Energy Fact & Opinion: India Joins International Energy Agency as an Association Country
In March 2017, India activated the association status with the International Energy Agency (IEA), an organization comprising 29 member countries and 6 association countries.
Membership in the IEA, which is restricted to advanced economy members of the Organization for Economic Co-operation and Development (OECD), requires them to demonstrate their net oil importer status, have reserves equivalent to 90 days’ average of crude oil and/or oil products imports in the prior years, and have a demand restraint program for reducing national oil consumption by up to 10 percent.
In an effort to reflect the rising role of non-OECD economies with major impact on the global energy market, the IEA introduced the “association” status in 2015. Since its inception, China, Indonesia, Thailand, Singapore, Morocco, and now India have become associated with the IEA.
The association status allows these countries to participate in meetings of IEA standing groups, committees, and working parties, without prior invitation. Association countries can work with the IEA on matters of energy security, energy data and statistics, energy policy analysis, and benefit from priority access to IEA training and capacity-building activities.
With India’s inclusion, the IEA accounts for about 70 percent of the world’s energy consumption.
India’s membership in the IEA is a major milestone for India, the IEA, and global energy governance. India has had dialogues with the IEA on emergency preparedness in the past, but India’s joining as an association country can facilitate its collaboration with the IEA in developing preparedness for oil supply disruptions and emergencies, including building and maintaining emergency reserves. The IEA association can help strengthen India’s capacity building in the areas of energy efficiency, energy technology, renewable energy, electricity security, and grid integration—many of which have been identified by Prime Minister Narendra Modi’s government as key priorities.
For the IEA, India’s participation signifies the evolution of the IEA as a global energy institution that better represents key players in the global energy markets today. According to the U.S. Energy Information Administration, non-OECD demand for energy will rise by 71 percent from 2012 to 2040, whereas total energy use in OECD economies will rise by 18 percent during the same period. Participation by major energy consumer countries—earlier by China and now by India—helps the IEA increase transparency in the global energy system through improved access to their production and consumption data. Also, closer dialogues with energy policymakers and capacity building in India strengthens the IEA’s effectiveness in setting the right agenda today to help address key challenges tomorrow. This will be especially relevant as these economies drive global energy trends and affect the global course for combating climate change in the future. Given that the IEA is now also the secretariat for the Clean Energy Ministerial (CEM) in which India has participated, joining the IEA will allow all member nations, including India, to work together on clean technology policies.
Participation in the IEA is by no means a silver bullet for the challenges that India faces. India has a long way to go in providing energy access for its vast population. Today, 245 million Indians lack access to electricity. Also, emergency preparedness is a growing challenge for India, which has only 13 days of net oil import coverage in its Strategic Petroleum Reserve (SPR) as of 2016. As India looks to provide universal electricity access and pursues urbanization, its energy demand will double over the next 25 years, contributing to one-fourth of global energy demand growth during that period. Consequently, India is expected to become increasingly reliant on foreign sources of energy, as its import dependence, which is about 80 percent for crude oil and 40 percent for natural gas today, will grow. Not being a member of the IEA or OECD, India is not subject to any of the preconditions to which the member countries are subjected, including the 90-day oil reserve requirement. However, India and the international community will stand to benefit from India’s collaboration with the IEA on emergency preparedness, as supply disruptions could significantly harm the global economy as well as Indian economy. Specifically, association with the IEA may hasten the development of SPR in India.
Lastly, India’s participation in the IEA may herald the dawn of new era in global energy governance. The associate membership arrangement allows for a greater voice for emerging economies like India and China, whose policy vision and economic direction affect the global energy future. Whether their presence grows commensurate to their energy consumption growth, and whether these countries can influence the interworking of institutions like the IEA and the norms guiding global energy governance, are open questions. Their influence, which warrants close observation, will be critical at a time when inclusive governance is necessary to address the most pressing challenges of society—expanding energy access and security to all while mitigating local pollution issues and grappling with the challenges of climate change.