Climate Change, Security of Supply, and the New Emerging
Hegemony in the Energy Sector in Europe:
An Analysis of the North Sea Offshore
Grid Initiative (NSOGI).
Master‘s Thesis
July 2010
M.A. International Relations and International Organization (IRIO)
Bridget Schoffelmeijer Morris Plutolaan 72
9742 GS Groningen (+31)0649687245
1 Abstract
The European Union (EU) finds itself in a situation whereby the member states are relying heavily on imports for a large majority of their energy resources. However, although the EU was initially founded on concepts of energy (i.e. the European Coal and Steel
Community (ECSC) and the European Atomic Energy Organization (EURATOM), there remains no consistent energy policy at the level of the European Commission. This paper will examine the development of a common energy policy in Europe. It will argue that in spite of the state‘s role to promote the growth of GDP in general, the EU can achieve Climate Change goals and security of supply goals through the creation of new areas of capital accumulation. This paper will explore the role of the Vertically Integrated Utilities (VIUs) in Europe and how they are seeking to increase their structural power throughout this process, at the cost of the traditional oil and gas industry. The paper focuses largely on their corporate strategies and how they mirror and differ from the global energy industry trends. How has Europe been successful in incentivizing these energy giants to assist in meeting Climate Change and security of supply goals? The paper will use the North Sea Offshore Grid Initiative (NSOGI) as an example as to how this process can unfold.
2 Acronyms:
ACER- Agency for Cooperation of Energy Regulators
BMU- German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety
CC- Climate Council
CSS- Coal Separation and Sequestration CEPS- Center for European Policy Studies CIEP- Clingendael International Energy Program EC- European Commission
ECF- European Climate Foundation ECT- Energy Charter Treaty
ERGEG- European Regulatory Group for Electric and Gas EIB- European Investment Bank
ENTSO-E- European Network of Transmission System Operators for Electricity ETS- Emissions Trading Scheme
EU- European Union
EWEA- European Wind Energy Association GCC- Global Climate Council
GDP-Gross Domestic Product GHG-Greenhouse Gas
GW- Gigawatts
HVDC- High Voltage Direct Current IEA- International Energy Agency
IPGCC- Intergovernmental Panel on Global Climate Change ISO- Independent System Operator
MNC- Multinational Corporation NGO- Non-Governmental Organization NSOGI- North Sea offshore Grid Initiative
OECD- Organization for Economic Cooperation and Development OPEC- Organization for Petroleum Exporting Countries
PEF- Pentalateral Energy Forum
REFIT- Renewable Energy Feed-In Tariff RES- Renewable Energy Source
TEN-E- Trans-European Network for Electricity TSO- Transmission System Operator
TYNDP- Ten Year Network Development Plan
3 Table of Contents
Chapter I: Introduction 4
Chapter II: Theoretical Implications and Methodology 7
Hegemonic Structures 8
Structural Power of Energy Companies 10
A Shift in the Hegemonic Structure 12
The Hegemonic Structure in European Energy Policy 13
Methodology 15
Chapter III: European Energy Policy 16
Climate Change-A Global Problem 18
Energy Security: Geopolitics or Market Based? 22
The Role of Energy Companies in Climate Change and Energy Security 26
Europe‘s Energy Portfolio 34
The Member States 36
The Companies 43
The EU Policy Response: Kyoto, Lisbon and Moscow 47
Kyoto 50
Lisbon 52
Moscow 57
Conclusions on EU Energy Policy Efforts 60
Conclusions: A Shift in the Hegemonic Structure 62
Chapter IV: The North Sea Offshore Grid Initiative (NSOGI) 65
The Supergrid 68
NSOGI 69
The Pentalateral Region 70
The UK and Ireland 73
The Nordic Countries 75
NSOGI: The Challenge for Investment 77
The Renewable Companies 82
The Next Step 85
Conclusions 86
Chapter V: Conclusions 88
4 I.
Introduction
Energy has been brought to the forefront of state policy makers across the globe in recent times. Pressures from Climate Change and the volatility and depletion of traditional fossil fuel resources are causing states to examine their energy portfolios to seek long term solutions. The European Union is no different. They are leaders in the policy creation of measures to reduce Greenhouse Gas Emissions (GHG) and are facing increasing pressures with regard to security of supply issues due to their lack of organic fossil fuel resources.
In January 2010, ten northern European countries signed an agreement which approved the North Sea Offshore Grid Initiative (NSOGI). This international transmission system seeks to invest close to €30 billion in underground infrastructure and above ground transmission systems in order to connect renewable energy resources along the North Sea with the infrastructure in mainland Europe. This collective project is seen as a step towards a greater continental Supergrid in Europe. Some proponents of this project seek an energy independent, and carbon neutral Europe by 2050. In order for the EU to achieve energy independence, the make-up of the capital and structural power relationships would have to change.
The MNCs that operate in the oil and gas industries have a certain amount of structural power. One of the primary roles of the state in capitalist societies is to ensure the growth of capital in general. During the past century, this growth has relied heavily on the oil and gas industry to produce energy which allows for increased economic growth. Therefore, the state relied heavily upon the capital growth of these industries. Because of this relationship, the industry has gained and maintained a structural power. Furthermore, due to the ability of these MNCs to mobilize in the globalized economy, states are vulnerable to any threats which these MNCs may pose, reinforcing their structural power.
The European Union (EU) finds itself in a situation whereby the member states are relying heavily on imports for a large majority of their energy resources. However, although the EU was initially founded on concepts of energy (i.e. the European Coal and Steel
5 goals and security of supply goals through the creation of new areas of capital accumulation. It will argue that the Vertically Integrated Utilities (VIUs) in Europe are presenting
themselves as a long-term solution to energy issues, and are winning the battle for market shares in the mean time. Using the NSOGI as an example of how this process unfolds, it will demonstrate the emergence of a new hegemonic structure in the region, based on greener technology, common infrastructure and reduced dependence on foreign fuel.
Theoretically, this paper utilizes concepts from a critical International Political Economy (IPE) perspective. Instead of taking the world as it is, as most problem solving theories do, the critical tool of historical materialism seeks to examine conflict between opposing forces and how this has changed the structure over time. It is possible to examine historically how opposing forces have changed the structure and how this may continue to change. Historical materialism also examines power vertically by examining who the elites may be or who controls the forces of production, and who is subject to this power in the capital system Furthermore, critical IPE uses a pluralist approach, it appreciates the power and role of the state, but complements this with other actors such as social forces and
corporations. This paper illustrates the interaction between the political and economic realms and denies that either can be approached in isolation from the other.
The Gramscian critical concept of hegemony will play an important role throughout the paper. The idea of a hegemonic structure representing the status quo, allows for an examination into the idea of rival structures. As Peter Newell and Matthew Paterson discussed in their 1998 article on climate change, 1there is a hegemonic benchmark of GDP growth to which all policy is measured. Because of this hegemonic character, policies which are not in line with the current bench mark are not easily created.
