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Energy Security, Trade and the EU

Regional and International Perspectives

Rafael Leal-Arcas, Costantino Grasso and Juan Alemany Ríos

Energy security is a burning issue in a world where 1.4 billion people still have no access to electricity. This book is about finding solutions for energy security through the international trading system. Focusing mainly on the European Union as a case study, this holistic and comprehensive analysis of the existing legal and geopolitical instruments strives to identify the shortcomings of the international and EU energy trade governance systems, concluding with the notion of a European Energy Union and what the EU is politically prepared to accept as part of its unified energy security.
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Chapter 1: Overview

Rafael Leal-Arcas, Costantino Grasso and Juan Alemany Ríos

I.  INTRODUCTION

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. Let us begin with two facts: first, the EU imports 53 per cent of its energy;1 and second, six EU countries depend 100 per cent on Russia for their gas.2 Imagine for a moment if any one of the EU’s energy suppliers were cut off. Many of the EU’s energy suppliers are politically and economically fragile. This makes the EU vulnerable, as we saw in the recent Russia–Ukraine gas disputes. In addition, EU companies pay more for energy than their competitors. All of this has consequences for the EU’s economy and quality of life. So, the EU urgently needs to diversify its energy supply.

We are not alone in this belief. In February 2015, the European Commission published a communication on the creation of a European Energy Union.3 This shows the urgency of the energy security problem in the EU. Moreover, the European Innovation Union, the Energy Community, the European Energy Union,4 and the Europe 2020 initiative address energy security as a priority, but policies seem to be reactive instead of addressing energy security in its complexity. This problem can be solved with appropriate legal tools. Energy governance has links with several policies: trade, investment, environmental protection, energy transit, energy security, finance, etc. Of these policies, energy trade has a high impact for European energy security policy. Currently, the international community does not address trade in energy as a cohesive entity and its governance is fragmented and disjointed, with selective membership and guided by state interests. Moreover, trade in energy covers very different markets: petroleum, coal, liquefied natural gas and electricity. All these markets have different characteristics: the first three are not network bound.

This book aims at developing effective trade policy instruments to enhance EU energy security. The approach is interdisciplinary, bringing together an analysis of trade in energy from the perspective of law, economics and international relations, with an emphasis on methods of legal analysis, which makes the book ground breaking and unconventional. It goes beyond examining the law and governance of international trade in energy and its effects on EU energy security to identify the existing gaps in energy trade governance. Thus it develops a concept of ‘governance by design’ through the interplay of various legal regimes and institutions with the ultimate aim of facilitating the creation of the planned European Energy Union. The aim is to achieve affordable, secure and sustainable energy. The Energy Union is based on five pillars, which are analysed in the book’s final chapter:

1.  security, solidarity and trust;
2.  the completion of a competitive European internal market;
3.  moderation of demand;
4.  the decarbonization of the EU energy mix (i.e., greater use of renewable energy); and
5.  technologies, research and innovation.5

The EU is the first region in the world to set up the ambitious target of decarbonizing its economy by 2050. All of this could be reproduced in other regions of the world and eventually create a new international energy order.6 This requires a fresh and comprehensive approach to legal instruments. To do that, we will answer some fundamental questions throughout the book:

1.  How does current energy trade governance affect EU energy security?
2.  How should the international trade in energy system be adapted to ensure EU energy security?
3.  How can the EU diversify its energy supply to improve EU energy security?
4.  How can the EU’s preferential trade agreements facilitate renewable energy for the EU?

Let us first start with the notion of energy security, which we analyse from the perspective of energy supply.

A.  Energy Governance and Energy Security: Definitions7

A valid definition of global energy governance is the fact of ‘making and enforcing rules to avoid the collective action problems related to energy at a scale beyond the nation-state’.8

What we mean by energy security is the satisfaction of humankind’s energy needs to maintain lifestyle levels in the developed world and to promote development and improve the quality of life across the world, including least-developed and developing countries. However, this notion still remains unclear. Depending on subjective factors, such as the distinct policy priorities of each state, this definition may be extended to mean ‘affordable’ and/or ‘sustainable’ energy. What is more, when discussed within the context of energy-producing/net-exporting states, this could be stretched to mean security of demand.9 However, when energy security is discussed in global terms, its content is less precise, and the deployment of the term global energy security can be deceptive.10 So while domestic energy security is a straightforward concept, it is less so at the international level, as it leaves several questions unaddressed, including: what does ‘global’ mean in this context?; is it achievable in the current normative and broader systemic setting?; who/which body is charged with the responsibility of addressing global energy security needs?; what changes would be necessary to achieve this?; and what are the implications for state sovereignty? While this chapter does not attempt to address all of these questions, it proceeds on the following bases: that a global energy security that is truly global should seek to address the universal collective needs of humanity, and that a global energy security strategy ought to be bifurcated in that it should aim to negate all zero-sum approaches to energy security, and to fully explore all non-polluting, non-exhaustible/ renewable energy sources through projects based on the broadest possible international cooperation.11

Although energy security is a concern common to all sovereign actors, it is currently not a collective objective as is, for instance, human security (i.e., the prohibition of aggression) under the UN Charter. What we witness when we examine instances of interstate cooperation in relation to energy security is that most of these are concerned with partial – not universal – energy security needs, namely the needs of the states involved. As discussed above, the furthest states go in terms of global energy governance is to deal with matters that engage energy in a thematically fragmented manner and to the extent that it is politically acceptable to them. The furthest they go in addressing their energy security needs is to the extent that each state deems a collective approach to yield more favourable results than going it alone. In terms of interstate cooperation on energy security, the furthest states go appears to be limited to engaging in bilateral arrangements, to setting up regional arrangements – e.g., the North American Free Trade Agreement (NAFTA) and the European Union/European Economic Area (and their bilaterals with significant producer and transit states such as Russia12 and Ukraine,13 respectively) – or to setting up other types of multilateral sector-specific arrangements – the example par excellence being the Energy Charter Treaty regime. In that respect, current interstate energy security arrangements are far from global. That said, it would be interesting to see whether the combined effect of these different regimes actually enhances global energy security in the sense that, arguably, the proliferation of preferential trade arrangements (PTAs) – e.g., customs unions and free trade areas – has contributed to trade liberalization.

Energy security is a theme relevant to instances of institutionalized energy-related international cooperation. For its part, energy security is an imprecise term in both the domestic and global context.14 What is more, the various themes we have listed above interact. For instance, arguably, an effective trade system and energy transit system enhances energy security for those economies concerned in the relevant instances of international cooperation. That said, energy security is not only about trade. A country that has all of its own energy sources still can have issues about reliability of supply or the price of energy (e.g., Nigeria) and, in turn, supply is affected by measures to manage demand for energy.

At the domestic level, a single agent – e.g., the state – is the authority that adopts measures towards the energy security of the territory/ economy that it controls.15 Such an agent is not omnipotent in its attempts towards energy security, given that the latter often relies on factors – e.g., availability and price of energy commodities – over which such a sovereign actor might have little or no control. At the global level, there is a plurality of actors16 who have influence over the global energy economy. While energy security is a concern of all sovereign actors, this reality unites all such actors to the extent that global energy security becomes a common concern. The plurality of actors and the variety of interests at play – e.g., interests across the national-regional-universal spectrum and the public-private spectrum – mean that, at the global level, the achievement of global energy security becomes less feasible, and that no truly universal regime exists charged with the task of providing governance for the global energy economy or for addressing energy security interests.17

Energy security itself is a nebulous concept, with competing definitions as to its meaning and scope.18 These definitions differ not only in their general conceptual understandings of the term, but also in its application to the different forms of energy resources such as oil and gas.19 One approach emphasizes the continuity of energy supplies,20 while another factors in the absence of price volatility above a given price,21 and a third approach extends this definition to the impacts on ‘the economy and in some cases the environment’.22 The European Commission’s broad definition of the term – which we use for the purposes of this chapter – falls largely into this last category:

The European Union’s long-term strategy for energy supply security must be geared to ensuring, for the well-being of its citizens and the proper functioning of the economy, the uninterrupted physical availability of energy products on the market, at a price which is affordable for all consumers (private and industrial), while respecting environmental concerns and looking towards sustainable development, as enshrined in Articles 2 and 6 of the Treaty on European Union.23

As the European Commission in the same document acknowledged, the path to EU energy security is one that takes into account the undiversified energy dependence of the EU economy and aims at reducing the risks associated with such dependence by diversifying sources of supply, both by product and geography.24 This path to energy security is, however, not as linear as it first seems, with there being a multitude of factors that exert strong influences. Examples include the EU’s own clean energy commitments, the proposed Trans-Adriatic pipeline and the ongoing shale revolution in the US.

Some regard energy security as an economic and even a security matter. From the EU perspective, unsurprising given the EU’s energy dependency, energy security is perceived from a supply security point of view. This is the notion we have espoused for the purposes of this chapter.25 In relation to EU energy security, this seems to engender all that could make EU energy policy complex, given that energy security is a matter that relies on several factors for it to be achieved.26

Firstly, however, we must be clear on what we mean by energy security. To answer this, we need to understand to whom the benefits of energy security accrue. For instance, if we were to answer this in connection with the EU, we would claim that energy security means the steady and secure access to energy supplies to meet the energy needs of all 28 EU Member States.27 It is also worth noting early on that the EU’s origins partly lie in matters connected to energy security.28

If we were then to supplement the question of what energy security is within the EU context by asking who might be a responsible or influential agent in fulfilling the objective of EU energy security, we enter the complexity of energy within the EU context. This is because to ask who is responsible engages the question of competences (e.g., who does what and to what extent); and to ask who is influential engages the question of competences plus who possesses the diplomatic clout. The latter becomes even more pronounced when we take into consideration the disparate levels of influence between EU Member States. Furthermore, within the EU context, energy security has come to be heavily conditioned by environmental objectives with the addition of ‘sustainable’ to the notion of EU energy security.29

As stated above, energy security relies on a variety of factors – including efficient infrastructure and consumption, and diversity of primary energy mix and supply – that, again, illustrate how EU energy security may rely on action across the EU policy spectrum and that engages the internal–external cleavage. Much has been done at the intra-EU level to rationalize the energy market to the extent that the Internal Energy Market (IEM) is heading towards coherence.30 Much has been said to make possible more cohesive external energy action. We conclude, however, that so long as the constitutive treaties that spell out EU competence upon which the EU lies are not substantively amended, the furthest the EU could go in relation to EU energy security is to act to the extent that the treaties make possible – that is to say, to the extent that the EU has powers to address some, albeit not all, key factors upon which energy security relies. That said, it is our view that EU institutions appear to be making full and very competent use of the means at their disposal. For instance, the European Commission makes good use of its capacity to make recommendations to the Council and the European Parliament, and to also propose legislation focused on enhancing EU energy relations and ultimately energy security.

In sum, therefore, it is useful to conceptualize EU energy security primarily in relation to the structural challenges – namely the question of vires – that the EU faces when compared to other prominent players on the international plane, e.g., sovereign actors such as China and the US. The energy markets of the 28 EU Member States vary widely in terms of, among other things, infrastructure, investment and pricing. The IEM is not fully integrated; however, it is not far from achieving this in relation to electricity and gas. What is more, the EU has strategically promoted the integration of energy markets and regulatory convergence with bordering third-party states, through the medium of rational markets, to the end of its own energy security. In that respect, perhaps what has so far been achieved in terms of the promotion of EU energy security is optimal, given the circumstances.

B.  What Is the Challenge?

1.  The governance of international trade in energy

Currently, there is no cohesive governance for global energy trade. On the contrary, governance of energy trade arises by default, rather than design, through the ad hoc interplay of different aspects of the international economic system.31 This has implications for the EU, which relies heavily on the rest of the world for its energy supply32 and, consequently, its energy security.33 The governance regime for energy trade is not conducive to EU energy security because of the fragmentation of the global and European energy trade regimes, the lack of cohesiveness of the global and European energy trade systems, divergent national interests and the diversity of energy sources.34 It is vital that the EU take the right steps and decisions to ensure a more secure, clean, competitive and sustainable energy system. At the global level, a more cohesive global governance system for energy trade would facilitate energy flows, avoid unnecessary legal disputes and provide predictability. Achieving this will require a thorough understanding of the elements, workings and evolution of the current global energy trade governance regime and its consequences for European energy security.

Energy trade is a key component of both the global and EU economies, and international trade in energy spans a number of policy areas, including trade, investment, economic development and environmental protection. The very nature of energy – namely its centrality to almost every field of human endeavour – and the very nature of traditional energy resources – namely finiteness, uneven distribution and high desirability – lead to the politicization of energy and encourage intense competition for control over energy resources between actors.35 While energy supply and consumption are important aspects of the global and EU energy economy,36 they do not exist in an equilibrious relationship. Rather, they are heavily mediated by political considerations and by the very operation of global markets, which dictate the extent to which energy needs are ultimately met.

The dominant opinion is that trade liberalization will increase economic activity and therefore energy consumption. All countries require energy resources, but few possess them, and thus trade in energy (primarily oil and gas) is crucial to fulfil global energy needs.37 Internationally, there is more trade in oil than in anything else. ‘Fully half of world trade in services is intensely energy-dependent.’38 Yet, the General Agreement on Tariffs and Trade (GATT)/World Trade Organization (WTO) has historically not preoccupied itself with energy trade. Very few energy-rich countries saw a need to join the GATT/WTO club, given that the reduction of import restrictions – one of the main goals of the multilateral trading system – is not an issue when it comes to energy. Saudi Arabia, a major energy-producing country in the world, only joined the WTO in 2005 and several energy-producing countries are still not WTO members.

