How Governing International Trade in Energy Can Enhance EU Energy Security

Abstract

Energy security, or the access to energy at an affordable price, is one of the main problems that humanity faces today and the European Union (EU) has to rely on energy-rich countries for its energy needs. This paper offers four ways in which the EU may enhance its energy security through the international trading system.

First, since the regulation of energy in international law is fragmented and largely incoherent, it is essential to understand the overall trade in energy system and determine its net effect in terms of EU energy security.

Second, all forms of energy should be subject to the same rules. Energy may become part of the World Trade Organization (WTO) agenda in the near future. Given that current WTO rules are far from addressing all the needs of energy trade today, is it necessary to have a WTO Agreement on trade in energy? If so, can and should the Energy Charter Treaty be used as a model? Moreover, now that Russia has joined the WTO and that energy is one of its greatest assets in economic terms, would this be the right time to include energy trade as part of the WTO Agreements? Those energy-rich Middle Eastern countries that are not yet WTO Members but wish to become WTO Members will most likely follow Russia. These Middle Eastern countries should prioritize the conclusion of negotiations to enter the WTO in order to integrate fully into the global trading system and protect their growing interests on world markets. WTO membership will certainly help eliminate any discrimination against them in their trade.

Third, since the EU is energy-dependent, it is necessary to propose models for enhanced governance of energy trade to promote energy security. The aim is to find ways so that this can be encouraged normatively. The expansion of the Energy Charter’s membership to countries in the Middle East and North Africa and to the Economic Community of West African States may be an avenue to enhance EU energy security through the creation of an infrastructure that will enhance international, long-distance trade in energy.

Fourth, the aim of the international community is to decarbonize the economy. With renewables, international trade in energy is likely to increase. In turn, the trading system can be a major vehicle towards moving away from fossil fuels to renewable energy. To this end, it can provide fair competition, economies of scale and knowledge transfer. Very little research has been conducted on the impact of preferential trade agreements (PTAs) in addressing climate change mitigation and energy security. It is thus worth exploring the potential of incorporating chapters addressing climate change mitigation and promoting renewable energy within PTAs, for which the EU could make use of its vast network of PTAs. There could well be tangible ways in which the EU can, through its network of PTAs, move towards greater energy independence as renewable energy becomes increasingly economically viable.

Keywords: energy security, international trade in energy, EU energy policy

JEL Classification: N7, Q41, Q42, Q43, K33