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Will the European Green Deal enhance Europe’s security towards Russia? A political economy perspective
Abstract
The European Green Deal is a set of policy initiatives set by the European Commission with the aim of making the European Union climate neutral in 2050. The Deal is credited with many virtues by its proponents, and in particular that it would reduce geopolitical disputes with Europe’s main supplier of energy, Russia. The nascent literature on energy transition is primarily focused on its economic costs and benefits, and on its contribution to energy security; but it has so far left unaddressed the question of the transition’s military consequences. To address that question, our paper adopts a political economy perspective by looking at how a sizeable drop in the energy revenue, which would result from the successful implementation of the Deal, is likely to affect the intraelite competition underway in Russia. We model that competition by means of a Tullock contest in which the energy revenue may be allocated by the sole winner to the provision of private goods or of club goods. We show that the Deal would favour the currently ruling elite group’s efforts at winning the contest. Given that this elite would thus control energy revenue and would spend it on military investments intended at maintaining it in power, the Deal could have adverse security consequences for Europe. The paper concludes by underlining the importance for the Deal’s success to factor in its unintended geopolitical consequences.
Decarbonisation is harder for transport, heating, industry and agriculture. That is, a doubling of the decarbonisation rate requires much more than a doubling of the policy effort. The low-hanging fruit has been picked.
Vladimir Putin’s personal popularity creates the base for sociopolitical stability of regime. However, in the long term, the aspirations of Russia’s elite for national sovereignty will come to naught without anew economic development model. Applying the “limited access orders” framework of North, Wallis, and Weingast, this essay analyzes the interactions among three key groups in the ruling elite#x20; the top federal bureaucracy, politically connected big business (oligarchs), and heads of security forces (siloviki). It considers the evolution of rent sources in Russia during the last 25 years and the incentives of elite groups. Itargues that under dominance of siloviki after 2012, the ruling coalition could not negotiate anew agreement on rent distribution, nor could it broaden access to economic opportunities and political activity for new social groups. Russia’s ruling elite missed the opportunity to avoid adeep shock that will likely destroy the existing “limited access order”.
The Russian history of politicization of natural gas supplies led Europe to seek alternatives. US LNG is considered to be a viable alternative for Europe, which positioned the US as a strong competitor against Russia. In a game theoretic approach, we model this strategic decision-making process in simultaneous-move and sequential games. Our findings indicate a mixed strategy equilibrium: Europe cannot commit to diversify in the face of Russian advantages, and Russia cannot fully resist the temptation to politicize its supplies to Europe. The US might attempt to intervene in the European commitment problem through implementing sanctions on Russian gas sales. We find that in any case episodic Russian politicization remains likely in equilibrium.
This article seeks to nip in the bud four emerging myths about the geopolitics of the rise of renewable energy and the concomitant increase in electricity usage. The article presents alternative perspectives, arguing that (1) the risk of geopolitical competition over critical materials for renewable energy is limited; (2) the resource curse as we know it from the petroleum sector will not necessarily reappear in many countries in connection with renewable energy; (3) transboundary electricity cut-offs will mostly be unsuitable as a geopolitical weapon; and (4) it is not clear that growing use of renewable energy will exacerbate cyber-security risks. In all four areas, the evolving literature could place more emphasis on uncertainty and risks and less on one-sided scenarios and maximization of threats.
The geopolitics of renewables: Does more energy security come with more energy dependencies?
The purpose of this article is to analyse the geopolitical consequences of a spread of renewable energies worldwide. The challenges induced by energy transition policies could paradoxically turn out being as complex as today’s geopolitics of energy. Indeed, local and decentralised relations could be added to current traditional actors. Plus, technical, economic, sociological, behavioural, spatial and legal dimensions could complicate the emerging puzzle. From a macroeconomic point of view, it would be tempting to conclude that the transition to renewables will end today’s geopolitics of fossil fuels. But a contrario, one must wonder about the transformations this shift implies regarding inter-States relations, especially considering the various internal issues in oil-producing countries. Last, a massive diffusion of renewables into the world’s energy mix could lead to new, unexpected interdependencies.
