The Continuing Need for a Strong International Energy Agency
The ascent of Fatih Birol to the leadership of the International Energy Agency in Paris on September 1 is good news for the organization, its members, and the global energy and climate community. As the long-time Chief Economist of the IEA, Dr. Birol has been among the world’s leading voices on energy and climate policy, leading much of the agency’s renowned analytical work. His rise to the Executive Director position is recognition by the members of the importance of Dr. Birol’s work and its relevance going forward.
The challenges the new Executive Director faces are significant. Dr. Birol inherits an agency with morale problems, chronic budgetary difficulties, and what many see as declining importance since membership is limited to OECD members – i.e., China, India, Brazil and others driving the growth of energy demand, and whose choices are critical to addressing climate change, are outside the organization. Dr. Birol has indicated he will move aggressively to tackle these issues. Regarding cooperation with non-members, he tweeted on his first day as Executive Director his intention to make the agency truly international in coming years “by creating room for rising energy powers under the IEA umbrella.” Underlining this direction, Dr. Birol’s first trip as Executive Director was to China.
Cooperation between the IEA and key non-members such as China and India is strong. The current members could send a clear signal of their interest in welcoming the Chinas and Indias of the world into their club by dropping the requirement of OECD membership which serves little purpose today. That is unlikely to happen soon for a variety of reasons, however.
While their membership in the organization would be very desirable, the priority should be agreements between the IEA and China and India to collaborate with the organization and its members on a joint release of oil stocks in event of a supply disruption.
Coordinating a collective response to a major disruption of oil supply is the core reason the IEA was created in 1974. Both China and India have participated in IEA emergency response simulations and are quickly building and filling strategic petroleum reserves that although still well below the level IEA members are required to hold (90 days of net imports), would be very useful in a common effort to stabilize oil markets should a supply crunch arise.
Notwithstanding the importance of deepening cooperation with other major energy consumers, the key priority for the IEA going forward remains producing authoritative analysis of global energy issues and recommendations, as stated on the organization’s web site, to “enhance the reliability, affordability and sustainability of energy” for its members and beyond. This is both a time of revolutionary change in the global energy scene, and great uncertainty. The rise of unconventional oil and gas in the United States has disrupted global hydrocarbon markets and geopolitics, while the plummeting costs of wind and solar energy threaten to transform global power markets. At the same time the move toward cleaner energy sources will be gradual. As a result while energy security has become about more than oil, for most countries, at least for the foreseeable future, their feelings of security or insecurity likely will remain a function of their dependence on fossil fuel imports.
The tumult in the global energy picture, combined with the need for decisive action to limit climate change, requires sober, impartial analysis of markets and technologies and advice on how to meet sometimes contradictory objectives. This demands the kind of global view that the IEA is best able to provide. With its leading statistical work and reporting on energy markets, preeminent annual World Energy Outlook, groundbreaking work on the potential of energy efficiency, thorough study of the investment requirements and tradeoffs required to limit carbon emissions from the energy sector, and roadmaps for technology development, the IEA has no peer on analytical breadth and integration. Other international organizations, NGOs and companies perform excellent research on different aspects of the energy landscape, but no one brings it all together in a comprehensive picture as the IEA has shown it can do. Governments and stakeholders may not always like what the IEA has to say, but its independent voice is essential to our understanding.
The IEA is a rather small organization with a budget of about $30 million and staff of 250 which thanks to its intellectual capacity plays an outsize role on the international scene. Its work remains essential to informing global decision makers on a vital set of issues, in addition to limiting damage to the global economy from an emergency in the oil market. The IEA is in good hands now, its new leader and his team deserve the support of all who care about energy and climate.
Douglas C. Hengel, Senior Fellow, German Marshall Fund of the United States. Views expressed are the author's alone and not those of the Department of State.
The views expressed in GMF publications and commentary are the views of the author alone.