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The Transatlantic Trade and Investment Partnership, Energy, and Divestment

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Book cover The Palgrave Handbook of the International Political Economy of Energy

Part of the book series: Palgrave Handbooks in IPE ((PHIPE))

Abstract

This chapter assesses the role that energy plays in the Transatlantic Trade and Investment Partnership (TTIP) negotiations and the growing importance that energy security is acquiring in the US–European Union (EU) political agenda. It analyses the potential effects that the liberalization of trade in energy and raw materials is supposed to exert in both economies and the way in which the so-called US shale gas revolution will drive major changes in the commercialization of energy products. The chapter illustrates the main problematic aspects currently under discussion regarding the application of the TTIP to the energy sector. Lastly, it discusses how divestment campaigns might constitute a valid instrument of sociopolitical pressure to induce energy companies and governments to adopt more ethical and environmentally friendly policies.

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Notes

  1. 1.

    For a definition of a free trade area, see GATT Article XXIV: 8.b.

  2. 2.

    For an in-depth analysis of the Compatibility between WTO and regional trade agreements, see Leal-Arcas et al. (2015b).

  3. 3.

    European Commission, ‘11th Round Transatlantic Trade and Investment Partnership Negotiations,’ available at http://trade.ec.europa.eu/doclib/events/index.cfm?id=1375.

  4. 4.

    European Commission, ‘About TTIP’ http://ec.europa.eu/trade/policy/in-focus/ttip/about-ttip/.

  5. 5.

    Articles 3 and 21 of the Treaty on EU, as amended by the Treaty of Lisbon.

  6. 6.

    Council of the EU, ‘Renewed Sustainable Development Strategy’ http://register.consilium.europa.eu/doc/srv?l=EN&f=ST%2010917%202006%20INIT.

  7. 7.

    See European Commission, Joint Statement EU-US Energy Council (3 December 2014) available at http://europa.eu/rapid/press-release_IP-14-2341_en.htm.

  8. 8.

    See ‘European countries anxious to buy US natural gas—report’ Reuters (17 January 2014) http://www.reuters.com/article/2014/01/17/usa-lng-europe-idUSL2N0KR0Y220140117.

  9. 9.

    By the early 1970s, American crude oil consumption was rising even and domestic oil production was declining, leading to an increasing dependence on oil imported from abroad. Moreover, the situation was exacerbated by the fact that the Organization of the Petroleum Exporting Countries issued an oil embargo against the USA in retaliation for its involvement in the 1973 Arab-Israeli War. As a result, the USA enacted in 1975 an extremely broad ban on US crude oil exports. See Roger and Asmus (2015).

  10. 10.

    Section 3 of the Natural Gas Act requires federal approval by the Department of Energy for the import and export of natural gas, including LNG, and approval by the Federal Energy Regulatory Commission for the siting, construction, and operation of onshore LNG import and export facilities. See US Energy Information Administration ‘Natural Gas Act of 1938’ available at http://www.eia.gov/oil_gas/natural_gas/analysis_publications/ngmajorleg/ngact1938.html.

  11. 11.

    Currently, the EU’s energy dependency rate is 88% for crude oil and 66% for natural gas. See European Parliament, ‘TTIP Impacts on European Energy Markets and Manufacturing Industries,’ (2015) at p. 28, available at http://www.europarl.europa.eu/RegData/etudes/STUD/2015/536316/IPOL_STU(2015)536316_EN.pdf.

  12. 12.

    On 4 February 2015, a bill was presented in the US Congress (H.R.702) ‘to adapt to changing crude oil market conditions.’ It aims to amend the Energy Policy and Conservation Act to repeal authority to restrict the export of coal, petroleum products, natural gas, or petrochemical feedstocks, and to prohibit any federal official from imposing or enforcing any restriction on the export of crude oil. On 9 October 2015, the bill passed in the US House of Representatives with 261 favourable votes and 159 adverse ones. However, the bill will now be engrossed and sent to the Senate for consideration. President Barack Obama has threatened to veto the bill and it seems unlikely at present that both houses of Congress can muster the required votes to override a veto. See Roger and Asmus (2015).

  13. 13.

