The GLOBAL The GLOBAL PoLITICS of EnERGY Aspen Policy Books is a series devoted to developing critical new thinking on U.S. national security policy. This book is a collection of papers prepared for the 2007 summer Aspen Strategy Group conference on The Global Politics of Energy. This cross-disciplinary and high-level examination of policy strategies for addressing the challenges posed by the soaring demand for oil, the rise of petro-powers, and the implications of climate change makes energy security issues urgently relevant to the American and global policy communities. POLITICS Contributors include: Jeffrey Bader (The Brookings Institution), Stephen Biegun (Ford Motor Company), Ivo Bozon (McKinsey & Co.), Diana Farrell (McKinsey Global Institute), Jay Gulledge (Pew Center on Global Climate Change), Robert Hefner (The GHK Company), John Podesta (Center for American Progress), Dennis Ross (The Washington Institute for Near East Policy), David Rothkopf (Carnegie Endowment for International Peace), Angela Stent (Georgetown University), David Victor (Stanford University), and Daniel Yergin (Cambridge Energy Research Associates). of EN E R G THE ASPEN INSTITUTE, WASHINGTON, DC | www.aspeninstitute.org/asg Y The GLOBAL This book’s cover was made with 80% recycled content, including 40% post-consumer waste. The interior of the book was made with 100% recycled content, including 100% post-consumer waste. POLITICS The virgin fiber for both the cover and interior came from sustainably-managed forests and was processed chlorine free. of ENERGY FOREWORD BY JOSEPH S. NYE & BRENT SCOWCROFT EDITED BY KURT M. CAMPBELL & JONATHON PRICE 08/001 The GLOBAL POLITICS of ENERGY FOREWORD BY JOSEPH S. NYE & BRENT SCOWCROFT EDITED BY KURT M. CAMPBELL & JONATHON PRICE Copyright © 2008 by The Aspen Institute The Aspen Institute One Dupont Circle, NW Suite 700 Washington, DC 20036 Published in the United States of America in 2008 by The Aspen Institute All rights reserved Printed in the United States of America ISBN: 978-0-89843-482-8 08/001 Cover design by Billy Sountornsorn and Crabtree + Company Cover photograph: © CORBIS Interior design by Crabtree + Company Co-ChAIRMEN Susan Collins Joseph S. Nye, Jr. Senator University Distinguished Service Professor United States Senate John F. Kennedy School of Government Richard Danzig Harvard University Nunn Prize Fellow Brent Scowcroft Center for Strategic and International Studies President John M. Deutch The Scowcroft Group Institute Professor of Chemistry Massachusetts Institute of Technology DIRECTOR Kurt M. Campbell Thomas E. Donilon CEO and Co-Founder Partner Center for a New American Security O’Melveny & Myers LLP Richard A. Falkenrath AssoCIATE DIRECTOR Deputy Commissioner for Counter Terrorism Jonathon Price New York City Police Department Associate Director Dianne Feinstein Aspen Strategy Group Senator MEMBERS United States Senate Madeleine Albright Michèle A. Flournoy Principal President and Co-Founder The Albright Group LLC Center for a New American Security Richard L. Armitage Richard N. Haass President President Armitage International Council on Foreign Relations Zoë Baird Chuck Hagel President Senator Markle Foundation United States Senate Stephen E. Biegun Jane Harman Vice President Member of Congress International Governmental Affairs United States House of Representatives Ford Motor Company Robert Kagan Robert Blackwill Senior Associate President Carnegie Endowment for International Peace Barbour Griffith & Rogers International Nicholas Kristof Lael Brainard Columnist Vice President and Director The New York Times Global Economy & Development Richard G. Lugar The Brookings Institution Senator Ashton B. Carter United States Senate Co-Director, Preventive Defense Project Jane Holl Lute Chair, International Relations, Security Assistant Secretary General and Science Faculty Department of Peacekeeping Operations John F. Kennedy School of Government The United Nations Harvard University Sylvia Mathews Burwell Elizabeth Sherwood-Randall President Senior Research Scholar Global Development Program Stanford University Bill and Melinda Gates Foundation Adjunct Senior Fellow, Council on Sam Nunn Foreign Relations Co-Chairman and CEO Anne-Marie Slaughter Nuclear Threat Initiative Dean Thomas O’Gara Woodrow Wilson School of Public Founder & International Affairs O’Gara Company Princeton University William J. Perry James B. Steinberg Co-Director Dean and J.J. “Jake” Pickle Regents Chair Preventive Defense Project in Public Affairs Michael and Barbara Berberian Professor Lyndon B. Johnson School of Public Affairs Stanford University University of Texas — Austin Daniel Poneman Marin Strmecki Principal Senior Vice President and Director of Programs The Scowcroft Group Smith Richardson Foundation