Published daily by the Lowy Institute

It’s time for Australia to scale up its energy diplomacy

A huge transformation of global energy production and consumption is underway but sorely needs international governance.

Queensland’s Curtis Liquefied Natural Gas project site (Photo: Patrick Hamilton via Getty)
Queensland’s Curtis Liquefied Natural Gas project site (Photo: Patrick Hamilton via Getty)

Later this month, Prime Minister Scott Morrison will travel to Osaka for the annual G20 Leaders’ summit, and he will no doubt want to make his mark following his election triumph. Advocating for the reform of the international energy architecture would be a good place to start, given the rapidly changing geopolitics of energy and Australia’s interest as an energy superpower.

Why energy?

In 2014 in Brisbane, G20 leaders agreed the international energy architecture – the raft of international organisations that govern the domain of energy – is failing. Unlike other global policy areas, such as trade, health or finance, there is no single international organisation that governs energy to match the World Trade Organisation, the World Health Organisation, or the International Monetary Fund.

Instead there is a jumble of international organisations that are ill equipped to address the transformations taking place in global energy markets. First, the sources of global energy production and consumption are being recast in ways that were unimaginable even a decade ago. The US has now overtaken both Saudi Arabia and Russia to be the largest producer of oil and gas in the world. China is now the largest energy consumer, and India is catching up.

Second, climate change is forcing governments to re-think energy production and consumption and this will have profound geopolitical implications. As a recent report by the International Renewable Energy Agency concluded, new forms of clean energy will alter the global distribution of power, relations between nations, the risk of conflict, and the social, economic and environmental drivers of geopolitical instability.

The international energy architecture is failing to keep up with these changes. For example, the International Energy Agency, the closest the world has to a global body, was established after the oil shocks in 1974, but today does not include China, India, Russia or Brazil among its members, and is in no way ready to address the next energy crisis.

Thunderstorms in Brandenburg, Sieversdorf (Photo: Patrick Pleul via Getty)

Why now?

G20 governments recognised this is 2014, but they are soon to face a series of decisions, which could have widespread geopolitical ramifications. This is because any changes to the international energy organisations that were established in the post-war era could have cascading effects beyond energy.

Any changes to the international energy organisations that were established in the post-war era could have cascading effects beyond energy.

For example, rumours that India has expressed a desire to join the IEA – the first of the major emerging economies to do so – is a case in point. International organisations such as the IEA and associated bodies, like the OECD, have long excluded developing countries.

There is no doubt that the IEA should broaden its membership to include emerging economises if it is to be a truly global body, but what will this mean for the role of China and India in other organisations, such as the Organisation for Economic Co-operation and Development (OECD)? Will the US ever allow China into these organisations?

Such questions are likely to become more prominent in 2020 when Saudi Arabia takes over the presidency of the G20. As the second largest producer of oil in the world, and the home to the much smaller International Energy Forum, another of the plethora of international energy organisations, it will likely have its own agenda with its own ramifications.

What should Australia do?

Morrison should make clear in Japan that the G20 is best placed to steer international energy reforms, and that Australia is ready to play a key role. In particular, to work with other countries in the lead up to the next meeting in Saudi Arabia to develop a G20 action plan for the reform of the international energy architecture.

The time is ripe for Australia to scale up its energy diplomacy and to ensure it is consistent with our broader foreign policy objectives.

Alongside the National Energy Security Assessment due out this year, the new government would be wise to commission a short independent review of Australian energy diplomacy and the geopolitical ramifications of the changes taking place in global markets.

In particular to consider, what are Australia’s interests in energy diplomacy? What international organisations do we want to dominate the international energy landscape? Who do we want the members to be? What should their mandate be? And critically, how should the federal government be organised internally on international energy issues?

Morrison has the chance to re-set Australia’s reputation on the international stage, especially given the election should bring some political stability after the turmoil of recent years. The G20 is the perfect stage and energy could well be the issue with which he leaves his mark.

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