Increased shale gas and shale oil production in the USA will affect global geopolitics and national security considerations. An influx of Qatari LNG into Europe and Asia, which is diverted from the USA, erodes the tremendous market share held by the Russian gas company Gazprom and significantly reduces its pricing power. The USA did not begin to import the quantities of LNG from countries like Qatar and Trinidad and Tobago. Those quantities have instead been redirected to other markets, including Europe. As part of the impact of the US shale revolution, Russian energy control over Europe will be greatly reduced. Russia’s power over the region will also be reduced. Russia has earned from US60 billion per year from selling gas to Europe. Fewer exports and lower prices will cut those revenues. Given the importance of oil and gas companies to Russia’s economics, it is urgent for Moscow to restrict Central Asian production and infrastructure to mainly or even exclusively Russian channels lest Russian oil and gas become less competitive due to its own high cost and wasteful monopolistic structure and dilapidated infrastructure.
Energy security improvement is often presented as a co-benefit of climate policies. This paper evaluates this claim. It investigates whether climate policy would improve energy security, while accounting for the difficulties entailed by the many-faceted nature of the concept and the large uncertainties on the determinants of future energy systems. A multi-dimension analysis grid is used to capture the energy security concept, and a database of scenarios allows us to explore the uncertainty space. The results, focusing on Europe, reveal there is no unequivocal effect of climate policy on all the perspectives of energy security. Moreover, time significantly matters: the impact of climate policies is mixed in the short term and globally good in the medium term. In the long term, there is a risk of degradation of the energy security. Lastly, we examine the robustness of our results to uncertainties on drivers of economic growth, availability of fossil fuels and the potentials and low-carbon technologies, and find that they are sensitive mainly to fossil fuels availability, low carbon technologies in the energy sector and improvements in energy efficiency.
This paper considers current contradictions in state–business relations in Russia. On one hand, the Russian political elite needs economic growth to keep social stability in the country and to limit mass protesting in big cities. Economic growth is impossible without investment, which explains Russian leaders' increased interest in improving Russia's business climate. On the other hand, influential interest groups (represented first of all by security and law enforcement agencies) try to expand their control on rent sources in the economy. These groups of interests could strengthen their positions due to fear of political protests. This strong conflict among different groups in the Russian elite creates additional uncertainty for investors and the business community, and can lead to economic recession independent of the level of oil prices and dynamics of global markets. Reversing these negative trends in economic development will be possible only with collective actions of different economic and political actors (including technocrats in federal and regional governments, representatives of large and successful middle-sized business and top-managers of public sector organizations) in the search for pragmatic solutions to the challenges faced by Russian economy and society.
In weak institutional settings, autocrats barter political and economic concessions for support to remain in power and extract
rents. Instead of viewing the favors’ beneficiaries, i.e. the elites, as an exogenous entity, we allow the king to decide
whom to coopt provided the subjects are heterogeneous in the potential support—their strength—they could bring to the regime.
While the ruler can select the elites on the basis of their personal characteristics, an alternative strategy consists in
introducing some uncertainty in the cooptation process. The latter strategy allows the king to reduce the clients’ cooptation
price since in the event of a revolution the likelihood of being included in the future body of elites is lower. We show that
weak rulers are more likely to coopt the society’s strongest individuals, while powerful rulers diversify the composition
of their clientele. Moreover, when agents value more future discounted outcomes, the king is more likely to randomly coopt
subjects.
KeywordsWeak institutions–Autocracy–Rent seeking–Elites
This paper presents a survey of the theory of contests.
Ironically, by sanctioning Russia, the West may actually make that country into a true petrostate that is dependent on a handful of extractive industries – making today’s caricature of Russia come true in the near future.
