BRIC by BRIC : Governance and Energy Security in Developing Countries

Abstract

Security of energy supply is a top priority of policymakers around the globe, especially in countries of the economically emerging world. This paper's aim is to investigate the link between the mode of governance in four developing countries and the way policies to secure energy supply are established. The paper looks at the four "BRIC" countries, Brazil, Russia, India, and China. These countries are experiencing rapid economic growth and poverty alleviation but differ in their modes of governance. The four BRIC countries provide a window into the particular relationship between governance and energy security policy in developing countries. From a theoretical stance, a public choice model is applied to energy policies to develop hypotheses relating the similarities and differences of incentive schemes between democratic and authoritarian governments to predict policy outcomes. We hypothesize that authoritarian regimes seek control and the capability to reward and repress social groups by providing public goods, such as energy supply. In the first empirical step, the current energy economic performance is examined by focussing on domestically available resources, de-concentration and decentralization of the supply side and energy development indices. Doing so, the paper modifies the Kaya Identity to figure out the drivers of energy demand. Furthermore, the paper introduces some metrics such as the Herfindahl-Hirschman-Index (HHI) to measure degrees of concentration and centralization and radar-charts to illustrate the metrics graphically. According to our calculation, Russia's electricity generation park is geographically most centralized. China and Russia have the largest plants by mean output and show the lowest degree of concentration. Referring to indicators, ranging from electricity distribution losses, access to electricity, to the consumption to production ratio, and others, the research finds China to have the most secure energy supply among the BRIC countries, while India performs poorly. Energy policies to foster supply security are compared in the paper's second empirical part. It includes systematic in-depth analyses of the government-driven utilization of National Oil Companies (NOCs) and the construction processes of hydroelectric dams. China seems to be able to exclude social, political and environmental costs, prioritizing economic growth over other objectives. This allows Chinese power plants to be built in a faster and in a cheaper way. Finally, evidence is provided that authoritarian systems tend to utilize NOCs for their political purpose. The paper concludes that there is a significant relation between the mode of governance and the way energy supply is secured. As the rest of the developing world industrializes, investigating the BRIC countries now, during their period of transition, provides clues into how other developing countries might respond to the challenges of securing the supply of energy.