Energy, Environment, Writing

The Geopolitics of Energy Transition: A Guide for Policymakers, Executives, and Investors

This report was co-authored with Dr. Alexis Crow

As the price of natural gas reached record highs in the UK and Europe—trading at the equivalent of $200 per barrel of oil,[1] and as economic activity in China has been curtailed by the country’s power supply crunch, central bankers and policymakers from across the globe are forced to confront significant challenges to price stability, with a focus on shielding households and businesses from an increase to the cost of transport and basic goods, while monitoring the potential for price pressure and supply chain bottlenecks to upend the global economic recovery. This is important at this time, for the ripple effects of disruptions to energy markets could amplify social and political fissures that are visible across the global landscape, and which might portend complex domestic politics as many countries head into elections in 2022.

Surging demand for natural gas—and shortages and bottlenecks to supply—have resulted in a corollary demand for oil products (referred to as gas-to-oil switching), thus driving up the price of WTI crude to seven-year highs.[2] The skyrocketing commodity price environment has led one observer to point to the “revenge of the old economy”, according to which the collective noble efforts to move toward a cleaner, greener future fuelled by renewable energy have been stymied by a recent past of inadequate investment into the capacity and infrastructure of the hydrocarbons that power our economies.[3]

Thus, even as COP26 has drawn to a close, and as policymakers, business leaders, and investors have left Glasgow with firm commitments to ostensibly advance the decarbonisation agenda, we are reminded of the extent to which our entire energy infrastructure still hinges upon the use of fossil fuels. This includes oil used for transport or power generation, or natural gas (or coal) for power generation, as well as natural gas deployed as “bridge fuel” to support the growth of renewable energy, including wind, solar, and hydrogen. This is effectively captured by what transpired in Germany earlier this year. In the first six months of 2021, the country increased its coal-based generation, which contributed 27 percent of the country’s electricity demand.[4] The need to resort to coal-fired power generation is not unique to the case of Germany: the US has also posted the first annual increase in coal use for power generation since 2014.[1] The combination of an asynchronous economic recovery, attendant shocks to demand, curtailments of supply, and surging prices in natural gas are contributing factors to rich income countries’ pivoting toward the use of coal. This illustrates one stark reality: hydrocarbons continue to underpin our  global energy infrastructure.[5] For all the talk of “stranded assets” and potential “dinosaurs of investment”,[6] hydrocarbons still compose the lion’s share of energy consumption on a global basis.[7]

What are the lessons to be learned from the recent power crunches? And what are the potential macro, socio-economic, and geopolitical implications as we navigate the energy transition? Amidst so much uncertainty and volatility, where are the opportunities for accord, as well as bright spots for investment?

Humility is also requisite as governments confront their energy interdependence with one another: again, despite record growth in renewable energy capacity,[8] and surging climate financing, countries within the European Union are poignantly aware of their dependence upon natural gas imports—whether from Russia, Norway, or the US. And even despite its own domestic shale and conventional oil and gas production, the US continues to import hydrocarbons from countries such as Canada, Colombia, and Saudi Arabia. Similarly, even despite trade tensions, resource ties still bind China with Australia, with the latter having exported a record volume of natural gas to China in 2020.[9] Thus, geopolitics remains at the very heart of the changing energy landscape. The inverse is also entirely true.

In the past, resource ties have been a source of tension; but, as we shall see, such bonds also have the potential to become a geopolitical salve, provided that the relationship is designed to be mutually beneficial to both parties. As we navigate the path toward net zero, and by seeking balance and diversification, our continued energy interdependence can actually spur opportunities for cooperation amongst policymakers, and for long-term investment and profit generation for enterprises and economies around the world.

