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61. How an international agreement on methane emissions can pave the way for enhanced global cooperation on climate change

Author:
Kimberly Clausing, Luis Garicano, and Catherine Wolfram
Publication Date:
06-2023
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
Under the 2022 Inflation Reduction Act, the United States has for the first time implemented a methane emissions fee as a backstop to new methane regulations in the oil and gas sectors. The European Union is also implementing methane regulations on fossil energy. Methane is a short-lived but potent greenhouse gas, and reducing it is imperative for limiting global temperature rise to the 1.5°C target. Among the primary sources of methane emissions (including agriculture, fossil fuels, and waste), the oil and gas sectors have the greatest low-cost abatement potential. Clausing and colleagues recommend that the United States and the European Union coordinate their methane reduction policies and eventually impose border adjustments on imports from countries that fail to raise their standards. The aim would be to encourage oil and gas exporters to adopt comparable regulations or, if they fail to do so, pay a border adjustment fee on exports to the two jurisdictions. A US-EU methane border adjustment policy in oil and gas would reduce methane emissions by an estimated 15 to 45 percent worldwide, while having an indiscernible effect on key energy prices US and EU households face. With time, most major energy importers would ideally join the coalition of countries cooperating on both stringent domestic regulations on oil and gas production and border adjustments on any dirty, nonregulating exporters. Such an international agreement would help defuse frictions caused by differing climate policies and increase incentives for ambitious climate policy action worldwide.
Topic:
Climate Change, Environment, International Cooperation, Treaties and Agreements, European Union, and Energy
Political Geography:
Europe, North America, and United States of America

62. Russia's invasion of Ukraine has cemented the European Union's commitment to carbon pricing

Author:
Jacob Funk Kirkegaard
Publication Date:
09-2023
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
The European Union managed to overcome Russian energy blackmail in 2022 and used the political motivation from this national security crisis to accelerate its decarbonization process. The planned dramatic increase in the scope of carbon pricing in the European Union can herald the total decarbonization of sectors covered in the EU Emissions Trading System and expand into important new ones. The interplay between the EU carbon border adjustment mechanism (CBAM) and the US Inflation Reduction Act may cause transatlantic trade friction. But these two approaches could also offer a path to greater cooperation. Kirkegaard outlines proposals for how both the European Union and the United States can implement additional policies to secure their comprehensive decarbonization.
Topic:
Climate Change, Environment, European Union, Carbon Emissions, Decarbonization, and Energy
Political Geography:
Europe and United States of America

63. How trade cooperation by the United States, the European Union, and China can fight climate change

Author:
Chad P. Bown and Kimberly Clausing
Publication Date:
10-2023
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
Recent efforts to reduce greenhouse gas emissions have revealed different policy priorities; the United States and China have emphasized subsidy-based approaches, and the European Union has emphasized carbon pricing. These divergent policy choices—some lowering energy costs, others raising them—raise concerns about industry competitiveness and have implications for upstream and downstream firms in supply chains. This paper identifies the trade tensions resulting from varying climate policy approaches and describes policy efforts to address them. It then describes the role of a rules-based trading system in tackling the challenges that these distinct policy approaches create, examining World Trade Organization (WTO) rules on subsidies, border measures, and export restrictions. The authors suggest that the United States, the European Union, and China prioritize reforms to those rules as a path forward for cooperation on trade and climate. Such an approach would be an important starting point toward creating a functioning multilateral system.
Topic:
Climate Change, European Union, Trade, Cooperation, and Energy
Political Geography:
China, Europe, and United States of America

64. The global future of nuclear energy

Author:
Matt Bowen
Publication Date:
08-2023
Content Type:
Special Report
Institution:
Atlantic Council
Abstract:
Energy supply is an integral and essential part of modern society. Since nuclear energy provides low-carbon, baseload power, it could play a larger global role in addressing growing energy demands while reducing the risks of climate change and air pollution. Russia’s unprovoked invasion of Ukraine has also highlighted energy security as a national imperative that nuclear power could help countries to achieve. Both preserving the existing fleet of reactors and building new advanced nuclear power plants could play a role in achieving deep decarbonization of electricity supply systems by mid-century. Public support, designs with greater inherent safety, licensing advanced reactors, and reasonable costs and schedules will be integral parts of this strategy. Nuclear power’s future would also benefit from national governments putting renewed emphasis on spent nuclear fuel disposition. This report by Matt Bowen discusses a number of actions that the United States, Japan, and other civil nuclear allies could pursue so that nuclear energy can play a larger role in overcoming the challenges related to energy demand, energy security, and associated environmental and public health risks.
Topic:
Security, Foreign Policy, Nuclear Energy, and Energy
Political Geography:
Russia, Japan, Europe, Ukraine, North America, United States of America, and Indo-Pacific

