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131. The Automotive Industry: The Achilles’ Heel of German Economy?

Author:
Marie Krpata
Publication Date:
03-2021
Content Type:
Special Report
Institution:
Institut français des relations internationales (IFRI)
Abstract:
The global car market has been shrinking since 2018. This is a key economic sector for Germany whose producers belong to the Top 15 carmakers worldwide. Yet they are running the risk of being outclassed and eventually replaced, given emerging actors in the USA and China. These new competitors benefit from the growing digitization of the mobility sector, disruptive economic models and the obsolescence of vehicles with an internal combustion engine. This form of propulsion is progressively being replaced by less-polluting alternatives, which are being endorsed by public authorities. The Chinese-American rivalry is also impacting German carmakers, whose strategy greatly relies on the globalization of production chains. This has led to major successes in the past, but the threat of a technological decoupling between the USA and China limits German carmakers’ activities in terms of production and exports. Access to the Chinese market, which accounts for nearly 20% of the global population, is indispensable for the German brands that intend to benefit from China’s catch-up effects. European industrial and political actors plan to invest in promising sectors whilst seeking to respect environmental and social objectives. Also, the European Union (EU), led by a German powerhouse, intends to prevent market distortions such as hurdles to market access, while supporting the emergence of technologies and the compliance with production standards. However, developments in the automotive sector are challenging the EU’s capacity to act in a unified fashion, even if the EU is not seeking to impose its vision on the industry’s private sector, in a top-down manner.
Topic:
Climate Change, Economics, Energy Policy, Industrial Policy, European Union, Social Policy, Mobility, Industrialization, Green Deal, and Automotive Industry
Political Geography:
Europe and Germany

132. Denmark: A Case Study for a Climate-Neutral Europe

Author:
Thibault Menu
Publication Date:
04-2021
Content Type:
Special Report
Institution:
Institut français des relations internationales (IFRI)
Abstract:
In recent years, Denmark has steadily emerged as a leader and role model in the global green energy transition. Its greenhouse gas (GHG) emissions since 2010 have been reduced at greater pace than those of the European Union (EU) average. This transformation is all the more impressive, given that the country used to be a significant oil and gas producer which also relied heavily on coal for power generation. From its highly publicized success in offshore wind, to its ambitious goal of cutting GHG emissions by 70% by 2030 - which would put Denmark as a European and global frontrunner, with only Finland being more ambitious and planning to be climate neutral already by 2035 – as well as its pioneering green energy policies, the country has transformed itself into a beacon for low carbon technologies and public policies. The country has a record high share of renewable energy sources in power generation, with wind in the lead. Given the recent announcements and climate goals set by the Von der Leyen Commission, Denmark serves as an interesting case study for other European and world nations alike on how to embark on their own energy transitions. This paper assesses whether the country is really successful in accelerating even more than its European peers in its decarbonization process. And if so, what is so special about Denmark and what can be learned from its transformation? Policies range from well-publicized successes, such as the country’s ability to nearly rid itself from coal in its power mix in less than thirty years by increasingly developing its wind power potential, in leading the offshore wind segment and championing repowering, but also its lesser-known achievements, such as the diffusion of combined heat and power (CHP) and district heating across the country. Another success point of the country’s strategy relies in promoting energy efficiency in the industrial sector as well as its use of energy taxation for enhanced decarbonization, even in challenging sectors such as transportation. Questions remain open, especially concerning the sustainability credentials of biomass, a fuel which is a key component of the country’s energy mix, but also the future role of natural gas, which has an important balancing role in power generation, given the country decision to rid itself of oil and gas (O&G) production by the middle of the century. To a large extent, the Danish success story so far can be linked to a combination of socio-political factors including: a high level of stability and predictability in energy policy stemming from Denmark’s long historical tradition of broad energy agreements, a cross-sectoral and holistic approach to developing the nation’s energy policy involving a high level of participation from various public and private actors, a willingness to back innovative technologies, combined with generous public policy schemes in order to bring them to market-level competitiveness. Next frontiers will consist of large-scale carbon capture and sequestration projects, as well as low carbon energy islands. However, it would be somewhat reductive to simply equate Denmark’s success story to these previously mentioned factors. Indeed, the Scandinavian nation also benefits from certain geographical dispositions which are great assets for its path to decarbonization. For one, the country is ideally placed to develop variable renewable energy sources, most notably wind power given its topography and its strong wind resources. On top of this, Denmark also benefits from an incredibly reliable and interconnected power grid thereby making renewable energy integration into the wide energy system all the easier. In addition, the fact that its power grid is one of the most interconnected in Europe entails that excess renewable energy production can quickly be exported when the wind blows, just as imports can hastily be called upon when wind is found to be lacking. Finally, from a more socio-political perspective, the relatively flat social structure of Danish society as well as the country’s high level of institutional trust, makes policymaking and policy implementation simpler as well as more effective than in other European states. As such, although this paper identifies important lessons to be learnt from Denmark’s decarbonization strategies, the context as well as the particular characteristics of the country in which these were implemented should nevertheless be considered when seeking to establish similarly successful carbon reduction policies. In any case, Denmark is still far from coming close to achieving its objectives and will have to accelerate its decarbonization on all fronts: the country’s current total primary energy supply still relies for 60% on fossil fuels.
Topic:
Climate Change, Energy Policy, Decarbonization, and Green Deal
Political Geography:
Europe and Denmark