Geopolitics and fossil fuels: tension and salve

The quest for resources to fuel industrial growth, military campaigns, and transport and urbanisation lies at the very heart of geopolitics. In considering the relationship between energy and geopolitics, the existence of resources is often associated with tension, be it in the form of border disputes, armed conflict, trade disputes resulting in embargoes, or interstate conflict or war. Access to strategic reserves of coal in Romania was a pivotal part of the campaign on the Western front during the Second World War. During the 1970s, energy-importing countries experienced the oil shocks related to the OPEC crises in the wake of the Arab-Israeli War, the Yom Kippur War, and the Iranian Revolution.[10] Indeed, research shows that if a resource-rich country has an endowment of oil along its border with an “oil-less” country, then the probability of conflict between these two countries is higher than if there were no oil at all.[11] Recent data also indicates that the presence of onshore oil might even portend a higher rate of conflict than the presence of offshore oil, as the potential for production and output to be seized by rebel groups is far higher on land than it is in deep-sea projects.[12]

And yet, while asymmetric access to resources might spur tensions between countries, it can also be a geopolitical salve, by underpinning ties of trade, development, and civic diplomacy and even employment. Japan’s quest for resources to fuel its extraordinary manufacturing era from the 1960s onwards resulted in a mutual export of ODA (overseas development assistance) to southeast Asian countries such as Vietnam. One might also argue that Israel’s relatively recent discoveries of natural gas—and successive exports to Egypt—have also underpinned a normalisation of relations with Cairo, — a diplomatic rebalancing which has also been a key facet of improving relations between Israel and the UAE. 

A crude awakening: our enduring energy interdependence, and continued reliance upon fossil fuels

Such positive examples of resource ties are swiftly forgotten in times of crises. The underlying conditions that led to positive benefits to the political relationship in these two instances are also ignored. And so it is with the present power crunches ricocheting across the globe. With the asynchronous reopenings of economies in the wake of the COVID-19 pandemic—and amidst ongoing disruptions to supply (be it from underinvestment in hydrocarbons, weather-related events such as flooding, pandemic-induced stoppages to production, or port congestion)— we are reminded not only the extent to which our economies depend upon fossil fuels for power generation and for transport, but also, of the extent to which many countries remain deeply interlinked in patterns of energy interdependence.

The European dilemma regarding natural gas supply from the Russian Federation is instructive, but it must also be recognised that energy interdependence cuts both ways. As long as Russian gas is a competitive source for energy, then energy-hungry European manufacturing powers will need to engage with the leadership in Moscow; equally, as long as Europe has access to alternative sources of fossil fuels – even if not as cheap – Russia will need to retain an understanding of European red lines. This is what interdependence means. This insight is equally applicable to the energy interconnections of the future: China can be a useful partner in the energy transition, even if it is not the only one.

Indeed, for some policymakers, part of the allure of developing domestic renewable energy capacity was that it ostensibly would lead toward more enhanced energy independence. Ostensibly, extraordinary efforts in diplomacy might not be needed in such a green future, as countries would, in theory, no longer be reliant upon conflict-ridden territories to secure energy supply. Even in a net-zero future, this is perhaps to view the world through rose-coloured glasses: for the development of wind, solar, and hydrogen energy—or indeed techniques of greater energy efficiency—at an affordable cost is intrinsically related with garnering supplies, inputs, R&D, and human capital from different jurisdictions. Overly halcyon scenario-planning for domestic renewable energy capacity development often fails to incorporate these facts.

The shift from fossil fuel-based to renewable energy capacity does not end interdependence; it merely pushes interdependence to a different part of the energy mix. The dependence now shifts from hydrocarbons to metals and from ores to rare earths. Countries in Africa, Asia, Americas and Australia are likely to emerge as global mineral hubs, and the routes to ship these new commodities might pave new geostrategic highways.

In recent years, control over the production of rare earths has become a familiar site for geopolitical tension. In 2021, the Biden administration in the United States ordered a review of the country’s critical mineral supply chain; the recommendations included prioritising development financing for “international investments in projects that will increase production capacity for critical products, including critical minerals”.[13] The administration’s concern is readily understandable, as shown in Table 1.

Table 1: China’s share in the rare earths supply chain

Source:World Mining Data,

*Disaggregated data for neodymium was not available; the data for Rare Earth Concentrates (REO) has been used since neodymium is a rare earth metal.

Yet it is not just production of rare earths that will be relevant, but also the locations of their processing and other forms of value addition. These might emerge as the equivalent of present-day refineries and petroleum complexes, and their distribution potential linked to key consumption centres might lead to the birth of new geostrategic lynchpins such as the Straits of Malacca and of Hormuz. The notion that domestic renewable energy production would free countries from the intricacies of dependence is misguided – and a seminal mistake if it was to be the basis of new energy order.

Sunset on Malthus?