Despite apparent overlaps between institutions and regimes involved in energy trade governance, there are significant gaps in the system. The result is a mixed bag of incidental outcomes arising from an array of disjointed energy-related institutions and processes operating at various scales (bilateral, regional, etc.), often each with its own selective membership. Wholesale change to institutions requires more time than is available, and so the book will focus on the trade aspects of energy governance and on how they could be adjusted to better promote EU energy security interests.

The book will map the complexities of EU competences against its energy policy, in accordance with Articles 4.2 and 194 of the Treaty on the Functioning of the European Union (TFEU), to identify governance gaps. For the EU, improving energy security will involve taking regulatory and policy measures which address its internal–external cleavage.

2.  Sovereignty over natural resources

Energy is one of the biggest challenges facing the EU today. With very few energy reserves of its own, the EU currently imports over half its energy, making it extremely reliant on the rest of the world for its energy supply. It is in the EU’s interest to diversify its energy sources and supply channels, and also increase energy efficiency by promoting more sustainable practices and greater energy market integration. In fact, we see efforts in those directions through the promotion of the IEM and the Energy Community.39 Trade policy and regulation can be instrumental in achieving these goals. For example, there is potential to incorporate energy-efficient provisions within regional and multilateral agreements; there are trade incentives to better manage competition and invest in technologies such as up-to-date energy grids; and possibilities for exporting cutting-edge EU technologies through the EU’s trade and bilateral cooperation agreements.

EU energy security depends upon institutionalized energy-related internal as well as international cooperation.40 For instance, arguably, effective systems for energy trade and energy transit enhance energy security for those economies involved in such cooperation. At the domestic level, a single agent – namely the state – is the authority that adopts measures towards the energy security of the territory/economy that it controls.41 Such an agent is not omnipotent in its attempts towards energy security, given that energy security often relies on factors – e.g., energy commodities’ price and availability – over which it has little or no control. At the EU level, there are numerous actors who have influence over the energy economy, including EU and Member State bodies. This plurality of actors and the variety of interests at play – e.g., interests across the national–regional–universal spectrum, the public–private spectrum and across the policy spectrum – mean that achieving EU energy security is a very complex challenge.42 While all sovereign actors/economies have an interest in their respective energy security, global energy security is essentially a concern to none. In that sense, it is not a common concern as is the case for climate change.43

At the international level, the EU is one of a patchwork of institutions that may have implications for cross-border energy trade.44 While the EU lacks the powers of a sovereign actor to diplomatically pursue its energy security in the manner that China or the US may, it does possess a comprehensive energy policy that is multifaceted and that makes good use of the powers that lie within its competences.45 The WTO also provides governance over trade within its scope, including over energy trade. The WTO does not handle energy commodities any differently from other tradable commodities within its scope. In that sense, it provides energy trade governance by default. Another example is the Energy Charter Treaty (ECT), whose principal concerns surround the investment protection and trade aspects of energy between contracting states.46 Many other institutions exist that provide degrees of governance over aspects of trade in energy at the interstate level. This patchwork of institutions and regimes amounts to a sort of ‘accidental’ energy trade governance, and presents some areas of overlap. For instance, both the WTO and the ECT have rules that apply to the trade, investment and environmental protection aspects of energy. These overlaps in no way amount to cohesive governance of energy trade.

II.  BACKGROUND TO EU ENERGY POLICY47

In this section, we will attempt to survey the different governance frameworks that address energy trade in an EU context by looking at the various institutions and instruments that operate in the energy trade sector which may have a bearing on EU energy security. The purpose of this section is to provide insights into how disparate energy realities are across the bloc of 28 states. These realities are important, given that considerations specific to a particular EU member might be the driving factors behind the policies that member would want to promote at the EU level. It might be more difficult to persuade EU Member States that rely heavily on energy sources other than gas and oil to support a common EU position aimed at more institutionalized relations with gas and oil behemoths such as Russia, other members of the Commonwealth of Independent States (CIS), and of states across the Middle East and North Africa (MENA) region.

For instance, states that derive a large share of their electricity from coal might be indifferent, or in some cases opposed, to deeper EU–Russia economic integration. In the case of Poland and the Baltic states, for example, this could be compounded by historic animosity towards a state they regard to be the successor to Imperial Russia and the Soviet Union, rather than the most important EU energy partner. On the other hand, it might be in the national interest of those highly reliant on gas imports for their electricity, e.g., Luxembourg and the Netherlands, to promote a more strategic approach.48 All the instances of divergence between EU Member States present a situation that makes cohesive policymaking more difficult than it would be in a fully confederated system charged with the external relations of the whole (e.g., Germany, Switzerland and the US), not simply due to EU structural/vires issues but also due to the highly divergent infrastructural, economic, regulatory and diplomatic climates that exist from EU Member State to Member State.

In this respect, it may be helpful to think of the EU to be:

1.  a fully federated entity solely in relation to policy areas in which it has exclusive competence;49
2.  a loosely federated entity for shared competence policy fields in which the central authority (the EU institutions) must ensure that it develops policy to the extent acceptable to the constituent elements (i.e., the Member States) of the federated entity (the EU);50
3.  an association of states for policy areas that fall outside both exclusive and shared competence EU remits.51

An EU member’s position essentially seeks to capture the interplay of considerations at the national level that arise in relation to each EU member’s economic, political and historical tradition. An EU member’s position, in turn, interplays with those of its peers before, if ever, an EU common position is finally adopted.52 All this makes a cohesive EU energy security policy particularly difficult to achieve.

The EU faces structural limitations in sui juris promulgating a comprehensive energy strategy, quite unlike how a sovereign actor would. This is due to the multifaceted nature of energy that leads to certain aspects of energy falling within the exclusive or shared competence remit of the EU, while other aspects of energy sit squarely with Member States. Even where matters sit with the EU, there are other issues – e.g., how a decision might be adopted – that are capable of complicating or even stalling the adoption of a common position.

A.  Allocation of Competences Between the EU and its Member States

The EU is a sui generis interstate organization composed of 28 sovereign states that has certain intergovernmental and – most pertinently, for the purposes of this chapter – supranational/federal-like features. It is worth noting the general parameters of competence allocation between the EU and its Member States.53 Broadly, EU Member States – through the founding treaties – have expressly endowed the EU with exclusive competence (that is to say, to the exclusion of its constituent Member States) to handle such matters that are directly linked to principally the achievement and completion of the customs union and internal market, the competition rules of the internal market, and the administration of the monetary union for those EU Member States that have adopted the euro as their currency.54

Although apt historical precedents do not seem to exist,55 some parallels have been drawn between the EU and Germany, Italy, and the US during, in the case of the first two, their unificatory/nationalist geneses, and in the case of the last one, its secessionist genesis.56 Also, parallels have been drawn to the Canadian model in terms of how EU Member States seem to interact with the overarching EU order.57 What the EU has achieved is to create a core of states that had historically – in their previous configurations – been belligerent towards each other. This core, in turn, attracted the polities of smaller states at the periphery into an economic order within which it is unimaginable for armed conflict to break out. In that respect, this order of sovereign equals – deeply tied together economically through buy-in, rather than military force – has been quite unlike any other historical precedents of empire, and comes the closest to the Kantian ideal of a peaceful universalism.58

What ought to surely set the EU apart from all confederated examples is its limited capacity to represent – though its institutions – its Member States across the entire policy spectrum. In other words, its limited vires – as opposed to institutional – capacity to handle the foreign relations of EU members to their exclusion. That said, the EU is endowed with powers to act in its own right and to the exclusion of EU members – including to contract with third-party states and other international organizations59 – in matters that fall squarely within its exclusive, yet limited, competence remit.60 However, it should be borne in mind that these powers derive from treaties contracted by sovereign actors who, at any time, may potentially withdraw in accordance with international law, and, consequently, re-assume full sovereign control over such aspects of policy that are currently within the EU’s exclusive competence remit.

In relation to certain other matters that, although important, had not been deemed to be indispensable to the achievement of the principal aims of the EU, the original EU Member States involved in drafting the founding treaties of the 1950s have extended a degree of competence to the EU to act alongside Member States. Competence over such matters is therefore shared.61 ‘Energy’, in its broad sense, could be seen as one such matter, although there are aspects of energy, such as customs policy on energy imports into the EU, which are clearly a matter over which the EU is competent to develop policy to the exclusion of Member States.

Equally, there are other features of energy that may sensibly be considered to be within the sovereign preserve of EU Member States. An example would be, for instance, German diplomatic efforts with Russia to promote the interests of German energy downstream companies (over those of other EU Member States’ energy companies) by having EU energy imports from Russia arrive into Germany.62 Generally, it can reasonably be assumed that all other matters over which the treaties are silent (by containing no express provision) remain the sovereign preserve of EU Member States. Fundamental tenets of treaty interpretation would support this view.63 In that sense, assessing the appropriate level of EU action initially requires the identification of the various policy matters implicated in order to subsequently assess what could be done at the EU level without the EU institutions unjustifiably infringing upon whatever prerogatives have been preserved by the 28 sovereign actors that make up the EU.64 It is also important to bear in mind that the challenges the EU faces in developing and promoting a coherent energy policy are not limited to inherent and systemic limitations, but stem from the grossly disparate energy realities among its 28 Member States.65

That said, EU Member States are obligated to refrain from acting in ways that would undermine EU external and security policy action.66 This is a provision with a potentially restrictive effect on Member States’ policy space, given that it is not unusual for their energy policies to contain features that affect EU interests in the EU’s external action. On the other hand, safeguard provisions exist that aim at the containment of EU competences to the limits prescribed in the founding treaties, that promote proportionality in EU action, and that promote efficient use of shared competences.

Additionally, the founding treaties further contemplate the possibility that there may be cases in which, while the EU has no express competence (i.e., neither shared nor exclusive competence) whatsoever to act, it may be appropriate for it to do so, so long as Member States expressly and unanimously consent to this via the appropriate EU deliberative and decision-making bodies.67

The foregoing has been included in order to outline the high-level EU constitutional coordinates within which to understand the question of competences. It is important to bear in mind that, because of energy’s multifaceted nature, different levels of EU competence apply to different energy-related issues. This makes it difficult to identify the relevant EU competence without having first identified which energy-related issues will be engaged.68 Finally, in relation to the aspects of the EU constitutional framework that may affect energy, the advent of the Lisbon Treaty has had certain implications for EU competences over energy. However, importantly, this has not been in a manner that erodes Member State prerogatives. In relation to energy, the Lisbon Treaty provides some degree of streamlining, while boosting the EU’s environmental protection objectives by giving these a more prominent role in EU energy policy development. This has been expressed in legislative backing for renewable energy within EU policy as a means of making good on the EU’s commitment to environmental protection and to achieving a more sustainable energy reality.69

Returning to the question of EU powers to handle external energy relations, it may be helpful to approach this through a series of assessments: first, it would be necessary to assess whether an energy-related proposal in question falls within the exclusive or the shared competence remit of the EU. Should it unequivocally fall within the former category, the EU would enjoy unbridled powers to pursue the external aspects of the energy-related policy proposal in question. Should the energy-related policy fall within the latter category, it would then be necessary to assess how the proposal ought to be decided at the EU level – that is to say, whether it engages such matters that the Council of the European Union70 may have to decide unanimously or by majority in order for an EU policy to be adopted. In broader terms, Article 208 TFEU expressly mentions that the EU and its Member States ‘complement and reinforce’ each other in a framework of shared competence.

Article 192.2(c) TFEU refers to the vires of the Council to seek to legislate or take measures that significantly affect a Member State’s choice between different energy sources and the general structure of its energy supply. We witness a high degree of incursion by the supranational into the national sphere. However, Article 192.2 introduces safeguards by making clear that decision making by the Council under Article 192.2(c) must be reached in the Council on the basis of unanimity and not by qualified majority.71

What this might indicate is that, in the final analysis, crucial energy security-related measures with strong diplomatic overtones such as measures that, if taken, affect rather significantly a Member State’s choice between what energy sources it may use, or how the general structure of its energy supply ought to be, remain firmly with Member States given the unanimity requirement in such cases. In effect, this preserves certain sovereign prerogatives of Member States.

