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191. Cutting Putin’s energy rent: ‘smart sanctioning’ Russian oil and gas

Author:
Georg Zachmann, Guntram Wolff, Agata Łoskot-Strachota, Simone Tagliapietra, Axel Ockenfels, Ricardo Hausmann, and Ulrich Schetter
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
In the wake of the Russian aggression against Ukraine, major sanctions have been imposed by Western countries, most notably with the aim of limiting Russia’s access to hard international currency. However, Russia remains the world’s first exporter of oil and gas, and at current energy prices this provides large hard currency revenues. As the war continues, European governments are under increased pressure to scale-up their energy sanctions, following measures taken by the United States, the United Kingdom, Canada and Australia. Given the inelasticity of Russia’s oil and gas supply, the most efficient way for Europe to sanction Russian energy would not be an embargo, but the introduction of an import tariff that can be used flexibly to control the degree of economic pressure on Russia.
Topic:
Oil, Sanctions, Gas, Vladimir Putin, and Energy
Political Geography:
Russia, Eurasia, and Ukraine

192. How to make the EU Energy Platform an effective emergency tool

Author:
Walter Boltz, Klaus-Dieter Borchardt, and Thierry Deschuyteneer
Publication Date:
06-2022
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Uncertainty about the supply of Russian natural gas is causing extremely high and volatile European gas and electricity prices. European Union countries may struggle to import sufficient volumes of natural gas at reasonable prices. During the summer, the imperatives are to fill storage sites sufficiently in a coordinated manner and to organise sufficient import volumes to replace a substantial share of gas that might no longer come from Russia. Coordination is essential to ensure that disruptions during difficult winter months do not lead to a break-up of the EU internal gas market with potentially serious political repercussions. One part of the EU response is establishment of an EU Energy Platform for the purchase of gas, LNG and hydrogen. This aims to pool demand to leverage the bloc’s economic clout, international outreach to reliable partners and efficient use of existing infrastructure. EU leaders have backed the plan but it has not yet been translated into a feasible scheme. The platform should be developed into an effective emergency tool to safeguard gas supply in case Russian flows stop. We detail two complementary proposals to achieve this. First, there should be EU-wide auctioning of remuneration for filling storage sites in specific regions. Companies would remain responsible for all stages of the value chain, benefitting from remuneration and in return offering the market operator some control over how this gas is released during winter months. Second, EU demand for additional LNG quantities, and the sourcing of this on international markets, should be coordinated through a platform, creating a transparent market for these volumes. These mechanisms would resolve the prevention paradox and prevent free-riding. If EU countries buy gas jointly, they will find it much easier to let markets allocate scarce volumes across borders in case of a complete stop to Russian supplies. . This would reduce the risk of energy market fragmentation, as well as the subsequent energy security, economic and political impacts of a shock that would hit member states very differently.
Topic:
Oil, European Union, Gas, and Energy
Political Geography:
Russia, Europe, and Ukraine

193. Legal options for a green golden rule in the European Union’s fiscal framework

Author:
Zsolt Darvas
Publication Date:
07-2022
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Achieving the European Union’s climate goals and decoupling from Russian energy will require a massive increase in green public spending, which will be difficult when EU fiscal rules requiring fiscal consolidation are reinstated. The two major proposals to address the conflicting goals of fiscal consolidation and increased green public investment needs are a possible new European climate investment fund and a green golden rule. The latter would exclude any increase in net green public investment from the fiscal indicators used to measure compliance with fiscal rules, for countries with sound public finances. An EU climate fund and a well-designed green golden rule would be equivalent in terms of project selection, implementation and control procedures. If the climate fund does not involve redistribution across member states, then the treatment of related spending and consequent borrowing in national fiscal indicators and in the EU’s fiscal framework would be the same. New regulations would be needed to set up both the climate fund and the green golden rule. Special legislation would be needed to exempt the subsequent climate expenditures from EU fiscal rules in both cases. A climate fund financed by EU borrowing with redistributive effects across countries would likely result in the exclusion of the fund’s activities from national fiscal indicators and EU fiscal rules without any legislative changes. There are question marks about the desirability and political feasibility of redistribution across the EU for climate purposes. An EU climate fund, irrespective of whether or not it involves redistribution, would mainly benefit southern and eastern EU countries. An instrument is needed to foster green public investment in western and northern EU countries as well. The green golden rule would be such an instrument. While there are some pragmatic options to mimic a green golden rule in the current EU fiscal framework, such as amending the so-called ‘investment clause’ and adjusting the medium-term objective for the structural balance, ultimately, elements of the 2011 Six-Pack legislation and the 2012 Treaty on Stability, Coordination and Governance should be revised to include a green golden rules.
Topic:
Climate Change, Law, European Union, Fiscal Policy, and Energy
Political Geography:
Europe