Chapter II will provide a theoretical overview of the critical concepts used in this paper, and their applications to the energy world. It will also explain the research methodology used to develop the arguments within this paper.
Chapter III will provide an extensive summary of EU energy legislation. It will begin with a discussion on the global Climate Change debate and global issues surrounding security of supply. What implications do these global issues have for the creation of energy policy at the European level? This chapter will also explore how the EU addresses these concerns
1 Newell, P. and Paterson, M. (1998) ‗A Climate for Business: Global Warming, the State and Capital‘, Review
6 through the internal market. Furthermore, this chapter discusses the roles and interests of member states in the development of European policy. What are the strategic trends among the energy companies in the wake of these policy changes? How have the VIUs emerged as a hegemonic rival to the traditional oil and gas companies?
Chapter IV will discuss how the NSOGI is being developed. It will explore the interests of the individual member states, as well as the Vertically Integrated Utilities (VIUs) which operate in this region. This chapter will offer an example for the emerging green economy, the market-based solution for achieving EU goals. How does the creation of new areas of capital accumulation through projects such as the NSOGI promoted by states, allow them to achieve extra-economic goals? How can the EU use the NSOGI as a building block for its‘ proposed Supergrid, and how does the project fit into the overall EU energy policy going forward? Who is benefitting from the investment? This chapter aims to demonstrate how a new hegemonic structure in this region is emerging as a result of this initiative.
7
II. Theoretical Underpinnings and Methodology
This chapter will explain the theoretical tools which are used within this paper from a critical International Political Economy (IPE) perspective. The concepts and themes will be explained in relation to energy policy and environmental governance. The second section of this chapter explains the methodology used throughout my research in order to develop and support the thesis.
Theoretical Underpinnings
The problematic in this paper focuses on the creation of the North Sea Offshore Grid Initiative (NSOGI), how it came about and how the states involved are using it to achieve security of supply and Climate Change goals. More generally however, it is focused around the interaction between energy and environmental policy, and the costs associated with them. The nature of energy policy is changing; this can be seen among the western developed economies at various levels. Environmental concerns are prevalent. However, addressing these concerns comes at serious costs. States are still concerned with how policies measure against the GDP growth of their economies.
More traditional, mainstream IR perspectives have examined EU energy policy as a result of interstate bargaining, or through the lense of European Integrations studies.2 The actors generally remain the member states, and the European Commission, etc. The energy companies are mentioned, but generally as reacting to the development of policy. They are not given a priority role in this development. The interests of the actors are given in these cases, based on shared norms and understandings. These understandings provide the common interests which drives the creation of energy policy and Climate Change policy. Instead of looking at EU energy policy and the NSOGI as the result of interstate bargaining based on common interests, it must be understood as part of an historical process based on the power struggles of different actors.
This paper draws heavily upon critical perspectives in IPE. The critical approach ―leads to a construction of a larger picture of the whole of which the initially contemplated part is just one component, and seeks to understand the processes of change in which both
2
8 parts and whole are involved.‖3
The purpose of this paper is not one of problem solving theory where the focus would be on the NSOGI as a part of a constant political and social system. Instead, its‘ purpose is to explore the greater picture surrounding the NSOGI in order to understand its‘ relation to an ever-changing historical process. The critical concepts of ―hegemony‖, ―structural power‖ and ―war of position‖ are key within this thesis.
Furthermore, the role of the state, the linkages between the domestic and international realm, historical materialism and the structure of the capitalist society are the most important theoretical themes in its foundations.
Hegemonic Structures
The concept of hegemony within this paper is not the traditional Realist concept based on a state‘s dominance or ―power over‖ others. Instead this concept is borrowed from
Antonio Gramsci who referred to hegemony as one belonging to civil society in which classes relate to each other through consent instead of coercion.4 A hegemonic order at a given time in history is a result of social interrelationships based on shared knowledge or ideas which legitimize the order within society. Gramsci called these orders ―historic blocs‖5
in order to classify periods in history which were dominated by particular hegemonic orders. These orders or structures can be classified by the make-up of institutions, social ideas and material forces.6 Hegemonic orders shift over time as opposing ideas and social forces clash with each other through a dialectic, resulting in new forms of struggle or conflict. Historic blocs
exercise hegemony through the ―coercive and bureaucratic authority of the state, dominance in the economic realm, and the consensual legitimacy of civil society.‖7
This paper aims to apply the critical approach of historical materialism to the energy realm in Europe in order to demonstrate its evolution from a traditional oil based economy towards the direction of a technologically advanced, sustainable economy based on renewable and low-carbon energy sources. The hegemonic order has been shifted by the influx of climate change ideology among civil society. Furthermore, institutional changes resulting
3
Cox, Robert (1981) ‗Social Forces, States and World Orders: Beyond International Relations Theory‘, Millennium Journal of International Studies, vol. 10, no.2, p.129.
4
Gill, Stephen (1993) Gramsci, Historical Materialism and International Relations. Cambridge University Press: New York. P. 52.
5
Levy, David L., and Egan, Daniel (2003) ‗A Neo-Gramscian Approach to Corporate Political Strategy‘ Journal of Management Studies, vol. 40, p. 806.
6
See Cox, Robert (1981) ‗Social Forces, States and World Orders: Beyond International Relations Theory‘, Millennium Journal of International Studies, vol. 10, no.2, pp. 126-155.
7
9 from the global environmental governance regime have shifted priorities amongst actual international and domestic institutions and among institutions in the ideological sense. Finally, material forces shift as fossil fuel resources become scarcer, more inclined to price volatility, and new technological advances in low-carbon energy production emerge.
In 1998 Peter Newell and Matthew Paterson published an article entitled ―A climate for business: global warming, the state and capital‖8
in which they challenged the traditional liberal institutional approach to global environmental governance. Instead of focusing on the changing nature of international regimes based on inter-governmental bargaining and
institutionalized norms, they argued that their approach based on the role of the state in promoting capital accumulation could better explain state policies and international
agreements in the environmental sector. The liberal institutionalist approach is based on two false premises. First the state is a unitary actor and second, politics and markets are separate, non-interacting fields of activity.
On the second page of the article, Newell and Paterson point out that a political economy approach to global environmental politics allows them to examine that state as an actor which fulfills a role in capital accumulation as a part of the overall capitalist structure.9 The state cannot be understood as a unitary actor which approaches international bargaining with given interests based on common rationality. Instead, the state‘s primary role is to ensure the growth of capital by enforcing the structure which allows this to happen. This includes enabling the conditions from which resources are harnessed to create energy.
The main criticism of Newell and Patterson‘s approach is that it defines power in mainly structural terms, characterized by the relationship between states and firms.10 What it lacks is a focus on the societal element. The approach views politics from a market
perspective and examines the market, although less so, through a political perspective. The role of the state in promoting capital is given, and not examined as a result of social power struggles. These social struggles determine the nature of firms, which are generally accepted as those that prioritize profit maximization. In other words, although Newell and Patterson successfully deconstruct structural power relations in capitalist societies in order to explain
8
Newell, P. and Paterson, M. (1998) ‗A Climate for Business: Global Warming, the State and Capital‘, Review of International Political Economy, vol. 5, pp. 679-703.