If we take as an example Directive 2009/28/EC,72 we note in its preamble that this instrument was adopted in accordance with Articles 95, 175.1 and 251 of the Treaty Establishing the European Community (TEEC).73 Having regard to Articles 175.1 and 251, which are cited in this directive, decisions were adopted within the Council on the qualified majority decision-making procedure. This is interesting, given that Directive 2009/28/EC sets, among other things, mandatory national targets for the overall share of renewables in a Member State’s final consumption,74 which could be interpreted as significantly affecting a Member State’s choice of energy sources. However, it might have been the view of Council members that the interference was not so significant as to invoke the unanimity-based decision-making process.75

As we shall see below, EU energy policy is multifaceted. Its introspective aspects have been adopted to, among other things, integrate the IEM in terms of gas and electricity, and to promote energy efficiency and the use of renewables. There is sufficient legal basis within the treaties – namely the TFEU – for the EU to take action, e.g., by promulgating policy, to handle aspects of the IEM. Conceivably, creating an effective IEM also rests on a degree of regulatory convergence across the EU. Under the TFEU,76 the EU may legislate to such an end. However, whether either the qualified majority vote or the unanimity-based Council decision-making process applies depends on which matters are being considered for convergence. The language of the relevant provisions does not make it an easy task to ascertain which decision-making process applies, given how nuanced it appears to be. To make this clear, let us look at Articles 114 and 115 TFEU. Article 115 states that the Council in unanimity may adopt such measures for the approximation of laws across the EU in relation to matters that directly affect the establishment or functioning of the internal market, while, under Article 114, the Council may decide on the qualified majority basis for measures for the approximation of laws that have as their object the establishment or functioning of the internal market. Here we witness the cleavage in EU law and policy making in relation to Council decision-making procedures. Furthermore, the TFEU contains the legal basis for the integration of energy infrastructure and the development of EU-wide energy infrastructure.77

1.  The situation prior to the Lisbon Treaty

Until the entry into force of the long-debated, but finally ratified in 2009, Lisbon Treaty, there was no express provision for the development of a common energy policy at the EU level.78 While numerous false starts were made towards this objective, consensus was elusive.79 As a result, the pre-Lisbon Treaty period was characterized by EU-level energy policy developments being an incidental function of the EU’s ‘environmental protection’, ‘internal market’ and common commercial policy mandates.80 During this period, energy policy was primarily formulated and implemented at national level.81 This position gradually shifted in the new millennium as a number of factors such as the increasing dependence on external energy sources, the lack of EU influence on the energy supply side and the potential failure of the EU to meet its climate change obligations under the Kyoto Protocol led to the recognition of the need for a pan-EU policy aimed at ensuring long-term energy security.82 This recognition first manifested itself in a European Commission Green Paper on the ‘Security of Energy Supply’83 in 2000 and was subsequently followed up in a number of similar documents and accords, all of which were slow but steady steps towards a pan-EU energy policy that ultimately came into force through the Lisbon Treaty.

2.  The Lisbon Treaty

The entry into force of the Lisbon Treaty of 2009 represented a turning point in the structure of EU energy policy governance. First, it marked a shift in energy policy from being an exclusive EU Member State subject to one upon which EU Member States and the EU possess ‘shared’ legislative competence.84 This means that both the Union and its Member States can ‘legislate and adopt legally binding acts’ in the area of energy policy.85 However, EU Member State competence is limited to the extent that the Union has not exercised or has decided to cease exercising its competence.86

Secondly, and more crucially, a separate section (Title XXI) on energy was included in the form of Article 194 TFEU. This provided that the Union would act in a ‘spirit of solidarity’ between EU Member States to ‘(a) ensure the functioning of the energy market; (b) ensure security of energy supply in the Union; (c) promote energy efficiency and energy saving and the development of new and renewable forms of energy; and (d) promote the interconnection of energy networks’.87 While the same provision allows EU Member States to retain decision-making autonomy in matters concerning the mix of energy sources, the conditions for exploiting its energy resources and the structure of its energy supply,88 this approach has signified a marked departure from the earlier approach in the pre-Lisbon Treaty era of EU Member States retaining complete control over policy decisions in the energy sector.

In addition, Article 207 TFEU transferred the competence for foreign direct investment protection arrangements from the national to the EU level. This is important in the energy policy context because many of the major investment protection cases so far involve energy-producing companies.

Thus, the Lisbon Treaty is an important stepping-stone for the EU to emerge as an entity with one voice in the international energy setting.89 While questions exist about the method of policy formulation and implementation90 – most notably the unanimity requirement of Article 194.3 TFEU, which effectively allows each EU Member State a veto on decisions – there is no doubt that the Lisbon Treaty is a solid manifestation of not just the recognition of the EU’s precarious energy position, but also of the general agreement that the way forward lies through concerted and unified action by EU Member States. Whether the Lisbon Treaty, with its unanimity requirement for most energy policy decisions, is an effective or even appropriate framework for the fulfilment of this long-standing objective, however, remains to be seen.91

Beyond the energy field, some commentators see the external relations codification of the Lisbon Treaty as rather unsatisfactory92 or fuzzy93 and some even expressed the opinion that the Lisbon Treaty failed when it came to explaining external competences.94

B.  EU Energy Policy and Its Complications

A number of authors predict that the wars of the future will not be fought over religion or freedom, but over basic resources and energy.95 While these predictions may seem overly drastic, the fact remains that global energy consumption demands are growing at rates that are far from sustainable over the medium term, given the currently accessible sources of energy. For every country or economic bloc, a crucial component of the equation for its long-term sustainability is the concept of ‘energy security’, which deals with the ability of an economy to sustainably provide for its long-term energy demands.

This section presents the case of the EU – a major economic bloc – in the context of the governance frameworks that contribute to its energy security.96 The discussion is significant, given the weak energy position the EU has traditionally possessed and the steps it has taken to remedy the situation. The journey towards an energy-secure EU requires strong governance mechanisms and structures that ensure not only that internal EU policy is undeterred from its energy security objectives, but that externalities such as the effects of a changing global energy environment are carefully studied and accounted for. It is within such a context that this section seeks to examine the existing EU energy governance framework and the effects that are likely to result from developments in global energy trade.97

The nature of EU energy policy has been examined previously.98 We notice that EU energy policy is comprehensive and multifaceted. Multiple European Commission communications testify to this. EU energy policy extends over a wide range of policy matters that relate to energy, and we note that EU energy policy encompasses inward- and outward-facing aspects. Until now, EU-level energy policy has predominantly been inward looking, however. EU energy policy aims at, among other things:

●  the integration of the intra-EU electricity and gas markets through the IEM;99
●  the promotion of energy efficiency within the EU;100 and
●  the decarbonization of EU economies.

Much of this relates to the internal EU reality and applies to intra-EU territory. The EU is close to achieving an internal market for energy101 and has made initial steps to harmonize efforts to use energy more efficiently. However, the advancement of EU energy interests cannot be, and – as we shall see – is clearly not, restricted to introspective EU measures.102

An economic bloc that is largely energy dependent will only be able to secure its energy supply by looking outward. With the EU aiming at decarbonizing, or at least phasing out, the most polluting hydrocarbons such as coal, while at the same time phasing out nuclear energy, as some EU Member States intend to do,103 EU energy security will not be achievable through energy savings alone. Consequently, the EU also directs efforts outward by engaging with third-party states in order to encourage, outside its borders, a range of practices such as promoting open and stable markets for energy resources, more efficient and sustainable energy use, energy sector liberalization and investment protection for its energy-producing companies abroad, and pro-market processes that, arguably, contribute towards the promotion of EU energy interests by enhancing the volume of energy commodities that eventually reach the global and EU markets. We could call such efforts directed outside the EU, and principally concerned with energy, the EU’s external energy policy.

However, notwithstanding the above, the multifaceted nature of energy – and the breadth of policy matters it engages – complicates matters for actors such as the EU when we compare it with sovereign entities such as the US or the People’s Republic of China. This is because the various matters energy may engage at the intra- and extra-EU fields of action – for instance, diplomacy, trade, competition and market regulation, environmental protection and investment protection – in turn engage different levels of EU competence to act, ranging from exclusive104 to shared105 to zero competence.106

Although the EU faces challenges (be they inherent, systemic or incidental) in going about addressing its energy interests in the manner that China, India, Japan or the US may, it makes full and effective use of whatever competences it is afforded. For instance, the EU (or, to be more accurate, its predecessor, i.e., the European Communities (EC)) had been the prime mover behind the ECT. Moreover, the EU played a major role in setting up the Energy Community, which draws in surrounding energy-significant states.107 The ECT, for its part, creates, in addition to investment protection provisions, important energy transit rights for ECT parties,108 which, crucially, also extend to fixed energy-related infrastructure,109 thus enhancing energy trade flows between ECT parties and flows into the EU.

It is also the case that institutions such as the Energy Community allow the EU to maximize its interests in cases where it is perhaps politically challenging (or naïve to expect the EU) to think of energy-significant neighbouring states joining the EU. In the immediate aftermath of the collapse of the communist regimes across Eurasia – in what had been lauded as the end of history110 – it may have been more realistic to think that those economies on the brink of collapse might have been willing to join on whatever terms the developed Western European states may have imposed. This may have changed significantly nowadays with the protracted global economic slump and the increased Russian cloud in Eastern Europe and Central Asia.111 Market failure may have given rise to scepticism towards globalized markets and economic integration as being unquestionably safer paths towards modernization and economic development. The example of Russia’s having stabilized its economy and, to some extent, its society as a whole with the income from ‘black gold’ might have contributed to the idea that the liberalization of energy markets is not always the best way forward for energy-rich economies in Eurasia. Consequently, those states may be less willing to follow the EU in its striving for open energy markets.

Within this context, we could perhaps understand a realization on the part of EU members’ polities that it is best to focus on the core economic relations per se and to draw third-party states, particularly energy-significant states, into EU energy policy-lite arrangements. This might be especially true for states which are relevant for their energy supply because they have important gas pipelines, such as Moldova and Ukraine.112

C.  The EU Energy Situation: Dependent and Undiversified

Traditionally, the EU has been strongly dependent on imports to fulfil its internal energy requirements.113 To illustrate, between 2007 and 2011, the EU relied on non-EU Member States to supply around 53.5 per cent of its total energy.114 In fact, in 2011 alone, EU-27 energy import dependency included imports of 41 per cent of its solid fuels, 85 per cent of its petroleum and 67 per cent of its gas supplies.115 Such a high level of energy dependence has resulted in a concerning paradox, where the EU – consuming one-fifth of the world’s energy supply – is the world’s largest importer of energy.116 This positional incongruity is further accentuated by the lack of diversity within the EU’s primary energy suppliers (namely Russia, Norway and Algeria), who account for 85 per cent of the EU’s natural gas imports and almost 50 per cent of its crude oil imports.117

Source: Financial Times graphic, based on the International Energy Agency, Eurostat and US Energy Information Administration data.

Figure 1.1  EU imports from Russia as a percentage of total imports of natural gas, 2012

Such an undiversified reliance on external energy sources places the EU in a position that is vulnerable ‘to energy price shocks or energy supply disruptions, which may translate into significant losses to competitiveness and GDP, inflationary pressures and trade balance deterioration’.118 This was most visible in relation to the energy supply disruptions due to the 2006 and 2009 Russia–Ukraine gas disputes, which had significant deleterious consequences for infrastructure and quality of life in a number of EU Member States.119 Moreover, as can be seen in Figure 1.1, the degree of dependence on Russian gas varies from country to country in the EU.

Given the continuation of this trend of energy dependence in recent times,120 the forecast of its significant increase121 to 70 per cent by 2030,122 the rise of competition for energy supplies from emerging economies,123 and its, at best, scattered common external energy policy, there are important implications for the continued economic stability and security of European energy supplies.

D.  EU Energy Consumption vis-à-vis Global Energy Consumption

Even in 2009, in the middle of the financial crisis, EU energy consumption stood at c. 1,703 Million tons of oil equivalent (Mtoe).124 Of this figure, slightly less than half – namely, c. 48 per cent (c. 818 Mtoe) – was sourced within the EU. This means that the EU was energy dependent by 52 per cent of its total consumption.125 The level of EU energy dependency fluctuates depending on the energy resource in question. For instance, the EU imports up to 83.5 per cent of its oil, 64 per cent of its gas and about 38 per cent of its coal.126

The EU’s energy dependency also fluctuates widely depending on the origin of energy imports. For instance, 50 per cent and 80 per cent of EU oil and gas imports, respectively, come from just four non-EU Member States: namely Algeria, Libya, Norway and Russia.127 The fact that at the EU level, the 28 Member States are collectively importing more than half of their energy resources should not mask the EU Member States’ individual energy realities. At the Member State level, the degree of energy dependency varies hugely, as it is contingent upon their particular energy endowments, the form of their energy generation, energy efficiency, respective market access to the energy resources/markets of third-party states, and on whatever their other relevant energy-related particularities might be.

In terms of EU energy consumption, the breakdown for the EU-wide figure during 2009 (1,703 Mtoe) is the following: 37 per cent came from oil, 24 per cent from gas, 16 per cent from coal, 14 per cent from nuclear energy, and just 9 per cent came from renewable energy sources.128 This shows that 77 per cent129 of EU energy consumption drew from traditional energy sources,130 that is to say, from the sort of energy sources that are finite and patchily distributed across the world (and, most crucially in relation to climate change mitigation, highly polluting). In that sense, current EU energy supply draws heavily from sources that are highly politicized. In world history, competition for control over these resources has often led to great human suffering and loss. Simply put, the EU is 77 per cent energy dependent on controversial hydrocarbons.131

What is more, given that the proportion of hydrocarbons in the EU’s energy mix is more or less on a par with global figures, the proportion of environmentally friendlier energy sources in the EU’s energy mix is not substantially above the global figure.132 This is particularly alarming, given that the European Commission aspires to raising the share of renewables in its energy mix to 27 per cent by 2030133 and that the EU claims to have taken the need for energy efficiency and climate change mitigation in earnest.134 However, regarding energy efficiency, the European Commission did not provide a specific target. In February 2014, the European Parliament was even more ambitious than the EU Commission and voted (even if the vote is not legally binding) in favour of three binding targets for a 40 per cent greenhouse gas (GHG) emissions reduction, 30 per cent share of the energy market for renewable energy and 40 per cent improvement in energy efficiency by 2030.135

The specific realities of each Member State’s energy dependency are hugely disparate as we see below. What is more, EU energy dependency varies depending on the energy resource in question. For example the EU imports 83.5 per cent of its oil, 64 per cent of its gas and c. 38 per cent of its coal.136 Furthermore, as shown in Table 1.1, about 50 per cent and 80 per cent of EU oil and gas imports, respectively, come from only four countries: namely Algeria, Libya, Norway and Russia.137 One-third of those gas imports – 34 per cent – comes from Russia.138 The fact that at the EU level, the 28 Member States are collectively 52–53 per cent energy dependent should not mask the EU Member States’ individual energy realities. At the Member State level, the degree of energy dependency varies hugely, as it is contingent upon their particular energy endowments, energy efficiency, respective market access to the energy resources/markets of third-party states, and on whatever their other relevant energy-related particularities might be.