Part of the reason why the aspiration of energy independence retains its sheen is that our energy economics and policymaking continues to be suffused with a Malthusian legacy.[14] Said another way, the spectre of scarcity continues to inform the way we think about energy and resources. The fear that “there will never be enough” renders misgivings about dependence—or else outright denial. A sense of energy insecurity –no matter how much it is brushed under the rug might also prompt a premature and imprudent vaunt into a disorderly energy transition, with a disproportionate focus on bolstering capacity at home. Such a policy would have little regard for the fact that climate change has been branded as humanity’s largest negative externality: in order to mitigate the situation, global actions ought to be in concert. Humility is thus needed not only in recognising the endurance of hydrocarbons within the energy mix, but also, but it is also implicit in our interconnectedness as we navigate the green transition. For the rich income countries, part of this humility also requires understanding the various ways in which the energy transition has the potential to deepen the chasm between the ‘haves’ and the ‘have nots’.

The haves and the have-nots: is the energy transition deepening the chasm?

The energy transition has the potential to create a deeper chasm between the standings of the ‘haves’ and the ‘have nots’ in the global macroeconomic environment. First, if we consider the traditional trajectory of industrial growth—that is, from agrarian activity to textile production, and then from heavy industry to light manufacturing, eventually segueing to services-oriented economies—the case can be made that for developing countries earlier on the maturity curve (such as Vietnam and India), stringent measures toward decarbonisation might actually thwart what would otherwise unfold as a full evolution of robust domestic industry. For the ‘price takers’ and for commodity-hungry countries, this might take the shape of premature restrictions on access to or use of resources to fuel domestic manufacturing activity.

And for the ‘price makers’—that is, commodity-rich exporting countries—the case can also be made that swift or unrealistic moves toward decarbonisation might rob oil and gas exporters from a significant base of output as well as a source of gross national income. In a country in which resource wealth underpins GDP, export activity, employment (both directly related to exploration, extraction and production of natural resources, as well as indirectly, via civil service salaries), national income, and sovereign and pension funds, the potential for social fissures to either manifest or to be exacerbated is clear.

It should be noted that history indicates that access or proximity to natural resources is not perfectly correlated with a trajectory of sustainable economic growth—hence the “Dutch resource curse”. Research from Brazil also indicates that oil endowments within a province or a municipality do not necessarily result in improved livelihoods for members of that community.[15] Indeed, even in a lofty commodity price environment, such as at present, windfalls potentially reaped from higher export prices of oil and gas do not always translate into higher incomes for households within the exporting country.[16]

This tension between environmental and the development agendas within emerging markets and developed economies (EMDEs) is also evident in the debate surrounding the potential carbon border adjustment tax (CBAT), as well as recent agreements on deforestation in COP26. 

Home game: mitigating the domestic bias of climate finance

An effective, secure energy transition is currently undermined by the “domestic preference” evident within the realm of climate finance. In recent years of tracking climate finance flows, data from one leading industry body evidences that 76 percent of capital is invested in the same country in which it is sourced.[17] Thus, despite various commitments and guarantees from bodies such as the G7 or the G20, a significant challenge remains regarding the ability for much-needed climate finance to cross borders.[18] Certainly, a long-running trend of a domestic bias for investment is not limited to climate and infrastructure investments. Rather, it extends across sectors and asset classes, including real estate, energy, private equity, and venture capital. Whilst managing ‘sticky capital’ and the prospect of generating long-term returns, and building up enterprise and asset values, investors might harbor an inclination to place their money close to home—in other words, “where home-country risks are well-understood.”[19]

As these authors have highlighted previously, playing close to home in infrastructure investing may not always be the least risky option.[20] And yet, we have already motioned that the dawning age of renewables is not one of energy independence, but of a new kind of interdependence. Policymakers operating under the illusion of energy sovereignty are otherwise missing out on the opportunity to cultivate positive structures of interdependence which could potentially support their own geo-strategic aims – such links, might, in turn, spur opportunities for private investment.