9
Newell, P. and Paterson, M. (1998) ‗A Climate for Business: Global Warming, the State and Capital‘, Review of International Political Economy, vol. 5, p.680.
10 the nature of the Climate Change regime, the structural power in itself, is not deconstructed far enough to incorporate the importance of localized social relationships.
This thesis attempts to further deconstruct the structural power of the energy companies. The theoretical contribution of this thesis is that it goes beyond the efforts of Newell and Patterson by further deconstructing the power struggles among the various players in the energy field. The chapter devoted to the North Sea Offshore Grid Initiative (NSOGI) focuses largely upon the role of social forces (i.e. the renewable companies and the
environmental NGOs) in order to demonstrate how one sector of the energy world is aligning themselves with these social actors in order to win the war of position. However, I do need to point out that the scope of analysis on which this paper focuses, is limited to a regional
perspective on the Northern European countries and the energy companies which operate there. Although this paper does attempt to further deconstruct Newell and Paterson‘s argument, it is limited in scope and does acknowledge that social relationships in this region could be deconstructed even further. Furthermore, this paper does not focus largely on the role of civil society in the energy world other than to acknowledge that it is the area within which hegemony is maintained.
Structural Power of Energy Companies
Due to the fact that traditional energy production and consumption has been central to the growth and success of industry throughout modern history, the success of the energy industry as well as the variances of energy resource capacities among states has contributed to the reactions of the states in the realm of global environmental politics. In addition, there are many capitalist countries which historically, and some that still do, have partial or complete ownership over the larger utilities. Those that have been privatized often still maintain close relationships with the state due to historic patterns of dependency. Therefore, the energy industry has enjoyed a privileged position which undoubtedly influenced the interests of the state.
According to Newell and Paterson, there has been a hegemonic discourse based upon the economic costs of action with regard to addressing climate change.11 The traditional oil
11 Newell, P. and Paterson, M. (1998) ‗A Climate for Business: Global Warming, the State and Capital‘, Review
11 and gas companies, at the time this article was published had focused their political efforts on one clear message: the costs incurred by industry as a result of any large-scale effort to minimize green house gas (GHG) emissions would be detrimental to the GDP of the state. Capitalist societies rely upon economic growth in order to survive. Therefore, the role of the state in this system is to ensure the growth of what Newell and Paterson call ―capital in general‖.12
This role is therefore paramount to maintaining a state‘s legitimacy.
Consequently those that maintain power over the production of capital, in this case the energy industry, maintain an elitist role due to their structural power within the capitalist system. The characteristics of this structure result in what Newell and Patterson refer to as the ―hegemonic benchmark of GDP‖.13
All state policy is measured against a GDP benchmark for the sake of capital in general.
The arguments of Newell and Patterson were able to explain how the structural power of capital molds the interests of the state as promoter of GDP growth. They also succeeded in explaining how the hegemonic benchmark of GDP guides policies of the state and how traditional energy companies maintain privileged positions in this policy making due to their historical ties to the growth of capital in general. By using empirical evidence related to heavy industry lobbying, they were able to demonstrate how this structure had limited international reactions to the climate change issue. However, this article was published in 1998. Although still arguably limited, there has been progress with regard to Climate Change in the global environmental governance arena. Traditional fossil fuel companies have shifted their business plans. No longer do they oppose the science of Climate Change and argue that any efforts to address the issue will threaten GDP. Arguably, they have shifted strategies to appear as a part of the solution.
A Shift in the Hegemonic Structure
In 2003 David L. Levy and Daniel Egan published an article entitled ―A Neo-Gramscian Approach to Corporate Political Strategy: Conflict and Accommodation in the
12 Newell, P. and Paterson, M. (1998) ‗A Climate for Business: Global Warming, the State and Capital‘, Review
of International Political Economy, vol. 5, p.691.
13 Newell, P. and Paterson, M. (1998) ‗A Climate for Business: Global Warming, the State and Capital‘, Review
12 Climate Change Negotiations‖.14
They applied Gramsci‘s political theory to Climate Change negotiations with a focus on the structural power of corporations. In a similar manner with Newell and Patterson‘s article, the authors argue that the European and American MNCs maintain a hegemonic position due to their structural power in the capitalist system.
Five years after Newell and Patterson‘s article, the Kyoto agreement had been signed and the business community witnessed the dissolution of many high-profile international lobbying associations. Yet Levy and Egan argue that this was not the triumph of the Climate Change ideology and environmental activism, instead it was a strategic miscalculation on the part of the business community. They argued that the lobbying arm‘s strategy, which
primarily argued against the science of climate change theory presented by the International Panel on Global Climate Change (IPGCC) scientists, was flawed because they did not put enough effort into entrenching themselves in the civil society element. Furthermore, the science of Climate Change became more and more convincing as scientific studies revealed factual evidence of its‘ effects.15
Because these facts gave the IPGCC scientists more clout among civil society, the business strategy failed. The lobbying arms began to cede to the science of Climate Change and shifted their strategies to the economic costs of action.16 This concession reduced their legitimacy and effectiveness. They could no longer argue against the factual evidence of Climate Change, and therefore they had to change their strategies.
“War of Position”
Levy and Egan concluded that the business community maintains their strategic power in the altered hegemonic structure because they have accommodated the Climate Change interests into their business plans by investing in renewable energy and green images. This is a tactic employed in what Levy and Egan referred to as a ―war of position‖. This
14Levy, David L., and Egan, Daniel (2003) ‗A Neo-Gramscian Approach to Corporate Political Strategy‘
Journal of Management Studies, vol. 40, pp. 803-829.
15
The conclusions of the IPGCC scientists are explained in Chapter III.
16Levy, David L., and Egan, Daniel (2003) ‗A Neo-Gramscian Approach to Corporate Political Strategy‘
13 theoretical concept is rooted in the works of Gramsci‘s discussions of hegemony. Gramsci used the ―war of position‖ as an alternative to a ―war of movement‖.17
Gramsci used the war of movement to describe a revolutionary force which attempts to seize control of the state. Within western democracies, where civil society is well-developed, these efforts will fail eventually, because they will be rejected by the societal element. This war of movement seeks gains within a preexisting hegemonic structure. In contrast, within these societies, a more successful strategy would be the ―war of position‖. In this case, the revolutionary actors engage in a long-term, strategic effort to gain legitimacy through civil society by creating an alternative hegemonic structure. Instead of operating within the current order, these strategies create a new one. Once the war of position has been ―won‖ and a rival hegemonic structure emerges which is able to challenge the current order. Given the
hegemonic structure, these companies are in a constant battle with others in order to maintain their privileged position within it. In this case, this may be considered market shares. In the energy world, this means those that have control over the production and distribution and sale of energy. The paper will illustrate the various attempts by industry players to engage in a ―war of movement‖ versus a ―war of position‖. Therefore, whereas once this was dominated by the oil industry players, rival production resources such as natural gas, nuclear, and more recently, renewables, have challenged traditional oil company dominance. Chapter‘s III and IV will provide factual evidence on this shift and will discuss in detail how the Vertically Integrate Utilities (VIUs) have engaged in a war of position, aligned with social forces and often the member states, in order to offer a rival hegemonic structure. It will further discuss how the war of movement tactics engaged by the oil and gas industry to maintain their
hegemonic position, have been less successful due to their inability to win the war of position.