133. Acceleration of Climate Policy and the Energy Transformation in Slovakia

Author:
Łukasz Ogrodnik
Publication Date:
07-2021
Content Type:
Special Report
Institution:
The Polish Institute of International Affairs
Abstract:
The Eduard Heger government wants to increase the production of energy from renewable sources and nuclear energy. This is evidenced among others by the preparations for the commissioning of two new units of the Mochovce nuclear power plant. Although Visegrad Group states include pronouncements they plan to use nuclear power in their national energy mixes, the difference in those mixes limits the possibilities of formulating regional climate policy and results in a lack of coherence on the EU forum. Hydrogen fuel, the use of which is growing in Slovakia, also remains an untapped potential for regional cooperation.
Topic:
Climate Change, Energy Policy, Government, Nuclear Power, and European Union
Political Geography:
Central Europe and Slovakia

134. What Do Energy Sanctions Say About the World?

Author:
Aurelie Bros
Publication Date:
08-2021
Content Type:
Journal Article
Journal:
Baku Dialogues
Institution:
ADA University
Abstract:
Statecraft is often under­stood as the art of con­ducting state affairs in order to exert a direct influ­ence on other actors in the in­ternational system in order to get them to do what they would not do otherwise. To achieve their goals, policymakers are able to employ a variety of le­vers such as diplomacy, propa­ganda, military statecraft, and economic statecraft. According to Elizabeth Ellis of the Inter‑ Disciplinary Ethics Applied Centre of the University of Leeds, the latter category encompasses all economic means—including recourse to economic sanctions— that might be used by interna­tional actors with the intention of (i) preventing objectionable policy or behavior, (ii) sending a message, or (iii) punishing unlawful policy or behavior. Princeton University’s David A. Baldwin wrote in 1985 that economic sanctions are divided into two main categories: those with a punitive function and those aimed at encouraging or rewarding. He also noted that they impact trade (e.g. embargo, quotas, and (un)favorable tariff discriminations) as well as cap­ital (e.g. aid suspension, con­trols on imports or exports, and (dis)advantageous taxation), and that they can be used wisely or unwisely, justly or unjustly, de­pending on the situation at hand. Although economic sanctions have a long history, with origins in Antiquity, they are unequally distributed over time. For example, their use greatly increased during the post‑World War II era, especially in the energy sector. This increasing use of energy sanctions has been partic­ularly noticeable since the early 1970s. Over the past several de­cades, they have essentially become a way for energy producers and con­sumers to exert disapproval over one another and to weaken those considered to be morally respon­sible for objectionable policies (not always related to energy issues). En­ergy sanctions, therefore, are often paired with non‑energy economic sanctions targeting a large array of goods and services. For example, an oil embargo can take place in tandem with nuclear‑related sanc­tions aimed at stopping military use of civilian nuclear power tech­nology—as in the Iranian case. Energy sanctions are always deeply rooted in a wider polit­ical and economic environment, reflecting the global order of their time. This essay will focus mainly on the bipolar interna­tional system led by the United States and the Soviet Union between 1947 and 1991, which was followed by a post‑Cold War in­ternational system in which the United States assumed the role of the world’s leading power, sup­ported by Western‑dominated organizations. Nevertheless, this unipolar, rules‑based order is now under pressure, perhaps even du­ress—some argue it is coming to an end.
Topic:
Diplomacy, Energy Policy, Sanctions, and Conflict
Political Geography:
Global Focus