Thus, we might witness a shift in incentivisation for private finance and the climate problem: such that sticky capital not only supplies the domestic market, but that it is directed outwards as well, perhaps even towards the geographies where host countries of finance might find mutually beneficial resource ties – such as the model of Japan and ODA in Southeast Asia, discussed earlier. As argued above, interdependence can be a salve for geopolitics as long as both sides gain in the energy or in the development equation. Such a value exchange – or what Michael Oakeshott refers to as an “enterprise association” – rests upon an understanding of interdependence – again, something that has been jettisoned in the lack of humility in the energy transition (something which is mirrored in the “domestic bias” of climate capital).

Such misconceptions have the potential to divert policymakers from a future of true sustainability, which involves the creation of resilience through diversification. Redirecting long-term flows of investment—including private capital—towards emerging market/developing economies will not necessarily be easy. Large sources of private capital in the global north – whether institutional capital or banks – will need a fresh set of incentives to invest in the energy supply chains of the future.[21]

Moreover, recognising that these investments will likely be in new minerals, new processes, and new geographies, it is clear that old regulatory risk models may no longer be suitable. New market mechanisms to help enable a level playing field of investment in new energy materials are needed—which might take inspiration from the industry bodies which have developed over time in support of oil markets around the globe.

Conclusion: The Green Marshall Plan

The scale of the rebalancing required – of investment, attention, and financial flows – is vast. If anything, it should be compared to the Marshall Plan. That enormous effort, after all, had both pragmatic and idealistic motivations. On the one hand, it was necessary to assist a Europe devastated by war; on the other, it was essential that a liberal community be built that was strong and resilient in the face of the Soviet challenge. There are similar overlaps today between the realist search for security and the idealist requirements of climate action. A Green Marshall Plan has the potential to both stabilise international relations and create the diversification and resilience necessary to allow for durable interdependence during the energy transition. 

For the energy transition to act as a geopolitical salve rather than as a source of discord, a Green Marshall Plan must have four characteristics.

First, it should be genuinely global in character. A global net-zero approach would understand that some regions might take longer on the fossil fuel transition because of the specifics of their development or their energy landscape. Nor should geographical factors be ignored: An archipelago like Indonesia will take longer to transition to solar energy and away from natural gas than a continental country.

Second, legacy energy infrastructure will need attention to help enable the success of the Green Marshall Plan, to make it implementable, and to scale it. As is evident in energy consumption patterns across the globe, fossil fuels remain a part of the energy mix, and a way of working toward a balanced and global green transition. Nor can sectors like mining be ignored: the Green Marshall Plan will likely have to go into a “dirty” sector, invest in new ways of mining and new materials to mine.

Third, the Green Marshall Plan is not just about blue-sky research into the possibilities of the future. It is about increasing investment in nuts-and-bolts manufacturing in underserved geographies as well – whether energy efficiency in the Asian steel producers of the future or new cobalt mining technologies in sub-Saharan Africa today. It is about enabling development of critical frontier technologies, as well as swiftly and sustainably spreading a green ‘know-how’ which is globally benchmarked.

And fourth, the Green Marshall Plan should embed energy resilience at its heart. Areas which have sped up their energy transition are those where it is seen as assisting in energy security. As these authors argued, dependence on a single source or vendor is antithetical to achieving long-term and sustainable energy security. As such, the strategic mapping of a secure energy future cannot exclude a China, with its strong presence in the rare earths supply chain, or a Russia with reserves of natural gas, or the countries of the Gulf, abundant in oil and gas reserves. Again, humility as well as diversification might render each actor a more responsible and empathetic participant in the global energy transition.

What we are recommending is an all-inclusive future. That will require the leaders of key nations to invest political capital in a new institutional framework that supports the energy landscape of the future. The International Energy Agency, OPEC, commodity exchanges and others defined and shaped the hydrocarbon world. The global energy transition requires new frameworks, organisations and political arrangements to underwrite our common journey ahead, which reflect the needs of multiple stakeholders, in both the private and public spheres. The G7’s B3W, the European Union’s Global Gateway, and the Indo-French International Solar Alliance all point to one imperative: of green arrangements underwriting green transitions. The world needs a new institutional structure: one that keeps the lights on in the 21st century.

Endnotes

[1] Today in Energy; Annual U.S. coal-fired electricity generation will increase for the first time since 2014.

[1] David Sheppard and Tommy Stubbington, “Record gas prices hit bonds as investors fear wider damage,” Financial Times, October 6, 2021.

