In the past fifteen years, however, non-OECD countries have developed growing and—in the case of China—massive interests in global energy governance. In 2012, China began to clamor for new global energy governance institutions. It was not simply pushing back on the dominant role of the IEA, but also lamenting the large number of noninclusive, fragmented, and uncoordinated international institutions addressing energy governance. Most recently, China has focused on the G20—an international gathering of the governments of twenty of the largest economies in the world—as a potential vehicle for establishing greater international cooperation on energy issues. President Xi Jinping has reportedly said privately, and bluntly, that if China is to be part of the international energy order, it must have influence over how it is run.
The West and its institutions were slow to respond to China’s explicit calls for new international structures to manage global energy issues. However, a development in late 2014 lit a proverbial fire under those who had been nodding passively at China’s exhortation for new institutions or the reform of old ones. On October 24, 2014, China and representatives from twenty-one other countries signed a charter for the establishment of the Asian Infrastructure Investment Bank (AIIB). The Obama administration and others in the United States saw this move as a direct challenge by China to the Bretton Woods system that established the World Bank and the International Monetary Fund to help with the development of infrastructure and other projects. While some believe that China would have propelled the AIIB forward under any circumstances, others saw the move as a direct result of the sluggish pace at which the Bretton Woods institutions were willing to grant China greater influence in them, given that its economy has grown more than twentyfold since their establishment in 1944.
U.S. and other officials were suddenly nervous that if Beijing’s persistent entreaties for reform of global energy governance were not addressed, China would launch its own parallel set of energy institutions, directly challenging yet another element of the existing international order. The combination of these anxieties, and recognition of the need to create more inclusive, coordinated structures, stoked a significant effort on the part of the IEA to bring China and other large energy consumers into the fold. Upon taking the helm of the IEA in September 2015, Executive Director Fatih Birol made Beijing the destination of his first official trip. There, he explained that strengthening ties between the IEA and emerging powers would be a key objective of his tenure. “China,” he told an audience at the Chinese Academy of Sciences, “is at the very top of this list.” In the months that followed, the IEA opened a joint energy center in Beijing. China and other Asian countries also activated an “association status,” granting them access to a wide variety of data, training, and discussions at the IEA.
Will such steps be sufficient to keep China—and potentially others—in the tent of existing international energy institutions and from creating competing institutions? That remains to be seen, but there is no question that agreeing to principles and terms of reference for new or existing structures will be less contentious in an environment of abundance than in one of scarcity and competition. Moreover, many of the steps that might be required of aspiring members or associates—such as the obligation of creating a strategic oil stockpile equal to ninety days of the country’s consumption—are more easily done when prices are relatively low, rather than sky-high.
Restoring U.S. Leadership on Climate Change
The fifteen ambassadors from the European Union regularly met for lunch in Washington, D.C. Often, they would invite a member of the U.S. administration to this private gathering for an exchange of ideas about pressing foreign policy issues. In March 2001, with the Bush administration still settling into office, the EU ambassadors considered it a stroke of good fortune to have National Security Advisor Condoleezza Rice join them at the Swedish ambassador’s residence. They were nervous about some of the signals the new administration had sent on the issue of climate change and wanted to register how important ratification of the Kyoto Protocol—the international climate treaty negotiated in 1997—was to their governments. Rice didn’t mince her words, “Kyoto is not acceptable to the administration or Congress . . . Kyoto is dead.”
If the reaction at the luncheon was, as reported, subdued, it bore no resemblance to the international furor that followed the administration’s public disavowal of Kyoto two weeks later. Leaders from around the world met the Bush administration’s decision not to send the treaty to the Senate for ratification with sharp words. The French minister for the environment, Dominique Voynet, called the decision “completely provocative and irresponsible,” and warned the United States against “continuing the work of sabotage” if other countries sought to pursue Kyoto without the United States. Romano Prodi, the former prime minister of Italy and president of the European Commission, the executive body of the European Union, at the time, chided, “If one wants to be a world leader, one must know how to look after the entire earth and not only American industry.”
In her 2011 memoir, Rice expresses regret over how the administration handled Kyoto, calling it a “self-inflicted wound.” The combination of the failure to offer an alternative to the treaty and the abrupt manner in which it was handled dealt a blow to American soft power. The rejection of Kyoto by the United States ran counter to the idea that America would be at the forefront of solving global problems and left the impression that America cared more about maintaining its “lifestyle” than dealing with the potentially existential threats climate change could pose to other nations. Even though the Bush administration had some understandable objections to the protocol, its positions were dismissed as narrowly self-serving. Its concerns that the burdens of cutting emissions fell exclusively on industrialized countries were perceived as the United States using the inaction of others to justify its own reluctance.