65. Corking Russian Gas: Global Economic and Political Ramifications

Author:
Scott Semet
Publication Date:
08-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Awarm winter in 2022–2023, a purposive decline in consumption that caused the economy to cool, and frantic efforts to attract supplies of liquefied natural gas (LNG) obscured Europe’s enduring reliance on cheap Russian gas for economic growth. European winters will not always be warm, and there is not enough LNG to replace Russian gas in the short term. Efforts to wean Europe from Russian gas permanently defy economic logic. Should policymakers choose to do so, it would carry costs not only for Europe but also for the United States and the rest of the world.
Topic:
Gas, Economic Growth, Imports, Energy, and Regional Politics
Political Geography:
Russia, Europe, and United States of America

66. Charting a Green and Competitive Future for Europe

Author:
Lila Djait
Publication Date:
12-2023
Content Type:
Policy Brief
Institution:
EGMONT - The Royal Institute for International Relations
Abstract:
The Egmont Royal Institute for International Relations, with support of the Belgian Ministry of Foreign Affairs and in collaboration with the Representation of the European Commission in Belgium, has organised a series of three foresight workshops and three working dinners. Each session was dedicated to a key strategic challenge, providing a vital platform for dialogue and expert insight sharing among decision-makers from EU institutions, the Belgian administration, and civil society. Far from being just a theoretical exchange, the discussions were a targeted effort to further develop strategic long-term thinking, with a vision extending over the next 5 to 10 years. The inaugural session, focused on ‘Charting a Green and Competitive Future for Europe’, addressed a pressing issue of our times. In 2023, the World Economic Forum Global Risks Report propelled climate change to the pinnacle, categorizing it as the greatest risk, and underscored its entangled nature with diverse social, economic, and political dynamics. Recognizing its critical importance, the Commission has placed this theme at the heart of several Strategic Foresight Reports. These reports, among numerous other efforts, reflect the EU’s commitment to navigating the delicate balance between ecological sustainability and citizens’ wellbeing, with economic growth in the twin transition. This theme’s relevance stems from its central role in shaping the future transformation of our society and economy, highlighting the EU’s proactive approach in addressing these interconnected challenges.
Topic:
International Relations, Climate Change, European Union, Strategic Competition, and Energy
Political Geography:
Europe

67. Towards a Renewed Euro-Mediterranean Cooperation on Sustainable Agri-Food Systems for Food Security in the Region

Author:
Marko Lovec, Desirée A.L Quagliarotti, Tommaso Emiliani, and Ines Gasmi
Publication Date:
05-2023
Content Type:
Policy Brief
Institution:
IEMed/EuroMeSCo
Abstract:
This joint Policy Study discusses the vulnerabilities of the Mediterranean agri-food system exposed by the food and energy price spikes caused by the war in Ukraine and the implications for human security in the region. The Middle East and North African (MENA) region, as the world’s largest food importer, faces challenges on both the demand and supply sides, including population growth, urbanisation, dietary changes, macroeconomic constraints, scarcity of natural resources, and climate change impacts. Rural populations and farmers often experience food insecurity, while European countries are not immune to high food prices and their socioeconomic consequences. Existing policies focused on international trade and production have failed to address the complex interplay between food, environment, and society. The concept of food sovereignty provides valuable insights for developing context-specific strategies to foster resilient agricultural and food systems. The proposed ‘Euro-Mediterranean blueprint for sustainable agricultural and food systems‘ outlines six pillars, including agroecological transition, support for traditional agricultural systems, initiatives targeting the agri-food chain, promotion of blue foods strategy, participatory policy-making, and macroregional cooperation. The authors emphasise the need for enhanced regional cooperation in agriculture, particularly in the context of changing geopolitics and the disruptive impacts of the COVID-19 pandemic and the Russian invasion of Ukraine. They suggest various avenues for collaboration, such as involving Southern Mediterranean countries in European Union initiatives, increasing climate funding for agriculture and food, reengaging in regional trade negotiations, fostering partnerships in research and innovation, and promoting unifying narratives. The limitations of the EU’s Common Agricultural Policy (CAP) in driving transformative strategies in the Euro-Mediterranean region are discussed in the study, along with recommendations for targeted CAP payments aligned with climate and biodiversity objectives, conditionalities on trade, and support for sustainable practices. The role of climate and digital agendas in agriculture is highlighted, particularly the challenges and compromises associated with implementing Climate Smart Agriculture (CSA) in the region. The authors emphasise the need for context-driven, climate-smart ideas and solutions, improved water management, policy coordination, strengthened institutions, enhanced access to funding, and increased national investments in climate-friendly agriculture.
Topic:
Agriculture, Food Security, Sustainability, and Energy
Political Geography:
Europe, Middle East, North Africa, and Mediterranean