[2] Stephanie Kelly, “Oil prices reach multi-year highs on tight supply,” Reuters, October 26, 2021.

[3] Jeff Currie, “The revenge of the old economy,” Financial Times, October 21, 2021.

[4] “Germany: Coal tops wind as primary electricity source,” DW, October 13, 2021.

[5] See also, Vivan Sharan and Samir Saran, “India’s Coal Transition: A Market Case for Decarbonisation,” ORF Issue Brief No. 505, November 2021, Observer Research Foundation.

[6] Steve Fuller, “Are fossil fuel companies a dinosaur of an investment?” Ellsworth American, February 14, 2015.

[7] “Statistical Review of World Energy,” 70th Edition, 2021, p. 12.

[8] Elizabeth Ingram, “World adds record new renewable energy capacity in 2020,” Renewable Energy World, June 4, 2021.

[9] Damon Evans, “Australian LNG exports to China hit record,” Energy Voice, August 8, 2021.

[10] Daniel Yergin, The Prize: The Epic Quest for Oil, Money & Power (US: Simon & Schuster, 1990).

[11] Francesco Caselli, Massimo Morelli and Dominic Rohner, “Asymmetric oil: Fuel for conflict,” VOX EU, July 19, 2013.

[12] Andrea Tesei, Jørgen Juel Andersen and Frode Martin Nordvik, “Oil price shocks and conflict escalation: Location matters,” VOX EU, October 26, 2021.

[13] “FACT SHEET: Biden-⁠Harris Administration Announces Supply Chain Disruptions Task Force to Address Short-Term Supply Chain Discontinuities,” The White House Statements and Releases, June 8, 2021.

[14] For an excellent discussion of how Malthus continues to cast a long shadow on economics in advanced economies, see J.K. Galbraith, The Affluent Society (US: Houghton Mifflin, 1958).

[15] Francesco Caselli and Guy Michaels, “Oil windfalls and living standards: New evidence from Brazil,” VOX EU, January 20, 2010.

[16] Bryan Harris, “Brazil’s GDP surges back to pre-pandemic levels,” Financial Times, June 1, 2021.

[17] CPI 2019, 2020, 2021.

[18] Sophie Yeo, “Where climate cash is flowing and why it’s not enough,” Nature, September 17, 2019.

[19] Barbara Buchner, Alex Clark, Angela Falconer et al., “Global Landscape of Climate Finance 2019,” Climate Policy Initiative, November 2019.

[20] Alexis Crow and Samir Saran, “Geopolitics and investment in emerging markets after COVID-19,” World Economic Forum, September 25, 2020.

[21] IANS, “Modi’s supply chain mantra: trusted source, transparency and time frame,” Business Standard, November 1, 2021.

Standard
Writing

The unravelling of Pax Americana

The “war on terror”, launched two decades ago, epitomised the peak of America’s unipolar moment. The jets crashing into the twin towers were seen by most as an attack on the soul of globalisation, a project promoted and designed by the United States (US) and its partners in Europe. The near-universal commitment to this war, within the P-5 and outside, was a demonstration of America’s real power. That was a different time and a different world.

Since then, the US has been implicated in the global financial crisis of 2008. Its flawed domestic landscape and divided democracy have been a public spectacle for global audiences since 2016, from the swearing-in of President Donald Trump to that of President Joe Biden. Both individuals were and are legitimate leaders for only half their nation. America’s botched and self-serving response to the Covid-19 pandemic only hastened the decline of its ethical and moral positioning. Hot on the trail of these events, the hasty and bungled exit from Afghanistan is not just a political event, but part of a continuum, one that points to the momentous unravelling of Pax Americana.

The jets crashing into the twin towers were seen by most as an attack on the soul of globalisation, a project promoted and designed by the United States (US) and its partners in Europe.

It is not the US’s material power alone that has suffered; the institutions undergirding the liberal order are on shaky ground as well. The partisanship of its media and academia are visible to all. It is a nation where trolling as a way of life has replaced a broad national consensus. Morally tinged lectures about the international liberal order are likely to fall on deaf ears for those who witnessed the West’s callous indifference to billions in the developing world still in need of vaccines, or towards the thousands of Afghan interpreters who risked their lives to fight America’s war.

