Enhancing the bilateral framework between EU and US in Energy. Or not.
Energy is a key issue in the relations between the EU and US. Security of supply, free trade in energy products and services, cooperation on geopolitical challenges and nuclear safety, reducing greenhouse gas emissions and promoting renewable energy sources: these are the priorities that could be implemented also by the New US Administration. This program on energy policy foresees consequent legislative measures at European and international level. So we think it is relevant at this time to better understand the general framework that EU and USA have, up to now, built together.
The EU-US Energy Council is a high-level bilateral meeting to discuss common energy challenges and prospects. The Energy Council has held annual meetings since 2009, and its conclusions feed into the broader EU-US Summit. The Energy Council has set up working groups to look into particular aspects of the energy relationships. Neither the USA nor the EU have a comparable format for bilateral energy relations with other Countries. The Energy Council constitutes a forum for regular dialogue and has so far involved very high-level representatives in its proceedings. The effectiveness of the Energy Council required sustained commitment and could be improved by providing more mechanisms for implementation, administrative coordination and a follow-up on agreed EU-US goals. The question is if this frame could be or not implemented by the new US Administration.
The future of Trade and Environmental Multilateral Agreements might well change with President Trump and this could impact on Energy sector; however, the 2016 Framework appears very solid and strategical and it appears very difficult for the New Administration to change priorities and the numerous areas of synergy.
The 2016 Energy Council was held in Washington, DC on May, and its conclusions reflect a combination of EU and US strategic priorities. Key issues addressed included energy security, investment in critical infrastructures, mitigation of climate change, energy efficiency, promotion of renewable energy, developing new technologies on carbon capture and storage (CCS) and smart grids, guaranteeing nuclear safety, encouraging regulatory convergence and promoting cooperation in energy research and technologies. “The USA welcomed the commitment of Europe to guaranteeing the energy security of Ukraine, while the EU was enthusiastic about the lifting of the US export ban on crude oil and the start of US LNG exports”[1]. Both sides endorsed the 2015 UNFCC Paris Agreement and called for its ratification. Further discussion centred on enhancing future bilateral cooperation in the Energy Council (including a new Working Group for Climate Change), finding ways to promote public and private investment in energy research, development and demonstration (RD&D) projects, encouraging deeper cooperation through international frameworks such as the Clean Energy Ministerial, and making further progress towards concluding an Environmental Goods Agreement at WTO level.
Consolidating the multilateral framework is an opportunity for the US New Administration. Global energy dialogue involves an array of overlapping multilateral fora in which USA, EU and its Member States are closely involved. Active participation in these multilateral fora can complement bilateral relations between the USA and EU in the energy field.
EU-US cooperation has always been close in the field of nuclear safety and proliferation, often through multilateral bodies such as the International Atomic Energy Agency (IAEA) and the OECD Nuclear Agency. The sensitivity of nuclear cooperation and its military potential makes it distinct from other areas of multilateral energy cooperation.
An established multilateral framework for EU-US energy dialogue is the International Energy Agency (IEA)[2]. The principal founding objective of the IEA was to develop strategic oil reserves and burden-sharing mechanisms, in order to minimise the effects of major supply shocks. As such risks have receded and some IEA members have become major energy producers in their own right (notably the USA), the IEA’s organisational role has evolved to focus on global energy dialogue, broader security of supply issues, ways to improve energy efficiency, promote use of renewable and meet global climate changes goals[3].
Some other bodies for multilateral dialogue in the energy field were created more recently, and tend to incorporate a broader array of global actors: developed and developing economies, as well as major producing countries (members of OPEC as well as non-members). The International Renewable Energy Agency (IRENA), founded in 2011, includes 149 members (with another 27 countries in the process of joining), drawn from across the world including the USA, the EU and 27 of its Member States[4]. Another multilateral arena is the International Energy Forum, whose primary purpose is enhanced dialogue between energy-production and consumption[5]. While international organizations with a broad global membership can claim to be highly representative, the array competing political and economic interests make it hard to agree on substantive goals and ensure their implementation, especially if decisions must be taken by consensus.