135. The Strategic Benefits of the Southern Gas Corridor

Author:
Vitaliy Baylarbayov
Publication Date:
04-2021
Content Type:
Journal Article
Journal:
Baku Dialogues
Institution:
ADA University
Abstract:
At the end of 2020, the Southern Gas Corridor became fully operational. This marked the completion of a journey that began a decade ago when the government of Azerbaijan and the State Oil Company of the Azerbaijan Republic (SOCAR) took a strategic decision to launch a major natural gas export project. The Southern Gas Corridor is one of the largest and the most expen­sive gas supply projects in the world built to date. In December 2013, SOCAR and its partners signed a Final Investment Decision (FID) to establish a gas pipeline corridor from Azerbaijan through Georgia, Turkey, Greece, and Albania be­fore ending in Italy. A branch pipe­line is now under construction to Bulgaria, which is expected to be completed in the second half of 2021. In July 2018, the project supplied its first gas to the Turkish market and went on to change the dynamics of that country’s gas market, whereby Azerbaijan is now one of its top gas suppliers. On December 31st, 2020, inaugural commercial gas supplies arrived from the Caspian into Europe, signaling the commencement of the Southern Gas Corridor’s full operations. For Azerbaijan, the Southern Gas Corridor provides a major source of revenue unlinked to the global oil market; the project also strengthens Baku’s links with its neighbors and Europe. For SOCAR—as operator of components of the project and investor in all its segments—the project’s success represents a major step in the company’s transition from a national to an international energy company. The Southern Gas Corridor provides new gas supplies to Turkey, Georgia, and Europe and is a platform for in­creased supplies to these markets and also can be extended to reach additional markets in Europe. With the completion of the first stage of the Southern Gas Corridor, Azerbaijan and SOCAR, together with their partners, are examining strategies for the next phase of the corridor’s development.
Topic:
Energy Policy, International Trade and Finance, Natural Resources, and Gas
Political Geography:
Europe, Asia, and Azerbaijan

136. The Southern Gas Corridor and the New Geopolitics of Climate Change

Author:
Morena Skalamera
Publication Date:
04-2021
Content Type:
Journal Article
Journal:
Baku Dialogues
Institution:
ADA University
Abstract:
It has been argued that the U.S. shale revolution, the Trump Administration’s energy pol­icies, and the global shift towards low‑carbon energy sources and re­newables have contributed to shape a new energy order—one that chal­lenges the market power tradition­ally enjoyed by petro‑states. No­where are these developments more relevant than in Azerbaijan, as the country’s expensive investments in the Southern Gas Corridor come under increasing pressure. Unless Azerbaijani gas can be decarbon­ized at a competitive cost, it may risk becoming redundant within a couple of decades as Europe embraces a greener future. Geopolitics and Geo‑economics The Southern Gas Corridor (SGC) is a $45bn mega‑project ($25bn for the development of the Shah Deniz II field and at least $15bn for the delivery system) to supply natural gas from the Caspian Sea to Europe and, by so doing, reduce re­liance on Russian imports. This is a priority that has taken on urgency in the wake of Russia’s 2014 an­nexation of Crimea and the sharp deterioration in relations between Moscow and Brussels that ensued. Currently, the SGC is made up of two pipelines to deliver gas from Azerbaijan’s Shah Deniz II field to Turkey and Europe—one called TANAP that is already operational and runs the length of Turkey, and another known as TAP stretching from Turkey’s border with Greece across Albania to Italy, which started pumping gas in late 2020. This is how a leading ADA University policy expert described the situation to me in October 2020, in light of technical delays in the pipeline’s inauguration and the big changes in energy markets de­scribed above: “the TAP pipeline is 90 percent completed and will be inaugurated soon. Unlike oil pipe­lines, whose flexible delivery to the end‑consumer can be sorted out once they are built— as oil travels via tanker, rail, etc.— gas pipelines are more rigid invest­ment endeavors. [...] You don’t agree on a gas pipeline unless you have secured a buyer on the other end.” While natural gas supplies from Azerbaijan’s Shah Deniz field are already contracted, the project has seen numerus twists and turns since it was signed with great fan­fare at the end of 2013. The SGC is an expensive endeavor and the in­stitutions that lined up to finance it are a testament to the degree of strategic importance it carries for the EU. The project has, indeed, been designated as one of the EU’s “priority projects.”
Topic:
Climate Change, Energy Policy, Environment, Natural Resources, and Gas
Political Geography:
Europe, Asia, and Azerbaijan

137. China, climate politics and COP26

Author:
Sam Geall
Publication Date:
10-2021
Content Type:
Commentary and Analysis
Institution:
Lowy Institute for International Policy
Abstract:
There is no credible emissions pathway towards limiting global warming to 1.5°C without significant movements from China over the next decade to accelerate its energy transition and decarbonisation. China aims to become carbon-neutral by 2060. Yet Beijing is hedging in the near term, in part due to an uncertain global macro and geopolitical environment, and in part due to domestic threats of social instability and economic stagnation. China’s negotiating position at COP26 in Glasgow stands to benefit from support from many developing countries — unless the United States and other rich countries make an effective alternative appeal to the Global South with respect to climate finance, mitigation and adaptation.
Topic:
Climate Change, Energy Policy, and Carbon Emissions
Political Geography:
China, Global Focus, and United States of America

138. The Organizational Roots of Market Design Failure: Structural Abstraction, the Limits of Hierarchy, and the California Energy Crisis of 2000/01.

