Academic journal article Denver Journal of International Law and Policy

Negotiating an Energy Deal under TTIP: Drivers and Impediments to U.S. Shale Exports to Europe

Academic journal article Denver Journal of International Law and Policy

Negotiating an Energy Deal under TTIP: Drivers and Impediments to U.S. Shale Exports to Europe

Article excerpt

I. INTRODUCTION

The problem of global security of energy supply is growing in importance with the escalation of conflict between Russia and Ukraine. Interruptions of gas supplies to Ukraine by Russia threaten to cause devastating energy shortages not only in Ukraine but also in those E.U. Member States, which are dependent on the gas supplies from Russia via Ukrainian pipelines. In this regard, diversification of E.U. energy sources may be facilitated by U.S. exports of gas to Europe in view of breaking the Russian stranglehold on energy supplies.

Yet, this solution currently faces geopolitical, legislative and technical barriers to energy trade between the European Union and the United States and is associated with social and environmental costs. The European Union and the United States need considerable investments into building the necessary infrastructure for transporting gas from the United States (e.g. liquefied gas terminals, regasification terminals, requalification of refineries, etc.). (1) Changes are also required in the U.S. legislation to allow exports of energy resources (e.g. elimination of various forms of export quantitative restrictions, such as bans and non-automatic licensing procedures). Furthermore, an increasing role of the United States as a major energy exporter faces opposition of the long-established world energy suppliers in a context of shrinking oil prices, whereas domestically it confronts different sectors of the U.S. society with contrasting political economy interests. (2) Environmental concerns about the impacts of shale oil and gas exploitation also figure prominently in the debate.

The on-going negotiations of a free trade agreement between the European Union and the United States-the Transatlantic Trade and Investment Partnership ("TTIP") (3)--present an opportunity to speed up the dismantling of some of these barriers. Along with the evident gains for the European Union, the opening of E.U. energy markets for U.S. shale gas would also benefit the United States, which is experiencing shrinkages of shale gas prices caused by oversupplies in the internal market. (4) The mutual interests in energy trade could pave the way for the materialization of a TTIP chapter on energy and raw materials. (5) Furthermore, given the lack of international rules on energy trade, the negotiations between the European Union and United States create a unique opportunity to adopt a legal framework for trade in energy products and raw materials that has never existed before and could later be plurilateralized.

This paper explores some of the thorniest legal, geopolitical, and economic issues that need to be taken up by TTIP negotiators for the promotion of a secure and sustainable trade in energy between the United States and European Union. It is organized as follows: Section II gives an account of the most recent developments in the TTIP negotiations on energy; Section III examines the link between a possible legal framework for energy trade under TTIP and other energy-related regional and international fora; Section IV critically assesses the negotiating positions of the European Union and the United States in light of their reciprocal energy profiles and needs; Section V offers an overview of the critical items most likely to be on top of the TTIP agenda on energy based on a comparative analysis of energy provisions in E.U. and U.S. legislation and in light of the both parties' interests; Section VI discusses the main driving forces and inhibiting factors capable of facilitating or rather impeding a successful conclusion of an energy trade deal between the United States and the European Union; and Section VII provides concluding remarks.

II. TTIP NEGOTIATIONS ON ENERGY

In June 2013, the twenty-eight Member States of the European Union provided the European Commission with a mandate for negotiating TTIP with the United States. (6) Since then, TTIP negotiations have been carried out in regular rounds focusing on the elimination of tariff and non-tariff barriers to transatlantic trade and facilitation of mutual investments. …

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