Book Review: A liberal Actor in a Realist World: The European Union Regulatory State and the Global Political Economy of Energy

A liberal Actor in a Realist World: The European Union Regulatory State and the Global Political Economy of Energy by Andreas Goldthau and Nick Sitter. Oxford: Oxford University Press 2015. 168 pp, £50 hardcover 9780198719595

What does a liberal regulatory state actor do in a realist world? Andreas Goldthau and Nick Sitter start from the observation that the global world of energy has turned realist: new energy consumers have emerged, many countries have turned to state-centred energy polices and the threat of global warming is looming. In this context, they argue, the EU is a regulatory state that acts as a liberal actor abroad. This book tests several hypotheses about the expected action of the EU with regard to three main challenges: oil markets, gas markets and the carbon challenge. The study was supported by the EU FP7 research project GR:EEN (Global Re-ordering: Evolution through European Networks).

The monograph starts with a thorough review of the literature on the International Political Economy (IPE) of energy. It then proceeds with two conceptual chapters. While the second chapter reflects upon the IPE of energy, the third offers an important contribution by defining the EU as a regulatory state, i.e. a state that governs by regulation rather than direct intervention or other means of policy-making. In the public policy world of energy, this means dealing with the design, building and maintenance of markets. Each of these aspects is analysed in detail, looking at the specific tools available to the EU such as primary and secondary legislation and regulation. The authors also offer a good overview of the policy tools available to the Commission, of which competition policy is the most powerful.
Chapters four, five and six respectively turn to how the EU deals with the challenges of international oil markets, regional gas markets, and the effort to combat climate change. The three chapters are rich in terms of empirical data and well organized around a common structure in five subsections: a) the background in which the challenge takes place and a set of specific hypotheses about the expected action of the EU; the analysis of how the EU acted in b) designing, c) building, d) operating the markets and e) an assessment of the EU policy. The common assumption underpinning the three chapters is that the EU will treat these challenges as market failures using its regulatory toolbox. All three chapters confirm the main assumption of the study about the EU being a liberal actor in the global world of energy. In the domain of oil, the EU has tried to build and maintain market institutions supporting rule-based trade and investment (see, for instance, the EU’s commitment in the WTO and the Energy Charter Treaty). Concerning gas, the EU has tried to build rule-based markets internationally and regionally and to project its own rules and principles beyond its borders (see, for instance, the Energy Community and the efforts in the external dimension of the Single Market forcing companies such as Gazprom to change some of their business practices). Finally, the EU has also tried to establish a multilateral, legally binding climate governance regime. Amidst these challenges, the EU has tried to promote free market principles such as transparency and competition. The three empirical chapters, then, provide strong evidence to confirm the hypotheses that the EU acts as a liberal actor in a realist world. The chapters also highlight the different extent to which this happens (the liberal strategy is more successful when it comes to gas and less when it comes to oil) and some exceptions to the liberal rule, such as the use of sanctions for broader political goals or support to member states in bilateral negotiations.

Chapter 7 is the most interesting in terms of conceptual insights. Reflecting upon the existing literature on the kind of power the EU is, the authors offer a fourfold categorization that distinguishes not only between hard and soft power (i.e. based primarily on coercion or attraction) but also between whether this power is directed at a given target (such as a government or firms) or not. The most promising category is the so-called “soft power with a hard edge” where the attractiveness of a market (soft power) is complemented by a targeted and conditional approach that governs access (e.g. regulatory governance) to the market itself. This kind of power is a key policy tool for the EU because the EU has a very attractive market and it can attach conditions in order for actors to be able to access it.

The authors come to the conclusion that the EU might be best understood as “Regulatory Power Europe”. This regulatory power depends on the EU’s authority and capacity as a regulatory state and how the Commission exercises the power itself. It varies with the type of challenge, the geographical distance from the EU, and the type of actor that is the target of EU regulatory power. One important finding in this regard, for instance, is that it works best when it targets firms like Gazprom and less well when it targets states like Russia. This is so because while governments might not share the EU’s liberal approach, companies are more likely to conform to EU rules because they see the benefit of accessing the EU market.

To conclude, the book has several theoretical and empirical contributions to offer. Conceptualizing the EU as a liberal regulatory state, the study contributes widely to a literature which so far has not been particularly abundant. The category of “soft power with a hard edge” is particularly useful to the debate around EU actorness. The book also offers rich empirical evidence about what IPE actually entails in the EU and what the specific challenges are and which tools are involved. Finally, having established that the EU is a liberal regulatory state, the book asks several questions about EU actorness in the IPE of energy such as, for example, how the heterogeneity of preferences among Member states might impact on EU actorness externally. The monograph, therefore, not only contributes to the existing theoretical and empirical debate but also nourishes this debate with additional points for future research.

Francesca Batzella received her doctorate from the University of Edinburgh. Her research focuses on EU energy policy and EU external energy relations.