The Hegemonic Structure in European Energy Policy
What this paper aims to achieve is to apply the work of Newell and Paterson to the European realm of energy policy. Furthermore, it aims to demonstrate a shift in the traditional hegemonic structure, in line with the arguments from Levy and Egan. It argues that states are able to achieve Climate Change and security of supply goals in spite of their
17
14 direct effect on the energy companies. To do this, states may use policies to create new areas of capital accumulation where these goals can be achieved. For these purposes, it means harvesting a green economy, where renewable and low-carbon technology can flourish, create new markets, and maintain the growth of GDP. Using an historical materialism approach, the paper will demonstrate the primary struggles within the hegemonic structures between
environmental efforts and the energy companies in Europe. Furthermore it will highlight the elitist role and structural power of these energy companies due to their role in the
management of production and capital accumulation. It will focus on member states and the European Union level governments and their roles in reducing greenhouse gas emissions and balancing this with the accumulation of capital in general.
The third chapter will demonstrate a shift towards decoupling the growth of the oil and gas industry from the growth of GDP in general. It will discuss how these traditional energy companies, in the face of environmental policy, engage in order to maintain their structural power. The fourth chapter will highlight an example of an emerging economy which rivals the traditional fossil fuel based economy through the North Sea grid proposal, and its impact on the strategic power of energy companies. This chapter will demonstrate how new
ideologies in this region, and aligned interests, across the three pillars of hegemony (power of the state, control of economic production and the social forces/ civil society element) can alter the hegemonic structure. The thesis maintains that the GDP benchmark remains the
15 Methodology
As mentioned previously, this paper will be utilizing historical materialism applied to the historical structures methodology developed by Robert Cox.18 Cox refers to this approach as ―limited totalities‖19
where a ―particular sphere of human activity in its historically located totality.‖20
In other words, this paper does not assume that the theories and structures apply globally, but focuses on a particular issue, the NSOGI, as a present day proposal resulting from its relation to European energy policies and the historic structures that have evolved to create it. The institutions, ideas and forms of state are particular to the issue explored within this paper.
The focus of Chapter III begins with the global discussion of the emergence of the climate change debate. The implications of which are tied to the creation of energy policy at the European level. This is then tied in to historic structure analysis at the member state level. The fourth chapter analyzes the structure of the NSOGI project and how it relates to the
previous shifts at the global, European and member state levels.
The research draws heavily upon primary sources such as European Union legislation. It also includes a literary review on various European energy policy initiatives. News articles are utilized to emphasize historical developments. NGO publications are referenced in order to demonstrate interpretations of historical events as well as ideological tools for the
realization of the NSOGI.
There is of course much to offer in the way of literature on the global climate change discussions. This is also true in the realm of energy policy in Europe. Yet for applications of critical IPE with regard to these issues, these resources are somewhat limited. It is for this reason that this paper relies so heavily on primary sources in many of the areas of analysis. This is especially true for the NSOGI chapter. There has been very little written about this initiative beyond meeting minutes, NGO and interest group reports and goals within
legislation. Furthermore, although this paper is analytical in nature, much of it is descriptive as well, due to the complexity and nature of the subjects at hand.
18
See Cox, Robert (1981) ‗Social Forces, States and World Orders: Beyond International Relations Theory‘, Millennium Journal of International Studies, vol. 10, no.2, pp. 126-155.
19 See Cox, Robert (1981) ‗Social Forces, States and World Orders: Beyond International Relations Theory‘,
Millennium Journal of International Studies, vol. 10, no.2, p. 137.
20 See Cox, Robert (1981) ‗Social Forces, States and World Orders: Beyond International Relations Theory‘,
16
III. European Energy Policy- Implications for the Nature of GDP
“A given socio-historic moment is never homogenous; on the contrary, it is rich in contradictions.” -Antonio Gramsci
Energy policy in the European Union (EU) is at the forefront of discussions in Brussels. Global Climate Change pressures and increasingly volatile global oil and gas markets have highlighted the need for drastic greenhouse gas (GHG) emission reductions and a decreased reliance on fossil fuels. Energy portfolios and infrastructures within the member states are vastly different, and many of the newly accessed members bring with them great vulnerabilities which are potentially disastrous if left as is for Europe‘s economic future. Furthermore, the line between energy policy and foreign policy is becoming increasingly grey as resource nationalism is on the rise among fuel exporters amidst ―peak oil‖ uncertainties in the global markets.
The EU‘s supranational authorities have been broadened as the common market has become further integrated since 1992. In this role, the EU institutions are responsible for the success of the market by establishing and enforcing the rules which allow for competition, free movement of goods and services, and prevents protectionist measures by member states. Yet in the energy world, the liberalization of this market has been markedly slower in this respect. Europe is seeking to create a common energy policy which incorporates three primary focus areas; environmental issues, energy security and the integration of the common energy market.
The European Commission is expected to release its third strategic energy review at the end of 2010, along with a long-term energy infrastructure development plan. The creation of a common energy policy has been in the making for quite some time. How will this be realized? In order to approach this question, this chapter focuses on the historical
17 This is changing, however, as the EU policies force the internal state energy markets to Europeanize. This process poses new challenges to the traditional structural relationships between energy companies and their member states. Because these markets were traditionally located within state boundaries, the member states had control over the regulation, pricing and taxation of the industry. Europeanization of the energy sector threatens this control and thus the member state ability to dominate its policy. The shifting of the member states are divided among those that have historically maintained national champion models within their energy industry (France, Germany, Belgium, Italy) and those that have liberalized their markets early on, and are now facing the sale of their energy industry to growing European monopolies (The Netherlands and the United Kingdom).
In many cases European energy integration presents new market opportunities for these companies. As the energy market grows beyond state and regional levels to a unified European market, some of the market leaders are able to grow with it through merger and acquisition strategies. These companies are then focused on the EU level policy makers and regulators, and become less concerned with state-level regulation and control. The structural power of the member states is becoming increasingly challenged within the energy market in these instances. Because of the potential for growth of the energy industry leaders, the EU is able to promote the emergence of a green economy, coupled with increased competition and market integration, and therefore increase security of supply.