Table 1.1  Origin of EU oil and gas imports during 2009

OilGas
35% OPEC34% Russia
33% Russia31% Norway
15% Norway14% Algeria
17% others (including Kazakhstan 5%, Azerbaijan 4%)21% others (including Qatar 5%, Libya 3%)

Source: European Commission, ‘Key Figures’, Market Observatory for Energy, June 2011, p. 7.

To further contextualize EU energy needs, the EU’s share of global energy consumption is about 14 per cent.139 This is close to the 1,700 Mtoe annual mark and it has remained steady over the last two decades.140 By 2035, though, the EU’s share of global energy consumption is projected to drop to about 10 per cent,141 while global demand is projected to rise substantially over the next two decades, as can be seen in Figure 1.2, which provides a snapshot of the growing demand for energy in the world.142 This will happen as a result of more efficient use of energy within the EU over the next two decades, alongside the fact that future increases in global energy consumption are likely to be attributable to countries such as China and India (rather than those of the Organisation for Economic Co-operation and Development (OECD)).143 Based on these figures, by 2035, all other things being equal, the EU and the rest of its OECD peers are likely, collectively, to account for about 30 per cent of global energy demand, while China and the rest of the world are likely to account for about 70 per cent.144

Source: IEA; FT research.

Figure 1.2  A growing demand for energy in the world

While overall EU energy dependency across its primary energy mix stands at around 52 per cent, the situation varies widely in relation to each EU Member State. For instance, Denmark is entirely energy import independent while Malta is entirely energy import dependent.145 In terms of oil, Denmark is entirely oil independent, given that it is the only EU Member State that is a net oil exporter. The next comparatively better off EU member is the United Kingdom (UK) as it is 9 per cent oil dependent, followed by a very distant third, Romania, which is circa 50 per cent oil dependent. All other EU members’ oil dependency ranges from circa 63 per cent to 100 per cent.146 Predictably, such acute disparities, along with other differences between EU Member States, have implications for cohesive EU action.

In terms of how total EU energy consumption is broken down, roughly, 33 per cent goes on transport, 27 per cent on households, 24 per cent on industry, 12 per cent on services, and 2 per cent on agriculture.147 From this breakdown we can deduce that energy price volatility coupled with weather-induced increased energy consumption could have considerable implications for the economy and human welfare. For instance, higher energy prices add to industry costs that, in turn, may lead to EU-produced services and goods becoming less competitive in relation to like products produced in economies where energy costs are lower.148 Furthermore, as households account for 27 per cent of EU energy consumption, price increases would eat into household disposable income, which, in turn, could potentially depress consumption rates and thus affect the entire EU economy.149 In that respect, setting aside the environmental imperatives, promoting a paradigm shift from hydrocarbons – on which the EU is hugely externally dependent – to renewables could potentially immunize the EU considerably from such shocks.

It is interesting to read the above breakdown of EU energy consumption against the backdrop of overall EU CO2 emissions. The energy industries produce 35 per cent of EU CO2 emissions, closely followed by transport at 30 per cent, industry and construction at 18 per cent, and residential use at 11 per cent of EU CO2 emissions.150 In that respect, one could argue that action be largely targeted at the most polluting sectors. However, as we shall see below, given that the situation is disparate between EU Member States, a more variegated approach would be necessary when, for instance, we look at the energy industries across the EU. Electricity is produced in a more environmentally damaging way in Malta, Cyprus, Estonia and Poland than it is, say, in Sweden and the Netherlands.

E.  Energy Production in the EU

During 2009 the EU met 48 per cent of its energy needs from its own energy production. That is 818 Mtoe out of the 1,703 consumed that year. Sixty-six per cent of EU energy production comes from just five EU Member States: namely the UK, France, Germany, Poland and the Netherlands.151 The breakdown in relation to the 818 Mtoe figure, which represents the amount of EU-produced energy during 2009, is the following: 28 per cent from nuclear power, 19 per cent from gas, 13 per cent from oil, 20 per cent from coal, and 18 per cent from renewables. When comparing these figures to those of 1990, we witness that the share of coal in EU energy production dropped from 39 per cent to 20 per cent, the share of nuclear power increased from 22 per cent to 28 per cent, and reliance on renewables also increased from 7 per cent to 18 per cent.152 However, this should be understood against the fact that EU energy production in 1990 was higher – namely 943 Mtoe – largely due to greater use of coal back then.153 This illustrates the current trade-off between, on the one hand, environmental protection objectives and, on the other, the pursuit of energy security, which, for the most part, relies on hydrocarbons.

The situation between EU members is disparate not least in relation to their reliance on renewable energy. For instance, the most exemplary are Austria, Latvia and Sweden in that 68 per cent, 65 per cent and 58 per cent of their respective electricity needs in 2009 came from renewables at a time when the EU average was circa 18 per cent.154

When it comes to nuclear power – which, while less polluting than hydrocarbons in terms of CO2 and other GHG emissions, is also harmful to the ecosystem – the situation is also disparate between EU members. France leads with 76 per cent of its electricity derived from nuclear power, followed by Lithuania and Slovakia at 70 per cent and 55 per cent respectively, while the Netherlands derives less than 4 per cent of its electricity from nuclear power.155

Several EU states derive more than 50 per cent of their electricity production from gas. For instance, Luxembourg produces 74 per cent of its electricity from gas, the Netherlands about 63 per cent, Ireland about 57 per cent, and Italy about 53 per cent, while Sweden, Slovenia and Poland produce about 2 per cent, 3 per cent and 4 per cent, respectively.156

At the most polluting end of the spectrum is electricity generated by coal and oil. Poland and Estonia derive about 87 per cent and 86 per cent, respectively, of their electricity from coal. The Czech Republic, Greece, Bulgaria and Denmark derive approximately 57 per cent, 56 per cent, 48 per cent, and 47 per cent, of their respective electricity production from coal.157 In terms of electricity produced by oil, Malta and Cyprus derive almost 100 per cent of their electricity from oil, while the rest of the EU members derive between c. 17 per cent and 1 per cent of their electricity needs from this energy source.158

F.  Energy Pricing in the EU

In terms of energy prices and taxation, again, the situation is quite uneven.159 For instance, pricing and taxation may vary along several cleavages – e.g., according to energy source and from sector to sector within a national economy, and across the EU membership. For example, during the second semester of 2010 the highest electricity prices for households were in Austria, Belgium, Cyprus, the Czech Republic, Denmark, Germany, Italy, Luxembourg, the Netherlands, Spain and Sweden, while the highest electricity prices for industry were in Denmark, Germany, Ireland, Italy, Spain and Sweden.160 In terms of taxation for household-destined electricity, it is around the 15 per cent mark in Ireland, Malta and the UK, while it is around the 35 per cent mark in Denmark, Germany and Portugal. Taxation for industry-destined electricity is around the 15 per cent mark in Ireland, Luxembourg, Malta and Portugal, while it is around the 35 per cent mark in Denmark and Germany.161

III.  OBJECTIVES, SCOPE AND ORIGINALITY

A.  Objectives and Scope

This book is about finding solutions for energy security through the international trading system. Energy security is a burning issue in a world where 1.4 billion people still have no access to electricity.162 A solution for energy security is better governance of energy trade. The fact that governance of energy trade is fragmented, disjointed, with selective membership and guided by state interests hinders transnational energy flows and predictability. It also leads to unnecessary legal disputes. We focus mainly on the EU as a case study.

The book analyses the governance and geopolitics of energy trade, aiming at enhancing EU energy security. To that end, we have conducted a holistic and comprehensive analysis of the existing legal and geopolitical instruments to identify the shortcomings of the international and EU energy trade governance systems.

This book focuses on certain issues of energy trade law in relation to energy security questions, which have not been dealt with in detail so far. It discusses both governance and legal-framework questions, namely energy transit issues as well as multilateral, regional and bilateral trade agreements as tools to secure energy supply, with a clear focus on the EU, although not exclusively. The book also deals with legal security, with a discussion of the Yukos case. However, it is not the purpose of this book to exhaustively dissect all areas of energy; rather, specific aspects of energy such as gas, oil, unconventional sources of fossil fuel, and renewable energy. This book is equally not about fossil fuel and renewable energy subsidies, a subject beyond the scope of this study. Moreover, energy security is not only about trade. For instance, there are countries that have all their own energy sources and yet still have issues about reliability of supply and price. In turn, supply of energy is affected by measures to manage demand of energy, such as energy efficiency. This book, however, is conceived as an inquiry into energy trade.

B.  Originality

Existing literature has taken a comparative approach,163 but focuses only on some aspects of the problem. Some have carried out their comparative analyses on the trade aspects of energy;164 others on the external dimension of EU energy law and policy165 or the internal dimension of EU energy policy;166 others on the inter-relationships between trade,167 investment,168 transit169 and/or environmental agendas170 vis-à-vis energy;171 and others, while having carried out thorough cross-policy comparative examinations,172 do not explore the systemic implications of their subject matter for EU energy security per se.173 Moreover, there is literature on the implications of global174 and regional systems on energy security,175 specific to certain structures – e.g., the EU176 and the NAFTA – and to limited memberships. Other research looks at the relationship of regional or sectoral systems for global energy governance,177 but does not focus comprehensively on EU energy security.

The advent of the EU has tried to put an end to the divide between domestic and international law. The interaction of different layers of government, their legitimacy and various sources of law in an ever more fragmented legal system has been examined by other scholars.178 There are several approaches to this multilayered governance: a human-rights-based approach,179 mutual recognition,180 constitutional pluralism,181 global administrative law,182 cosmopolitan political theory,183 and theories advocating inherent fragmentation and pluralism.184

C.  Why Is the Problem Worth Researching?

Without a deep understanding of the current systemic aspects of energy trade governance and their implications for EU energy security, it is impossible to achieve effective change. Our world faces two major challenges when it comes to energy. For one thing, one person in five on the planet still lacks access to electricity, and almost three billion people still use wood, coal, charcoal or animal waste for cooking and heating. The other main global energy challenge is that, in places with access to modern energy services, the lion’s share of energy usage stems from fossil fuels. The findings of the book may lead to a fuller understanding of the link between energy trade governance and EU energy security, and thus establish the starting point from which EU and national policymakers as well as the academic community can propose reforms. The findings are also likely to be relevant to other jurisdictions beyond the EU.

Recent developments suggest the timeliness and relevance of this book. EU policymakers are giving priority to enhancing EU energy security. The EU is debating the idea of a European Energy Union (which will be analysed later in the book) to enhance energy security. The aim is to achieve affordable, secure and sustainable energy.

Our book sets the ground for future debates focused on regional and universal views of an emerging field within international economic law, international economic relations, and their interplay. This study seeks to tease out specific issues of EU energy security and the degree to which the various elements of the law and governance of international trade in energy in the wider economic context may systemically work in an integrated manner.

D.  Ground-breaking Nature of the Book

This study is unique in that there is no similar comparative study that takes a comprehensive approach over energy trade governance and its implications for EU energy security, thereby bringing together and going beyond many strands that predecessor publications left untied. Previous studies have examined specific micro-aspects of the field, e.g., the effect of trade liberalization on energy transit. However, there has been no overarching, cross-disciplinary study that examines the implications of international governance regimes on energy trade and EU energy security. Due to the lack of similar studies, despite the growing research area of energy security, academic literature is limited to the fields of economics and international relations. However, there is a lack of a similar all-embracing outlook to energy security and trade in the academic literature. In fact, this is the first study to analyse the governance of energy trade comprehensively, from the perspective of law, political economy and geopolitics. Looking at energy solely from the perspective of law would not suffice to understand its complexity.

An ambitious goal for the international community would be the creation of a new international energy order that eventually secures energy for all; a paradigm shift from the current institutional and normative framework of global energy trade governance. This book, however, intends to break new ground in international relations and international and EU law by assisting in the gradual constitutionalization of international and EU energy trade law in its wider economic context.185 It aims to lay the ground for future inquiry and discussion in relation to energy security within the context of international economic law, international economic relations, and their interplay. In fact, this study seeks to show that there is a wide range of institutions that pertains to international energy trade governance; yet, there is a misalignment between their respective purposes and mandates. The book will identify the reasons why this is the case. This in-depth concentration on EU energy security, and how it can be enhanced by changing the relationships through trade actors, is where our book is innovative and ground breaking. The ambition of attempting to answer very large research questions in their entirety and seeking to establish a new interdisciplinary field of study at the juncture of two different but related sectors (i.e., trade and energy) is why our book goes beyond the state of the art.

E.  Hypotheses

EU energy security can be fostered if energy trading is subject to governance through greater legal cohesiveness (for instance, through the creation of a General Agreement on Trade in Energy in the WTO context) and international political and economic cooperation. Moreover, we argue that the higher the level of legal harmonization, the easier it is to trade energy and, therefore, the greater the level of energy security. The book explores the following:

1.  how the fragmentation of the global and European energy trade regimes affects EU energy security;
2.  how national interests of sovereign states impact overall energy trade governance;
3.  how diversifying its energy sources would help the EU meet its environmental objectives alongside its energy supply diversification objectives.

