placed the issue of subsidies on the international
agenda and helped create the longer-term conditions for reform. When oil prices collapsed,
many governments took advantage of the political space to reform consumption subsidies.
The G20’s role in energy cooperation has
grown since, with a commitment to improve the
transparency of energy data made at the St
Petersburg Summit in 2013, and adoption of the
G20 energy principles at the Brisbane Summit in
2014. Perhaps most importantly, while emerging
economies have struggled to effect fundamental
reforms at the multilateral level, they have been
able to make a growing contribution to energy
dialogue via the G20; for instance, China’s use of
its presidency in 2016 to champion green
finance. Moreover, the Hangzhou Consensus
reaffirmed “the importance of energy collaboration towards a cleaner energy future and sustainable energy security with a view to fostering
economic growth”, drawing perhaps the clearest
links yet between global economic and energy
and climate governance.
Annex A.6: Case Studies, Going it
Alone Versus Cooperative Action
Case study 1: IEA
Pooled economic and political capital is more
powerful than a single country acting alone. In
response to the 1973 oil crisis, the USA took
unilateral and multilateral action simultaneously.
Unilaterally, the USA banned oil exports, which
helped to reduce and stabilise oil prices in the
short term. At the same time the USA was a
founding member of the IEA in 1974, central to
which was the emergency response mechanism
(ERM), a multilateral organisation and cooperative mechanism to enable the group of consumers
to exert greater market power over oil producers.
The unilateral response of the oil export ban was
arguably a short-term measure designed to
address an acute short-term problem. The establishment of the IEA and ERM took longer to
structure and implement than the USA’s unilateral export ban but has arguably been more
effective in achieving the desired objective of
stabilising prices.
Before the ban was lifted in 2015, many
critics argued that lifting the ban would increase
production, as producers would begin to sell to
the global market. The Council on Foreign
Relations estimated production would rise by 1.2
mb/d, translating into a 1% increase in
US GDP. Disentangling the impact of decreasing
global oil prices on the US oil industry after
lifting the ban and how US producers would
otherwise be impacted, is challenging. After
lifting the ban at the end of 2015, year-on-year
production declined by 0.5 mb/d, but this could
have been much greater if the unilateral approach
hadn’t been reversed.
These two distinct approaches exhibit simultaneous unilateral and multilateral responses to
the same issue. Dichotomising between collaboration and going it alone is somewhat of a fallacy, as countries have used a mixture of
approaches to achieve the same objective.
Reforming the IEA by making it more representative of production and consumption to
enable the IEA to fully achieve its remit presents
significant challenges. Principally, countries such
as China and India would need to move from
associates to full members. The joint political
will to overcome these hurdles, doesn’t appear to
exist. This is mainly due to the IEA’s archaic
voting system. Simply put, voting shares are
determined on the basis of the oil consumption
data from 1973, leaving China and India with
little voting influence. If updated to more recent
oil consumption data, the existing memberships’
voting influence would significantly diminish.
Modifications to the IEA’s formal treaty would
require ratification by the IEA’s member states at
the domestic level, which would likely run into
significant domestic political challenges. These
hurdles could be overcome by mutual effort, if
the pooled political will and determination existed within the current IEA membership. Indeed, a
Special Report 5: International Energy Cooperation and Governance
695
agenda and helped create the longer-term conditions for reform. When oil prices collapsed,
many governments took advantage of the political space to reform consumption subsidies.
The G20’s role in energy cooperation has
grown since, with a commitment to improve the
transparency of energy data made at the St
Petersburg Summit in 2013, and adoption of the
G20 energy principles at the Brisbane Summit in
2014. Perhaps most importantly, while emerging
economies have struggled to effect fundamental
reforms at the multilateral level, they have been
able to make a growing contribution to energy
dialogue via the G20; for instance, China’s use of
its presidency in 2016 to champion green
finance. Moreover, the Hangzhou Consensus
reaffirmed “the importance of energy collaboration towards a cleaner energy future and sustainable energy security with a view to fostering
economic growth”, drawing perhaps the clearest
links yet between global economic and energy
and climate governance.
Annex A.6: Case Studies, Going it
Alone Versus Cooperative Action
Case study 1: IEA
Pooled economic and political capital is more
powerful than a single country acting alone. In
response to the 1973 oil crisis, the USA took
unilateral and multilateral action simultaneously.
Unilaterally, the USA banned oil exports, which
helped to reduce and stabilise oil prices in the
short term. At the same time the USA was a
founding member of the IEA in 1974, central to
which was the emergency response mechanism
(ERM), a multilateral organisation and cooperative mechanism to enable the group of consumers
to exert greater market power over oil producers.
The unilateral response of the oil export ban was
arguably a short-term measure designed to
address an acute short-term problem. The establishment of the IEA and ERM took longer to
structure and implement than the USA’s unilateral export ban but has arguably been more
effective in achieving the desired objective of
stabilising prices.
Before the ban was lifted in 2015, many
critics argued that lifting the ban would increase
production, as producers would begin to sell to
the global market. The Council on Foreign
Relations estimated production would rise by 1.2
mb/d, translating into a 1% increase in
US GDP. Disentangling the impact of decreasing
global oil prices on the US oil industry after
lifting the ban and how US producers would
otherwise be impacted, is challenging. After
lifting the ban at the end of 2015, year-on-year
production declined by 0.5 mb/d, but this could
have been much greater if the unilateral approach
hadn’t been reversed.
These two distinct approaches exhibit simultaneous unilateral and multilateral responses to
the same issue. Dichotomising between collaboration and going it alone is somewhat of a fallacy, as countries have used a mixture of
approaches to achieve the same objective.
Reforming the IEA by making it more representative of production and consumption to
enable the IEA to fully achieve its remit presents
significant challenges. Principally, countries such
as China and India would need to move from
associates to full members. The joint political
will to overcome these hurdles, doesn’t appear to
exist. This is mainly due to the IEA’s archaic
voting system. Simply put, voting shares are
determined on the basis of the oil consumption
data from 1973, leaving China and India with
little voting influence. If updated to more recent
oil consumption data, the existing memberships’
voting influence would significantly diminish.
Modifications to the IEA’s formal treaty would
require ratification by the IEA’s member states at
the domestic level, which would likely run into
significant domestic political challenges. These
hurdles could be overcome by mutual effort, if
the pooled political will and determination existed within the current IEA membership. Indeed, a
Special Report 5: International Energy Cooperation and Governance
695