Jack Reed Strobe Talbott Senator President United States Senate The Brookings Institution Mitchell B. Reiss Christopher Williams Vice-Provost for International Affairs Vice President College of William and Mary Oakley Networks Susan Rice Fareed Zakaria Senior Fellow Editor The Brookings Institution Newsweek International Dennis B. Ross Philip D. Zelikow Counselor and Distinguished Fellow White Burkett Miller Professor of History The Washington Institute for Near East Policy University of Virginia David E. Sanger Robert B. Zoellick Chief Washington Correspondent President The New York Times The World Bank Wendy Sherman Principal The Albright Group LLC Acknowledgements Kurt M. Campbell Jonathon Price Director, Aspen Strategy Group Associate Director, Aspen Strategy Group rom August third through August eighth, 2007, the Aspen Strategy Group F met in Aspen, Colorado to examine questions surrounding the global politics of energy. Representing diverse perspectives from multidisciplinary fields, Aspen Strategy Group members, invited guests, and energy experts examined the complexities and challenges for the United States within the global energy framework with an emphasis on national security. This publication presents the eleven papers that helped guide and illuminate our discussions over the week. It also includes the workshop scene setter and a set of concluding observations. Our meeting was a result of the collaborative efforts of a number of organizations and individuals to which the Aspen Strategy Group is deeply grateful. In particular, we thank the Joy Foundation for its generous and essential support for the preparation and publication of this book. Other generous supporters of this year’s workshop include the Feldman Family Foundation, the Harman Family Foundation, Robert and MeiLi Hefner, Hastings Johnson, McKinsey and Co., Thomas O’Gara, John Osborn, The Rockefeller Brothers Fund, Terrence Turkat, and Leah Zell Wanger. We also thank our General Brent Scowcroft Award Fellows, Lacy Kilraine, Shannon Hiller, Rob Brown, Lauren Griffith, and Ben Andruss, for their important contribution to this initiative, and we wish them well in their future endeavors in the field of foreign and national security policy. Finally, our efforts would not have been possible without the support of our Co-Chairmen, Joseph Nye and Brent Scowcroft. Thank you both for your leadership, vision, and the invaluable contributions you make to the group. Contents Foreword by ASG Co-Chairmen........................................................................7 Joseph S. Nye & Brent Scowcroft Preface................................................................................................................10 Kurt M. Campbell & Jonathon Price Part 1 EnERGY: GLOBAL PERSPECTIVES, GLOBAL PoLITICS, GLOBAL ConCERns CHAPTER 1 Energy Under Stress.............................................................................................26 Daniel Yergin CHAPTER 2 Demand-Side Economics: The Case for a New U.S. Energy Policy Direction..................................................44 Diana Farrell & Ivo Bozon Part 2 FOCUSIng THE EnERGY SCOPE: REGIonAL OUTLooKS AND A MULTITUDE of ThREATS CHAPTER 3 Arab and Gulf Perspectives on Energy.................................................................64 Dennis Ross CHAPTER 4 An Energy Superpower? Russia and Europe.................................................................................................76 Angela Stent CHAPTER 5 Rising China and Rising Oil Demand: Real and Imagined Problems for the International System.....................................96 Jeffrey A. Bader Part 3 ThE GREAT EnERGY DEBATE: ThE NATIonAL SECURITY IMPLICATIons of GLOBAL CLIMATE ChAngE AND IMPACT PoTENTIAL of ALTERNATIVEs CHAPTER 6 Climate Change Risks in the Context of Scientific Uncertainty...........................114 Jay Gulledge CHAPTER 7 Sources of Alternative Energy and Energy Market Innovations...........................134 David G. Victor CHAPTER 8 The Age of Energy Gases: The Importance of Natural Gas in Energy Policy..................................................148 Robert A. Hefner III Part 4 A GLOBAL EnERGY ConsEnsUS: NEW PoLICY DIRECTIons AND THE WAY FORWARD CHAPTER 9 New Energy Paradigm, New Foreign Policy Paradigm........................................186 David Rothkopf CHAPTER 10 The Global AMERICAN Politics of Energy.........................................................214 Stephen E. Biegun CHAPTER 11 A Blueprint for Energy Security..........................................................................224 John Podesta & Peter Ogden Concluding Observations.................................................................................240 Kurt M. Campbell & Jonathon Price 6 THE GLOBAL