    See European Commission, ‘Energy and raw materials in TTIP’ available at http://trade.ec.europa.eu/doclib/docs/2015/january/tradoc_153015.2%20Energy%20and%20raw%20materials.pdf.

  14. 14.

    In December 2014, the EU foreign affairs Chief Federica Mogherini pushed for the inclusion of an energy chapter in the TTIP during talks with US Secretary of State John Kerry. See Crisp (2014)). Such approach has also been adopted by the European Parliament, which recommended the European Commission to retain the objective during the negotiations ‘of dedicating a specific chapter to energy, including industrial raw materials.’ See the European Parliament resolution of 8 July 2015 containing the European Parliament’s recommendations to the European Commission on the negotiations for the TTIP, available at http://www.europarl.europa.eu/sides/getDoc.do?pubRef=−//EP//NONSGML+TA+P8-TA-2015-0252+0+DOC+PDF+V0//EN.

  15. 15.

    European Commission, ‘EU-US Transatlantic Trade and Investment Partnership: Raw Materials and Energy: Initial EU Position Paper’ http://trade.ec.europa.eu/doclib/docs/2013/july/tradoc_151624.pdf.

  16. 16.

    Ibid., p. 1. For further analysis on legal issues arising from international trade in energy, see Leal-Arcas and Abu Gosh (2014).

  17. 17.

    European Commission, ‘EU-US Transatlantic Trade and Investment Partnership: Raw Materials and Energy: Initial EU Position Paper’ p. 1 http://trade.ec.europa.eu/doclib/docs/2013/july/tradoc_151624.pdf. That said, one could have a situation where fragmented global governance of energy is also incoherent in the application of rules. See Ghosh (2011).

  18. 18.

    ‘Energy Trade in the Trans-Atlantic Trade and Investment Partnership: Endangering Action on Climate Change’ Sierra Club http://action.sierraclub.org/site/DocServer/Analysis_of_EU_Energy_Proposal_TTIP.pdf?docID=15744.

  19. 19.

    International Energy Agency, World Energy Outlook 2013, 2013 (at p. 12), available at http://www.iea.org/newsroomandevents/speeches/131112_weo2013_presentation.pdf.

  20. 20.

    LNG can be sold without a permit only to the few countries with which the USA has FTAs.

  21. 21.

    European Commission, ‘Quarterly Report on European Gas Markets,’ 2014 (at p. 3), available at https://ec.europa.eu/energy/sites/ener/files/documents/quarterly_report_on_european_gas_markets_2014_q4.pdf.

  22. 22.

    See Brence M, ‘Read Obama’s speech at Nike: Full text’ (8 May 2015), The Oregonian/OregonLive, available at http://www.oregonlive.com/politics/index.ssf/2015/05/read_obamas_speech_at_nike_ful.html.

  23. 23.

    The issue originated on 1 December 2008, when Canada requested consultations with the USA concerning certain mandatory COOL provisions in the Agricultural Marketing Act of 1946 as amended by the 2008 Farm Bill and as implemented through an Interim Final Rule of 28 July 2008. From the Canadian perspective, the mandatory COOL provisions were inconsistent with the US’s obligations under WTO law. On 29 June 2012, the WTO’s Appellate Body confirmed that the COOL measures violate Article 2.1 of the Technical Barriers to Trade Agreement by according less favourable treatment to imported Canadian cattle and hogs than to like domestic cattle and hogs. As a result, the United States was given a ‘reasonable period of time’ to implement the WTO recommendations. In 2013, Canada and Mexico challenged the treatment accorded to imported Canadian cattle and hogs and to imported Mexican cattle under the USA’s amended COOL rules for beef and pork and requested the establishment of a compliance panel. The matter was eventually resolved on 18 May 2015 by the WTO’s Appellate Body, which held that the amended COOL measures adopted by the USA increase the record-keeping burden for imported livestock entailed by the original measures. See United States—Certain Country of Origin Labelling (COOL) Requirements, WT/DS384/AB/R.

  24. 24.

