Searching for a New World Order

The world needs a power willing and able to take on the costs of creating new governance.

by Nicoló Sartori
12 July 2019
12 min read
by Nicoló Sartori
12 July 2019
12 min read

This article is taken from World Energy (WE) number 43, "The Challenge". Read the magazine.

At the turn of the new millennium, the system of international relations experienced a moment of extraordinary transformation initiated by the collapse of the Soviet Union and the end of bipolarity on a global level. This transformation was characterized by the emergence of a hegemonic power—the United States—and by the affirmation of a multipolar world driven by a series of regional powers, first among them China. The energy sector has followed this period of change at almost the same pace, also experiencing a gradual change in balance and dynamics at the international level. In the space of a few years, there has been a shift from stable and predictable (though complex) relationships between the nucleus of consumer countries belonging to the block of western democracies, the OECD, and a relatively small group of producers gathered around OPEC (plus Russia), to a world characterized by new and rapidly expanding areas of production and consumption—especially in East Asia. This transformation has generated a rarely experienced level of complexity in energy relations at the transnational level, which have proven difficult to manage through the governance models established in previous decades. 

The change, on both fronts, seems unstoppable. In recent years, violent attacks on the process of globalization and traditional models of multilateral cooperation, and the emergence of strong pressure for an energy transition, have been redesigning the requirements and relationships of the various international actors in the field of energy, making them decidedly more complex. This complexity makes it ever more urgent—albeit extremely difficult—to define new stable and inclusive international governance architectures.

The growth of sovereignism and the fate of the multilateral approach

The emergence of sovereignist rhetoric as a recipe for internal politics, seasoned with continuous, insistent attacks on the current global multilateral order, is one of the characteristic elements of the current international scene. Not since the end of the Second World War has the idea of a global order based on multilateral institutionalism seemed to be in such jeopardy due to the attitude (and some concrete initiatives) of the major global players.

First among these players has been the U.S., which, with the election of Donald Trump, has effectively abdicated the role it created for itself and played for decades of guaranteeing the international architecture based on the role of the United Nations and of multilateral and inclusive institutions, to pursue a deliberately unilateral approach to various global issues. From trade policies to the climate, nuclear disarmament to the rejection of Iran's international rehabilitation, the choices made by the current U.S. administration seem designed to undermine any attempt to pursue the path of multilateralism as a modus operandi in international relations. The administration’s approach, unprecedented in its vigor, has not only exacerbated relations between Washington and its main global competitor, Beijing but also created an unprecedented gap in relations with European partners in the Atlantic Alliance, the usefulness and need for which Trump has repeatedly questioned.

Now, with a leader departing from the main road, in an anarchical system like that of international relations, many may be tempted to follow. Hence the emergence of new unilateral forces, particularly at the regional level, as in the case of Jair Bolsonaro and Andrés Manuel López Obrador, recently elected to the presidency in Brazil and Mexico respectively, or of Erdogan’s turn of the screw in Turkey, as well as the strengthening of power policies in aspiring global powers such as China and Russia. Even in Europe, although the outcome of the recent elections has averted the emergence of a sovereignist majority capable of taking control of the institutions, the Union still appears strongly divided and marked by nationalist positions. This not only determines the inherent weakness of the E.U. in defining its own policies and priorities for action but also risks limiting its international projection to protect the multilateral and inclusive approach historically promoted by European institutions.

Without a strong international Europe, with the United States fiercely aligned against globalization and the primacy of the United Nations, with China in search of global leadership (but not willing to bear the costs of hegemonic power) and with a number of regional actors wishing to carve out a role in their spheres of influence, the hopes of keeping solid and effective cooperation mechanisms alive are now reduced to a flicker. This, in turn, opens the door to international and regional uncertainty and conflict for years to come.

The implications of the energy transition

Alongside this dramatic redefinition of existing paradigms on the international chessboard, the global energy sector is experiencing a series of changes, many of them momentous. Some of them are already taking place, others will definitely follow in the coming years, but what is clear is that these trends will add further complexity and uncertainty to a scenario already undergoing a profound transformation. The energy transition and decarbonization processes induced—mainly, but not only—by the global fight against climate change, will bring with them a series of changes that cannot be limited to the energy sector, but will have a wider geopolitical impact. Factors such as the delocalization of energy production, the growing penetration of renewables, the increase in efficiency and self-consumption, the gradual reduction of the use of fossil fuels, will in fact determine a redefinition of energy requirements (and consequently the priorities of international politics) and the modus operandi of the main actors on the international chessboard.

