G20 and Evolution of the Global Energy Governance System

Yu Hongyuan

Director and Researcher， Institute for Comparative Politics and Public Policy， SIIS

Global energy governance refers to actions taken by countries and relevant stakeholders around the world to coordinate and solve cross-border energy issues. Energy issues matter to security and development. However， the current global energy governance system is still decentralized and fragmentary， and lacks a widely representative， coordinated and effective energy governance mechanism. Currently， the G20 Summit has already become an important platform for facilitating international cooperation on issues such as economy， environment and energy. Energy has also become a long-term hot-spot issue for meetings at all levels under G20. The G20 Summit in Saudi Arabia in 2020 listed stabilizing the global energy market and promoting circular economy as important items in the agenda. Meetings at all levels under the summit were committed to optimizing energy governance and facilitating post-pandemic world economic recovery and sustainable development by means of forming the Energy Focus Group （EFG） and proposing Circular Carbon Economy （CCE）. Under the new circumstances， how to make G20 more effective and representative in energy governance and how China should achieve in-depth participation in global energy governance on the G20 platform are issues worth thinking.

Changes in the Global Energy Landscape and Challenges Confronting Energy Governance

Achieving effective control of international actors and international affairs by means of establishing rules， norms and institutions is the core purpose of global governance. On the international energy landscape， on the hand， countries around the world are releasing measures to reduce reliance on traditional energies as the climate change issue becomes more relevant; on the other hand， major energy consumer markets are diverting to emerging market and Asian countries， while breakthroughs in energy development technologies and exploitation of shell gas resources are causing prominent changes in the energy supply forces. Nevertheless， the current global energy governance system has failed to reflect the rising trend of developing country forces and there exists a huge gap between the development of global energy governance and demand from the international society.

Firstly， fragmentation of global energy governance mechanisms has brought about low efficacy and even failure of the energy governance system. As pointed out by Professor Rafael Leal Arcas from Queen Mary， University of London， “the global energy governance mechanism in todays world is highly fragmented”. Global energy governing bodies mainly fall into 6 categories， namely， inter-governmental organizations， international summits， international NGOs， multilateral financial institutions， regional organizations and mixed entities. The large number of bodies has reflected that the fragmentation of the global energy governance mechanism is very prominent. Meanwhile， the bodies also have drawbacks in the process of participating in global energy governance. The most representative one is the International Energy Agency （IEA）. As an important organization in the global energy governance system， its members have not included emerging market countries like China and India. In addition， although the IEA advocates for an opening energy market， it lacks the capacity in facilitating energy trade and in formulating legal frameworks. The second example is the Organization of Petroleum Export Countries （OPEC）. As a group of major petroleum producers， its international monopolistic position has been on the decline as the number of energy export countries outside this organization is increasing. The final one is the International Energy Forum （IEF）. As an organization for dialogues between energy producers and consumers， its influence is limited and its energy trade and investment are also constrained by many bilateral or regional agreements.

Secondly， public goods in global energy governance are insufficient. For good global energy governance， public goods including a stable global energy market system， stable relations between energy producers and consumers， consensus on energy governance with cooperation and development as its core， and the sharing of knowledge on the development and utilization of energy are essential. For individual countries， however， energy issues matter to their sovereign security and national development. The IEF defines energy security as “uninterrupted energy supply provided at an affordable price”. From the perspective of realism， due to the protection of their own interests， the competition on energy security among countries with zero-sum game mindsets will further escalate geopolitical conflicts and destabilize the international structure. As the conventional realism and zero-sum game mindset in western countries rise， the deficit in global public goods supply has worsened， and the passive interactions between countries will lead to the absence of energy governance public goods which are mainly provided by big countries. Take the 2020 oil price plummet as an example， Saudi Arabia， the US， Russia， out of concern for their own national interests and as geopolitical conflicts exacerbated， failed to reach a deal in the negotiation on OPEC + oil production cut in March 2020， and the international oil price fell by 10%. Geopolitical gaming between big countries have once again triggered imbalance in the international energy order.

Thirdly， new development in the global energy landscape has brought new challenges to global energy governance. The trend of “the east rises and the west falls” in the global energy governance has intensified rivalry on the say on energy between big western powers and emerging market countries. Currently， as shown in table 1， energy consumption demand from emerging market countries are on the rise and the focus of global energy governance has also shifted here. As energy consumption soars and the global energy consumption market transfers to emerging market countries， the consumption of energy globally will have increased by 50% by 2050. Most of the new increases will come from Asia， and those in India and China in particular will be the fastest. As the governance structure and distribution of power within the current global energy governance frameworks are not all reasonable， emerging market countries that are moving towards the center of global energy governance are taking the initiative to participate in formulating global energy rules and global energy governance. As vested interests and original dominators of the current global energy system， western big powers will never easily forgo their dominant position. Therefore， the conflicts between emerging market countries and conventional energy dominant countries might continue to exacerbate as they vie with each other for dominance of the energy governance system. This conflict brought by the new development in the global energy landscape will bring new challenges to global energy governance.