194. The Australian Defence Force and its future energy requirements

Author:
Ulas Yildirim
Publication Date:
06-2022
Content Type:
Special Report
Institution:
Australian Strategic Policy Institute (ASPI)
Abstract:
The global energy system is undergoing a rapid and enduring shift with inescapable implications for militaries, including the ADF. Electrification and the use of alternative liquid fuels are occurring at scale across the civilian economies. Despite that, fossil fuels, such as diesel and jet fuel, will be around for a long time to come, given their use in long-lived systems like air warfare destroyers, Lockheed Martin’s F-35 aircraft, M1A2 Abrams tanks, and in capabilities still in the design stage but planned to enter service beginning in the mid-2030s such as the Hunter-class frigates. Australian supply of these fuels is provided by globally sourced crude oil flowing through a handful of East and Southeast Asian refineries. Supply arrangements for these critical commodities are likely to become more fraught, however. This is already occurring because of the fracturing of global supply chains and the drive for national resilience in many nations, driven by Covid-19, the return of coercive state power and, of course, Putin’s war in Ukraine. Australia’s dependence on imports for liquid-fuel security, at least as it pertains to the ADF, extends well beyond insufficient reserves and refineries. The government and Defence must recognise this long-term risk to a fundamental input to our military capability and start acting to mitigate it for the future.
Topic:
Defense Policy, National Security, and Energy
Political Geography:
Australia

195. Technological Innovation and the Future of Energy Value Chains

Author:
Nicola De Blasio
Publication Date:
04-2022
Content Type:
Policy Brief
Institution:
Belfer Center for Science and International Affairs, Harvard University
Abstract:
The transition from energy systems dominated by fossil fuels1 to ones based on renewable electricity and carbon-free molecules will significantly impact existing value chains2 and forge new pathways and transformation steps from production to consumption. This transition will bring not only substantial cost challenges but also promises to dramatically alter stakeholders’ interactions along value chains. Technological innovation is driving dynamics not seen in the energy sector since the Industrial Revolution, and it will be key to accelerating the transition to a low-carbon economy while sustaining growth and achieving prosperity for all. But as new technologies develop to meet growing energy needs, understanding how these technologies will impact existing energy value chains is crucial for navigating the energy transition successfully. To elucidate these dynamics, we must first identify the key technologies3 driving disruptive change and then understand how their deployment at scale might impact existing value chains or cause new ones to emerge.
Topic:
Environment, Natural Resources, Innovation, Renewable Energy, Value Chains, Hydrogen, and Energy
Political Geography:
Global Focus

196. Carbon Capture, Utilization, and Storage: Technologies and Costs in the U.S. Context

Author:
Jonathan M. Moch, William Xue, and John P. Holdren
Publication Date:
01-2022
Content Type:
Policy Brief
Institution:
Belfer Center for Science and International Affairs, Harvard University
Abstract:
The Biden administration has set a goal of reaching net zero economy-wide greenhouse gas emissions by 2050.1 Carbon capture, utilization, and storage (CCUS)—a suite of current and emerging technologies that remove carbon dioxide emissions (CO2) from energy or industrial processes and then either sequester the carbon underground or use it for production of a variety of fuels or products2—is very likely to be a key technology on most of the plausible paths for reaching this goal. Among various applications of the technology, CCUS in combination with natural gas powerplants can be used to provide firm baseload electricity or could serve as backup for intermittent renewable power in place of multi-day electricity storage.3 Additionally, CCUS could be used to decarbonize hard-to-electrify industrial processes4 and to provide synthetic fuels for decarbonizing nonelectric energy uses.5 The key barrier to CCUS filling these various roles and living up to its technical potential is high costs relative to current incentives: despite current U.S. government support through tax policy, CCUS is not economically competitive today in most of its applications. Unless and until it becomes so or is required by law, it will not achieve widespread deployment.
Topic:
Environment, Science and Technology, Natural Resources, Coal, Carbon Emissions, and Energy
Political Geography:
North America and United States of America

