NS4960
Spring Term 2017
Fuels Paradise, Chapter 3
Potential Policy
Responses to Energy Insecurity
Overview
• Chapter interested in the various policy responses during
periods of heightened concern about energy security
• Need to have explicit framework for categorizing and
measuring these responses
• With this framework can see clearly which actions each
country has taken or not taken and then compare them.
• For this purpose asks:
• What are possible policy responses to concerns about energy
insecurity?
• What measures can governments take to increase their energy
security?
• Wants to make a distinction between internal and
externally directed policies
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Responses to Energy Insecurity I
• Examines state responses along three major dimensions:
• Depth,
• Form, and
• Breath
• With regard to depth, often distinguish between
• The objectives and ends of policy on one hand, and
• The instruments or means of policy on the other
• A more sophisticated approach might look at
• Changes in the levels of existing policy instruments
• Change in the basic instruments or techniques used to achieve
policy goals
• Changes in the goals that guide policy
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Responses to Energy Insecurity II
• With regard to functional forms, at least four broad sets
of policy instruments, each of which includes a number
of more specific tools
• Economic and fiscal policies – taxes, fees, tax
exemptions subsidies and direct grants
• Credit instruments such a s loans, loan guarantees, and
interest rate subsidies
• Regulation and deregulation including general market
regulation, price and volume controls and technical and
environmental standards.
• Direct government action, including state-owned or
controlled research, production or transmission, and
government services such as information provision, and
diplomacy and military activities.
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Responses to Energy Insecurity III
• Each of these four sets of policy instruments can be
applied to a wide variety of potentially energy policy
goals.
• As for the third dimension – breath or range of issues
covered by possible policy responses – need to have a
logical framework to organize them
• A number of possibilities have been developed over the
years:
• Mason Willrich approach (1975)
• Measures to decrease damage from possible supply
interruptions
• Measures to strengthen guarantees of foreign supply and
• Measures to increase energy self-sufficiency
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Responses to Energy Insecurity IV
• Paul Kemezis and Ernst Wilson (1984) more
comprehensive – three broad categories:
• Securing energy imports
• Enhancing domestic energy supplies and
• Managing energy demand
• Walter Carlsnaes (1988) less comprehensive approach for
Sweden included:
• Maintaining emergency stockpiles
• Promoting internaonal energy allocation programs among
importing countries
• Reducing energy imports through conservation and substitution
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Responses to Energy Insecurity V
• Several clarifications
• Relationship between state responses to energy
insecurity and other policies a state may pursue.
• No clear boundaries between traditional goals of energy
policy:
• Security
• Economic efficiency,
• Competitiveness, and
• Increasingly environmental sustainability
• Also may be hard to distinguish between policies about
energy security and those that are not
• Some measures taken to promote energy security may
also serve to further other (economic and environmental)
goals of energy policy– and vice versa.
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Responses to Energy Insecurity VI
• Internal policy responses
• Potential domestic policy responses to energy insecurity
fall into two brad categories:
• Contingency or emergency measures designed to minimize the
short term costs imposed by possible external supply disruptions
and
• Measures intended to reduce the state’s vulnerability to
disruptions of foreign energy supplies over the longer term.
• Emergency Preparations
• (1) Short term
• Easiest to devise
• Mainly rationing and allocating physical supplies during
emergency
• Can mean higher prices on a temporary basis
• Always constrained somewhat by political factors
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Responses to Energy Insecurity VII
• (2) Because of political constraints to many short-term
actions, states also often pursue another approach to
reducing short term impacts – stockpiles
• (3) Promote the acquisition of fuel-switching capacity by
energy users
• Tries to ensure energy users have at least short-term
alternatives in emergency situations
• Example switching inputs to electric power when possible
• May involve requiring private sector to make the necessary
investments.
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Responses to Energy Insecurity VIII
• Longer-Term
• Reducing vulnerability to potential disruptions in foreign
energy supplies – three basic ways
• Increasing (where possible domestic production) of the energy
resource
• Reducing directly the consumption of the resource and
• Substituting on a long-term basis other forms of energy for the
resource in question
• The three not necessarily mutually exclusive
• Increasing domestic production
• Number of incentives – taxes subsidies, direct state action
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Responses to Energy Insecurity IX
• Reducing consumption
• Need to reduce overall consumption not just imports –
that way impact of a sudden price increase reduced
• Two basic options
• Reduce directly the level of domestic consumption
• Place a cap on consumption or imports and allow market to set
the price
• More commonly governments impose taxes and other
incentives to
• Discourage consumption and purchase of inefficient equipment
and
• Encourage private sector to buy more efficient alternatives
• Stimulate research and development in alternative energies
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Responses to Energy Insecurity X
External Policy Responses
• Here policies can be divided into policies that
• Are directed at actual and potential foreign suppliers and transit
routes and
• Are aimed at other import dependent consumer countries
• Policies toward Energy Producers and Transit countries
• Approaches
• Try to reduce the risk that existing supplies will be disrupted
• Seek to diversify potential sources of foreign energy supplies
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Responses to Energy Insecurity XI
• If there is a threat of embargo good to try fostering closer
relationships with other producing countries
• Political alliance ties
• Provision of investment opportunities and access to importer’s
domestic market
• Economic and technical assistance
• Cooperation with other consumer/importer countries
• Preparing and coordinating of emergency responses to
disruptions
• Developing means of reducing existing levels of energy
consumption and imports or
• Producing alternative energy sources
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Conclusions
Summing up
• Looked at principal ways in which states can respond to
energy insecurity
• Distinguished between internal and external policy
responses
• Within each area a broad array of options
• How do states choose among these many ways to
promote energy security
• What are the most important determinants of state
responses
• Next chapter develops some of the more promising
explanatory factors.
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