As these policies are incrementally achieved and as the green economy continues to emerge, the composition of GDP changes. A rival hegemonic structure emerges based on reduced GHG emissions and an integrated market. What is constant, however, between the former energy hegemony and the emerging energy hegemony is the economic benchmark of GDP to which all policy is measured against. Traditional energy companies, characterized by their focus on the production and sale of fossil fuels, who once controlled great sectors of the production of capital, begin to lose the ―war of position‖ and apply new tactics to maintain their hegemonic power. Member State and EU level policies have focused on the expansion of renewable and low-carbon technologies. Carbon Trading Schemes, Feed-in Tariff systems, priority interconnection plans (PIP), government subsidies and development plans for
18 This chapter attempts to illustrate the historical processes which have allowed for the emergence of this green economy as a potential long-term rival to the traditional fossil fuel based energy companies. What clashing ideational forces have resulted in shifts in the historic structures? Who are the actors in this ―war of position‖ and how have they shifted strategies in order to maintain or gain hegemonic power? How does this shift in the historical structure affect future energy policy at the level of the EU? In order to answer these questions the chapter explores four focus areas..
First, it examines the global forces that shape or constrain energy policy at the EU level. With global Climate Change at the forefront of many environmental and economic debates, this section discusses how it emerged on the global stage, and how the EU has reacted and integrated this issue into its policy decisions. It will also describe the global issue of energy security and what implications the global market brings to EU level decisions. This section will focus largely on the global trends of the traditional oil and gas companies and how they have sought, through wars of movement and position, to maintain their hegemonic positions.
The following sections will explore energy policy making at the level of the EU. It will discuss the nature of the VIUs in Europe and how they are engaging in a war of position to solidify their presence in the emerging rival energy hegemony. It will focus on the history of energy policy efforts at the member state level and how the historical structures have resulted in increased competition for energy companies in some states, whereas others maintain a monopolist national champion with closer ties to the host nation. Finally, the chapter focuses on the EU level policies and the process by which they were agreed upon, whose interests these policies served, and to what extent they have shaped the common market going forward. The EU level policy discussion is divided by three different goals: Kyoto-Climate Change, Moscow- security of supply, and Lisbon- market integration. These levels are not separate, but greatly intertwined into an overall system. However by separating them in this manner allows for greater detail of an overall historic structure.
Climate Change—A Global Problem
19 detrimental to our society at large, some argue that this issue should not take precedence over economic affairs of the market or social welfare or other short term gains and needs. 21Others argue that this should be the priority to which all other policies are measured against. If we do not take global action now, there will be serious consequences in the near future. 22
This section addresses how the issue of Climate Change emerged on the global scale and which actors are involved. It explains what institutions have developed to handle this issue, and how scholars have assessed the valuation of this issue in economic terms. It will also discuss the extent to which climate change has affected the global oil and gas markets through the emergence of a new global energy market based on renewable and sustainable technology. This global discussion will allow me to introduce the EU as an actor in the climate change discussion, and will allow me to demonstrate how this issue constrains or enables the EU policy making in the following section.
In the 19th Century, meteorologists began to research the effects on the climate from carbon emissions.23 International scientific organizations began to share information, studies and technology in the early 20th Century. As scientific discoveries began to demonstrate that human activity may have unintended consequences on the global climate, the issue began to emerge from primarily scientific communities to political fields. Environmental activism in the United States and Europe emerged in the 1960‘s and 1970‘s as a reaction to questions of ―limits to growth‖ and environmental effects of pesticides and deforestation. According to Matthew Paterson, the issues of greenhouse gas emissions and climate change that were debated through international forums in the 1980‘s ―matured‖ into formal negotiations at the 1992 Rio De Janeiro UN Conference on Environment and Development (UNCED).24 These
21
These can be divided into two camps. The first is those environmentalists or social activists that see Climate Change as a distraction from real socio-environmental issues, such as Sonja Boehmer-Christiansan and Aynsley Kellow (Source: Meadowcroft, James (2005) ‗Environmental political economy, technological transitions and the state‘, New Political Economy, vol. 10, no.4, pp. 479-498.) The other camp would be those that see the solution in the market. The technology to address this will be developed in time, as necessary, and the Climate Change issue has been made bigger than it is. For a thorough discussion see Dryzek, John and Schlosberg, David (2005) Debating the Earth. 2nd Ed. Oxford University Press: Oxford.
22See Matt Paterson‘s explanation of Green Theory and ecocentrism in Paterson, M. (2009) ‗Green Politics‘,
Theories of International Relations, 4th ed., pp.260-283. Palgrave Macmillan: New York.
23
For a thorough historical explanation see Paterson, M. (1996) Global Warming and Global Politics. Routledge: London.
24
20 negotiations resulted in the ―Framework Convention on Climate Change‖, an environmental treaty signed by the UN member states.
As of 2007, IPCC scientists have proven that CO2 levels in the earth‘s atmosphere have risen from 280 ppm to 379 ppm since pre-industrial times.25 Scientists are expecting the earth‘s temperature to rise at a rate of .2 degrees Celsius per decade in the next 20 years. Water levels are rising at an average of 1.61 mm/year and have been throughout the past century. The temperature level rises are attributed to Greenhouse Gas emissions (GHG) that occur from our industrial economies. As the temperature continues to rise, glacial areas are thawed and water levels increase, threatening our coastlines and inland waters, and therefore threatening our livelihood and quality of life. States have been called upon to regulate GHG intensive industry and transportation in order to drastically reduce these emissions.
Following the agreements at Rio, further commitments were reached with regard to climate change. The first legally binding agreement was agreed to in 1997, the Kyoto
Protocol. However, due to policy changes from the United States and Russia, the protocol did not take effect until 2005.26 It included binding targets for emission reductions for 2010, based on each individual member state. Although these targets were binding, the Protocol received heavy criticism from the environmental community due to its final form of
ratification which allowed for arguably ―weaker‖ ways to achieve these emission reductions. The original intention of the environmental community would have sought strict reduction guidelines in the overall emissions of the participating states. However, this was not the result and the final language included three ―flexible mechanisms‖ to achieve these goals. This included an emissions trading opportunity, the clean development mechanism (CDM) and the joint implementation (JI) mechanism. All three of which are aimed at reducing the economic cost of overall Greenhouse Gas (GHG) emission reductions to the participating states. These flexible mechanisms offer high-emitting states the opportunity to invest in cleaner technology in less developed countries, or to pay a carbon fee for emissions to those countries that were not given reduction guidelines. The Kyoto Protocol resulted in the creation of a GHG market at global and regional levels. The price of carbon became a commodity to be bought, sold and traded on the market.
25
United Nations IPCC (2007) The Fourth Assessment Report. UNIPCC: Geneva. PP.30-31.