IV.  METHODOLOGY AND RESEARCH QUESTIONS

The book applies the theories of multilevel governance to EU energy trade governance, which (1) guide the conduct of the EU and its Member States towards a duty of cooperation in the energy field and assist with distinguishing energy security concerns at global, supranational, national, regional or local level; and (2) acknowledge the complexity of multilayered energy trade governance. It explores what is the most appropriate allocation of regulatory powers to the various layers of governance.186

To understand energy trade governance, the book also benefits from the regime theory, which argues that regimes or international institutions affect the conduct of states or other international actors in international cooperation. Regime theory will be analysed in the context of idealism187 and realism188 to explain the knowledge gap in international energy trade law and governance, given that it views regimes as intervening variables such as power, interest and values, on the one hand, and behaviour and outcome, on the other.189 The project will also benefit from the concepts of transnational legal order,190 institutional theory,191 regime complexes,192 theories from the economic analysis of law (e.g., rational choice theory)193 and systems theory.194

Importantly, the project, while benefiting from the above-mentioned theoretical work, will devise an appropriate and encompassing theoretical framework, with the ambition of driving a much-needed paradigm shift. Addressing the roots and ramifications of energy trade governance fragmentation requires advancing existing theoretical groundwork towards a comprehensive understanding that will pave the way for further research.

The book looks at the dynamics of change in governance and how governance has to be changing. For instance, where are the limits, especially in the context of transnational policy networks, in global (energy trade) governance? World order describes the distribution of power thought to be applicable to the entire world. An international order is the practical application of this concept to a substantial part of the world. Regional orders involve the same concepts applied to a specific geographic area.195 In the context of the EU, how much unity does it need? How much diversity must it preserve to obtain a meaningful unity? State sovereignty is fragmented and there is a multiplicity of actors which drive the management of social systems.196 Although power is dispersed beyond the state, it has not yet disappeared and its role may have been enhanced as a result of the increased complexity.197 We explore these questions by mapping the regulatory and institutional relations of multilevel energy trade governance.

By linking international trade in energy with EU energy security and by using trade policy tools to promote and improve EU energy security, the book addresses the following research questions:

1. How does current energy trade governance affect EU energy security?

Since the regulation of energy in international law is fragmented and largely incoherent, this question is essential to understand the overall trade in energy system and determine its net effect in terms of EU energy security. This question will reveal the normative gaps in the existing fragmented trade in energy regulatory system as well as the main causes and consequences.

2. How should the international trade in energy system be adapted to ensure EU energy security?

This question aims to propose ways in which gaps could be filled and overlaps eliminated while remaining true to the high-level normative framework, concentrating on those measures which would enhance EU energy security. For instance, there could be a benefit for the multilateral trading system in lowering technical barriers to trade in energy-related goods and services, including in relation to technological goods and services that could encourage the proliferation of renewables.

As for using trade policy tools to promote and improve EU energy security, we recognize that from energy transit, to technology transfer, to investment protection and promotion, energy and trade present interplays across various fields. For instance, what improvements can be made to the EU trading system to ensure greater energy security and more efficient energy markets? From an intra-EU perspective, what are areas for possible reforms? Moreover, would a General Agreement on Trade in Energy provide greater EU energy security?198 All forms of energy should be subject to the same rules. Energy may become part of the 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 ECT 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? The two energy-rich Middle Eastern countries (i.e., Iraq and Iran) 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. These general issues can be divided into two precise questions:

3. How can the EU diversify its energy supply to improve EU energy security?

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 in which 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. Also, the promotion of sustainable energy use abroad may, in the long run, contribute towards EU energy security indirectly by making more efficient use of energy resources globally. This could be achieved through a variety of means that the European Commission has contemplated in successive communications. The book provides normative recommendations on how this could be facilitated.

The book examines current EU trade policy and EU trade agreements with other countries to assess how energy flows from those countries into the EU are being supported or affected by these agreements. This part of the book entails a thorough exploration of energy-rich countries’ energy trade policies with a view to expanding EU energy trade relations to further diversify EU energy supply.

4. How can the EU’s preferential trade agreements (PTAs) facilitate renewable energy for the EU?

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.199 To this end, it can provide fair competition, economies of scale and knowledge transfer. Very little research has been conducted on the impact of PTAs in addressing climate change mitigation and energy security.200 The PTAs trend seems irreversible and is likely to persist, given the current crisis in the multilateral trading system. 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.

V.  STRUCTURE OF THE BOOK

The book is divided into seven chapters. After this overview, Chapter 2 sets the scene of the book and provides a snapshot of multilevel energy trade governance. The current international energy trade governance system is fragmented and multilayered. Streamlining it for greater legal cohesiveness and international political and economic cooperation would promote global energy security. The chapter explores three levels of energy trade governance: multilateral, regional and bilateral. Most energy-rich countries are part of the multilateral trading system, which is institutionalized by the WTO. The chapter analyses the multilateral energy trade governance system by focusing on the WTO and energy transportation issues. Regionally, the chapter focuses on four major regional agreements (i.e., NAFTA, the EU, Mercosur and ASEAN) and their energy-related aspects and examines the various causes of the proliferation of regional trade agreements and their compatibility with WTO law. It then provides several examples of regional energy trade governance throughout the world. When it comes to bilateral energy trade governance, Chapter 2 addresses only the EU’s bilateral energy trade relations and uses the EU as a point of departure to explain energy security regionally. Chapter 2 explores ways in which gaps could be filled and overlaps eliminated while remaining true to the high-level normative framework, concentrating on those measures that would enhance EU energy security.

Chapters 35 analyse specific cases of energy security. Chapter 3 deals with energy transit from the perspective of the ECT as a means to enhance EU energy security. The Energy Charter provides principles for cross-border cooperation in the energy industry, mainly among the states of Eurasia. The Energy Charter Secretariat produced a second edition of the Model Intergovernmental Agreement and Host Government Agreement for cross-border pipelines (together defined as the Model Agreements), designed to provide ‘a template of prescriptive clauses that are designed to reflect generally accepted practices within a given field’.201 The Model Agreements aim to assist state–state and investor–state in cross-border oil and gas pipeline matters. The agreements seek to balance all participants’ interests in cross-border pipeline projects and provide a starting point for negotiations between potential partners. These Model Agreements are also available to non-parties to the ECT to use or adopt. Chapter 3 provides an analysis of several intergovernmental agreements and host government agreements on oil and gas transit pipelines in several parts of the world as examples of major transit and trade agreements that operate as tools to secure energy supply.

Chapter 4 examines the system of law and governance of international trade in unconventional fossil fuels. Currently, there is no cohesive governance for global energy trade. As discussed, this has implications for the EU, which relies heavily on the rest of the world for its energy supply, and consequently its energy security. The chapter’s argument is that shale gas and shale oil will revolutionize world energy politics and economics. Irrespective of whether environmentally acceptable extraction technologies and political consensus for the extraction of unconventional sources of fossil fuel in Europe can be found, the EU will not be able to avoid its impacts on global energy markets and will have to adapt EU internal and external energy policies accordingly. Chapter 4 explains the current revolution in unconventional sources of fossil fuel and how it may impact the EU geopolitically.

Chapter 5 analyses concerns that arise out of PTAs and renewable energy from the EU’s perspective. It analyses whether the EU’s PTAs include provisions aimed at promoting renewable energy (RE) to enhance EU energy security and explores the potential of incorporating renewables-related chapters in the EU PTAs to boost the RE market across Europe (and beyond) to reduce EU energy dependence. It examines available renewable energies and the most effective way to combine them with PTAs. It considers these two areas in relation to the current environmental and economic climate. In particular, it focuses on the EU as a single entity and considers how it may conclude trade agreements with countries in regions with RE potential such as the Middle East and North Africa. As a result, the EU will aim at reducing its reliance on receiving conventional energy sources such as the natural gas that the EU has been dependent on for years from Russia.

Chapters 6 and 7 explore future projects to enhance energy security. Chapter 6 asks the question how the EU can diversify its energy supply to improve its energy security. Energy security remains a vital issue for the EU, even more so in the wake of the events that unfolded in early 2014 in Ukraine. The EU’s already fragile position in the international energy arena in terms of supply security appears to be more uncertain than ever after the umpteenth falling out with its historic energy supplier, Russia. This situation is untenable and calls for swift and decisive action to adequately tackle the issue once and for all. The chapter looks at the creation of a single EU energy market through integration of energy networks in the EU. The chapter then examines various ways to diversify its energy supply, whether through increasing the import of liquefied natural gas (LNG), through its relations with the Eurasian Union, or the construction of alternative pipelines and energy routes. The chapter then offers an analysis of the latest developments of the Energy Charter Conference.

The book concludes with a chapter on the notion of creating a European Energy Union, which analyses what the EU is politically prepared to accept as part of its unified energy security. Together with the perception of energy security being a pressing matter, the general disenchantment surrounding the European ideal in the wake of the rugged economic crisis makes the current task to ensure affordable, secure and sustainable energy a formidable challenge. In that vein, the European Energy Union could well be the flagship of this new step towards a more prosperous, energy-secure and unified Europe, bearing in mind that EU Member States wish to guard their sovereignty over national energy systems. The aim is to make it easier to trade energy inside the EU. In the past, there have been divisions between EU Member States when trying to draft a unified energy policy. The European Energy Union tries to rectify this deficiency. This final chapter proposes the emulation of the EU’s common commercial policy to reach a common position in EU energy policy. Chapter 7 analyses the role of the Energy Community and the Euro-Mediterranean Energy Partnership (EMEP) as avenues to further integrate energy markets beyond European borders, especially with the Eastern and Southern neighbours of the EU. It also dwells on the advancements that could arise in terms of pan-European energy infrastructure through the anticipated financial boost resulting from, inter alia, the Investment Plan for Europe, the European Structural and Investment funds and the Connecting Europe Facility (CEF). Finally, it provides an analysis of the importance of decarbonizing the economy.