Those watching from capitals in Asia, gearing up for a new era of conflict and competition in the Indo-Pacific, will be even more sceptical. Some among them will be the first victims of the Taliban’s willingness to shelter and nurture terrorist groups. More importantly, the fall of Kabul will serve as a dire reminder of the fate that may befall them if they get mired in great power competition.

For instance, if one lived in Japan, going nuclear may be a sensible option. If you were a resident of an Association of Southeast Asian Nations (Asean) country, your neighbourhood bully would seem a more predictable and acceptable proposition. No spin can change this. America today is less attractive to many. This is a heavily mediated exit from a partnership and the damage is far greater than any of its other follies.

As these geographies rediscover one another, everything in between becomes a shared problem; refugee surges from countries mired in civil conflict, the climate crisis, and flows of finance, infrastructure and technology.

One could even argue that the US’s Indo-Pacific project has already faced its first significant setback. The idea that the US will now focus on China with greater intensity is naïve and suggests a poor understanding of politics. Land frontiers still matter and the US has ceded South and South-West Asia to Beijing. Chinese State media have lampooned and mocked the US’s withdrawal all week.

What role China will eventually play in Afghanistan is uncertain, but it has plans to fill the void that exists. The Chinese model is different and is based on the extraction of value from resources in the host country and providing lucre to the rulers who facilitate this. Tribes and feudal societies tend to work with this model better than the alternatives that seek to turn them into liberal nations and free markets. In the short term at least, China could well emerge as a powerful shaper of the economic and military arrangements in Af-Pak and West Asia.

This episode will have repercussions for the Quad, an ostensibly “counter-China” alliance in the Indo-Pacific. It is time to face up to some home truths.

First, for too long, policymakers in DC have relied on maps that mark the East Indian Ocean as the Indo-Pacific boundary. India’s perspective on Afghanistan, Pakistan, and West Asia has been dismissed time and again. This must change, or India will work with other arrangements to manage the threats that abound. The US must realise that dealing with the influence of China in Afghanistan and Pakistan are a core Indo-Pacific challenge. Ceding these to China defeats the Western Pacific project as well.

Countries have learnt to assess the US by what it does, not by what it says. Efforts to shape and design regions to suit their own narrow interests are likely to be resisted.

Second, even as DC learns to re-imagine the expanse of the Indo-Pacific, it must internalise that Europe and Asia are merging through the efforts of Beijing. As these geographies rediscover one another, everything in between becomes a shared problem; refugee surges from countries mired in civil conflict, the climate crisis, and flows of finance, infrastructure and technology. The US cannot afford to ignore this region if it is to remain relevant at the end of the 2020s.

Third, India will continue to assess the US as its most important partner. A declining superpower is easier to do business with. The Countering America’s Adversaries Through Sanctions Act (CATSAA) sanctions and sermons on “values” could be shrugged off more quickly. Countries have learnt to assess the US by what it does, not by what it says. Efforts to shape and design regions to suit their own narrow interests are likely to be resisted. Its reliability and trustworthiness will be measured as per its capacity to contain China’s rise without disrupting the determination of states in the region to seek growth and development on their own terms. A transactional America will now encounter transactional friends.

This commentary originally appeared in Hindustan Times.

Standard
Research, Writing

Big Tech and the State: The necessity of regulating tech giants

The scramble for gold on the Internet has transferred control of vast swathes of cyberspace to a very small and select group: Big Tech. This has made ‘significant social media intermediaries’ highly profitable ad businesses that have grown amid non-existent privacy and weak intermediary liability laws. They make the market, grow the market, and shape market rules. No ad business, or any business in history—not even Big Oil or Big Tobacco—has held so much power over consumers and the economy. This perverse power is, perhaps, the single biggest challenge that nations and peoples will have to grapple with. Accountable Tech must be India’s leitmotif in 2023 as it presides over the G-20, and a robust digital republic its sovereign mission as its turns 75 next year. This will need sensible politics, sophisticated policies, and a return to first principles.