In the medium term, the transformation of the energy paradigm on a global scale may lead to a redefinition of the balance of power between producing and consuming countries, the emergence of new areas of geopolitical and strategic interest and a gradual waning of interest in others. Consider, for example, the need to access new natural resources such as lithium, cobalt and rare earths, and the potential competition between the major international players to ensure control over areas and regions of greater production, or preferential access to them. We would therefore see a redefinition of the very concept of security of supply, not swept away by the affirmation of the energy transition, but simply shifted to other sectors and other areas of the globe. From a geopolitical perspective, the gradual withdrawal from fossil fuels could also have significant implications for the internal stability of the major producing countries, which are currently heavily dependent on oil revenues. The fall in revenues from exports of oil and gas to international markets would require these governments to deeply revise their economic development model, and with it all those socio-political relationships that have ensured stability in recent decades. The risk of growing internal conflict, though not definite, is around the corner, with a potential for instability to spread even on a regional and global scale. 

Finally, the implications of a technological and commercial nature must be considered, especially in a historical era characterized by the return of protectionism, trade wars and tariffs. The development of new cutting-edge technologies for the energy sector—from storage systems to wind turbines, from electric vehicles to hydrogen—will increasingly take on a connotation of power internationally. While on the one hand the availability of skills and technological know-how may be an essential element of energy security at the national level, on the other the ability to compete on an international scale and to penetrate the great energy markets of the present and the future (think of the potential of the African subcontinent, where about 600,000 people have no access to basic electricity services) are strategic factors both for internal economic development and for geopolitical projection on an international scale. In this highly competitive context, factors such as technological primacy and commercial expansion may become key elements of the energy policy of the big global powers, with strong implications for their international positioning.

What governance for the future?

The world is changing fast, and with it so is the energy market. New actors are emerging, both on the supply and demand side, new interests and new strategic priorities are developing, new commercial and geopolitical relationships are being created, new areas of competition (thematic and geographical) are emerging. In this context, the current governance mechanisms of the energy sector—essentially based on the dualism between a compact group of consumer countries under the IEA umbrella, and the consortium of OPEC producing countries (and some of its extensions, see ROPEC) and, albeit with a more limited impact, GECF (Gas Exporting Countries Forum)—are proving inadequate to face the changes that have been taking place for two decades, and will be even less adequate in facing the challenges of the energy transition. The debate within the IEA on expanding membership to include the new big consumer countries, the OPEC crisis and its growing inability to influence the performance of the oil markets, and the difficulties faced by the GEFC in taking the lead in the gas sector are a clear demonstration of the inadequacy of current international institutional architectures in the energy sector.

The new dynamics triggered by the energy transition, therefore, require a rethinking of the tools and mechanisms of global energy governance. This could certainly lead to positive results; however, we cannot rule out the possibility of partial or negative results. Much will depend on how and especially by whom this transformation process is managed. As already mentioned, in fact, there seems to be no clear will on the part of the main global players to deal with the issue of energy transition in a concerted and shared way at global level, nor to create a global institutional architecture capable of managing, directing and enhancing this complexity and preventing the risks of uncontrolled and harmful competition.

In general, in fact, the emphasis of the large and medium powers on a nationalist and sovereignist rhetoric (in the field of energy, but not only), which offers an easy way to win approval internally, is a concrete obstacle to the definition of renewed and strengthened forms of international governance. Added to this is the lack of a leading figure, hegemonic or otherwise, able to take on a whole series of costs linked to the creation and maintenance of a global energy order. Trump's U.S. is more ready than ever to eschew any temptation to assume global leadership, while China still seems too anchored to bilateral (and sometimes predatory) dynamics in its foreign policy. Added to this is a European Union in transition, too weak on the domestic front to promote an international effort and guarantee cohesion among all the components.

In the meantime, some partial solutions remain in place to discuss the international implications of the energy transition. On the one hand, the extension of the mandate and membership of the IEA, which would nevertheless remain an organization with a strong Western connotation, and therefore biased (if not in the minority) in the face of current trends in the international energy sector. On the other hand, the strengthening of the role of the G-20—whose members contribute in aggregate to 80 percent of world energy consumption—but which nevertheless has a limited capacity to address energy issues, not being part of the core issues dealt with by the group.

All suboptimal and transient options, demonstrating that global energy governance—based on current trends—remains one of the great international challenges in the years to come.

The author: Nicoló Sartori

Nicolò Sartori is a Senior Fellow and the Head of the Energy Program at the Istituto Affari Internazionali (IAI) in Rome. He is mainly focused on the European Union’s energy policy and on issues of energy security and specifically on Italian and European external energy policy. He has also worked as faculty advisor at the NATO Defense College in Rome where he carried out research projects on the role of the Atlantic Alliance regarding energy security.