Energy security and climate policy

The IEA assesses interactions

Energy security and climate change are two major public concerns. Most governments are intervening with policies aimed at ensuring a continuous energy supply and reducing carbon dioxide emissions. But how are those two objectives related? And which policies can maximise both goals?

The International Energy Agency (IEA) studied these questions and published its findings in the book Energy Security and Climate Policy/Assessing Interactions, released on 28 March 2007. The book does not take positions on what actions should be taken. Its merit lies in the fact that it offers governments quantitative tools to assess policy choices.

Concerning energy security, the book focuses on the danger of market concentration of fossil fuel resources. Other energy security issues (supply disruptions due to extreme weather conditions, short-term balancing problems, etc.) are not discussed since they have no direct link with climate change mitigation.

New quantitative tools measuring energy security

The reductions of carbon dioxide emissions and of other greenhouse gases are good indicators to measure climate change mitigation efforts. The energy security problem however lacks similar clear indicators. Energy security can be affected in two major ways:

1. Prices that are overly volatile or not competitive
2. Physical unavailability of the energy

The IEA presents two new indicators, called Energy Security Index Price (ESI_price) and Energy Security Index Volume (ESI_volume). The names are somewhat unfortunate and confusing, since those indices in fact measure energy insecurity.

1. ESI_price of a particular fuel in a given country is the risk that prices for this fuel are not set competitively due to market concentration, divided by the share of this fuel in the fuel mix of that country.
2. ESI_volume of a particular fuel in a given country is the degree of physical limitation to the amount that can be imported that is not reflected in its market price, divided by the share of this fuel in the fuel mix of that country.

ESI_price is generally very high for oil and often high for coal. ESI_volume is high for natural gas that is imported via pipelines and whose price is coupled to the oil price. The coupling to the oil price also results in a high ESI_price for natural gas.

Evolution between now and 2030

How will CO₂ emissions, ESI_price, and ESI_volume evolve between now and 2030? The IEA book presents five case studies in an attempt to answer this question: the Czech Republic, France, Italy, the Netherlands, and the UK. The business-as-usual case is studied, as well as the influence of several governmental actions and objectives.

The general tendency is that without effective government actions, all three of the indices will worsen. Much will depend though on evolutions in the fuel mix and in the organisation of the natural gas sector.