Concentration of wealth is a competition issue and an economic policy question. Left unregulated, it brings about inequality in income and opportunity. But concentration of power when it comes to discourse—what is promoted, shared or suppressed—should be more worrying. Safe-harbour provisions in the United States along with self-regulation principles have allowed Big Tech to cherry pick what is to be acted on and what is to be ignored, effectively making it the arbiter of permissible speech. For example, anti-vaccine Twitter users have thrived during the pandemic, while, sometimes, less dangerous actors have had their posts labelled. In January, Angela Merkel, Chancellor of Germany, denounced the de-platforming of then US President Donald Trump by Twitter. “The right to freedom of opinion is of fundamental importance,” Merkel’s Chief Spokesperson, Steffen Seibert said, “Given that, the Chancellor considers it problematic that the President’s accounts have been permanently suspended.”

The issue here is not whether Merkel agreed or disagreed with Trump’s tweets. The question is—who censors him, how, and with what process and level of transparency? For the Chancellor and for many, Twitter cannot choose for itself when it seeks to be a provider of public goods, and when it is a private messenger eligible for intermediary protections. When governments around the world describe digital connectivity as a ‘utility’, information lines cannot be disrupted by religious, cultural or ideological filters. Like water, electricity and roads, significant social media will have to serve all, even those its management and owners disapprove of.

[Platforms] cannot choose for [themselves] when they seek to be a provider of public goods, and when they are a private messenger eligible for intermediary protections.

The instances when utilities (say electricity and water) are denied or disconnected are specific, rare and regulated. Even in the information age, only the state and its three pillars have this right. Global Big Tech is not part of this constitutional arrangement. There are checks and balances in place, with legal recourse available for all within the state and for external actors as well. Any alternative to this constitutional setup would be akin to legitimising foreign influence operations in domestic affairs. In an extreme, for a country that is almost perpetually in election mode, it would be tantamount to election interference. This may seem like hyperbole, but it is closer to the truth than we suspect. For instance, if an electoral candidate makes an incendiary speech on a physical stage, the Election Commission, law enforcement agencies and the judiciary act against him—not the private company that has set up the stage or the power utility that has provided an electricity connection to the mike. Is the online equivalent being honoured by Big Tech?

Regulation of Big Tech across democratic setups

Australia gets this. In February, it passed the News Media Bargaining Code. The code encourages intermediary tech firms to negotiate deals with media outlets, effectively mandating that Facebook and Google pay news firms for content. The law was passed after a protracted battle between the Australian government and social media firms. It escalated when Facebook removed content of certain Australian news agencies, several official government handles, emergency services, and civil society organisations from its platform. Prime Minister Scott Morrison held firm: “These actions will only confirm the concerns … about the behaviour of Big Tech companies who think they are bigger than governments and that the rules should not apply to them.”

Canada, too, is making moves to curtail the wealth and discourse monopoly currently enjoyed by Big Tech. Just this week, Canadian lawmakers passed Bill C-10, which seeks to regulate the kind of content media streaming services prioritise on their platforms. The Bill, which is yet to be passed by the Senate, aims to make digital streaming platforms at par with traditional broadcasting services; the latter are obligated to increase the visibility and “discoverability” of Canadian content, and to set aside part of their profits to support a fund that promotes original Canadian productions.

Across the pond from the Americas, the European Union is also actively working towards mitigating the risks posed by the monopoly of Big Tech. Margrethe Vestager, Vice President of the European Commission for A Europe Fit for the Digital Age, has stated that tech giants, “have the power to guide our political debates, and to protect—or undermine—our democracy.” In December 2020, Vestager and her office tabled the Digital Services Act (DSA), which seeks a systemic assessment of the varied social, economic and constitutional risks posed by the services provided by Big Tech.

The most decisive move yet has come from Poland, which has proposed a law to ‘limit’ the censorship tendencies of the tech giants. Soon after the deplatforming of Donald Trump by Twitter, Prime Minister Mateusz Morawiecki wrote on Facebook: “Algorithms or the owners of corporate giants should not decide which views are right and which are not. There can be no consent to censorship.” The new proposed law provides for a special mechanism for those whose content or profiles have been blocked/deleted by social media platforms, where they can complain directly to the platform, which is obligated to respond within 24 hours. After a review by a specially constituted “Freedom of Speech Council”, deleted content can be restored by order. If platforms do not comply, they can face a heavy fine of up to 50 million zloty (US $ 13.4 million).