By 2015, the Obama administration had largely reversed the American position on climate change and reestablished the United States as a global leader on the issue—thereby regaining much of the soft power lost in the Kyoto episode. Speaking in Alaska in August 2015, the president stated, “I’ve come here today, as the leader of the world’s largest economy and its second-largest emitter, to say that the United States recognizes our role in creating this problem [climate change] and we embrace our responsibility to help solve it.” In addition to markedly different rhetoric, the Obama administration placed the United States at the forefront of the 2015 United Nations Climate Change Conference held in Paris. It not only submitted to the United Nations a plan detailing how the United States would meet its goals of reducing greenhouse gas emissions 26 to 28 percent below 2005 levels by 2025, but it also took an active role in getting others to make comparable commitments. In a classic use of soft power, the administration sought to leverage its willingness to embrace ambitious goals to get other countries to do the same. Melanie Nakagawa, a State Department official in charge of assisting other countries as they make the transition to low-carbon economies, highlighted “a real pull from other countries for U.S. assistance to help them get on a glide path to meeting commitments in the wake of Paris.” Environmental Protection Agency (EPA) administrator Gina McCarthy said much the same when she commented that “if we don’t take strong action, we know we’re not going to get global action.” McCarthy pointed to India and Brazil, alongside China, as countries inspired by U.S. pledges to make more ambitious commitments of their own.
Perhaps ironically, none of this would have been imaginable in the absence of the unconventional energy boom. The surfeit in shale gas production in particular lubricated a resumption of U.S. leadership on climate change in two specific ways. First, it gave the United States credibility as a serious mover on emissions reduction. This was especially important in the context of negotiating the November 2014 U.S.-China Joint Announcement on Climate Change—a bilateral accord committing both the United States and China to specific actions to address carbon emissions and a springboard to the agreement
forged in Paris the following year. In urging China—and eventually others—to commit to reducing its own emissions, the United States could point to the significant progress it had made in bringing American emissions down to their lowest absolute level in twenty years. As discussed in greater detail in the next chapter, this decline was largely due to the advent of cheap natural gas and the switch away from coal that it inspired. In private, administration officials talked of how, in the wake of the bilateral agreement with China, several large countries approached the White House in the hopes of securing a similar, high-profile deal.
Without the shale gas boom, achieving the emissions cuts that the United States did would have required significant government intervention and involved high costs—all in a period of tepid economic recovery and high partisan rancor. In short, a hard scenario to imagine. Most likely, there would have been little in the way of emissions reductions.
In addition, the shale boom also facilitated renewed U.S. leadership on climate change by providing the Obama administration with a more palatable approach for meeting future U.S. pledges to reduce carbon emissions. The ability of the United States to meet the goals announced in the 2014 U.S.-China climate accord and later submitted to the United Nations in advance of the 2015 Paris Conference relied heavily on new EPA regulations to limit the carbon dioxide emissions of power plants. Even in a low-cost energy environment, such efforts to achieve further reductions in carbon emissions are politically controversial and will carry costs. Had they required utilities to shift to high-cost natural gas (rather than low-cost natural gas), or more expensive solar or nuclear, they would have galvanized even stronger domestic opposition.
On June 1, 2017, President Trump announced he would withdraw the United States from the Paris Agreement. He lamented the costs of meeting U.S. targets and appealed to the sense of some that the rest of the world was taking advantage of American naïveté. His administration could—and should—have taken a different approach. Instead of forsaking the agreement and the soft power that accrued to America as one of its vanguards, the Trump administration could have called upon American innovators to find another—perhaps less costly and more efficient—way to meet U.S. commitments. Nevertheless, Americans in support of the Paris accord can still take heart. Not only are sub-state actors galvanized to meet American goals, but continued advances in natural gas will help frustrate coal’s fortunes in the U.S. economy and open opportunities to meet commitments at lower costs than would exist in a world of energy scarcity, rather than abundance.
Promoting American Ideas about Markets, Transparency, and the Rule of Law
A lot was riding on Obama’s first official trip to China. Across Washington, U.S. officials huddled in various agencies, brainstorming about what “deliverables” could flow from his visit to Beijing in 2009. The likely agenda was broad and expected to include everything from global financial stability to the Iranian and North Korean nuclear programs. But lurking behind these more tangible issues was the larger question of what kind of role China would assume in the international system and to what extent the United States and China could work together to address global issues.
David Goldwyn had recently assumed a new post as special envoy and coordinator for international energy affairs, reporting to Secretary of State Hillary Clinton. He and his team were concerned about China’s energy trajectory and the many ways in which it might cause the United States and China to clash in the years ahead. By all accounts, Chinese dependency on Middle Eastern oil stood to grow substantially in the coming years, and Beijing was nurturing relations with countries in the region. Just as the United States was seeking the help of other countries to curtail Iranian oil sales, China was signing significant energy deals with Tehran. Moreover, China’s burgeoning coal use posed an environmental hazard not only for its own people, but for the global climate agenda. And China’s mercantilist approach to energy, best exemplified by its equity investments in pariah regimes in Africa, undermined American and international efforts to resolve certain conflicts and promote transparency and good governance.
