Renewable Energy Commons

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"For years, the great bane of international cooperation has been the much-scorned free rider. International public goods such as climate change mitigation, vaccination against disease, reduction in acid rain, and preservation of the ozone layer all require incentivizing states to participate in international institutions when the individually rational thing to do is remain on the sidelines. Lawyers, policymakers, and scholars have come up with a host of devices to deter free riding and encourage participation in global public goods. Issue linkages, trade sanctions, financial assistance, and minimum participation requirements are just some of the carrots and sticks that states use in international public goods institutions. And these efforts have frequently been successful.

For example, the Montreal Protocol, which governs ozone-depleting substances and uses financial assistance for developing countries as a carrot coupled with the stick of trade sanctions against non-members, has near-universal membership and has been haled as the single most successful environmental agreement to date.

But as the end of 2012 draws near, the inability to conclude a successor agreement to the Kyoto Protocol is forcing commentators to rethink their approach to supplying global public goods. The traditional tools of international governance have proven inadequate to generate meaningful international cooperation on climate change mitigation. What, then, is the way forward?

I argue that the scholarly focus on increasing participation and deterring free riders has caused commentators to underestimate the ways in which institutional design can undermine the ability of international legal regimes to facilitate cooperation.

International institutions can be designed in a number of ways that compound the risk of that international cooperation will fail, which I refer to as governance risk. In this brief article, I focus on two features of institutional design that are intended to encourage participation in public goods institutions, but can create the risk of gridlock and governance failure.

First, many public goods institutions are epistemic institutions. They establish processes for exchanging and evaluating information in an effort to reduce scientific uncertainty as a barrier to bargaining over substantive regulation among states with diverse epistemic and normative commitments. However, states and private actors do not invest in research on environmental harms behind a veil of ignorance. They frequently know the distributional consequences of regulating a particular activity; that is, they know which states (and domestic constituencies) stand to win and which to lose from governing a particular activity. Institutions that merge the knowledge-exchange and development process with the ability to negotiate and impose binding legal regulations thus run the risk that states that oppose the imposition of substantive regulations will use epistemic processes as a way to try to block the adoption of substantive regulation.

Second, governance risk can be systemic. Policies adopted in one institution can lead to governance failures or higher costs to cooperation in other institutions.

Governance risk is systemic when institutions are linked in some way: institutionally, as when institutions have overlapping jurisdiction or competence; at the bargaining table, as when states hold cooperation in one institution hostage to extract concessions in an otherwise unrelated institution; or functionally, as when two otherwise unrelated institutions regulate different aspects of the same underlying activity. Systemic governance risk is an underappreciated negative externality of cooperation in the fragmented international legal system. For example, cooperation in an area such as energy security, with its focus on stable and cheap access to fossil fuel supplies, can crowd out cooperation on climate change, with its focus on raising the prices of carbonintensive energy sources. States in one institution might also respond to the threat of interference from another institution by attempting to obstruct the other institution’s mission, as members of OPEC have done during the climate change negotiations.

This Article proceeds in three parts. In Parts I and II, I briefly sketch a theory of institutional governance risk and systemic governance risk, respectively. Institutions organized around the production of public goods, such as climate change mitigation, are particularly prone to high degrees of governance risk. The institutional design choices that aim to increase participation and reduce free-riding in public goods institutions, such as creating negotiating bodies like the United Nations Framework Convention on Climate Change (UNFCCC) that encourage broad membership by extracting few upfront commitments from states, can sometimes exacerbate governance risk by introducing epistemic and normative divisions among negotiators that can paralyze institutions. Systemic governance risk, for its part, is most frequently found among institutions that might appear unrelated, but in fact regulate different facets of the same underlying activity. Climate change institutions and energy institutions are a perfect example. Actions taken under the auspices of the International Energy Program (IEP) or the Organization of Petroleum Exporting Countries (OPEC) can make cooperation under the auspices of the UNFCCC costlier than it otherwise would have been.

Part III discusses several ways in which institutions might be designed to reduce these governance risks. In short, I argue that sometimes further fragmenting institutions by giving them very narrow mandates can reduce both institutional governance risk, the risk the institution itself fails, and systemic governance risk, the risk it causes other institutions to fail. I explore this argument in the context of a relatively new intergovernmental organization, the International Renewable Energy Agency (IRENA).

IRENA mitigates its governance risk by divorcing epistemic issues from the ability to promulgate binding legal rules. IRENA’s activities involve almost exclusively the development and dissemination of energy related to renewable energy, with little to no possibility of serving as a forum for the negotiation of legal obligations such as minimum renewable energy requirements for states. As such, IRENA’s is an intergovernmental effort to create a “renewable energy commons” on which policymakers and investors can draw. At the same time, IRENA mitigates contribution to systemic governance risk by held out by institutions such as the UNFCCC, but neither is it likely to founder on the cooperative challenges those institutions face. Instead, institutions such as IRENA, that mitigate the risks they pose to the interests of member states and other institutions, offer the realistic possibility of incremental cooperation on the provision of public good focusing on long-run trends among market actors that are largely ungoverned by existing international institutions. IRENA thus does not offer the promise of grand cooperation held out by institutions such as the UNFCCC, but neither is it likely to founder on the cooperative challenges those institutions face. Instead, institutions such as IRENA, that mitigate the risks they pose to the interests of member states and other institutions, offer the realistic possibility of incremental cooperation on the provision of public goods." (