Published daily by the Lowy Institute

Australian energy diplomacy

Implemented correctly, Australia could achieve some of its foreign policy goals through its energy exports.

Solar panels (Photo: Lombardi/ Flickr)
Solar panels (Photo: Lombardi/ Flickr)

Successive federal governments have declared Australia to be an “energy superpower”. The 2017 Foreign Policy White Paper is the most recent example, highlighting the size of Australia’s exports of coal and liquefied natural gas.

Yet Australian foreign policy has often overlooked energy diplomacy. In the US, terms such as “energy diplomacy” are now a popular part of the policy lexicon, but in Australia little attention has been given to the concept, including the way in which energy diplomacy might interact with broader foreign policy objectives.

In Australia, little attention has been given to the concept of “energy diplomacy”, including the way in which it might interact with foreign policy objectives.

In a recent article in the Australian Journal of International Affairs, I argue that given the transformations taking place in global energy markets, the time is ripe to reconsider Australian energy diplomacy. In particular, to broaden beyond a historical focus on promoting fossil fuels and securing export markets, to driving efforts that improve global energy governance via the Group of Twenty (G20), which agreed to reform the international system in 2014.

This is because the global energy system is failing to keep up with dramatic changes in the patterns of global energy production and consumption. Concerns have been mounting about the capacity of the system to ensure energy security, facilitate access to energy, and achieve the clean energy transition required to avert the worst impacts of climate change.

Indeed, many of the international energy organisations that have been established in decades past are no longer equipped to meet these challenges, including the International Energy Agency (IEA).

What should Australian energy diplomacy focus on?

Australia energy diplomacy should focus on three areas that will improve global energy governance, which are also consistent the with the 2014 G20 agreement.

First, Australia should use the G20 to strengthen existing multilateral institutions. One of the key principles agreed to by the G20 in 2014 was to ensure that:

International energy institutions [are] more representative and inclusive of emerging and developing economies.

To a large extent, this referred to reforming the IEA, which is considered by many nations to be out of date given that it does not include some of the largest energy consumers among its members, such as China and India.

Second, Australia should use the G20 to improve coordination between the various international organisations that often have conflicting goals in order to bring greater coherence to the international energy architecture. While some attempts have been made to improve coordination between organisations, such as OPEC which represents oil producers and the IEA which represents oil consumers, much more needs to be done if the global energy system is going to achieve governance objectives around energy security, energy access, or climate change.

Third, Australian energy diplomacy should promote collaboration between G20 member states’ national energy policies. The G20 has already shown the potential of collaboration in other domains such as finance. Following the global financial crisis in 2008, G20 leaders agreed to coordinate their fiscal and monetary policies thereby ameliorating the worst effects of the crisis.

Similar steps could be taken in the domain of energy. For instance, in 2009, G20 leaders announced that they would “rationalize and phase out, over the medium term, inefficient fossil fuel subsidies”. Yet despite their significant contribution to greenhouse gas emissions, G20 countries have so far failed to phase out such subsidies.

However, if Australian energy diplomacy is to effectively pursue a governance agenda then it must back up its rhetoric with actions.  In other words, Australia must demonstrate that it is a constructive international partner in the domain of energy.

In recent years, it is not clear that it has been. For example, Australia has failed to follow the US and China, among others, and participate in a peer review of its fossil fuel subsidies. It is also the only member of the IEA failing to meet its international obligation to maintain sufficient oil stocks in the event of a disruption in global oil markets – and of course there is the ongoing turmoil in climate policy.

Such issues will need to be rectified domestically if Australia is to be successful internationally.

How can Australian energy diplomacy support broader foreign policy objectives?

Broadening Australian energy diplomacy will enhance Australia’s capacity to achieve related foreign policy goals. First, Australia has a long standing objective to ensure that the G20 remains an effective and legitimate forum, given that there is no guarantee that Australia would have a seat at the table of an alternative G8-plus type forum if the G20 was disbanded. Hence to the extent that Australia can succeed in steering global energy governance reforms through the G20, it will help to bolster the legitimacy of the G20 and Australia’s membership of it.

Second, efforts to reform the IEA membership by bringing nations, such as China, India, and Indonesia on board, will support Australia’s foreign policy goal to ensure that these nations become responsible stakeholders within the international system. Australia has successfully pursued this objective in the domain of finance by advocating for IMF reform, and Australian energy diplomacy should do the same for IEA reform.

Third, Australia has historically invested resources in an attempt to restrict the growth of economic conflict between major powers, such as the US and Japan, and more recently the US and China, in order to maintain a peaceful multilateral international order in which it can prosper.

To the extent that Australian energy diplomacy shifts away from a narrow self-interested focus on export promotion, to improving global energy governance in ways that allow major powers to cooperate on critical issues, such as the rules governing oil markets, or subsidies for fossil fuels, it is also likely to ease rivalries and reduce potential conflict.

While Australia may well be an energy superpower, the power of its energy diplomacy has historically been limited to promoting fossil fuels and securing export markets. Taking a broader view of energy diplomacy will not only help to improve the international system governing energy on which we all rely, it will also reinforce Australia’s wider foreign policy.

You may also be interested in