1 See Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank, ‘A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy’, COM(2015) 80 final (25 February 2015) 2, available at http://ec.europa.eu/priorities/energy-union/docs/energyunion_en.pdf.
2 Ibid.
3 European Commission, ‘A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy’, COM(2015) 80 final (25 February 2015), available at http://ec.europa.eu/priorities/energy-union/docs/energyunion_en.pdf.
4 The Energy Community is a treaty-based regime whose signatories are the EU and several third-party states from south-east and east Europe. The Energy Union is a much greater project, aiming at ensuring that the EU has secure, affordable and climate-friendly energy.
5 European Commission, ‘Opening Speech – EU Energy Policy and Competitiveness’ press release, 17 November 2014, available at http://europa.eu/rapid/press-release_SPEECH-14-1883_en.htm.
6 Proposals for organizing multinational economic development are already in place. See for instance the so-called ‘One Belt, One Road’ strategy by President Xi of China – probably one of China’s most important foreign policy initiatives – and its ambition to contribute to the development of China and the rest of the world in the areas of energy, trade and culture. For more details on this proposal, see Stokes, J. ‘China’s Road Rules: Beijing Looks West toward Eurasian Integration’, Foreign Affairs, 19 April 2015.
7 Many of these ideas draw from Leal-Arcas, R., Filis, A. and Abu Gosh, E. International Energy Governance: Selected Legal Issues, Cheltenham: Edward Elgar Publishing, 2014, part I and chapter 5.
8 Sovacool, B. and Florini, A. ‘Examining the Complications of Global Energy Governance’ (2012) 30(3) Journal of Energy and Natural Resources Law, 238.
9 See Victor, D. and Yueh, L. ‘The New Energy Order: Managing Insecurities in the Twenty-first Century’ (2010) 89(1) Foreign Affairs, where this notion is cited as the position of the Organization of the Petroleum Exporting Countries.
10 Taylor, J. and Van Doren, P. ‘The Energy Security Obsession’ (2008) 6 Geo. J. L. & Pub. Pol’y 475; Smith, M. and Htoo, N. ‘Energy Security: Security for Whom?’ (2008) 11 Yale Hum. Rts. & Dev. L.J. 217.
11 By promoting reliance on less polluting energy resources, one must be cautious not to give rise to problems elsewhere. For instance, the diversion of land and water resources to produce plant-derived ethanol may pose threats to food security, with severe repercussions for global food security needs. See, e.g., concerns expressed on the Food and Agriculture Organization website, available at http://www.fao.org/energy/befs/en/. Furthermore, see Zarrilli, S. ‘The Development of the Emerging Biofuels Market’ in Goldthau, A. and Witte, J.M. (eds.) Global Energy Governance: The New Rules of the Game, Washington, DC, Brookings Institution Press, 2010 73 onwards for an exposition of the main contours of the emerging biofuels market, including key figures, trends and the features of the structure of this market. Moreover, see the 2009 World Bank report Global Economic Prospects 2009: Commodities at the Cross-Roads, where it is stated (at 7) that: ‘because farmers have responded to high maize prices by increasingly growing maize in fields where they once grew wheat and soybeans, prices of these (and other) commodities have also become increasingly sensitive to oil prices. Given that the energy market is much larger than the market for maize (if all the world’s maize were used to produce biofuels, it would only meet 8 percent of energy demand), biofuel demand has the potential to change permanently the nature (and price) of agricultural commodities. The International Energy Agency (IEA), for example, suggests that biofuel demand for grains could increase by 7.8 percent a year over the next 20 years (compared with 1.2 percent annual increases for food demand). If this prognosis is borne out, 40 percent of global grain production could be going to biofuels by 2030’ (emphasis added).
12 See http://ec.europa.eu/trade/creating-opportunities/bilateral-relations/coun-tries/russia/ for a run-down on EU–Russia trade relations. The main EU imports from Russia are oil and gas. The EU is the largest foreign investor in Russia.
13 For instance, the EU concluded a deep and comprehensive free trade agreement with Ukraine. See http://ec.europa.eu/trade/creating-opportunities/bilateral-relations/countries/ukraine/.
14 Bhattacharyya, S. Energy Economics: Concepts, Issues, Markets, and Governance, London: Springer, 2011; Korkmaz, D. ‘Internal and External Dynamics of European Energy Security’ (2010) accessible at http://www.jhubc.it/ecpr-porto/virtualpaperroom/034.pdf; Smith, M. and Htoo, N. ‘Energy Security: Security for Whom?’ (2008) 11 Yale Hum. Rts. & Dev. L.J. 217; Taylor, J. and Van Doren, P. ‘The Energy Security Obsession’ (2008) 6 Geo. J. L. & Pub. Pol’y 475; Victor, D. and Yueh, L. ‘The New Energy Order: Managing Insecurities in the Twenty-first Century’ (2010) 89(1) Foreign Affairs.
15 Graetz, M.J. The End of Energy: The Unmaking of America’s Environment, Security, and Independence, Cambridge, MA: MIT Press, 2011.
16 Korkmaz, D. ‘Internal and External Dynamics of European Energy Security’ (2010), accessible at http://www.jhubc.it/ecpr-porto/virtualpaperroom/034.pdf; Sovacool, B. and Florini, A. ‘Examining the Complications of Global Energy Governance’ (2012) 30(3) Journal of Energy and Natural Resources Law; Sovacool, B.K. (ed.) The Routledge Handbook of Energy Security, Abingdon: Routledge, 2011.
17 Goldthau, A. and Witte, J.M. (eds.) Global Energy Governance: The New Rules of the Game, Washington, DC: Brookings Institution Press, 2010; Korkmaz, D. ‘Internal and External Dynamics of European Energy Security’ (2010) accessible at http://www.jhubc.it/ecpr-porto/virtualpaperroom/034.pdf; Sovacool, B. and Florini, A. ‘Examining the Complications of Global Energy Governance’ (2012) 30(3) Journal of Energy and Natural Resources Law; Kuzemko, C. (ed.) Dynamics of Energy Governance in Europe and Russia, Basingstoke: Palgrave Macmillan, 2012; Anceschi, L. and Symons, J. (eds.) Energy Security in the Era of Climate Change: The Asia-Pacific Experience, Houndmills: Palgrave Macmillan, 2011.
18 Christian Winzer, ‘Conceptualising Energy Security’ (EPRG Working Paper 1123, University of Cambridge Electricity Policy Working Group July 2011) 4.
19 Haghighi, N. Energy Security: The External Legal Relations of the European Union with Major Oil and Gas Supplying Countries (Oxford: Hart Publishing, 2007) 14.
20 UK Department of Energy and Climate Change, ‘Energy Markets Outlook Report’ (2009) 19: ‘Secure energy means that the risks of interruption to energy supply, are low’.
21 The International Energy Agency provides the following definition: ‘Energy security is defined in terms of the physical availability of supplies to satisfy demand at a given price.’ See IEA, Towards a Sustainable Energy Future, Paris, 2001.
22 Christian Winzer, ‘Conceptualising Energy Security’ (EPRG Working Paper 1123, University of Cambridge Electricity Policy Working Group, July 2011) 5.
23 European Commission, ‘Towards a European strategy for the security of energy supply’, COM(2000) 769 final, 2.
24 Ibid, at 10.
25 See Korkmaz, D. ‘Internal and External Dynamics of European Energy Security’ (2010) (paper based on a chapter of Korkmaz’s Ph.D. thesis) available at http://www.jhubc.it/ecpr-porto/virtualpaperroom/034.pdf (at 5–6) for a review of the relevant literature.
26 See Baumann, F. ‘Europe’s Way to Energy Security. The Outer Dimensions of Energy Security: From Power Politics to Energy Governance’ (2010) 15 European Foreign Affairs Review, 87.
27 In fact, this is what the initial set of Ministers from six European states (namely the Federal Republic of Germany, Belgium, France, Italy, Luxembourg and the Netherlands) had in mind when they promulgated the Messina Declaration in 1955, in which they stated: ‘Putting more abundant energy at a cheaper price at the disposal of the European economies constitutes a fundamental element of economic progress. That is why all arrangements should be made to develop sufficient exchanges of gas and electric power capable of increasing the profitability of investments and reducing the supply costs. Studies will be undertaken of methods to co-ordinate development prospects for the production and consumption of energy, and to draw up general guidelines for an overall policy …’ (emphasis added) (cf. point 2 of the 1955 Messina Declaration, available at http://www.internationaldemocracywatch.org/attachments/296_The%20Messina%20Declaration%201955.pdf). Clearly, the initial set of European governments was well attuned to the importance of energy security to the economic reconstruction of European economies in the post-war period.
28 Let us be reminded that the initial instances of European interstate cooperation which eventually resulted in the remarkable international entity that is the EU revolved around locking together French and German coal and steel resources. See, e.g., the 1952 Coal and Steel Community Treaty and the 1957 Euratom Treaty. See the 2007 Commission Communication to the European Parliament and the Council, where the Commission reminds members and EU institutions to be faithful to the EU’s roots: ‘Europe needs to act now, together, to deliver sustainable, secure and competitive energy. In doing so the EU would return to its roots … the founding Member States saw the need for a common approach to energy’. Communication from the Commission to the European Council and the European Parliament, ‘An Energy Policy for Europe’, Brussels, 10 January 2007 (COM(2007) 1 final) (at 3).
29 This is a relatively novel development. See the 2010 Commission Communication: ‘Europe 2020: A strategy for smart, sustainable and inclusive growth’, Brussels, 3 March 2010 (COM(2010) 2020 final) where economic growth, climate change, and energy objectives have been presented as interlinked and mutually conditional.
30 The EU was committed to fully integrating the electricity and gas markets of the 28 Member States by 2014 into the Internal Energy Market (IEM). See Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, and the Committee of the Regions, ‘Energy Roadmap 2050’, Brussels, 15 December 2011 (COM(2011) 885 final), (at 19). For a useful historical analysis of the IEM and the integration of the US markets and an examination of the regulatory regimes in the EU and the US, see Bellantuono, G. ‘Contract Law, Regulation, and Competition in Energy Markets’ (2009) 10 Competition & Reg. Network Indus. 159–188. According to Bellantuono, EU and US energy markets have shifted from monopolistic towards competitive. The EU energy markets started shifting towards integration in earnest from around the beginning of the 2000s, while this happened around the 1980s in the US. A further interstate treaty-based organization to which the EU is a party along with several neighbouring states is the Energy Community (EnC), which essentially seeks to extend the IEM to those states as a means of EU energy interests.
31 Florini, A. and Sovacool, B.K. ‘Who Governs Energy? The Challenges Facing Global Energy Governance’ (2009) 37(12) Energy Policy, 5239–5248.
32 Yergin, D. ‘Ensuring Energy Security’ (2006) 85(2) Foreign Affairs; Yergin, D. The Prize: The Epic Quest for Oil, Money and Power, New York: Free Press, 2008.
33 Taylor, J. and Van Doren, P. ‘The Energy Security Obsession’ (2008) 6 Geo. J. L. & Pub. Pol’y 475; Victor, D. and Yueh, L. ‘The New Energy Order: Managing Insecurities in the Twenty-first Century’ (2010) 89 Foreign Affairs.
34 Leal-Arcas, R. and Filis, A. ‘Conceptualizing EU Energy Security through an EU Constitutional Law Perspective’ (2013) 36(5) Fordham Int. L. J., 1225–1301.
35 Andrews-Speed, P. (ed.) International Competition for Resources: The Role of the Law, the State, and of Markets, Dundee: Dundee University Press, 2008; Schrijver, N. Sovereignty over Natural Resources: Balancing Rights and Duties, Cambridge: Cambridge University Press, 1997; Wenger, A., Orttung, R.W. and Perovic, J. (eds.) Energy and the Transformation of International Relations, Oxford: Oxford University Press, 2009.
36 Yergin, D. The Quest: Energy, Security, and the Remaking of the Modern World, New York: Penguin Press, 2011.
37 Luciani, G. Security of Oil Supplies: Issues & Remedies, Deventer: Claeys & Casteels, 2013.
38 Gault, J. ‘A World of Introduction from the Energy Industry Perspective’ in Pauwelyn, J. (ed.) Global Challenges at the Intersection of Trade, Energy and the Environment, Geneva: The Graduate Institute, 2010, 9.
39 Salerno, F. ‘The Energy Community Treaty: Reconnecting South-East Europe’ [2006] Int’l Energy L. and Taxation Review, 72.
40 Jegen, M. ‘Two Paths to Energy Security: The EU and NAFTA’ (2010) 66 International Journal 73.
41 Graetz, M.J. The End of Energy: The Unmaking of America’s Environment, Security, and Independence, Cambridge, MA, MIT Press, 2011.
42 Goldthau, A. and Witte, J.M. (eds.) Global Energy Governance: The New Rules of the Game, Washington, DC: Brookings Institution Press, 2010; Anceschi, L. and Symons, J. (eds.) Energy Security in the Era of Climate Change: The Asia-Pacific Experience, Houndmills: Palgrave Macmillan, 2011.
43 Leal-Arcas, R. Climate Change and International Trade, Cheltenham: Edward Elgar Publishing, 2013.
44 De Jong et al. ‘Institutional Actors in International Energy Law,’ Leuven Center for Global Governance Studies, Working Paper No. 115, July 2013.
45 Haghighi, S. Energy Security: The External Legal Relations of the European Union with Major Oil and Gas Supplying Countries, Oxford: Hart Publishing, 2007.
46 Selivanova, Y. (ed.) Regulation of Energy in International Trade Law: WTO, NAFTA, and Energy Charter, Deventer: Kluwer, 2011; Wälde, T. The Energy Charter Treaty: An East-West Gateway for Investment and Trade, Deventer: Kluwer Law International, 1996.
47 Parts of this section draw from Leal-Arcas, R., Filis, A. and Abu Gosh, E. International Energy Governance: Selected Legal Issues, Cheltenham: Edward Elgar Publishing, 2014, chapters 5 and 6.
48 See for instance Benelux’s ‘Position Paper on Energy Security and Foreign Policy’, March 2006, in which this tripartite bloc of EU states urges the European Council to provide the steer for more cohesive EU common external relations that enhance the EU’s energy security through a multiplicity of approaches, including encouraging Russia to ratify the Energy Charter Treaty.
49 See Article 3 TFEU for a list of areas where the EU has exclusive competence.
50 Article 4 TFEU.
51 For a closer look at the anatomical structure of the EU, see Leal-Arcas, R. Theory and Practice of EC External Trade Law and Policy, London: Cameron May, 2008, 86–89.
