Research
CIEP’s current research and activities for 2009-2012 revolve around the issue of the growing mismatch between long-term energy needs, climate change visions and short-term market developments. As described in more detail below, the research agenda focuses on three main subject areas:
1: Development of European Energy Markets oil, gas and electricity) in which CIEP addresses the long process of liberalisation including regulatory and organisational change and the transition towards a low-carbon European energy market,
The European Union has been involved in a long process of liberalisation (and privatisation). Liberalisation was, however, not the panacea to solve all the energy policymakers problems, such as the public interests security of supply and environmental problems. The switch from a buyers to a sellers market challenged the political promise of policy makers that energy prices would decline as a result of efficiency gains. Moreover, the regulatory burden and the cost of organisational change pushed these economic rents elsewhere in the economy, while investor uncertainty resulted in bottlenecks in the system. Also, although many risks were privatised to the level of the consumer, information and instruments to reduce these risks are wanting, creating a backlash in some countries to not ‘go the whole nine yards’ in liberalisation. European member states instead promote national champions to improve the negotiation position with large third country transport and supplier companies. Despite the much heralded advantages of liberalisation, it was also clear that governments could never leave fuel choice to the market alone, nor to the Commission as evidenced by the Chairman’s conclusions of March 2006, if they were serious about their environmental and other policies. The 20-20-20 policy the European Commission is advocating has a profound impact on the market space and available companies choices, while the nascent external energy policy has impacted the energy relationship with Russia and other producers.
2: International economic and geopolitical aspects of the oil and gas markets, mainly with respect to the security of oil and gas supply in the European Union, in the context of an increasing dependence on imported energy;
In the next 25 years, due to increasing import dependency of the main energy consuming markets – Europe, U.S., Asia – competition for oil and gas will intensify, with consequences for the political and economic relations with these regions. The long term goal of moving away from fossil fuels (and their import dependency), and the short term supply bottlenecks and higher prices will seriously challenge the security of supply agenda. Security of energy supply is increasingly becoming an integral part of the foreign policy agenda, also in the EU, although development of these policies (and external energy policy) is excruciatingly slow. In a supply-constrained world, policy competition and strategic relations over energy resources can easily undermine the current international trade and investment system. Geopolitical and geo-economic competition to divide international wealth and the resources to produce this wealth pose a challenge to the organization of the international system. In this context the policy toolbox of the EU and the individual member states remains incomplete to deal with the new challenges, such as instability in key producing regions and competition for resources with main consumer countries. CIEP’s research on security of energy supply can be best posed in terms of the recently published Shell scenarios: can the world opt for Blueprint or does the world of Blueprint either run through Scramble or is unattainable in the current international setting? This question also ties in the third research theme, the low carbon economy.
3: Energy and sustainable development, with the focus on transition towards and governance structures of decarbonised energy markets,
Alarming UNFCCC reports, Al Gore’s film “An Inconvenient Truth”, Hurricane Katrina: these are just a few examples of the many events that have recently drawn the world’s attention to the dangers and urgency of the climate change problem. The present fossil fuel-based global energy sector, with its large CO2 emissions, is one of the key identified causes of global warming. There is a growing international consensus, particularly among OECD countries, that a transition to a low-carbon energy sector within several decades is imperative, if only to make room for Asia’s economic development. There is much more to the question of energy transition than climate change alone. CIEP is not involved with climate change science as such, but rather aims to examine the international political and economic drivers, or the lack thereof, and consequences of the envisaged global energy transition. Questions relevant to CIEP’s research into energy transition are, for instance: What does a low-carbon energy transition mean for international relations with and between oil and gas producing countries? What are the links between countries’ negotiating positions on climate change issues and the structures of their energy sectors and how will the development of new energy technologies in the fields of renewables and energy efficiency affect existing energy relations between countries?