26
21 Global politics surrounding Climate Change issues were, and are still not harmonious inter-state agreements in nature. Not only did these initial discussions often focus on the economic costs of action, but they often also became arenas in which other issues of global inequality were made central. As Peter Newell and Matthew Paterson argued in 1996, there were two main divisions among states involved in the Climate Change discussions. First, between industrialized and non-industrialized nations. Developing countries brought forth existing issues of global inequality into the discussion over who was responsible for this problem. Because the majority of GHG emissions were due to the industrialized countries such as the USA and those in Europe, developing countries argued that they should carry the burden. The United States rejected the Kyoto Protocol in 1997 due to a ―lack of meaningful participation of developing countries.‖27
China is expected to surpass US emissions by 203028 and continue to grow. Although China may have recently received much criticism for their continued lack of participation at COP-15 in December, 2009, others have argued that proportionally, and given their historical economic development, they are doing more than their share in comparison with the U.S.A. This is another argument from the developing countries. Head political negotiators from this region, led by China and Brazil, as well as many NGOs, argued that their economies need the room to develop just as those in the North and West have done29. Limiting technologies in their economies and increasing potential costs through the handling of the GHG issues is unfairly applied. They argue that if they are going to be required to cut emissions, then the wealthier nations should pay for it.
The second inequality discussion surrounds those countries who are fuel exporters and those that are net importers. The fuel exporters, generally those that form the Oil and
Petroleum Exporting Countries (OPEC), depend naturally on the ability to export their fuels at controlled prices. Addressing the Climate Change problem through a reduction in fossil fuels by the importing countries greatly reduces the economic potential of these resources. Many of these countries rely on these exports for a majority of their GDP and reductions in its use could be greatly detrimental to their economies.
In addition to these two divisions, Newell and Paterson also argued that the global politics of climate change brought with it, a debate about the economic costs of action. They argued that there is a Gramscian hegemonic benchmark based on Gross Domestic Product
27 Albrecht, Johan and Arts, Bas (2005) 'Climate policy convergence in Europe: an assessment based on National
Communications to the UNFCCC', Journal of European Public Policy, vol. 12, no. 5, pp. 885 — 902.
28
See International Energy Agency (2009) World Energy Outlook (WEO) 2009. OECD/IEA: Paris.
22 (GDP) to which all actions must be measured.30 All policy is measured by its effect on the overall GDP of a national economy. This discussion of the role of the state to promote the growth of GDP applies to the capitalist, developed countries and is therefore greatly applicable to this research paper.
The next section will discuss how the issue of energy security developed in the latter half of the 20th century. This will also explain why it is that GDP growth has been
traditionally tied to the energy companies.
Energy Security: Geopolitics or Market Based?
EU energy policy is also constrained or molded by another global issue- energy security. Energy security is a relatively modern focal point of policy, most notably beginning after the oil crisis of 1973. Although its origins and need came from military sources, i.e. securing enough oil to maintain a fleet, it soon developed into an issue of public policy based on the industrial economy as well as public utilities. Energy as we understand it today became part of our day-to-day lives at a rapidly developing pace during the 20th century. As technology developed new modes of transportation, i.e. the automobile, and eventually air travel and motorized sea travel, our dependency on energy began to increase. Furthermore, home-heating developed from wood and coal based technology to oil and even electricity and hot water. Much of this was dispersed through growing interconnected networks between homes and communities and eventually regions.
After the oil crisis of 1973, policy makers began to seek ways in which they could achieve energy security. Public sector analysts and foreign policy think tanks approached the concept of energy security from a government perspective. This traditional approach can be thought of in two separate ways. According to this train of thought, policy makers must first find ways to increase their own domestic production of energy as well as its efficient use and distribution in society. Secondly, policy makers must conduct foreign policy in ways that will ensure a flow of supply from exporting countries that is stable and cost-effective. Of course a state‘s ability to achieve the first goal of domestic stability affects the interests at hand for conducting foreign policy and vice versa.
23 However, there is another approach to the concept of security of supply. Many
economists argue that there is no need for policy negotiations on energy security.31 Instead, they argue that the solutions are all present in the market and that public sector intervention should be held to a minimum. In 2008, economist Pierre Noel argued against foreign policy reactions to concerns over the global oil and gas markets. He argued ―the answer to the first is higher taxes on oil, tougher fuel-economy standards and increased spending on alternative technologies. As for the higher risk of supply disruption, a new wave of investment is needed in emergency storage.‖32
Noel argued that the higher prices we have witnessed in recent years should not be seen as a problem, but should be interpreted as a solution. Higher prices mean investments in rival technologies, insurance scenarios and reductions in energy use.
The International Energy Agency (IEA), founded by the OECD countries in 1974, and considered the leading international statistical research center recently published their 2009 World Energy Outlook (WEO). The report estimated that in 2008, there were 1.5 billion people without mere access to electricity. The IEA expects overall energy demand to increase by 40% and electricity demand to increase 76% by 2030.33 To put this in perspective, it will require an additional 4800 gigawatts (GW) of capacity, or five times the current U.S.
production capacity. We can see from figure 3-1 that fossil fuels account for the majority of energy resources and make up 77% of the overall demand increase to 2030.
The global energy market largely remains based on oil, and the IEA does not see this changing in the near future. However, as OECD countries are predicted to reduce their dependency on oil to a certain degree, demands in India and China will rise. Thus, this will ensure the continuity of the global oil market as an inevitable component to energy security.
31
For a thorough explanation of this approach see Bohi, Douglas R., Michael A. Toman, and Margaret A. Walls. (1996) The Economics of Energy Security. Boston: Kluwer Academic.
32
Noel, P. (2008) Beyond Dependence: How to Deal with Russian Gas. Issue brief. P.3. European Council on Foreign Relations: London.
33
24
Figure 3-1: International Energy Agency (2009) Key World Energy Statistics 2009. OECD/IEA: Paris.
After the First Gulf War, some believed that oil prices would be stabilized, and the efforts for energy security began to wane. Prices in 1992 through 2000 remained between $10-$20 per barrel.34 However, in the years following a series of events shook the global oil market as prices sky-rocketed and uncertainty grew.
In 2002 Venezuela‘s national oil company PDVSA shut down operations for two months after the failed military coup to overthrow President Chavez. The loss of Venezuelan oil on the global market had a profound effect.35 This was in 2002 and 2003 before the launch of the Iraq War, which also led to a disappointment for the global oil market. Many believed that investors would pour into Iraq, seeking to take advantage of their natural resources. This did not occur at the level many had hoped due to the still, unstable infrastructure and threat of violence within its borders.36 In addition to Iraq and Venezuela, Russia has had its own run of political uncertainty and economic woes which have slowed its output as well as one of the leading oil exporting nations. Nigerian oil experienced a series of cut-offs from its
government in 2008. All of these issues, placed with the loss of U.S. oil drilling after
34
Energy Information Administration (2006) Annual Oil Market Chronology. Available: http://www.eia.doe.gov [accessed: 31 May 2010].
35
Mu ller-Kraenner, Sascha (2008) Energy Security: Re-measuring the World. Earthscan: London.