Author:
Georg Rilinger
Publication Date:
12-2021
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
Economic sociologists have rarely studied organizational reasons why market design pro- cesses fail. Drawing on the organizational literature on mistakes and accidents, the paper identifies such reasons for a fatal design decision during the creation of California’s first electricity markets. Designers proposed weak oversight structures even though their mod- els called for active and permanent regulatory control. Sellers like Enron could therefore manipulate the market without fear of detection, prolonging the western energy crisis. A process of “structural abstraction” explains this mistake. Designers were split into three groups that worked in different divisions and relied on local frames to understand the over- sight requirements. Each group missed information the others were aware of and arrived at the conclusion that minimal oversight would suffice. Higher levels of the hierarchy should have discovered and resolved these discrepancies. However, these levels considered the is- sue at a higher level of abstraction. Such structural abstraction made room for ambiguities that obscured the local disagreements.
Topic:
Climate Change, Economics, Energy Policy, Electricity, and Energy Crisis
Political Geography:
California, North America, and United States of America

139. The Harmonization of Russian and Abkhazian legislations and Its Significance for the Abkhazian Society and Official Tbilisi

Author:
Aleksandre Kvakhadze
Publication Date:
01-2021
Content Type:
Special Report
Institution:
Georgian Foundation for Strategic International Studies -GFSIS
Abstract:
On November 25, 2020, a document titled "Plan of measures for the formation of a common socio-economic space between the Russian Federation and Abkhazia" was published on the government websites of the Russian Federation and internet resources belonging to the unrecognized Abkhazia. The document was signed by Aslan Bzhania, the de facto president of Abkhazia, Alexander Ankvab, the prime minister, and Dimitri Kozak, the deputy head of the Russian presidential administration. The document consists of 45 paragraphs and covers issues such as customs and tax legislation, energy, healthcare, education, social security, economy and real estate. Alongside every paragraph in the document, the relevant responsible agency and the estimated years of its implementation is indicated. Most of the agreement provisions entail the harmonization of the legislations of Russia and Abkhazia. This document is a logical continuation of the recognition of Abkhazia's sovereignty by Russia in 2008, and the subsequent agreements. Notable among these agreements is the 2014 "Alliance and Integration Agreement", which, among many other clauses, includes the transfer of command of Abkhazia's de facto armed forces to the Russian General Staff. The aforementioned document was met with mixed assessment in Abkhazian political circles and media. Inal Khashig, a journalist and editor-in-chief of the “Chegemskaya Pravda” newspaper, positively assesses the prospect of an increase in pensions and budget salaries under the agreement, but is wary of a number of points in the document.
Topic:
Energy Policy, Government, Governance, Legislation, and Society
Political Geography:
Russia, Caucasus, Georgia, and Abkhazia

140. The Three Seas Initiative and Georgia: Perspectives and Challenges

Author:
Grigol Julukhidze
Publication Date:
01-2021
Content Type:
Commentary and Analysis
Institution:
Georgian Foundation for Strategic International Studies -GFSIS
Abstract:
The Three Seas Initiative (3SI) aims to strengthen ties in the region of the wider Central Europe (between the Baltic, Adriatic and Black Seas) which creates a solid foundation for economic development in terms of energy, transport, digital communication and the economy. It was established as a forum for cooperation between 12 countries: Austria, Bulgaria, Croatia, the Czech Republic, Estonia, Lithuania, Latvia, Poland, Romania, Slovakia, Slovenia, and Hungary. The area comprising the countries belonging to the Three Seas Initiative constitutes almost one-third of the total area of the European Union. Over 112 million people live there. The region is experiencing stable economic growth and a limited unemployment rate. The priority for the 3SI is to build a coherent and well-integrated infrastructure in Central Europe which will render the possibility to make up for development lags resulting from historical events. As a result, the infrastructural and economic inequalities of the common European market will be reduced and this will limit the division of the EU into less and more developed areas of integration. The most important added value of the Initiative is the assurance of political support at the highest level of state authorities for investments which have so far been a neglected field of cooperation between the Central European countries. The Three Seas is, therefore, pro-European and complementary to the existing regional cooperation formats (Ministerstwo Spraw Zagranicznych, 2020).
Topic:
Energy Policy, Communications, Infrastructure, and Economic Development
Political Geography:
Poland, Lithuania, Estonia, Bulgaria, Romania, Hungary, Georgia, Croatia, Latvia, Austria, Czech Republic, Slovenia, and Slovakia