This study seeks to investigate how and why state capitalism developed in China and Russia in the oil and gas sectors and explain why two countries that have contrasting energy-security challenges use state capitalism to solve them. It argues that state control over the oil and gas sectors has succeeded in achieving their respective goals, bolstered bilateral hydrocarbon ties between the two countries, buffered each against the geopolitics and financial volatility of oil and gas markets, and offered greater flexibility to shape their respective energy regimes over the last two decades. Still, state capitalism presents geopolitical and commercial challenges as the energy transition away from hydrocarbons advances in the coming decades.
For decades, the concept of deterrence and the fear for nuclear confrontation withheld large powers from waging aggression against each other. Recent technological developments and the growing interconnectedness however allowed some states to find ways to challenge the West by using so called ‘hybrid threats’. This way of waging war entails the synchronized use of a broad spectrum of instruments that are well-designed to stay below the thresholds of detection, attribution and retaliation. Combining these (relatively cheap) threats with conventional military hard power confronts the liberal democracies with a difficult choice in terms of defence budget allocation. Whereas arms race stability in the conventional and nuclear domain leads to a peaceful stalemate, this article demonstrates that adding hybrid threats to the spectrum of state power projection leads to a gradual shift of the power balance. While hybrid threats have been extensively studied within the international relations literature, we are (to the best of our knowledge) the first to study these changing security paradigms from a defence economic point of view. Moreover, this article is the first to represent this increasingly complicated state power competition in a game theoretic framework.
Economic analysis is being applied by scholars to an increasing range of legal problems. This collection brings together some of the main contributions to an important area of this work, the economics of contract law. The essays and illuminating notes, questions, and introductions provided by the editor outline the Law and Economics framework for analyzing contractual relationships. The first two parts of the book present a number of useful concepts - adverse selection, moral hazard, and rent seeking - and a general way of thinking about the economics of contracting and contract law. The remainder of the book considers a wide range of topics and issues. The recurring theme is that contracting parties want to assign the responsibility for adjusting to particular contingencies to the party best able to control the costs of adjustment. The adjustment problem is exacerbated by the fact that the parties might engage in various types of strategic behavior, such as opportunism, moral hazard, and rent-seeking. Many contract law doctrines can best be understood as attempts to replicate how reasonable parties might resolve this adjustment problem.
A Green Deal for Europe can set standards for ambitious climate protection, for an investment programme in future markets and for strengthening the European economy and European and non-European security. Climate protection and a sustainable energy transition not only create economic opportunities but also reduce geopolitical disputes, thus securing peace within and outside Europe. In order to meet the emission reduction targets of the Paris climate agreement and the EU deal, the share of renewable energy sources would have to increase significantly faster.
Today the global energy industry is undergoing major changes shifting towards the green growth and circular economy solutions. The paper offers the outcomes of the foresight study of the Russian renewable energy sector and focuses on three areas: converting solar energy into electricity; converting wind energy into electricity; and converting biomass into thermal energy and electricity. The goal of the study was to foresee and agree on the visionary future for the nascent renewable energy sector in the country, as well as to provide the scientifically justified grounds for government and corporate decision-makers. The research is based on a mixture of methods: bibliometric analysis and text mining, literature review, expert surveys and interviews, workshops, STEEPV analysis of trends, scenario analysis, and applied policy analysis. As a result of the study, major trends and uncertainties that may affect the Russian and global renewable energy sector in the next 15-20 years were identified. Other results include the scenarios for Russia’s renewable energy sector that are proposed together with recommendations for the Russian companies and public authorities. The study’s policy and market implications go beyond Russia: the outcomes may be useful for similar studies, early stage renewable energy policy planning and investment decision.
The aim of this article is to analyze the geopolitical consequences of the spread of renewable energies worldwide. From a macroeconomic point of view, it would be tempting to conclude that the transition to renewables (solar, wind …) will gradually end today's geopolitics of fossil fuels based on historical relationships between energy producers and consumers. The new challenges induced by energy transition policies could paradoxically turn out being as complex as today's geopolitics of energy. Local and decentralized relations could add a new geopolitical layer to current traditional actors. Technical, economic, sociological, behavioural, spatial and legal dimensions could also complicate the emerging puzzle.