Given the circumstances, President Obama’s visit to China seemed unlikely to open a constructive conversation on such delicate issues. What’s more, in late 2009, China seemed to have the upper hand. The United States was just beginning to crawl out of the Great Recession, which had reached bottom earlier that summer. In contrast, China had skipped over a short, sharp economic slowdown the previous year and was again growing rambunctiously, in contrast to the anemic U.S. economy. The Chinese real estate and stock markets were booming, and China was far and away the best performing major economy, driving much of global growth.
Goldwyn and his team had a clever idea. For all its economic difficulties, the United States was enjoying a massive boom in shale gas production. Other countries, including China, were no doubt wondering if this gas surge could be replicated within their own borders. As part of the deliverables for President Obama’s November 2009 trip, Goldwyn crafted a proposal the Chinese could not refuse: a resource assessment of China’s own shale deposits and a subsequent workshop to provide the Chinese with information about how to develop and manage whatever wealth was discovered. The Chinese seized the offer, and the launch of the U.S.-China Shale Gas Resources Initiative was announced as part of the joint U.S.-China statement following the trip. Its execution provided not only an important node of bilateral energy cooperation, but also created the opportunity for extensive conversations—the first of their kind—between U.S. officials and their Chinese counterparts about oil markets, the role of the market in procuring energy, pricing mechanisms for natural gas, and other matters. “The only reason the Chinese had any interest in having these conversations with us was because we were committed to helping them find a way to safely develop their own shale resources,” Goldwyn told me. “The initiative was an enormous door opener to even bigger and more strategic discussions.”
China, it turns out, was not the only country interested in benefiting from American shale gas expertise. The visit of India’s prime minister Manmohan Singh to Washington followed quickly on the heels of President Obama’s 2009 trip to Beijing—and a similar agreement was made between the two governments. America’s offer to help India assess its own shale potential helped pave the way for conversations about India’s heavy reliance on coal, prospects for the Iran-Pakistan-India pipeline to which Washington objected, and a panoply of needed reforms such as paring back energy subsidies.
Pretty soon, Goldwyn’s colleagues in other bureaus at the State Department were clamoring for similar overtures to countries around the globe. Could they offer Poland assistance with its regulatory structure? Could they help Morocco and Jordan, two energy-poor countries in the Middle East, determine if they had any shale resources? What about Ukraine, Romania, and Bulgaria, whose dependence on Russian gas was a strategic vulnerability? In August 2010, Goldwyn launched the State Department’s Global Shale Gas Initiative. With a mere $5,000 to spend, Goldwyn and his team attracted representatives from nearly two dozen countries—from Pakistan to South Africa—who listened intently for two days to U.S. officials describe every element of shale gas development; they discussed everything from assessing the geology to executing the permitting to managing water resources. The U.S. Commerce Department invited company representatives to present their own experiences in one session only; State Department sensitivity to criticism that the effort was more about business promotion than technical assistance led Goldwyn and his team to ask the participants from companies such as Devon, Chesapeake, and Halliburton to come only for their panel and then leave.
Today, that innovative initiative—now known as the Unconventional Gas Technical Engagement Program—has provided various forms of government-to-government assistance to dozens of countries from Hungary to Morocco to Jordan. Some received help assessing their resources, while others benefited from briefings, workshops, or aid in drafting regulations.
If evaluated solely on the amoun
t of energy produced, the program cannot be considered a raving success. Initial high hopes, energized governments, and American encouragement boded well at the beginning. Yet the efforts of Poland, Ukraine, and other countries in Eastern Europe subsequently fell woefully short due to a combination of complicated geology, restrictive property rights that discourage landowners from allowing exploration, and environmental concerns. In other places, shale gas efforts are in the early stages; with a few exceptions, commercial production is far from imminent.
The program, however, has been an unequivocal success in terms of enhancing America’s soft power. For starters, it gave the United States a seat at the table in what would otherwise be domestic-only conversations around the world related to energy security and the environment. It has enabled U.S. diplomats and area experts to engage foreign officials on these topics, not as lecturing outsiders, but as those bringing value added to the discussion. “These conversations provided the entry point for us to discuss bigger issues of how countries run their economies, how they treat investment, and the problem of corruption,” according to Goldwyn. “We couldn’t effectively address these issues from a theoretical point of view. We needed to have some skin in the game, to have the potential to be truly helpful.”
In a less direct way, the unconventional revolution also helped the United States gain traction with countries on a much broader set of issues related to energy markets, transparency, corruption, and the rule of law. Through the Energy Governance and Capacity Initiative—another brainchild of Goldwyn’s—the State Department sought out countries that, according to the U.S. Geological Survey, had real potential to produce significant volumes of conventional oil or gas. It offered U.S. advice on how a country that was not yet a producer might build a framework for responsible production of these resources. Guyana, Liberia, Sierra Leone, Uganda, Papua New Guinea, and Timor-Leste were just some of the countries that seized the opportunity. Vanishing natural gas imports and dwindling oil ones made the United States a more comfortable partner for countries in these conversations. According to Goldwyn, “the less energy the United States needed to import from abroad, the less our conversations were colored by host country perceptions that we were helping them merely as a way of getting their oil.”
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