Asia's Soaring Energy Demands will Pose Major Economic, Climate, Health Risks -- Report

Asia is moving along a dangerous path that will threaten its energy security, worsen environmental damages and widen the gap between rich and poor unless the region dramatically changes its course of energy use, the Asian Development Bank (ADB) said in a report published yesterday. 

Asia's Energy Challenge, a special theme chapter in the ADB's "Asian Development Outlook 2013," highlights the dilemma the region faces in seeking to meet the energy needs of its billions of citizens while restraining its already big appetite for energy.

In 2010, Asia consumed 34 percent of the world's energy, and this figure will rise to be 56 percent by 2035 based on the current growth rate, the report predicts.

That will turn Asia into the world's largest energy consumer within three decades, and if the region merely expands energy access without fundamentally changing the way it consumes, Asia will double its oil consumption, triple its natural gas use and need 81 percent more coal by 2035, according to the report.

But Asia's limited fossil fuel resources mean that most countries there will not be able to produce half of the energy they need by 2035, the report says, adding that Asia will heavily depend on imported fuels, in particular, foreign oil.

With 9 percent of proven global oil reserves, the report says, Asia (excluding Middle East countries) is now on track to almost triple oil imports by 2035, leaving its people and businesses extremely vulnerable to external supply shocks.

If developing Asia continues its current energy practices, it will entail significant damages to nature. Air pollution there will get worse due to increasing fossil fuel use, causing more than 3.6 million deaths per year by 2030, mostly in China and India, the report says. Besides that, Asia's newly added fossil fuel power plants require water for cooling, and the region is notably vulnerable to water scarcity, second only to Africa.

Under its current energy path, Asia is expected to contribute nearly half of the world's carbon dioxide emissions by 2035, the report predicts. This would hamper global efforts against climate change and also create a further risk to Asian countries -- many of which are island nations or have large coastal cities and face major damage from sea level rise.

Curbing demand and greening supply

Meanwhile, Asia's current energy practices might not be able to help lift millions of people there out of energy poverty. In 2012, 700 million Asians lacked access to electricity and some 2.8 million relied on the use of wood and other low-quality fuels. Most Asian countries give generous subsidies to provide affordable energy, but the report says the main beneficiaries of fuel subsidies are not the poor. 

Indonesia, for instance, spent 2.6 percent of its economic output in 2012 on fuel subsidies, but 40 percent of all subsidized gasoline flowed to households of the richest 10 percent. That's because most of poor Indonesians travel sparingly. So ADB researchers call for replacing general subsidies with subsidies targeting the energy poor, in order to support those in need while avoiding encouraging overconsumption.

Energy demand can also be reduced by designing cities in a smarter way, and the report says Asia has more advantages to do so than Europe or the North America. For one, Asian countries are still in the middle of their urbanization, and the relatively clean slate gives space for new and sustainable technologies. Their high population density also allows city planners to take advantage of cogeneration opportunities. For instance, large waste collection and disposal systems can generate electricity from waste, as is done in Incheon, Korea.

While cutting energy demand can bring Asia closer to a cleaner and more secured future, it alone can't achieve that mission. The report suggests Asia should also pursue a mix of renewable energy, low-emission power sources like shale gas and solutions that remove greenhouse gas components from the use of fossil fuels.

Already, Asian countries have shown strong interest in carbon capture and storage technology. Korea last year opened a facility to research the technology and China, the world's largest coal user and carbon dioxide emitter, built a multibillion-dollar plant in Inner Mongolia to pilot such technology (ClimateWire, Aug. 24, 2012).

Fostering regional energy market

According to the report, Asian countries can get significant benefits by integrating energy systems, and some examples already exist. For instance, the Malaysian state of Sarawak exports its hydropower to Indonesia's West Kalimantan, where power production relies on far more expensive and polluting oil. The trade not only brings much needed revenues to Malaysia but also helps the Indonesian province reduce fuel subsidies of $100 million per year.

On a larger scale, the report estimates that integrating power transmission in the great Mekong subregion would save $14 billion over 20 years by substituting hydropower for power generation using fossil fuels. It would also reduce carbon dioxide emissions by 14 million tons per year by 2020. 

So far, Asia's energy cooperation has only taken place among close neighbors. Technical barriers like interconnection, requiring standardized regulations, pricing and contracts play a role, but the report says the key obstacle to Asia's energy integration is the absence of political will.

Asian leaders, like others around the world, tend to view energy security as a vital component of national security, which makes them reluctant to relinquish control, the report says. Asian governments also intervene heavily in their energy markets, and that further reinforces the reflex to retain full control. Moreover, most utilities in Asia are state-owned or private giants heavily tied to the government and are likely to view regional cooperation as a threat.

The report says countries cannot meet all their power requirements on their own, so Asia must accelerate cross-border interconnection of electric and gas grids. The first step is to establish a ministerial task force to study the European experience, and with increased cooperation, a regional energy market in Asia is achievable by 2030.

Coco Liu, E&E Asia correspondent

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