Addressing Carbon Emissions and Oil Price Volatility

Introduction

The common dependency on energy, shared by societies around the world, entails policy challenges of global nature and scope. From dealing with the negative externalities of greenhouse gas emissions and adapting to dwindling low-cost reserves of fossil fuels in the context of massively rising demand driven by major emerging economies such as China and India, energy poses challenges that transcend national borders, involve both the public and private sectors and cannot be meaningfully addressed at national or regional levels. 

While the global dimension of energy challenges is unambiguous, the international community generally, and the transatlantic alliance in particular, has so far failed to supply the effective governance mechanisms that would form the basis of an effective multilateralism. Most of the existing institutions of energy governance have been crafted by the transatlantic alliance after the end of the Second World War, and thus in many ways ref lect the economic and political realities of the Cold War era. There can be no doubt that this existing and largely fragmented system is in need of serious reform. And it is also clear that the transatlantic partners will have to play a decisive role in that process.

However, the transatlantic alliance is confronted with a number of crucial challenges in this context. First, while the EU and the US promote broadly congruent goals and objectives in the context of global energy policy, there remain conspicuous exceptions where the transatlantic partners do not pull their end of the rope. The issue of climate change is one example. Americans and European still promote fundamentally different goals and strategies in international climate negotiations under the umbrella of the United Nations Framework Convention on Climate Change (UNFCCC). Transatlantic unity, while no longer a sufficient precondition for effective global solutions to emerge, is nonetheless of absolute necessity.

Second, as indicated above, joint transatlantic action is no longer sufficient to organize effective global energy governance. Even in case Europeans and Americans agree not just on goals but also on strategies to achieve such goals, their common weight, while still considerable, won’t be enough to result in lasting policy solutions. New powers, especially the major emerging economies such as Brazil, Russia, India and China (the so-called BRIC countries) need to be brought into the mix. Thus far, the transatlantic partners have failed to effectively include these crucial new players in the global energy arena. This especially holds true with regards to China, an increasingly important player in global energy.

Enhanced cooperation between the EU, the U.S. and China is therefore a crucial prerequisite for more effectively addressing global energy challenges. Indeed, as Javier Solana, the former EU High Representative for the Common Foreign and Security Policy, has argued the EU needs to ​“go beyond a narrow Western prism” in seeking effective global energy governance. Only through a shared understanding – not necessarily to be equated with an alignment of interests, but rather an increased awareness of, and the capacity to manage, divergences – can Europe and the United States succeed in contributing to designing effective global energy governance and help to include China as a joint stakeholder for effective global energy multilateralism.

This report addresses transatlantic commonalities and dividing lines in two key energy issue areas: mitigating carbon emissions and governing the global oil market. These issue areas are highly intertwined and a prerequisite for mitigating carbon emissions consists of stable prices of oil, the prime energy commodity. This report sketches opportunities and constraints for the transatlantic alliance in exerting leadership on these issues.

The report draws on a two-year research and debate project funded by the European Commission. The project, titled Common Goals – Different Approaches? Strengthening Transatlantic Cooperation on Global Energy Issues ↓