3 - Foundational Approach

Summary

This chapter examines the rules that place limits on the negative externalities of international energy transactions. It begins with a discussion of certain rules which appear in the very instruments enabling and protecting the transaction (investment, trade and transit). The advantages and disadvantages of including these ‘special’ externality-relevant rules in such instruments are analysed in the light of some illustrations. Subsequently, it examines the ‘general’ externality-relevant rules, namely those laid down in instruments whose main purpose is not the organisation of international energy transactions but the regulation of their negative externalities. The discussion is organised in four steps based on whether the relevant rules focus on cost-internalisation, prevention, response or reparation.