Powering the Asian century
By Changyong Rhee

Asia’s rise is increasingly considered a foregone conclusion, yet the extent to which the region will prosper hinges on its ability to feed its voracious, ever-increasing appetite for energy. To complicate matters further, Asia faces a seemingly unreconcilable paradox: if it can somehow secure sufficient energy resources to maintain robust growth, it will decisively boost rising global carbon dioxide levels in the process, with enormous economic and social costs.
To date, developing Asia’s energy needs have risen rapidly in tandem with its economic expansion, which is on the upswing again despite the economic doldrums afflicting other parts of the world. China’s recovery is firming to 8.2 per cent this year, India’s recovery should reach six per cent if reform can build momentum, and region-wide developing Asia’s GDP growth should climb to a healthy 6.6 per cent in 2013.
If developing Asia maintains a six per cent annual growth rate, its share of world GDP will increase from 28 per cent to 44 per cent by 2035, with the region’s energy consumption rapidly rising to 56 per cent over the same time frame.
Consumption needs could be even greater, as Asia’s leaders also face a moral imperative of extending the benefits of electricity to their more than half a billion people who are still, literally, in the dark. Ensuring affordable energy for the poor is central to the notion of “inclusive growth”, the kind of growth whose benefits reach the poorest and most vulnerable segments of society. Yet, getting those people connected will require a fivefold increase in yearly energy investments — and will result in an even greater environmental fallout.
The region’s desperate need for more energy is also problematic for several other reasons. The region may well possess a quarter of world coal reserves, but has only 16 per cent of conventional gas reserves and 15 per cent of technically recoverable oil and natural gas liquids. To bridge this gap, it will have to triple oil imports by 2035, rendering it vulnerable to external energy price shocks.
If Asia maintains its current energy mix, coal use will increase by 81 per cent, oil consumption will double and the use of natural gas will more than triple. This would raise energy-related carbon dioxide emissions to over 20 billion tonnes by 2035. In effect, Asia’s emissions alone would swamp global targets. The harsh truth is that there is no magic pill — Asia must act now if it is to power inclusive, sustainable growth this century.
Containing the burgeoning energy demand is critical. Replacing inefficient general fuel subsidies with targeted subsidies should be the first step. Consumer fuel subsidies impose a tremendous burden on public budgets. Those who benefit from subsidies — and invariably resist scrapping them — are rarely the poor.
One increasingly feasible possibility is for Asia to utilise its substantial reserves of shale gas to offset coal use. Asia’s geology is incompletely investigated, but indications are that China has the world’s largest shale gas resources — nearly 20 per cent of the total. With India and Pakistan also possessing sizeable shale gas reserves, unconventional gas could provide a cleaner bridge to a future that is less dependent on fossil fuels.
Asia faces a dilemma over nuclear power. The Fukushima disaster underscored the risks and reminds us of the three challenges to viable nuclear power: proliferation, waste management and safety. But if nuclear power was phased out and replaced by the current energy mix, carbon dioxide emissions from Asia’s power sector would rocket. Regional integration of energy markets can have great benefits. Connecting electricity and gas grids across borders can create economies of scale that improve efficiency.
The region must strive to establish a Pan-Asian Energy Market by 2030, aspiring to the degree of regional cooperation that currently prevails in Europe. There’s an imperative here to share information and harmonise regulations, standards and pricing policies. The reality is that Asia is on an unsustainable path where growth trumps environmental costs. But eventually — perhaps, sooner than most are willing to accept — this imbalance will erode Asia’s gains. Action is needed on all fronts if the “Clean Asian Century” is to be more than just a slogan.

Published in The Express Tribune, May 3rd, 2013.