52 Such modus operandi is reminiscent of EU trade policymaking in the pre-Lisbon Treaty era. For further details, see ibid, chapters 3–6; Leal-Arcas, R. ‘The EU Decision-Making Process in EC Trade Policy: The Three Internal Tensions’ in Astengo, F. and Neuwahl, N. (eds.) A Constitution for Europe? Governance and Policy-Making in the European Union, Vol. II, Collection ‘Etudes Européennes’, Chaire Jean Monnet, Université de Montréal, 2004, 132–156; Leal-Arcas, R. ‘The EU Constitutional Treaty and International Trade’ in Laursen, F. (ed.) The Rise and Fall of the EU’s Constitutional Treaty, Leiden: Brill/Nijhoff, 2008, 25–50; Leal-Arcas, R. ‘Exclusive or Shared Competence in the Common Commercial Policy: From Amsterdam to Nice’ (2003) 30(1) Legal Issues of Economic Integration 3–14; Leal-Arcas, R. ‘The State of Play of the EC’s Common Commercial Policy: A Legal and Policy Analysis’ (2003) 11(2) Tilburg Foreign Law Review 537–559; Leal-Arcas, R. ‘The EC in the WTO: The Three-Level Game of Decision-Making. What Multilateralism Can Learn from Regionalism’ (2004) 8(14) European Integration Online Papers, September, 1–43, http://eiop.or.at/eiop/texte/2004-014.htm; Leal-Arcas, R. ‘The EU Institutions and Their Modus Operandi in the World Trading System’ (2005/2006) 12(1) Columbia Journal of European Law 125–197; Leal-Arcas, R. ‘Is EC Trade Policy Up to Par?: A Legal Analysis Over Time – Rome, Marrakesh, Amsterdam, Nice, and the Constitutional Treaty’ (2007) 13(2) Columbia Journal of European Law 305–399; Leal-Arcas, R. ‘Will EU Member States Play Any Role at the WTO after the EU Reform Treaty?’ (2007) 1(2) Vienna Journal of International Constitutional Law 75–90; Leal-Arcas, R. ‘50 Years of Trade Policy: Good Enough or as Good as it Gets?’ (2008) 15(1 and 2) Irish Journal of European Law 157–182; Leal-Arcas, R. ‘Reflections on EU International Trade Law: An Introspective View’ (2012) 7(1) Frontiers of Law in China 1–20.
53 Delvaux, B. EU Law and the Development of a Sustainable, Competitive and Secure Energy Policy, Cambridge: Intersentia, 2013; Pielow, J. and Lewendel, B. ‘Beyond “Lisbon”: EU Competences in the Field of Energy Policy’ in Delvaux, B., Hunt, M. and Talus, K. (eds.) EU Energy Law and Policy Issues, Cambridge: Intersentia, 2011.
54 See Article 3 TFEU. See also Article 6 TFEU for areas where the EU will have competence to carry out actions to support EU Member States’ actions.
55 The EU is quite unlike any other structure that historically has ever existed. See Sands, P. Lawless World: The Whistle-Blowing Account of How Bush and Blair are Taking the Law into Their Own Hands, London: Penguin, 2006, in which Philippe Sands informs us that: ‘The most highly integrated regional system is that between the EU’s twenty-five [at that time] members. [The EU] … originally intended to remove barriers to trade, it soon became clear that creating a common market necessarily meant addressing other standards which would affect flows of goods and services and the free movement of people. Gradually standards were developed on everything from labour to the environment, from agriculture to competition rules. The original six became the nine … the nine became ten and then twelve, and then fifteen [and so on]’ (at 101).
56 See Goldsmith, J. and Posner, E. ‘The Limits of International Law’, Oxford: Oxford University Press, 2005, where they state that: ‘Many scholars view European Union integration as a possible model for a more ambitious public international law. Although the EU project is in some respects constituted by international law, we think it is more usefully viewed as an example of multi-state unification akin to pre-twentieth century unification efforts in the United States (which, during its Articles of Confederation period, was viewed by some as a federation governed by international law) Germany, and Italy’ (at 5).
57 Within the EU context, states have been likened to Canadian Provinces vis-à-vis their relationship with the federal order. See for instance Sands, P. Lawless World: The Whistle-Blowing Account of How Bush and Blair are Taking the Law into Their Own Hands, London: Penguin 2006 (at 102), who deduces this view from the pleadings of the UK government in the 2003 Permanent Court of Arbitration MOX Plant case between Ireland and the UK.
58 Immanuel Kant laid out the case for an international league of democracies governed by the rule of law in his essays ‘Perpetual Peace: A Philosophical Sketch’ and ‘An Idea for A Universal History with a Cosmopolitan Purpose’. Kant, I. Political Writings, Cambridge: Cambridge University Press, 1970.
59 See Weiler, J. The Constitution of Europe: Do the New Clothes Have an Emperor?, Cambridge: Cambridge University Press, 1999 (providing a full exposition of the legal position in relation to the possibility of the concurrent international treaty-making capacities of two different agents such as a central authority – e.g., the EU – and its constituent parts – e.g., EU Member States).
60 Article 3 TFEU.
61 See Article 4 TFEU.
62 See Korkmaz, D. ‘Internal and External Dynamics of European Energy Security 5–6 (2010)’, available at http://www.jhubc.it/ecpr-porto/virtualpaperroom/034.pdf, where he discusses energy diplomacy between Russia and Germany, and the latter’s pledge to underwrite the Nord Stream gas pipe project.
63 Namely the notion that States are, save for exceptional cases (e.g., arguably, under the operation of United Nations Charter provisions around Security Council prerogatives, or in the case of jus cogens), normatively bound to the extent that they consent to the norm in question through treaty making (or the operation of custom). It would be improper from an interpretative point of view to aggrandize EU competences where no competence has expressly been granted in those treaties by the sovereign actors involved, or where such possibility is not contemplated in the relevant treaties. In this context, see also what Takis Tridimas calls ‘dormant EU competence’ to refer to situations ‘where, although the EU cannot pass legislation, the discretion of the national governments to do so is constrained by EU law’. Tridimas, T. ‘Competence after Lisbon: The Elusive Search for Bright Lines’ in Ashiagbor, D., Countouris, N. and Lianos, I. (eds.) The European Union after the Treaty of Lisbon, Cambridge: Cambridge University Press, 2012, 47–76, at 75.
64 For a fuller analysis of the EU constitutional aspects of, and considerations in, EU energy policy development and EU energy security, see Leal-Arcas, R. and Filis, A. ‘Conceptualizing EU Energy Security through an EU Constitutional Law Perspective’ (2013) 36(5) Fordham International Law Journal 1225–1301. See also Johnston, A. and van der Marel, E. ‘Ad Lucem? Interpreting the New EU Energy Provision, and in particular the Meaning of Article 194(2) TFEU’ (2013) 22(5) European Energy and Environmental Law Review 181–199.
65 Some EU Member States – such as Denmark – are entirely oil independent, while others – such as Cyprus – produce the lion’s share of their electricity through the combustion of oil. Some Member States, e.g., Germany, have more comfortable relations with Russia – an important energy partner – while others, e.g., Poland, do not. See the European Commission, ‘Key Figures’, Market Observatory for Energy, Directorate-General for Energy, June 2011, for an exposition of the energy realities across the EU alongside several themes – e.g., renewables use, electricity production, prices and energy imports.
66 See Article 24.3 Treaty on European Union (TEU).
67 See Article 352.1 TFEU.
68 For further details on EU law and competences regarding energy matters, see Leal-Arcas, R. and Filis, A. ‘Conceptualizing EU Energy Security through an EU Constitutional Law Perspective’ (2013) 36(5) Fordham International Law Journal 1225–1301.
69 See Title XXI TFEU, which relates to energy and has only one article, Article 194 TFEU.
70 This is a key institution of the EU composed of 28 ministers whose composition alters according to the policy matter at hand. E.g., ministers with responsibility for agriculture meet within the EU context to decide a particular EU-wide agricultural policy. This is an important institution that, alongside the EU Parliament through a co-decision process, may adopt legislation. Hereinafter we shall refer to it as the ‘Council’. It should not be confused with the European Council (i.e., the configuration of the 28 heads of state/government), which is the supreme political body within the EU. The European Council – technically, in its alter ego, namely the ad hoc summit gathering of heads of state/government – is the body that contracts the treaties upon which the EU rests.
71 Council decision making based on the qualified majority voting procedure is the norm, unless stated to the contrary, under Article 238 TFEU. See also Article 16 TEU. From November 2014, qualified majority shall mean at least 55% of Council members representing at least 65% of the EU population or 72% of Council members representing at least 65%, depending on circumstances. See Article 16.4 TEU, and Articles 238.2 and 238.3 TFEU.
72 Directive 2009/28/EC of the European Parliament and the Council of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC.
73 The TEEC was amended by the Treaty of Lisbon, which was signed on 13 December 2007 in Lisbon and which entered into force on 1 December 2009, embracing a revised TEU and a revised Treaty Establishing the European Community, which would be called the TFEU. Consequently, Articles 95, 175 and 251 TEEC became Articles 114, 192 and 294 TFEU. Note, however, that when Directive 2009/28/EC was concluded (April 2009), it was done on the basis of the TEEC, which was applicable at the time. Furthermore, this directive also cites the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) in relation to the EU’s international obligations, and those of its Member States, under that instrument.
74 Article 1 of Directive 2009/28/EC.
75 This seems to be the case when one notices that the national targets are calculated on factors that take into account national figures around energy consumption, thus applying a variegated regime rather than seeking to enforce a uniform target on all members alike. See Article 5 of Directive 2009/28/EC.
76 Namely Chapter 3 (Articles 114–118) TFEU on the approximation of laws.
77 See Article 170 TFEU dealing with the Trans-European networks (TEN), including for energy (TEN-E).
78 See, e.g., Groome, F. ‘From Contradiction to Cooperation: A New Legal and Diplomatic Foundation for Energy Policy in the EU’ (2012) April, Journal of Energy Security, available at http://www.ensec.org/index.php?option=com_content&view=article&id=343:from-contradiction-to-cooperation-a-new-legal-and-diplomatic-foundation-for-energy-policy-in-the-eu&catid=123:content&Itemid=389.
79 An example of this was the attempt to include an energy chapter in the 1992 Treaty of Maastricht. This move was opposed by a number of EU Member States, especially those with high reserves, ‘as they did not want to give away autonomy in that field’. Langsdorf, S. ‘EU Energy Policy: From the ECSC to the Energy Roadmap 2050’ (December 2011, Green European Foundation) 5.
80 European Commission, ‘Towards A European strategy for the security of energy supply’, COM(2000) 769 final, 11: ‘As a result, the energy problems which have inevitably cropped up since the Treaty of Rome was adopted, more particularly after the first oil crises, have been approached either through the mechanism of the internal market, or from the angle of harmonisation, environmental policy or taxation.’ See also Articles 207 and 218 TFEU for trade policy aspects.
81 Voutilainen, P. ‘Developing Energy Policy for Europe: A Finnish Perspective on Energy Cooperation in The European Union’ (2008) 29 Energy L.J. 121, 122–123.
82 COM(2000) 769 final 12.
83 http://ec.europa.eu/energy/green-paper-energy-supply/doc/green_paper_energy_supply_en.pdf.
84 Article 4.2(i) TFEU. The case of energy is, however, much more complex than just stating what the TFEU says in Article 4.2(i). For a constitutional analysis, see Leal-Arcas, R. and Filis, A. ‘Conceptualizing EU Energy Security through an EU Constitutional Law Perspective’ (2013) 36(5) Fordham International Law Journal 1225–1301. See also Lilliestam, J. and Patt, A. ‘Conceptualising Energy Security in the European Context: A Policy Perspective Bottom-up Approach to the Cases of the EU, UK and Sweden’ (SEFEP Working Paper 2012-4, June 2012) 9.
85 Article 2.2 TFEU.
86 Ibid.
87 Article 194(1) TFEU.
88 Article 194(2) TFEU.
89 Groome, F. ‘From Contradiction to Cooperation: A New Legal and Diplomatic Foundation for Energy Policy in the EU’ (2012) April, Journal of Energy Security 1.
90 E.g., whether the Lisbon Treaty actually changed the way the EU approached energy issues. See Falkner, G. ‘EU Policies in the Lisbon Treaty: A Comparative Analysis’ (Working Paper No. 03/2008, Institute for European Integration Research) 59.
91 For a number of potential challenges that the implementation of the Treaty of Lisbon may be faced with, see generally Jan Frederik Braun, ‘EU Energy Policy under the Treaty of Lisbon Rules: Between a New Policy and Business as Usual’ (Working Paper No. 31/February 2011, European Policy Institute Network).
92 Van Vooren, B. and Wessel, R.A. EU External Relations Law: Text, Cases and Materials, Cambridge: Cambridge University Press, 2014, 110.
93 Hillion, C. and Wessel, R.A. ‘Competence Distribution in EU External Relations after ECOWAS: Clarification or Continued Fuzziness?’ (2009) 46(2) Common Market Law Review 586.
94 Klamert, M. ‘New Conferral or Old Confusion? The Perils of Making Implied Competences Explicit and the Example of the External Competence for Environmental Policy’, CLEER Working Paper 2011/6, 3.
95 See, e.g., Klare, M.T. Resource Wars: The New Landscape of Global Conflict, New York: Henry Holt and Co., 2001 xi; Glover, P.C. and Economides, M.J. Energy and Climate Wars: How Naive Politicians, Green Ideologues, and Media Elites are Undermining the Truth about Energy and Climate, London: Continuum, 2010, 228.
96 On international energy governance, see generally Leal-Arcas, R., Filis, A. and Abu Gosh, E. International Energy Governance: Selected Legal Issues, Cheltenham: Edward Elgar Publishing, 2014.
97 See generally Leal-Arcas, R. and Abu Gosh, E. ‘Energy Trade as a Special Sector in the WTO: Unique Features, Unprecedented Challenges and Unresolved Issues’ (2014) 6(1) Indian Journal of International Economic Law.
98 See, e.g., Leal-Arcas, R. and Filis, A. ‘Conceptualizing EU Energy Security through an EU Constitutional Law Perspective’ (2013) 36(5) Fordham International Law Journal 1225–1301.
99 The EU set itself the aim of achieving full integration of the electricity and gas markets of the 28 Member States by 2014. See Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, and the Committee of the Regions, ‘Energy Roadmap 2050’, Brussels, 15 December 2011 (COM(2011) 885 final), p. 19. For more information on the IEM, see http://ec.europa.eu/energy/gas_electricity/internal_market_en.htm.
100 There is a raft of EU policies and legislation aimed at the promotion of the efficient use of energy across the EU membership. See http://europa.eu/legislation_summaries/energy/energy_efficiency/index_en.htm for more details. In relation to primary legislation, see Article 194.1(c) TFEU, which promotes the efficient use of energy as an objective of the establishment and functioning of the internal market among the EU Member States.
