IEEJ：February 2019○ｃIEEJ 2019
Special Bulletin
A Japanese Perspective on the International Energy Landscape (415)

February 13, 2019

Discussion in Malaysia on Global Energy Governance
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn February 11-13, I visited Malaysia and had a meeting with energy policy officials, energy
industry people and university researchers in Malaysia to discuss global energy governance. I have
served as international adviser to the Energy Commission at the University of Tenaga Nasional(UNITEN) in Malaysia since December 2015. At the meeting, I made a presentation on theabovementioned theme and discussed the matter with these various Malaysian energy stakeholders.
For these energy stakeholders who deal with daily energy policy challenges or face real energy
business operations, global energy governance may seem a very big or elusive matter to which they
are not related directly. If global energy governance is understood as a mechanism to secure theworld’s stability or sustainability regarding energy market stability, energy security andenvironmental issues such as climate change, however, they may find that the matter is not unrelated
to them.
In fact, global energy governance has always been present in the international energy market.
Mechanisms or attempts to stabilize the energy market or prices included Standard Oil’s energy
market control in the beginning of the 20th century, the Texas Railroad Commission’s production
control after which the Organization of the Petroleum Exporting Countries was modeled, the “SevenSisters” oil majors’ joint control of Middle Eastern oil, OPEC’s production adjustment based on
country-by-country production quotas, and production adjustment by Saudi Arabia serving as swingproducer. In today’s international oil market, the so-called OPEC-plus group has attempted
production adjustment in response to an oil price crash from the second half of 2014. Given that oil
price fluctuations are a factor that has great influence on many energy companies’ business
operations, oil producing and consuming countries’ economic growth and the balance of power
between major countries, governance for stabilizing the market is clearly significant for energy
stakeholders.
Regarding global energy governance to secure energy security and exert great influence onenergy market order, we can see the world from the viewpoint of changing influence of major
players such as the United States, China, Russia and the Middle East as well as activities andinfluence of international organizations or mechanisms such as the International Energy Agency,
OPEC and the International Energy Forum. Among them, we must pay attention to the presence andpower of the United States that has served as the most important guardian of international energy
market governance or order. Until the 1960s, the United States had played roles or functions oftoday’s Saudi Arabia as possessor of surplus oil production capacity. Even since becoming a net oilimporter, the United States has taken advantage of its excellent political, economic and military
power to remain in the center of global energy governance. The United States can be seen as having
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IEEJ：February 2019○ｃIEEJ 2019taken leadership in creating the IEA as an international organization to counter oil producing
countries in response to oil crises.
Under the Trump administration’s “America First” foreign policy, however, the United States
has enhanced its inward-looking attitude and reduced its engagement with or interests in maintaining
global order. Rather, its policy has begun to shake the world. The United States has thus produced agreat change that is very significant for future global energy governance. Also significant for thematter is the existence of China that has rapidly enhanced its influence on and presence ininternational society. The spreading recognition that China is becoming a power to challenge
traditional global order is a factor behind the current U.S.-China trade war or a bilateral competitionfor technological supremacy. Therefore, the struggle between China’s Belt and Road strategy and theUnited States’ Indo-Pacific strategy is attracting attention from the viewpoint of global energy
governance.
While climate change involves global interests of conserving the global environment andensuring human survival, climate change countermeasures affect national economic growth throughstructural energy supply and demand changes and represent serious problems with national interests.
As countries in the world are put into various positions, the conflict between global and national
interests has made international climate change negotiations very complex and difficult, becoming acentral challenge for global energy governance. In this respect, countries in the world have achieved
the Paris Agreement by adopting a bottom-up approach in which they voluntarily set their respective
greenhouse gas emission reduction targets. However, whether they could make their voluntaryemission reduction targets more ambitious based on last year’s 24th Conference of Parties to theUnited Nations Framework Convention on Climate Change will become a future theme for global
energy governance.
Renewable energy’s contributions to global energy governance were an interesting issue as
discussed at the Malaysia meeting, based on the abovementioned arguments. Renewable energy isdomestic energy useful for improving energy self-sufficiency in each country and diversifying anddistributing energy sources and can be expected to contribute to energy security. Renewable energy
expansion can reduce energy-related geopolitical risks accompanying fossil fuels by contributing tolowering dependence on fossil fuels. Carbon-free renewable energy is also expected to makecontributions to resolving environmental problems. While renewable energy cost cuts attract global
attention, what renewable energy expansion means for global energy governance may have to beanalyzed from new angles. As a matter of course, total costs must be considered in a world whereintermittent renewable energy expands greatly.
At the Malaysia meeting, interesting arguments were made on what energy mix Malaysia or
any other country should pursue on the presumption of the uncertain future of energy and global
energy governance challenges. For example, questions were asked on how ambitious each country’semission reduction target should become to enhance climate change countermeasures and on what
energy mix each country should adopt for an ambitious target. In response to these questions, it waspointed out that each country should not only make its emission reduction target appropriately andsufficiently ambitious in consideration of various future possibilities and innovative technologies but
also give priority to the affordability of energy prices from a pragmatic viewpoint. Each country will
be required to use all available options in a balanced, appropriate manner while remembering
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IEEJ：February 2019○ｃIEEJ 2019
realistic and pragmatic viewpoints and approaches in pursuing the stability and sustainability of themarket.

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