25 Hurricane Katrina and the current economic crisis, has left the global oil market in tighter times with a price of $100/barrel in 2008 to just below $80/barrel in 2010.37
―Peak Oil‖ discussions have continued to gain ground in recent years as scientists predict that the height of production has already occurred, or is soon to be reached. In addition to concerns about the scarcity of supply, experts have predicted a continual
concentration of the supply of oil in more internally instable areas.38 78% of the world‘s oil reserves lie in the regions of the 13 OPEC countries, and 40% of world oil production comes from these states, three of the largest being Saudi Arabia, Russia and Iran.
The fluctuations and uncertainty in the oil market have had great impacts on the national economies of the importing countries. As the price of oil remains high, and its future is uncertain, market forces as well as public policies have driven the emergence of new technologies in the energy sector. In addition to oil, natural gas has become a dominant resource in the global energy market. The demand for natural gas is expected to increase by 1.6 percent per year from 104 trillion cubic feet in 2006 to 153 trillion cubic feet in 2030.39 Due to its relatively lower costs as an alternative to oil, and to its lower overall carbon
emissions, policy makers and businesses have increased investment in natural gas technology. Whereas once the global gas markets were tied to the oil markets, they have become
increasingly decoupled, and gas has grown from 16% in 1973 to 20.9% of the overall world energy consumption.40 Oil has decreased from 46.1% of world energy consumption in 1973 to 34% in 2007. In the OECD countries, this share was 52.5% of overall consumption in 1973, and in 2008 it was reduced to 37.8%.41
Although the oil and gas markets have become increasingly decoupled, the initial investments in the exploration and production of natural gas were for the most part funded by the oil industry. Natural gas subsidiary companies are primarily owned and operated by what is termed an Integrated Oil and Gas (IOG) company. All of the primary oil giants have natural gas operations within their business portfolios. Some are even strategically moving in a direction of primarily natural gas driven technology and reduced oil dependency. The
37
Energy Information Administration (2009) Official Energy Statistics from the U.S. Government. Available: http://www.eia.doe.gov [accessed: 31 May 2010].
38
See Youngs, Richard (2009) Energy Security: Europe's New Foreign Policy Challenge. Routledge: Abingdon. Also see De Jong, J., Glachant, J. and Hafner, M.(2010) A Smart EU Energy Policy. Clingendael International Energy Program: The Hague.
39
Energy Information Administration (2009) Official Energy Statistics from the U.S. Government. Available: http://www.eia.doe.gov [accessed: 31 May 2010].
40
International Energy Agency (2009) Key World Energy Statistics 2009, P.6. OECD/IEA: Paris.
26 primary leader on this strategy is Royal Dutch Shell. Similar to oil, there are still smaller gas companies which operate independently yet for the most part, the two business operations are integrated.
The decreased reliance on oil in the OECD countries is not only attributable to the natural gas industry but also nuclear technology, which has grown from 1.3% to 10.9% of overall energy consumption in this region.42 Furthermore, the electricity sector has grown from 9.4% to 17.1% of overall fuel consumption in the world and 21% within the OECD region.43
In addition to a general shift in energy consumption, the make-up of the consumers has shifted as well. Whereas in 1973 industry and transport made up for almost 60% of energy consumption, in 2008 these numbers were reduced to 44%.44 This means that in 2008 just under 60% of fuel was consumed by other sectors including agriculture, public services, residential homes, commercial and others.
The global oil industry may have once enjoyed structural power due to its control over the nature of production. Yet the industry has been weakened by the insecurities in the market and the emergence of rival technologies. Combined with growing concerns over climate change and other environmental concerns such as oil spills, as well as civil society concerns about their elite roles amidst policy makers45, their structural power is being
challenged. The next section will examine how the traditional energy industry has reacted to these challenges on the global scale. These general trends have great implications for the European energy industry, which will be examined later in this chapter.
The Role of Energy Companies in Climate Change and Energy Security
What makes the climate change discussion different with regard to its effects on the energy production business is that it limits overall carbon emissions. In this sense, it does not
42 International Energy Agency (2009) Key World Energy Statistics 2009, P.6. OECD/IEA: Paris. 43 International Energy Agency (2009) Key World Energy Statistics 2009, P29. OECD/IEA: Paris. 44 International Energy Agency (2009) Key World Energy Statistics 2009, P.35. OECD/IEA: Paris. 45
27 allow these energy producers to switch fuels or adjust methods of production. In the majority of cases a reduction in overall fossil fuel emissions equates to a reduction in their overall production business. Shifting capital intensive oil and coal plants over to natural gas plants or coal plants that utilize coal separation and sequestration technology (CSS)46 is not
economically viable especially in investor-owned utilities who are seeking rents from the sales to customers. Not only that but these companies have invested heavily in infrastructure through pipelines, refineries and production facilities that had long-term investment plans. Decommissioning these projects could cause unlimited losses for their business plans. In this regard the energy lobby from fossil fuel producers is very strong because it is their very livelihood and existence at stake.
The traditional oil companies, also termed ―the seven sisters‖48
, monopolized the oil industry by the first half of the 20th century. The companies were Standard Oil of New Jersey (later known as Exxon), Royal Dutch Shell, British Petroleum, Standard Oil of New York (later known as Mobil), and Standard Oil of California (later Chevron), Gulf Oil and Texaco. By the 1950‘s most of the oil fields had been discovered and these mostly American
companies enjoyed an oligopy over the market which allowed them to control prices. The International Oil Companies (IOC‘s) together enjoyed access to 85 percent of the oil production and reserves. The remaining was dominated by Soviet Russia, and only a small percentage was restricted for access by national oil companies (NOCs).49
It was not until the 1960‘s and 1970‘s that the rise of resource nationalism altered the game. As OPEC was formed, the resource wealthy, non-OECD countries began to demand a greater role in this market. They nationalized their resources and often prevented the
operation of foreign firms. This change has permanently altered the dominance of the seven sisters, who are now four do to mergers and acquisitions. The four remaining of the original seven sisters are ExxonMobil, Chevron, BP and Shell. In spite of mergers and acquisition strategies to maintain their dominance on the global market, these four together only produce 10 percent of the world‘s oil and gas production.50
The new seven sisters now include, in
46 See the example on Vattenfall AB in Chapter III. 48
The seven sisters include Royal Dutch Shell, BP, ExxonMobil, Standard Oil (California, New Jersey and New York), Gulf Oil and Texaco or now Chevron.
49Hoyos, Carola (2007) ‗The New Seven Sisters: oil and gas giants dwarf western rivals‘, The Financial Times
Online. Available: http://www.ft.com/cms/s/2/471ae1b8-d001-11db-94cb-000b5df10621.html. [Accessed 5 August 2010].