101 For a useful historical analysis of the IEM and the integration of the US markets and an examination of the regulatory regimes in the EU and the US, see Bellantuono, G. ‘Contract Law, Regulation, and Competition in Energy Markets’ (2009) 10 Competition & Reg. Network Indus. 159–188. According to Bellantuono, EU and US energy markets have shifted from monopolistic towards competitive. The EU energy markets started shifting towards integration in earnest from around the beginning of the 2000s, whilst this happened around the 1980s in the US. A further interstate treaty-based organization to which the EU is a party along with several neighbouring states is the Energy Community (EnC), which essentially seeks to extend the IEM to those states as a means of EU energy interests.
102 See Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, and the Committee of the Regions, ‘On security of energy supply and international cooperation – “The EU Energy Policy: Engaging with Partners beyond Our Borders”’, 7 September 2011 (COM(2011) 539 final). Here the Commission cites the EU’s heavy energy dependency on imports (c. 60% of its gas and c. 80% of its oil) and the growing competition the EU is likely to face in relation to rising future energy demand. All these matters necessitate a comprehensive external energy policy. The Commission emphasizes how an EU external energy policy is central to achieving an IEM. Noting that the rise in global energy demand will not be due to the EU and other developed economies, the European Commission recommends that the EU engage in activity aimed at encouraging less and least developed countries to access sustainable energy and to adopt more sustainable processes. See 14 onwards.
103 Sokolski,H.‘Post-Fukushima,NuclearPowerChangesLatitudes’,Newsweek, 28 November 2011, available at http://www.newsweek.com/post-fukushima-nuclear-power-changes-latitudes-66311.
104 Article 3 TFEU.
105 Article 4 TFEU.
106 Consequently, any policy matter for which the treaties make no express provision remains squarely the sovereign preserve of EU Member States. This is in line with the interpretative principle of expressio unius est exclusio alterius, i.e., the express mention of a matter or circumstance in a treaty in an exhaustive manner has the effect of excluding such matters not included. This is an interpretative principle to assist in deducing the scope of any given norm where this is textually unclear. The Vienna Convention on the Law of Treaties 1969 (VCLT), signed and ratified by most EU Member States, codifies norms concerned, among other things, with interpretative matters (see Part III (Articles 26–38) VCLT). While the fact that France and Romania – both EU Members – have not ratified the VCLT precludes its application, the norms it contains, however, are largely held to reflect extant customary norms, which may mean that it is reasonable to rely on these to interpret the EU treaties. Consequently, it would be improper from an interpretative point of view to aggrandize EU competences where no competence has expressly been granted in those treaties by the sovereign actors involved, or where such possibility is not contemplated in the relevant treaties.
107 Significant in terms of their energy-related natural resource endowments and/or their significance to the transit of energy flows into the EU.
108 For a thorough analysis of energy transit issues, see Leal-Arcas, R. and Peykova, M. ‘Energy Transit Activities: Collection of Intergovernmental Agreements on Oil and Gas Transit Pipelines and Commentary’, Queen Mary School of Law Legal Studies Research Paper No. 177/2014, 2014, 1–54.
109 Article 7 ECT.
110 That is to say, the notion that large-scale conflicts, say, between economic models during the Cold War had hitherto been resolved with the collapse of the Soviet Union, and that the result of human progress was the triumph of the purportedly inherently superior capitalist model. See Fukuyama, F. The End of History and the Last Man, London: Penguin, 1992 67.
111 An example of Russia’s new approach to the East is the creation of the Eurasian Economic Union between Russia, Belarus and Kazakhstan, signed on 29 May 2014. Armenia and Kyrgyzstan joined the Eurasian Economic Union in January and July 2015, respectively. See Eurasian Economic Union, ‘Parliaments of the member states of the Eurasian Economic Union completed the ratification of the Treaty on accession of the Kyrgyz Republic to the EAEU’, http://www.eaeunion.org/?lang=en#about-media. The Eurasian Economic Union is discussed in a later chapter of this book.
112 See also the EU neighbourhood policy, which addresses the relations between EU Member States and their southern as well as eastern neighbours. See http://ec.europa.eu/world/enp/policy_en.htm.
113 Haghighi, S. Energy Security: The External Legal Relations of the European Union with Major Oil and Gas Supplying Countries, Oxford: Hart Publishing, 2007 9; Voutilainen, P. ‘Developing Energy Policy For Europe: A Finnish Perspective on Energy Cooperation in The European Union’ (2008) 29 Energy Law Journal 121, 123.
114 European Commission Statistics (Eurostat), ‘Eurostat Data for 2011, Energy dependence’, last update of data: 08.01.2014, available at http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tsdcc310&plugin=1.
115 European Commission, ‘EU Energy in Figures: Statistical Pocketbook 2013’ (2013) 22.
116 European Commission, ‘The European Union Explained: Energy – Sustainable, secure and affordable energy for Europeans’ (2012) 3.
117 European Commission, ‘Renewable Energy: A Major Player in the European Energy Market’ SWD (2012) 149 final, 8.
118 European Commission Directorate-General for Economic and Financial Affairs, ‘Member States’ Energy Dependence: An Indicator-Based Assessment’, Occasional Papers 145 (April 2013) 5.
119 Stern, J. ‘The Russian-Ukrainian gas crisis of January 2006’ (2006) The Oxford Institute for Energy Studies 8; Kovacevic, A. ‘The Impact of the Russia–Ukraine Gas Crisis in South Eastern Europe’, (March 2009) The Oxford Institute for Energy Studies 1.
120 European Commission, ‘Renewable Energy: A Major Player in the European Energy Market’ SWD (2012) 149 final, 8.
121 European Commission, ‘A European Strategy for Sustainable, Competitive and Secure Energy, Commission of the European Communities’, COM(2006) 105 final 3, 9, 10.
122 European Commission, ‘Renewable Energy: A Major Player in the European Energy Market’ SWD (2012) 149 final, 11; also see generally Haghighi, S. Energy Security: The External Legal Relations of the European Union with Major Oil and Gas Supplying Countries, Oxford: Hart Publishing, 2007 10–11, citing International Energy Outlook 2006 (at 43).
123 In the context of natural gas supplies, see Ratner, M. ‘Europe’s Energy Security: Options and Challenges to Natural Gas Supply Diversification’ (August 2013, Congressional Research Service) 1–2.
124 European Commission, ‘Key Figures’, Market Observatory for Energy, Directorate-General for Energy, June 2011, 11. Based on 2009 figures.
125 Ibid at 5.
126 Ibid at 6.
127 European Commission, ‘Statistical Pocketbook 2009. EU Energy in Figures (Part 2)’, Directorate-General for Energy and Transport, January 2009, 14. In relation to those gas imports, up to a third – 34% – comes from Russia (cf., based on calculations on 2009 figures available in European Commission, ‘Key Figures’, Market Observatory for Energy, Directorate-General for Energy, June 2011, 11).
128 European Commission, ‘Key Figures’, Market Observatory for Energy, Directorate-General for Energy, June 2011, 11.
129 Ibid.
130 For the sake of brevity, let us interchangeably refer to these as ‘hydrocarbons’/‘fossil fuels’.
131 European Commission, ‘Key Figures’, Market Observatory for Energy, Directorate-General for Energy, June 2011, 11.
132 During 2011, c. 81% of global energy consumption came from hydro carbons/fossil fuels. This figure represents 10,689 Mtoe out of a total 12,274 Mtoe. The actual breakdown is 4,059 Mtoe/c. 33% from oil, 2905.6 Mtoe/c. 24% from gas and 2,724.3 Mtoe/ c.30% from coal. See BP Statistical Review of World Energy, June 2012, www.bp.com/statisticalreview, 40–41.
133 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, ‘A policy framework for climate and energy in the period from 2020 to 2030’, COM(2014) 15 final (22 January 2014), 5. For an analysis, see Buchan, D. and Keay, M. ‘The EU’s New Energy and Climate Goals for 2030: Under-ambitious and Over-bearing?’ (2014) The Oxford Institute for Energy Studies available at http://www.oxfordenergy.org/wpcms/wp-content/uploads/2014/01/The-EUs-new-energy-and-climate-goals-for-2030.pdf.
134 However, it is interesting, and perhaps encouraging, to note that the EU occupies up to 60% of the global market share in the renewables industry. See Communication from the Commission to the European Council and the European Parliament, ‘An Energy Policy for Europe’, Brussels, 10 January 2007, COM(2007) 1 final 4.
135 NNFCC, ‘European Parliament rejects Commission’s one-legged 2030 policy’, press release, 5 February 2014, available at http://www.nnfcc.co.uk/news/european-parliament-rejects-commissions-one-legged-2030-policy; see also EurActiv, ‘Parliament back strong EU stance on 2030 clean energy goals’, 6 February 2014, http://www.euractiv.com/energy/meps-confirm-ambitious-stance-20-news-533298.
136 European Commission, ‘Key Figures’, Market Observatory for Energy, Directorate-General for Energy, June 2011, 6.
137 European Commission, ‘Statistical Pocketbook 2009. EU Energy in Figures (Part 2)’, Directorate-General for Energy and Transport, January 2009, 14.
138 Based on calculations on 2009 figures available in European Commission, ‘Key Figures’, Market Observatory for Energy, Directorate-General for Energy, June 2011, 11.
139 Based on calculations of data (namely 12,274 Mtoe, representing global total energy consumption, and 1690.7 Mtoe representing EU total energy consumption) available in BP Statistical Review of World Energy, June 2012, www.bp.com/statisticalreview 40.
140 See projections up to 2035 as cited in European Commission, ‘Key Figures’, Market Observatory for Energy, Directorate-General for Energy, June 2011, 3.
141 Ibid.
142 This is based on the assumption that global energy demand is set to rise to c. 18,000 Mtoe by 2035, by which time EU energy demand is likely to remain static at around the 1,700 Mtoe mark. Ibid.
143 Ibid. Further, in relation to China and India, the IEA projects that India and China would account for roughly 45% of the anticipated increase in global energy consumption between 2005 and 2035. See the Executive Summary to the 2007 IEA World Energy Outlook: China and India Insights report, 3.
144 The EU and the rest of the OECD are likely to account for just under 6,000 Mtoe out of the global energy demand figure of 18,000 Mtoe by 2035. See European Commission, ‘Key Figures’, Market Observatory for Energy, Directorate-General for Energy, June 2011, 3.
145 European Commission, ‘Key Figures’, Market Observatory for Energy, Directorate-General for Energy, June 2011, 8.
146 Ibid at 9.
147 Ibid at 14.
148 See e.g., Pogoretskyy, V. and Behn, D. ‘The Tension between Trade Liberalization and Resource Sovereignty: Russia–EU Energy Relations and the Problem of Natural Gas Dual Pricing’ (2011) 6 Oil, Gas and Energy Law, in which the authors analyse Russia’s dual pricing practice of gas against the strictures of the WTO and in relation to the tension between sovereignty prerogatives and trade liberalization objectives. In the article, the authors refer to EU Commission countervailing action in response to what it considers to be energy subsidies on the part of the Russian state to its domestic industries.
149 Energy costs are likely to increase so that households end up spending up to 16% of income on energy – including transport related energy – by 2030. This figure is likely to drop to 15% by 2050. Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, and the Committee of the Regions, ‘Energy Roadmap 2050’, Brussels, 15 December 2011 (COM(2011) 885 final).
150 European Commission, ‘Key Figures’, Market Observatory for Energy, Directorate-General for Energy, June 2011, 25.
151 Ibid at 18.
152 Ibid at 16.
153 Ibid.
154 Ibid at 20.
155 Ibid at 21.
156 Ibid at 22.
157 Ibid at 23.
158 Ibid at 24.
159 See the official EU website for energy facts and figures across the EU at http://www.energy.eu/.
160 European Commission, ‘Key Figures’, Market Observatory for Energy, Directorate-General for Energy, June 2011, 34–35.
161 Ibid at 38.
162 UNDP, ‘Universal access to modern energy for the poor’, available at http://www.undp.org/content/undp/en/home/ourwork/environmentandenergy/focus_areas/sustainable-energy/universal-access.html.
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166 Baumann, F. ‘Europe’s Way to Energy Security. The Outer Dimensions of Energy Security: From Power Politics to Energy Governance’ (2010) 15 European Foreign Affairs Review.
167 Shih, W. ‘Energy Security, GATT/WTO, and Regional Agreements’ (2009) 49 Natural Resources Journal 433.
168 Ghosh, A. ‘Seeking Coherence in Complexity? The Governance of Energy by Trade & Investment Institutions’ [2011] Global Policy 2.
169 Yafimava, K. The Transit Dimension of EU Energy Security: Russian Gas Transit Across Ukraine, Belarus, and Moldova, Oxford: Oxford University Press, 2011.
170 Guruswamy, L. ‘Energy and Environmental Security: The Need for Action’ (1991) 3 J. Environmental Law 209.
171 Pauwelyn, J. (ed.) Global Challenges at the Intersection of Trade, Energy and the Environment, Geneva: Graduate Institute, Centre for Trade and Economic Integration, 2010.
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201 Model Intergovernmental Agreement and Host Government Agreement for cross-border pipelines, 2nd edn., at 2, available at http://www.encharter.org/fileadmin/user_upload/document/ma-en.pdf.

Extract

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. Let us begin with two facts: first, the EU imports 53 per cent of its energy; and second, six EU countries depend 100 per cent on Russia for their gas. Imagine for a moment if any one of the EU’s energy suppliers were cut off. Many of the EU’s energy suppliers are politically and economically fragile. This makes the EU vulnerable, as we saw in the recent Russia–Ukraine gas disputes. In addition, EU companies pay more for energy than their competitors. All of this has consequences for the EU’s economy and quality of life. So, the EU urgently needs to diversify its energy supply.We are not alone in this belief. In February 2015, the European Commission published a communication on the creation of a European Energy Union. This shows the urgency of the energy security problem in the EU. Moreover, the European Innovation Union, the Energy Community, the European Energy Union, and the Europe 2020 initiative address energy security as a priority, but policies seem to be reactive instead of addressing energy security in its complexity. This problem can be solved with appropriate legal tools. Energy governance has links with several policies: trade, investment, environmental protection, energy transit, energy security, finance, etc. Of these policies, energy trade has a high impact for European...