Regulatory Frameworks in India

India, too, must take some tough calls. The vision of Digital India has advanced—from only four unicorn companies in 2014, India had 12 in just 2020 alone. Regulation must keep pace with this economic and social reality. It is absolutely critical that the Privacy and Data Protection (PDP) Bill, currently being examined by a Parliamentary Joint Committee be brought forth and enacted as law. Without the umbrella framework of the PDP bill, India’s regulation of Big Tech will be ad hoc, and may be misconstrued as a political instrument.

The vision of Digital India has advanced—from only four unicorn companies in 2014, India had 12 in just 2020 alone. Regulation must keep pace with this economic and social reality.

With respect to regulating intermediaries, the Indian government initiated a public consultation process in December 2018 and invited submissions from the public to the Ministry of Electronics and Information Technology. A spectrum of civic, industry and academic actors participated. The rules were notified in February 2021, specifying clear compliance requirements within three months. Yet, the reaction of Big Tech platforms has been to delay, stall and obfuscate compliance.

It is high time that the actions of these companies were subject to systematic and rigorous Parliamentary oversight; but for that to happen, legislation is needed. Indian law and policy are rooted in our Constitutional principles. Indian policies on digital governance are no different, but they now need the imprimatur of Parliament to truly be effective. And should there be questions and grievances regarding the scope and constitutionality of the law, the courts of India will be the ultimate judge.

The objective of regulatory frameworks is to safeguard public interest, even (or perhaps especially) if it involves eroding the bottomlines of powerful vested interests. To once again quote the EU Commission’s Magrethe Vestager (in an intervention at a technology policy panel at the Raisina Dialogue earlier this year), regulating Big Tech, “Is a job, not a popularity contest”.

Perhaps, the real limitation is one of our imagination. In our minds, Silicon Valley is forever a happy, sunshine place, led by geeky, long-haired wunderkinds in t-shirts and flip-flops. The reality is Big Tech’s instincts today are driven by a single-minded sense of territoriality and collective impatience for different governance systems. For them, their ‘code is law’ and it is universal. That is at the crux of it.

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Raisina Files 2021 aims to engage with the leitmotifs of this past pandemic year, mirroring the theme of the Raisina Dialogue 2021, “#ViralWorld: Outbreaks, Outliers and Out of Control”. Within this overarching theme, we have identified five pillars and areas of discussion to critically engage with—WHOse Multilateralism? Reconstructing the UN and Beyond; Securing and Diversifying Supply Chains; Global ‘Public Bads’: Holding Actors and Nations to Account; Infodemic: Navigating a ‘No-Truth’ World in the Age of Big Brother; and, finally, the Green Stimulus: Investing in Gender, Growth and Development. Together, these five pillars of the Raisina Dialogue capture the multitude of conversations and anxieties countries are engaging and grappling with.

Raisina Files is an annual ORF publication that brings together emerging and established voices in a collection of essays on key, contemporary questions that are implicating the world and India.

In this volume

Editors: Samir Saran, Preeti Lourdes John

  • Emerging Narratives and the Future of Multilateralism | Amrita Narlikar
  • Diplomacy in a Divided World | Melissa Conley Tyler
  • Is A Cold War 2.0 Inevitable? | Velina Tchakarova
  • Trust But Verify: A Narrative Analysis Of “Trusted” Tech Supply Chains | Trisha Ray
  • Can The World Collaborate Amid Vaccine Nationalism | Shamika Ravi
  • A Nuclear Insecurity: How Can We Tame The Proliferators | Rajeswari Pillai Rajagopalan
  • De Facto Shared Sovereignty And The Rise Of Non-State Statecraft: Imperatives For Nation-States | Lydia Kostopoulus
  • Digital Biases: The Chimera Of Equality And Access | Nanjira Sambuli
  • The Infodemic: Regulating The New Public Square | Kara Frederick
  • How Finance Can Deliver Real Environmental And Climate Impact | Geraldine Ang
  • Unlocking Capital For Climate Response In The Emerging World | Kanika Chawla
  • Putting Women Front And Centre Of India’s Green Recovery Process | Shloka Nath, Isha Chawla, Shailja Mehta
  • Investing In Material Innovation Is Investing In India’s Future | Nisha Holla

Read here – https://www.orfonline.org/research/raisina-files-2021/

Books, Raisina Dialogue, Writing

Raisina Files 2021

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