The Clean Energy Ministerial (CEM) is a global forum, founded in 2009 to promote policies and share best practices to accelerate the global transition to clean energy. The Secretariat of CEM was initially based on US Department of Energy, reflecting strong US interest behind this initiative. In June 2016 the participating countries agreed to move the Secretariat to the more neutral location of IEA headquarters in Paris. This reflects the consolidation and growing relevance of CEM in light of the 2015 UNFCCC agreement reached in Paris, which should stimulate far greater investment in clean energy sources and technologies. CEM currently has 24 participating countries (plus the European Commission), including the USA and eight EU Member States[6]. CEM participating countries account for 75% of GHG emissions and over 90% of investments in clean energy. Involvement in CEM programmes and initiatives is on a voluntary basis.
The European Commission and EU Member States only participate in a limited number of them, whereas the USA is currently involved in all of them. More EU Member States could choose to become members of CEM and participate in a wider range of initiatives.
The last G7 Energy Ministers meeting on 1-2 May 2016 was about global energy security, energy investment for global economic growth and sustainable energy. The meeting also focused on cyber security of energy infrastructures, innovation and deployment of new energy technologies, as well as on support for energy sector reforms in Ukraine. The conclusions of the meeting suggest some reflections on the European Energy Policy and Law.
First of all, falling oil and gas prices make energy investments more challenging for energy sector, both globally and in Europe[7]. Consequently, the global and European energy and climate challenges will not go away, and certainly not as result of low energy prices. G7, as a group of industrialised, developed and like-minded nations, must work together on the transition towards a more competitive, secure and sustainable energy system and this will require significant investments. And the Paris Agreement gives us the right framework to boost these investments.
The European Commission stated that “while substantial progress has been made in energy reforms over the past years in Ukraine, important legislative measures must be completed without delay”[8]. These include, a new law on energy regulators, a new electricity law in line with the EU’s law and a new law on energy efficiency.
The Framework in which the bilateral cooperation between the EU-US works takes the G20 dimension into consideration, maybe the most important global diplomatic meeting about energy. The last meeting was held in Peking on 4 July 2016 and in its Conclusions the G20 underlines the importance of “Transforming our World: the 2030 Agenda for Sustainable Development” by United Nations General Assembly (non legally binding document but politically relevant) and the Paris Agreement under the UNFCCC[9] (legally binding text). The Conclusions reaffirm the importance of energy collaboration within and beyond G20 Countries for tackling common energy challenges and shaping a sustainable low GHG (Green House Gas) emission energy future, while utilizing energy sources and technologies. The Text goes in some point relating to Energy Access, Cleaner Energy Future, Renewable Energy, Nuclear Power, Natural Gas, Advanced an Cleaner Fossil Fuel technologies, Energy Efficiency, Energy Security, Inefficient Fossil Fuel Subsidies, market Transparency. But a specific point of the Conclusions seems to be “a message” for the New US Administration. The point is titled “Global Energy Architecture”: “We share a common understanding that global energy architecture needs to continue to evolve to reflect better the changing realities of the world energy landscape. We recognize the contribution of G20 Countries to sustaining discussions on critical global energy issues, their roles in fostering collaboration to address global energy challenges and their effectiveness in facilitating collaboration among a variety of international organizations. We welcome G20 energy meetings’ collaboration with international organizations and their efforts to expand engagement with non-members”.
[1][1]Woerz, E. et al., The EU’s energy Diplomacy: Transatlantic and foreign policy implications, Study for the AFET Committee, Directorate General for External Policies (XPOL), Policy Department, European parliament, June 2016.
[2] The IEA was founded in 1970s as a response by developed countries to the economic crises caused by oil supply shocks resulting from geopolitical events (e.g. Arab-Israeli wars) and the politically driven response of producing countries in the OPEC cartel.
[3] See EPRS In-Depth Analysis published in May 2016.
[4] See EPRS briefing on IRENA published in September 2016.
[5] Its 72 members include all IEA and OPEC members, and account for over 90% of global energy production and consumption.
[6] Germany, France, Italy, United Kingdom, Spain, Sweden, Finland, Danmark. Other participants include Norway, Russia, China, India, Saudi Arabia, Brazil and Mexico.
[7] Commissioner Arias Canete, Commissione Press Conference in Kytakyushu, Japan, on 2 May 2016.
[8] Commissioner Arias canete, see above.
[9] UNFCCC-United Nations Framework Convention on Climate Change.