A massive diffusion of renewables into the world's energy mix could also lead to new, unexpected interdependencies such as dependencies to critical materials, a new geopolitics of patents and the implementation of a renewable diplomacy. Critical materials and patents on energy transition technologies could then become the new specific assets of the upcoming international climate negotiations for numerous countries.
Cet article vise à restituer la dynamique du poutinisme dans son évolution historique depuis 2000. Le chef du Kremlin a fixé, dès le début de la décennie 2000, un objectif : replacer la Russie au centre du jeu mondial, reconstruire un État qui soit également une puissance prospère qui compte dans le monde globalisé. La centralisation du pouvoir autour de la personne de Vladimir Poutine participe d’un mode d’exercice du pouvoir qualifié ici de prétorien. La notion de prétorianisme est le fil conducteur qui permet de comprendre l’action politique menée au sommet de l’État russe, en politique intérieure comme extérieure, et d’entrevoir, à la veille de l’élection présidentielle de 2018, les évolutions possibles de l’exercice du pouvoir en Russie.
Russia is waging a far-reaching political warfare effort against US interests in Europe and elsewhere, an effort facilitated by the Internet, cyber tools, cable news, and especially social media. This persistent political warfare effort largely eschews traditional military force; rather, it is focused on influencing the populations of targeted countries. Though the effects of Russian political warfare operations are hard to measure, they have likely had some effect on elections in France, the Netherlands, and elsewhere. Factors that make nations vulnerable to political warfare include physical proximity to Russia, high levels of corruption, contested politics, and cultural or historical affinities with Russia. If left unchecked, political warfare can do great damage to US power and interests by creating unwanted tensions, weakening allies, and eroding faith in democracy. The United States, as an open and democratic society, is at an automatic disadvantage when it comes to countering Russian political warfare. Nonetheless, Washington can seek to defend its interests by investing in effective counter-messaging, ensuring that the US intelligence community has the analytical and collection resources it needs, prioritizing anti-corruption programs in certain countries, and helping to build defense institutions in allied and partner nations.
State-Business Networks in Putin’s Russia
After the fall of the USSR, Russia underwent a twofold transformation: a political transformation, with the transition to pluralistic democracy; and economic transformation, with the adoption of the market economy. This novel situation favored the emergence of an oligarchy whose private interests prevailed over those of the state. The arrival to power of Vladimir Putin completely inverted this order: an elite in the service of the state’s interest emerged and gradually challenged the dominant position of the oligarchs. To the degree that its political authority and economic influence crush all competition, this elite resembles a ruling class. Ideologically structured around the rhetoric of the “strong state” and personally tied to Vladimir Putin, this ruling class benefits from a form of “administrative capital” that consists in the accumulation of key positions within the economic and political fields. This allows it to control the economy, coordinate strategic decisions and redistribute the economic rents of its dominant position.
In 1953, US President Dwight D. Eisenhower warned about the hidden costs of what he was to later describe as the “military-industrial complex.” Ike said: “We pay for a single fighter plane with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people.” The leaders of today’s Russia face a twenty-first-century version of this dilemma, weighing the trade-off between spending on guns or butter. Russia’s own defense-industrial complex (known as the oboronnyi-promyshlennyi kompleks, or OPK) has been the recipient of billions of dollars in the past few years, as the state ordered new weapons such as the T-50 PAK-FA fifth-generation fighter aircraft, the Armata main battle tank, new nuclear-powered submarines, and strategic missiles. Should they continue the costly effort to remake their military into one of the most numerous and sophisticated forces in the world? Or should Russia’s leaders instead focus their efforts on investing in health, education, infrastructure, and other areas to help build a more dynamic and competitive economy? The answer to this question will be partially shaped by how much money Russia’s leaders will have to spend; with the crash in the value of oil exports – the unstable pillar of this Eurasian petro-state – what funds can they expect to draw upon? Decision-makers in the Kremlin will also be influenced by their perception of whether Russia faces a hostile geopolitical environment. If the current view prevails, it is possible that Russia’s leaders may choose to maintain military spending even as the economy sinks into stagnation.