    European Commission, ‘A boost for clean and secure energy in Poland: European Commission approves more than € 200 million EU regional funds for liquefied natural gas terminal’ press release (16 July 2013) http://ec.europa.eu/commission_2010-2014/hahn/projects/pdf/pl_2013_07_16_liquefied_natural_gas_terminal.pdf.

  25. 25.

    Ibid.

  26. 26.

    ‘EUR 107 million of EU regional funds to optimize natural gas supply in Greece’ (12 August 2014) http://ec.europa.eu/commission_2010-2014/hahn/projects/pdf/el_31072014_energy.pdf.

  27. 27.

    Counter Balance, ‘Myths and Facts: The Netherlands as a Gas Roundabout and EIB Investments in Excess Capacity,’ http://www.counter-balance.org/wp-content/uploads/2014/06/Gas-Roundabout-finalweb.pdf.

  28. 28.

    Since 2010, the US coal exports have amounted to some 100,000 thousand short tons that represent almost the double of the precedent figure. See US Energy Information Administration, ‘Quarterly Coal Report (Abbreviated) January-March 2015,’ available at http://www.eia.gov/coal/production/quarterly/pdf/qcr.pdf.

  29. 29.

    In 2014, the amount of US petroleum product exports have amounted to 1,525,641 annual-thousand barrels whilst in 2009 this figure was just 738,803. See US Energy Information Administration, ‘Petroleum & Other Liquids—Exports,’ available at http://www.eia.gov/dnav/pet/pet_move_exp_dc_NUS-Z00_mbbl_a.htm.

  30. 30.

    See US Energy Information Administration, ‘Annual Energy Outlook 2013 with Projections to 2040,’ available at http://www.eia.gov/forecasts/aeo/pdf/0383(2013).pdf.

  31. 31.

    Incidentally, US energy export restrictions are in manifest violation of GATT Article XI, and yet have never been challenged at the WTO. Since WTO law is about economic interests, and WTO Members may obtain cheap coal from other countries, this may explain why no WTO Member has ever challenged this GATT Article XI violation by the USA. Bringing a complaint before the WTO is costly and countries can certainly find cheap coal elsewhere. That said, the USA has long argued that its energy export restrictions are excused by GATT Article XXI(b)(iii), which states that ‘Nothing in this Agreement shall be construed … to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests… taken in time of … emergency in international relations.’ The legal basis of the US export restrictions is the 1975 Energy Policy and Conservation Act, which was a response to the 1973 oil crisis, and which expressly mentions that its measures are intended to prepare for energy emergencies.

  32. 32.

    See The European Commission, 2050 Energy strategy, available at https://ec.europa.eu/energy/en/topics/energy-strategy/2050-energy-strategy.

  33. 33.

    For instance, it has been argued that ‘by directing economic development towards exports and external competitiveness at all costs, these policies make our economies and our societies ultra-dependent on fossil fuels imports and exports, and provide to economic actors instruments that are preventing the implementation of genuine policies able to achieve the energy transition.’ See Combes M. and Canonne A. ‘Climate or TTIP make your choice!’ available at https://france.attac.org/IMG/pdf/note_tafta_lima_-en.pdf.

  34. 34.

    As of 2009, there were already more than 493,000 active natural gas wells in the USA, almost double the number in 1990. Around 90% of them have used hydrofracking to get more gas flowing. See Urbina, I. ‘Regulation Lax as Gas Wells’ Tainted Water Hits Rivers’ The New York Times (26 February 2011) http://www.nytimes.com/2011/02/27/us/27gas.html?_r=2&pagewanted=all.

  35. 35.

    For a complete list of chemicals potentially used in a hydraulic fracturing job, see ‘What Chemicals Are Used’ FracFocus https://fracfocus.org/chemical-use/what-chemicals-are-used.

  36. 36.

    See ‘NO to shale gas extraction (fracking) in Europe’ EuropeanGreenParty http://europeangreens.eu/news/no-shale-gas-extraction-fracking-europe.

  37. 37.

    See European Commission, ‘Energy and raw materials in TTIP’ available at http://trade.ec.europa.eu/doclib/docs/2015/january/tradoc_153015.2%20Energy%20and%20raw%20materials.pdf.

  38. 38.