68. Synchronized: The Impact of the War on Ukraine's Energy Landscape

Author:
Thomas Laffitte and Ihor Moshenets
Publication Date:
12-2023
Content Type:
Special Report
Institution:
Foreign Policy Research Institute (FPRI)
Abstract:
Before Russia’s full-scale invasion in 2022, Ukraine was able to generate substantial revenues from the transit costs of Russian hydrocarbons destined for the European market. Despite the war, Russian oil (and some gas) continues to flow to Europe via Ukraine, and the latter continues to receive transit fees. In the field of hydrocarbons, although Ukraine is far from having hydrocarbon reserves equivalent to those of Russia, it has several assets to offer Europeans, including particularly large storage capacities. Fortunately, these storage facilities are located in the western part of the country, away from much of the fighting. Thanks to the successful synchronization of the Ukrainian and the EU power grids, the electricity trade continues. It has become a field of increased cooperation between Kyiv and Brussels, offering a potential blueprint for other sectors with a view to future integration. Despite the immense destruction caused by the Russian army, which specifically targeted the country’s energy infrastructure, Ukraine has shown extraordinary resilience. Ukraine can export electricity to its European partners, creating a profitable situation for both parties and good promises for the future. While the debate continues in Europe regarding the role of nuclear energy in the energy transition, it is already clear that in this domain, North American actors have the upper hand in Ukraine. Decisions made in Brussels on the exact contours of the energy transition will have a major influence on energy policy decisions made in Ukraine. The country has significant potential to produce decarbonized and renewable electricity.
Topic:
Armed Conflict, Nuclear Energy, Energy, Russia-Ukraine War, and Energy Transition
Political Geography:
Europe, Eurasia, and Ukraine

69. Energy, Inflation and Market Power: Excess Pass-Through in France

Author:
Axelle Arquie and Malte Thie
Publication Date:
10-2023
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
We explore how, in the French manufacturing sector, producer prices vary with market power during a severe episode of energy price hikes (between January 2020 and December 2022). Our work provides micro-level empirical evidence in favor of a role for firms' market power in explaining inflation. Using a rich dataset on French manufacturing firms' balance sheets, we first estimate markups at the firm-level, and aggregate them at the sectoral level. We then study the response of the producer price index (PPI) to a change in spot energy prices, depending on average market power within sectors. We show that in sectors with higher markups, prices increase relatively more: in the least competitive sector, firms pass through over 115% of the energy shock, implying an excess pass-through of more than 15 percentage points. In addition, we analyze in greater detail the mechanisms that might be behind our results: we discard the possibility that the pricing behavior might be driven by a "liquidity buffer rationale", implying that the excess pass-through we identify is detrimental to consumers.
Topic:
Markets, Inflation, Manufacturing, Energy, and Markups
Political Geography:
Europe and France

70. What’s Next for Oil and Gas Methane Regulations

Author:
Ben Cahill
Publication Date:
03-2023
Content Type:
Policy Brief
Institution:
Center for Strategic and International Studies (CSIS)
Abstract:
Proposed methane regulations for the oil and gas industry are in the works in the United States and the European Union. These new rules—especially the U.S. regulations—could play a critical role in curbing emissions. This brief summarizes the next steps for methane rules on both sides of the Atlantic, including an overview of the emerging regulations in the United States and a synopsis of the EU methane legislation process. It identifies areas that require more analysis, such as how closely measurement, reporting, and verification (MRV), leak detection and repair (LDAR), and reporting requirements will align. The brief also summarizes the current EU approach to reducing methane emissions from its gas imports as well as its longer-term aspirations, outlining the implications for gas exporters to Europe.
Topic:
Climate Change, European Union, Regulation, Sustainability, Methane, and Energy
Political Geography:
Europe and United States of America