50
28 order of market dominance, Saudi Aramco, NIOC of Iran, CNPC of China, PDVSA of
Venezuela, Gazprom of Russia, Petrobras of Brazil and Petronas of Malaysia. Together these non-OECD companies, for the most part state-owned, control over one third of all production and hold one third of all reserves.51
The western dominant oil companies lost their oligopy on the global market. Many of these companies have altered their strategies to incorporate the sale of additional chemicals and services, including gasoline and diesel. Oil as a resource became the primary fuel for industrial growth in North America and Europe over the first half of the 20th century. One of the indicators used by state economists throughout the 20th Century to measure GDP was the growth of the national oil industries. In addition, military strength relied heavily upon a nation‘s ability to fuel its force. The importance of the oil and gas industry for measuring the growth of GDP overall ensured an elite hegemonic position for these players. Because they controlled the oil and gas production, transportation and retail, their ability to control prices ensured that a national economy heavily relied upon them. Although Exxon and Chevron maintain the top two positions for the global Integrated Oil and Gas (IOGs), the dominance of state-owned non-OECD companies ensures that they can no longer solely control oil and gas prices. Not only did the traditional IOC‘s see their international role in the global oil market diminished in the latter half of the 20th century, but they also faced new domestic threats based around security of supply and price volatility and increasingly applied pressure from the environmental lobby.
David L. Levy and Daniel Egan applied a Gramscian hegemonic approach to industry in climate change and developed the idea that the energy industry engages in a ―war of position.‖52
In order to maintain their privileged position in the status quo, these companies organize strategies across all aspects of the current historic bloc. As discussed in the previous chapter, these blocs exercise hegemony through the ―coercive and bureaucratic authority of the state, dominance in the economic realm, and the consensual legitimacy of civil society.‖53 Therefore corporate strategies among the energy giants have engaged in a war of position by focusing efforts towards the political realm of the states or international discussions, ensuring
51
Hoyos, Carola (2007) ‗The New Seven Sisters: oil and gas giants dwarf western rivals‘, The Financial Times Online. Available: http://www.ft.com/cms/s/2/471ae1b8-d001-11db-94cb-000b5df10621.html. [Accessed 5 August 2010].
52
Levy, David L., and Egan, Daniel (2003) ‗A Neo-Gramscian Approach to Corporate Political Strategy‘ Journal of Management Studies, vol. 40, pp. 803-29
53
29 their dominance over the global energy market and seeking social legitimacy through
marketing campaigns and social programs.
The energy companies coordinate political organizations to give them a foothold in the global debate. As the discussions towards the first agreements at Rio began, so did the
international lobby organizations such as the Global Climate Coalition (GCC) and the Climate Council (CC). Through these organizations they challenged the science of climate change and used their industry expertise in order to do so.54 The initial responses from these
coalitions focused on the cost of addressing Climate Change. In a GCC statement released to the United States Senate regarding the 2001 Clean Power Act, or S.556, which mirrored the non-ratified Kyoto Agreement, they argued that the bill was ―seriously flawed and virtually unworkable.‖55
To continue, they emphasized that the bill would ―increase energy costs, restrict productivity and impair overall growth.‖56
Furthermore they stated that the bill was based on questionable science and that it was not acceptable ―absent an overwhelmingly compelling argument that human health, the environment or national security requires it.‖57
The strategy was successful and S.556, similar to the Kyoto Protocol ratification, was tabled.
To ensure market dominance, energy companies conduct trans-national mergers (i.e. Exxon-Mobil, Chevron-Texaco, etc.). This compilation of resources, according to Levy and Egan, allow them to ―strengthen the bargaining positions of key firms, provide opportunities for economies of scale, and reduce the burden of risky investments in low emission
technologies.‖58
Many of these companies have also diversified their business plans through natural gas and non-traditional fuel ventures, such as shale and seed oil, as well as renewable investments. They have also developed or acquired business shares in electricity generation, infrastructure ownership and the consumer level sale of refined fuel and electricity. For instance, Shell has expanded operations into the natural gas sector as well as renewable
54
Levy, David L., and Egan, Daniel (2003) ‗A Neo-Gramscian Approach to Corporate Political Strategy‘ Journal of Management Studies, vol. 40, pp. 803-29
55
The Global Climate Coalition (2001) ―Statement of the Global Climate Coalition
Before the Senate Committee on Environment and Public Works Hearing on S. 556, the Clean Power Act‖, GCC: Washington.
56
The Global Climate Coalition (2001) ―Statement of the Global Climate Coalition
Before the Senate Committee on Environment and Public Works Hearing on S. 556, the Clean Power Act‖, GCC: Washington.
57
The Global Climate Coalition (2001) ―Statement of the Global Climate Coalition
Before the Senate Committee on Environment and Public Works Hearing on S. 556, the Clean Power Act‖, GCC: Washington.
58
30 energy. In 2009 they invested $2 billion in carbon and renewable technology, a small portion of their $278.2 billion revenue.59 Similarly, in addition to oil, Chevron invests in coal, and natural gas, as well as many renewable energy sources. Chevron has also owns, generate and supplies electricity in the United States and Asia and also distributes gas through the names of Chevron, Texaco and Caltex.60
To address the civil society element, the energy companies also utilize public relations specialists which allow them to appear as more ―green‖, ―sustainable‖ and ―eco-friendly‖. They invest in renewable technology in order to demonstrate their willingness to address environmental concerns.61 These relatively small transfers of technology in their business strategies allow them to create coalitions with more mainstream renewable energy companies, therefore promoting their corporate images among global institutions, other market players and global civil society. For instance, BP has created a subsidiary known as BP Alternative Energy. Through this enterprise they concentrate their efforts on venture options, investing or seeking interest in early or mid-stage renewable companies in order to capitalize on their successes. BP has recently invested with StatOil in BrightSource Energy, a large scale utility-sized solar company. Although Shell followed a similar path, the company received some angry press with regard to the CEO‘s 2009 decision to scale down their renewable energy plans and to focus primarily on oil, gas and biofuels.62
In addition to investing in smaller renewable ventures, the companies may also align themselves with environmental groups under umbrella organizations to further this image.63 For instance the Nature Conservancy lists BP as a member. The international NGO has been blasted in the press recently since the BP oil spill in the Gulf of Mexico for not only naming them as a member, but also as having given BP a seat on their International Leadership Council.64 These tactics in this war of position are long-term strategic calculations to ensure
59
‗About Us‘ (2010) [online] Shell.com. Available: http://www.shell.com/aboutus [accessed 10 June 2010]
60
See: ‗Chevron Annual Report‘ (2009) [Online]. Chevron.com. Available: http://www.chevron.com [accessed 04 August 2010].
61
See Vivoda, Vlado (2009) 'Resource Nationalism, Bargaining and International Oil Companies: Challenges and Change in the New Millennium', New Political Economy, vol.14, pp. 517-534.
62
Pagnamenta, R. (2009) ‗ Anger as Shell reduces renewable investment‘, The Times Online. Available: http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article5927869.ece [accessed 04 August 2010].
63 For instance the Pew Center on Global Climate Change or the Partnership for Climate Action. 64
