
double that of the USA) and energy investment
(21%).
Moreover, many aspects of the current G20
agenda are highly relevant, including the Principles for Energy Collaboration it adopted in
2014 (which included its long-running commitments to fossil fuel subsidy reform), the emergence of green finance under China’s presidency
in 2016, and progress on climate-related financial
disclosures through the Financial Stability Board.
Sustaining a reform process through the G20
would not be without challenges. First, the G20
is an informal club of governments, without a
secretariat to provide support and ensure delivery. Second, and relatedly, the G20 struggles to
sustain focus as its agenda tends to shift with the
priorities of successive presidencies. Consequently, any ambitious energy governance
reform agenda would need to include a strategy
to sustain G20 engagement.
Box 11: Strengthening oil security in
Asia
Asia consumes a third of the world’s oil.
About two-thirds of that are imports of
crude oil.
Only two ASEAN Plus Three countries
(Japan and South Korea) are party to the
OECD-based IEA with its emergency
response mechanism and obligations to
hold at least 90 days of oil imports as
compulsory stocks.
Asia and ASEAN lack mechanisms to
respond to supply disruptions collectively
rather than competitively: major disruptions would lead to a scramble for supplies
and large spikes in international oil prices.
The ASEAN Petroleum Supply Agreement
(APSA) supports, on a best endeavours
basis, member countries experiencing a
supply disruption equivalent to 10% of
consumption over 30 days. These efforts
may include a coordinated stock release,
relying on cooperation between the state
companies of the ASEAN countries.
A major disruption would likely generate
considerable uncertainty over how Asian
governments would respond. Given APSA
is currently set to expire in 2023, and
global oil prices are relatively low, now is
a good time to push for expansion of
regional strategic oil which could calm
markets if there was a disruption to supply.
This expanded APSA agreement could
include;
• increasing
government–controlled
stockholding in non-IEA, ASEAN Plus
Three countries to IEA-equivalent
levels: IEA members Japan and South
Korea hold more than double the IEA
target of 90 days of net imports;
ASEAN countries less than half; estimates for China suggest around
50 days;
• a commitment to coordinate the release
of stocks, to limit free-riders on stocks
released by other countries;
• a commitment to maintain, on a pro rata
basis, exports of products refined during a disruption of crude oil supplies.
Middle East crude is refined in South
Korea, Japan, India and Singapore for
export as product. Without such a
commitment, the product trade would
transmit disruption, resulting in a
scramble for supplies; and
634
W. Jigang and P. Webb