Can Energy Be Governed?

Energy lies at the heart of the world’s most pressing global challenges. Yet at both the global and national levels, energy is poorly governed. The fiasco of the Copenhagen climate summit is just one illustration of how far the world is from being able to bring about the desperately needed transition to a system of sustainable and secure provision of energy services.

The key role of energy in global problems is clear. Some two-thirds of the greenhouse-gas emissions that are causing climate change trace back to fossil fuel use. A renewed scramble for oil is raising fears of a new generation of geopolitical conflicts. Global economic instability correlates strongly with energy-price volatility. Economic development is in significant part defined by the process of overcoming energy poverty, yet 1.6 billion people still lack access to even the most basic energy services.

Only recently has it become clear that these seemingly disparate issues are a collective manifestation of a dysfunctional energy system. Globally and at the national level, energy is still conceptualized and managed in terms of energy sources, not in terms of the energy services those sources provide. Yet consumers of energy services have no particular interest in what sources of energy fuel their production, transportation, lighting, heating, air conditioning, or appliances. The existing paradigm serves to rigidify decision-making at a time when extraordinary flexibility and rapid change are essential.

At the global level, a host of inter-governmental organizations is tasked with addressing various pieces of the energy puzzle. Among these, the most conspicuous is the International Energy Agency (IEA). Created by oil consumers in the 1970’s in response to the OPEC price shocks and the embargoes by Arab oil exporters, the IEA has succeeded in establishing and supervising a system of national oil stockpiles, which has helped to prevent a recurrence. With a small but highly competent professional staff, the IEA has also become the primary source for the world’s energy statistics and is playing a key role in the climate debate.