G20 in the Global Energy Governance System

Energy security has always been a priority issue at the G20 Leaders Summit. G20 members include both major energy producers and consumers， as shown in table 2. First， G20s attention on the energy issue has been rising. From an ambiguous mentioning of the energy security issue at the beginning to discussing the establishment of a stable energy market， and to the focus shift onto green energy and then to the circular carbon economy and clean energy issues， the changing issues have shown that G20s understanding of the global energy security issue has been deepening， and that global energy governance has gradually been integrated into the G20 Leaders Summit agenda. Second， the G20 Leaders Summit has focused more and more on institutionalized solutions to problems in global energy governance. At the Antalya Summit in 2015， it was proposed that coordination within G20 should be strengthened and long-term voluntary cooperation frameworks be established. At the Hangzhou Summit in 2016， it was further proposed that a more effective and inclusive global energy framework be built. The changes in the G20 Leaders Summit declarations have reflected that G20 is working to build its energy security governance function into a long-term and institutionalized one. Finally， G20 has linked the energy issue with a wide range of issues such as economy， environment， and sustainable development. Take the 2020 Riyadh Summit as an example， the summit proposed that “access to clean， sustainable and affordable energy is the basis for reducing poverty and facilitating economic growth”. The approach of linking development and environment with energy security has reflected the flexibility of G20 as an informal global governance institution， which will enable G20 to participate in global energy governance more efficiently.

As pointed out in the 2020 G20 Riyadh Summit Leaders Declaration， G20 will “ensure a stable and uninterrupted supply of energy to achieve economic growth while responding to the challenges brought about by the pandemic”， and be committed to “leading energy transitions to realize the ‘3E+S （Energy Security， Economic Efficiency， and Environment + Safety）”， and “promoting open， competitive， and free international energy markets”. At the meetings at different levels under this summit， the importance of energy governance has become ever more prominent， and were discussed along with the issues of security， climate change， sustainable development and global trade， together developing and transforming global governance in the context of the COVID-19 pandemic.

Firstly， achieving stability in energy security and energy markets is vital in the global energy governance process. Energy security is the key to global energy governance， and energy markets stability matters to global economic development. To safeguard global energy security， G20 has established a short-term Energy Focus Group as advocated by the rotating presidency Saudi Arabia， which discussed a range of measures， including the adjustment of energy production， monitoring of consumption and supply reserves， and data transparency. In terms of stabilizing the energy market， energy ministers from G20 member states reached consensus on further enhancing energy security and strengthening markets stability， and pledged to increase energy data comprehensiveness and transparency， enhance the reliability and flexibility of the energy system， and help mobilize public and private investment in various energy sectors.

Secondly， constructing cleaner and more sustainable energy systems through circular carbon economy is the future development orientation of global energy governance. According to the Communique of the G20 Energy Ministerial Meeting， circular carbon economy is a holistic， integrated， inclusive and pragmatic approach to managing emission that can be applied reflecting country's priorities and circumstances. The Riyadh summit has forged consensus on speeding up the promotion of the circular carbon economy approach， and provided the approach and guidance on circular carbon economy. The circular carbon economy approach is built on the basis of the “4R” framework， namely， reduce， reuse， recycle and remove. The circular carbon economy guidance has provided G20 members and other countries with tools based on their national conditions， demands and priorities. In addition， achieving carbon neutrality was also a focus at this summit. Around this target， this summit has raised two sub-agenda items of managing emission for sustainable development and building a clean energy system for the new era. To be specific， Saudi Arabia will continue its efforts in improving the coordination among different emission reduction programs， while developing energy solutions and technologies to help build a cleaner， more sustainable and more affordable energy system.

Thirdly， we shall optimize the global energy governance mechanism to address major challenges such as world economy recession in the context of the COVID-19 pandemic. As the G20 Environment Ministerial Meeting Communique states， against the backdrop of the COVID-19 pandemic and climate change， the sustainable management of natural resources and energy is core to earth protection and growth resumption. An orderly global energy governance， a stable energy supply and stable energy markets will be the basis for world economic recovery， resumption of supply chains and production， and sustainable development. Energy is the basis of human activities， and more importantly a guarantee for world economic system operation. In order to achieve the vision stated in the G20 Trade and Investment Ministerial Meeting Communique that trade and investment must act as important engines of growth， productivity， innovation， job creation， development and poverty reduction， G20 should take coordinated action to enhance global energy cooperation and construction of energy governance frameworks， and to ensure global energy accessibility. The G20 global energy governance mechanism will become an important power to ensure world economic recovery.

