Sean Whelan, Europe Editor, looks at the EU's Lisbon Treaty and what difference it will make.

Globalisation, climate change and the need to secure energy supplies are shaping our world in the 21st century. How are European countries to respond to these challenges?

According to governments, it is by pulling together in the European Union, achieving the kind of critical mass that comes with having the world's biggest market and, right now, the world's most valuable currency. But they feel the EU needs a bit of re-engineering if it is to take on these challenges more effectively.

Enter the Reform Treaty (aka the Lisbon treaty, after the city where it was signed).

The Reform Treaty, and its genetically close predecessor, the failed EU constitution, is designed to streamline the internal workings of the European Union so that it becomes a more effective player in the outside world.

The European governments want the EU to be able to shape the forces of globalisation, hopefully to their advantage, and not be a passive player waiting for the globalising tsunami to wash over them.

It is the same for climate change. They want to stake out what they call a leadership position on cutting greenhouse gases – setting the agenda for others to follow – an agenda that should be to the advantage of European researchers, technologists and companies. For make no mistake, combating climate change is seen as a huge business opportunity.

So is the looming energy crisis.

Whether it is in renewable energies, clean technologies, energy reduction or the holy grail – safe, clean, limitless electricity generation of the kind promised (but not yet delivered) by nuclear fusion – the EU has the people, the money and the size to be able to develop and deliver alternatives to the oil based economy.

In all these cases size matters. The EU is now not far short of having half a billion citizens, all of them amongst the richest, healthiest, best educated people on the planet. In theory, that size will count when it comes to world trade talks, climate change talks, and energy supply talks (in the short run) and delivering markets for alternative energy technologies in the longer run.

But in practice the EU is underperforming its potential.

Part of the problem is the EU's institutions – the council, European Parliament, Commission and Court of Justice – the organs that are supposed to pull all that potential together and make things happen that the individual states on their own can't do, or could only do with difficulty.

For the past 17 years the member states have been wrangling about what changes need to be made to the Brussels set up. During that time the world has gone through enormous change. From the end of the Soviet Empire to the rise of al-Qaeda, from fax to e-mail, from landline to 4G, from $18 a barrel to $90 a barrel, from Tianemen Square to the Asian Dragon economic giant (and now world's biggest polluter).

During that period we have had the Maastricht Treaty, the Amsterdam Treaty, the Nice Treaty, the (rejected) EU constitutional Treaty, and now the Lisbon Treaty. All of them have made changes to the way the EU works. Now the leaders say enough is enough. No more changes for a long time to come. Time to concentrate on the big external issues that the EU should be able to deal with better than the individual member states acting alone.

That is the why, what about the how?

The Lisbon Treaty and all its annexes runs to close on 500 pages (if you feel the urge, a consolidated version is available online at the Institute for European Affairs

The main changes it makes are:

• A full-time chairman (President if you speak French) of the European Council – the summit of leaders. Up until now the post rotates among the different states every six months. If the new treaty is passed, the prime ministers and presidents will chose one of their number to organise their business on a full-time basis for a two and a half year period (renewable for a further term if they do a good job).

• Establishing a new foreign policy figure for the EU, who will work for both the European Council (i.e. the member states) and the European Commission (who have a big budget and staff for things like development aid and disaster relief). In the EU constitution this figure was known as the Foreign Minister - in the Lisbon treaty they get the title High Representative for Foreign Affairs and Security Policy. The idea of both new positions is to give the EU a higher profile on the world stage.

• A new system of voting for the member states when they are making laws. A law will be passed if 55% of member states representing at least 65% of the population of the EU agree. This is what is known as Qualified Majority Voting or QMV.

• Expands the number of policy areas in which decisions will be taken by majority voting (instead of unanimity).

• Gives a new role to national parliaments to get them more involved in the process of making EU laws.

• Gives legal effect to the Charter of Fundamental Rights, a comprehensive listing of human, civil, social and economic rights for EU citizens.

Of course there is plenty more in the detail, all of which is going to have to be explained to the electorate ahead of the Irish referendum. The treaty must be ratified in all member states before it can come into effect.