197. The Challenges of Decarbonizing the U.S. Electric Grid by 2035

Author:
Jonathan M. Moch and Henry Lee
Publication Date:
02-2022
Content Type:
Policy Brief
Institution:
Belfer Center for Science and International Affairs, Harvard University
Abstract:
The Biden administration has established a national goal of 100% carbon-free electricity by 2035 and reaching net-zero economy-wide greenhouse gas emissions by 2050.1 To realize these goals, the United States must not only transition the production of power, but also build thousands of miles of upgraded or new transmission. The U.S. electric grid consists of 600,000 miles of transmission lines connected to over 1 million megawatts of electricity generation capacity.2 Over 70% of these lines are more than 25 years old, well into their approximately 50-year lifetime.3 Furthermore, to meet President Biden’s 2050 goal, experts claim that over a million miles of new transmission will have to be built over a three-decade time span.4 Most plausible pathways to net-zero emissions call for the electrification of multiple services, such as heating and transportation.5 The resulting increase in electricity demand will require major upgrades to the grid, with some studies suggesting a 60% increase in peak demand by 2050.6 In the United States, the greatest potential wind energy resources are in the Midwest and along the two coasts,7 while the greatest solar energy resources are in the Southwest and in Florida.8 New transmission lines will be needed to carry the electricity from the areas where the renewable resources are most plentiful to distant load centers.
Topic:
Energy Policy, Environment, Natural Resources, Electricity, Decarbonization, and Energy
Political Geography:
North America and United States of America

198. South Korea’s Place in the Indo-Pacific: A Research Showcase for Pacific Forum’s Korea Foundation Fellows

Author:
Rob York, Seongwon Lee, Su Hyun Lee, Eun A Jo, Jae Chang, Kangkyu Lee, Jong-hwa Ahn, and Juyoung Kim
Publication Date:
06-2022
Content Type:
Special Report
Institution:
Pacific Forum
Abstract:
Papers by the Pacific Forum’s current and previous Korea Foundation Fellows examine pressing issues facing the Korean Peninsula in the 21st century. These include the Great Power Competition between the US and China, North Korea and nuclear security, critical new technologies, and energy security. These papers by emerging leaders in the Korean Studies field offer fresh perspectives on Korean security issues – both well-known and emerging – useful for watchers of the peninsula both inside and out of Northeast Asia. Authors of this volume participated in the Pacific Forum’s Korea Foundation Fellowship program between 2019-2022, with the generous support of the Korea Foundation.
Topic:
Security, Science and Technology, Weapons, Leadership, Multilateralism, Disinformation, Cooperation, and Energy
Political Geography:
Japan, Asia, South Korea, United States of America, and Indo-Pacific

199. Cutting Putin’s Energy Rent: ‘Smart Sanctioning’ Russian Oil and Gas

Author:
Ricardo Hausmann, Agata Łoskot-Strachota, Axel Ockenfels, Ulrich Schetter, Simone Tagliapietra, Guntram Wolff, and Georg Zachmann
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
Following the Russian aggression against Ukraine, major sanctions have been imposed by Western countries, most notably with the aim of limiting Russia’s access to hard international currency. However, Russia remains the world’s first exporter of oil and gas, and at current energy prices this provides large hard currency revenues. As the war continues, European governments are under increased pressure to scale-up their energy sanctions, following measures taken by the United States, the United Kingdom, Canada and Australia. This piece argues that given the inelasticity of Russia’s oil and gas supply, for Europe the most efficient way to sanction Russian energy would not be an embargo, but the introduction of an import tariff that can be used flexibly to control the degree of economic pressure on Russia.
Topic:
Economics, Oil, Sanctions, Exports, Currency, Energy, and Russia-Ukraine War
Political Geography:
Russia, Europe, Ukraine, and North America

200. The Necessary U.S. Role in Fixing the Baghdad-Kurdistan Energy Dispute

Author:
Michael Knights
Publication Date:
06-2022
Content Type:
Special Report
Institution:
The Washington Institute for Near East Policy
Abstract:
A targeted intervention could aid American interests and the global effort to find a substitute for Russian and Iranian oil and gas. On February 15, 2022, Iraq’s Federal Supreme Court ruled that the 2007 oil and gas law for the Kurdistan Region was unconstitutional, requiring a review of numerous production sharing contracts and oil sales agreements. If the case prevents oil exports via Iraqi Kurdistan, then the world market will almost immediately lose 500,000 barrels per day, triggering higher oil prices, expanded windfalls for Russia and Iran, the collapse of Iraqi Kurdistan’s economy, and a dangerous turn in Baghdad’s ties with Erbil and with Ankara. In this timely Policy Note, Iraq expert Michael Knights calls for the United States to act with other concerned states to resolve the Baghdad-Erbil energy crisis. In doing so, he categorizes the sub-issues of FSC implementation on a spectrum from higher to lower consensus, and explains both sides’ views in an unvarnished, direct manner. A targeted intervention by the United States and its partners, the author argues, could guide the dispute toward a long-overdue resolution that greatly aids U.S. interests and the global effort to find a substitute for Russian and Iranian oil and gas.
Topic:
Oil, Gas, Crisis Management, Disputes, and Energy
Political Geography:
Iraq, North America, United States of America, and Kurdistan Region of Iraq (KRI)