Acting Points for China to Participate in Global Energy Governance

As Chinas reliance on import of energy continues to grow， a sufficient， stable and affordable energy supply will be a precondition for China to achieve its long-term goals through 2035. However， Chinas energy security has always been faced with complex situations and multifaceted constraints. As the world today is undergoing profound changes unseen in a century， the active participation of emerging markets and developing countries represented by China in multilateral energy governance platforms such as G20 will be an unstoppable trend. Participating in the G20 energy governance will be conducive for China to integrate into the existing global energy governance platform， fully grasp the gaming rules and power structure of global energy governance， balance international energy cooperation with national interests， and ascertain the converging point between Chinas national interests and the existing global energy mechanism.

Firstly， we shall facilitate the G20 Summit to play a better role as a platform for coordination and consultation， and guiding members to actively participate in reshaping the global energy governance mechanism. Most G20 members are big energy producers and consumers， which enables the G20 Leaders Summit to enjoy a special position in the global energy governance system. First， G20 may play a coordinating role among different energy organizations and other international energy mechanisms. Second， the G20 Leaders Summit may give play to its leading role as an informal political and economic coordination platform in times of energy prices fluctuations and even energy security threats. As the worlds largest energy consumer and oil and gas importer， China should leverage its huge energy consumption market and turn it into the capacity to influence energy organizations such as the IEA and OPEC， and actively work to achieve coordinated interaction between the Belt and Road regional energy governance and the G20 platform. On major issues like energy security and climate change， China represents the interests of developing countries among G20 members， and should actively coordinate between emerging market and developing countries and traditional western energy dominant countries， and between energy producers and energy consumers， so as to help G20 truly become an effective coordination and consultation platform for global energy governance.

Secondly， we shall strengthen cooperation in key energy areas and fields via the G20 platform. Asia is becoming a major area of energy consumption. Energy security， energy stability and reshaping of the global energy order is getting more and more important to Asia. With G20 as the platform， China may work to facilitate in-depth cooperation between different countries in Asia， and between energy producers outside Asia and energy consumers in Asia， and mobilize G20 members to exchange data on oil and gas production， transportation and storage， energy finance and futures market and conduct joint research， so as to enhance transparency in energy markets at the levels of real economy， financial market， and policy mechanisms. In addition， renewable energy is a key issue in global energy governance. The International Renewable Energy Association （IRENA） was established in 2009， and was committed to providing support for countrys transition to sustainable energy. China acceded to it in 2013. If China strives to promote cooperation between G20 and IRENA， it will be conducive for G20 to strengthen its governing functions on renewable energy and green low-carbon economy issues， and China may participate deeper into the global renewable energy governance process.

Thirdly， we shall promote issue nexus， and coordinating energy governance， global low carbon construction and sustainable development within the G20 framework to contribute China strength into G20s in-depth participation in global energy governance. Against the backdrop of the COVID-19 pandemic， the international community generally prefer seeking green and flexible economic recovery， which means nexus between issues like energy， environment and development will be enhanced. As Ursula von der Leyen， president of the European Commission points out， “the old growth model based on fossil fuels and pollution has become outdated.” Therefore， promoting issue nexus and coordinating energy governance， global low-carbon construction and sustainable development within the G20 framework will help improve the order of global energy governance. In September， 2020， China declared that it would strive to peak carbon dioxide emissions by 2030， and achieve carbon neutrality by 2060. Practicing and promoting “green recovery” of the world economy with concrete actions， China is contributing strength to global energy governance by strengthening its coordination and energy governance capacity， and through in-depth participation in global energy governance.

Fourthly， we shall strengthen China-Europe cooperation within the G20 framework to give further play to the guiding role of China and Europe. A stable global energy governance system is in line with the interests and value appeal of both China and Europe. In its 14th five-year plan， China proposes to “actively participate in the reform of the global economic governance， and encourage G20 to play a role in facilitating international economic cooperation，” and “attaches importance to safeguarding energy and strategic mining resource security”. Likewise， since the COVID-19 pandemic broke out， the EU has also attached importance to energy security governance. During the pandemic， the EU Electricity， Natural Gas and Oil Coordination Groups， the EU Offshore Authorities Group， and the EU Nuclear Safety Regulators Group performed well in EU energy risk prevention and cross-border energy coordination. China and EU are both important energy consumption markets and important forces within G20， possessing huge influence in the global energy market. Based on their common interests and values on issues such as climate， environment and sustainable development， if China and Europe strengthen coordination and cooperation on global energy security， give play to EU's experience advantage in formulating international norms and Chinas representative advantage as an emerging market country， and work together to advance and guide the reshaping of the global energy governance system within the G20 framework， it will be conducive for economic globalization to move toward a more open， inclusive， balanced， and win-win direction.