This analysis contributes to recent efforts to better understand the evolution of energy security in a low-carbon world. Our objective was to assess how energy security may change over the course of the century, and to what extent these changes depend on the uncertainty of the factors that drive the evolution of energy systems, including future technologies, improved energy efficiency, fossil fuel resources and markets, and economic growth. To this end, we focused on Europe and on a set of energy security indicators based on three perspectives: sovereignty, robustness and resilience. A database of scenarios allowed us to account for the large uncertainties surrounding the determinants of future energy systems. We then analyzed the way energy security indicators evolve over time, and how their trajectories vary across scenarios. We identified the indicators that vary the most between scenarios, i.e., the indicators whose future evolution is the most uncertain. For these indicators, we performed an analysis of variance to estimate the contribution of each driver to the uncertainty of the indicators. The paper shows that the European double target of significantly decreasing CO2 emissions and increasing the security of the supply of energy may be difficult to reach. Nevertheless, some levers could facilitate the transition to a low-carbon society while improving energy security, or by limiting its degradation. The results emphasize not only the importance of policies in favor of low or zero carbon technologies in power generation but also the differences in their contributions to the complete uncertainty of the indicators. Policies promoting energy efficiency also play a role but only in the resilience of TPES. These policies are thus important levers for mitigating the negative impacts of climate policies on energy security.
Vladimir Putin’s Non-Economic Logic
Russia’s economic crisis was not caused by decisions taken by the West following the Russia-Ukraine conflict. It was predicted and widely mediatized. However, Russian leaders preferred to handle it politically, and use it to intensify internal public opinion against the West’s “aggression”. Unfortunately, it is unlikely that this opinion will turn around in the short term. Nationalist rhetoric and external belligerence will continue to mask serious economic difficulties.
This paper analyzes the transition costs of moving towards a low carbon society when the second-best nature of the economy is accounted for. We emphasize the consequences on mitigation costs of considering the interplay between a ) technical systems inertia, including slow infrastructure turnover in transportation and construction; and b ) imperfect foresight influencing investment decisions. To this end, the hybrid general equilibrium modeling framework I maclim- R is employed as it allows for transitory partial adjustments of the economy and captures their impact on the dynamics of economic growth. The modeling exercise quantitatively emphasizes the a) specific risks that the interplay between inertia and imperfect foresight leads to high macroeconomic costs of carbon abatement measures; b) opportunities of co-benefits from climate policies permitted by the correction of sub-optimalities in the reference scenarios. The article draws insights for the framing of future climate architectures by studying the role of measures that act complementarily to carbon pricing in the transport sector. In particular, reallocating public investment towards low-carbon transport infrastructure significantly reduces the overall macroeconomic costs of a given GHG stabilization target and even creates the room for long-term net economic benefits from climate policies.
This paper analyzes the provision of local public goods with positive spillovers across jurisdictions. If spillovers are symmetric, the noncooperative game played by jurisdictions admits a unique equilibrium, and an increase in spillovers reduces the total provision of public goods. Smaller jurisdictions always reduce their contribution, but larger jurisdictions can increase their contribution. When spillovers are asymmetric, equilibrium is unique if spillovers are low, while multiple equilibria exist for high spillover values. In the case of two jurisdictions, an increase in the flow of spillovers to one jurisdiction benefits agents from that jurisdiction but harms agents in the other jurisdiction. Beyond the case of two jurisdictions, the effect of changes in spillovers cannot be signed. An increase in the spillovers flowing to a jurisdiction can actually result in an increase in the supply of public goods by that jurisdiction and harm agents residing in it, while benefiting agents in the other jurisdictions. The results of the paper reveal the complexity of interactions that will plague the design of institutions for multijurisdictional local public good economies with spillovers.
Using a constitutional political economy perspective, we study the paradox of government (how a limited government can stay limited) and the different ways in which systems of law try to solve it. We then provide a tentative application to a possible European state and assess the relevance of some member countries' constitutional and administrative law, if they were both to develop and to contain this European state.
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