    The only section of the draft text to deal specifically with renewable energy—Article O: Localization in the renewable energy sector—actually serves to restrict the ability of governments to create localized clean energy economies and build domestic manufacturing of renewable energy technologies. See Solomon, I. ‘The EU’s drive for free energy trade in the TTIP endangers action on climate change’ EnergyPost (3 September 2014) http://www.energypost.eu/pursuit-free-energy-trade-trans-atlantic-trade-investment-partnership-ttip-endangering-action-climate-change.

  39. 39.

    See European Commission, ‘Energy and raw materials in TTIP’ available at http://trade.ec.europa.eu/doclib/docs/2015/january/tradoc_153015.2%20Energy%20and%20raw%20materials.pdf.

  40. 40.

    See ‘Lifting the Ban, Cooking the Climate—The Climate Impact of Ending the US Crude Oil Export Ban’ Oil Change International (March 2014) available at http://priceofoil.org/content/uploads/2014/03/LiftingTheBanFinal.pdf.

  41. 41.

    See ‘Transatlantic trade deal must not dilute environmental safeguards’ Parliament UK (10 March 2015) http://www.parliament.uk/business/committees/committees-a-z/commons-select/environmental-audit-committee/news/ttip-report-announcement/.

  42. 42.

    See the European Parliament resolution of 8 July 2015 containing the European Parliament’s recommendations to the European Commission on the negotiations for the TTIP, available at http://www.europarl.europa.eu/sides/getDoc.do?pubRef=−//EP//NONSGML+TA+P8-TA-2015-0252+0+DOC+PDF+V0//EN.

  43. 43.

    Ibid.

  44. 44.

    Ibid.

  45. 45.

    See the organization’s website at http://350.org/.

  46. 46.

    See ‘Divestment campaign—Fight the power’ The Economist (27 June 2015) http://www.economist.com/news/finance-and-economics/21656204-investors-are-being-pressed-sell-their-holdings-coal-oil-and-gas-fight.

  47. 47.

    See Gethard, G. ‘Protest Divestment And The End Of Apartheid’ Investopedia (16 July 2008) http://www.investopedia.com/articles/economics/08/protest-divestment-south-africa.asp.

  48. 48.

    Ibid.

  49. 49.

    See ‘Boycotting Israel – New pariah on the block’ The Economist (13 September 2007) http://www.economist.com/node/9804231.

  50. 50.

    See ‘Divestment campaign - Fight the power’ The Economist (27 June 2015) http://www.economist.com/news/finance-and-economics/21656204-investors-are-being-pressed-sell-their-holdings-coal-oil-and-gas-fight.

  51. 51.

    See ‘Fossil-fuel divestment - No smoking’ The Economist (27 June 2015) http://www.economist.com/news/leaders/21656183-institutional-investors-should-divest-oil-gas-and-coal-only-if-their-beneficiaries.

  52. 52.

    See Hendey, E. ‘Does Divestment Work?’ Harvard University Institute of Politics http://www.iop.harvard.edu/does-divestment-work.

  53. 53.

    Ibid.

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Author information

Authors and Affiliations

  1. Centre for Commercial Law Studies, Queen Mary University of London, London, UK

    Rafael Leal-Arcas

  2. School of Business and Law, University of East London, London, UK

    Costantino Grasso

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  1. Rafael Leal-Arcas
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  2. Costantino Grasso
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Editor information

Editors and Affiliations

  1. Ghent Institute for International Studies, Ghent University, Ghent, Belgium

    Thijs Van de Graaf

  2. University of Sussex, Brighton, United Kingdom

    Benjamin K. Sovacool

  3. Council on Energy, Environment and Water, New Delhi, India

    Arunabha Ghosh

  4. University of Sussex, Brighton, United Kingdom

    Florian Kern

  5. University of Massachusetts, Amherst, USA

    Michael T. Klare

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Leal-Arcas, R., Grasso, C. (2016). The Transatlantic Trade and Investment Partnership, Energy, and Divestment. In: Van de Graaf, T., Sovacool, B., Ghosh, A., Kern, F., Klare, M. (eds) The Palgrave Handbook of the International Political Economy of Energy. Palgrave Handbooks in IPE. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-55631-8_8

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