How can Asia cope with its biggest challenge – energy security?

In Asia’s developing nations, threats to energy security have increased in recent years.

Some attempts to quantitatively measure energy security have been made, including an energy security index study by the Economic Research Institute for ASEAN and East Asia (ERIA). The study found that, in most Asian developing countries, energy self-sufficiency rates have gradually dropped, that these countries tend to depend on a single energy source, that they have room to further improve energy efficiency, and that they carry a high environmental load. The study has thus highlighted that energy security has been deteriorating in these countries.

How can Asia’s developing countries address these multilayered challenges? Based on Asian characteristics, I would like to propose the following three-step approach:

Developing nations in Asia are urgently required to address their growing dependence on energy imports caused by a rapid increase in demand. Basically, they are required to implement traditional energy security policies involving fossil fuel supplies. These policies include improving energy efficiency to restrict demand growth, developing domestic resources proactively, diversifying their energy mix and import sources to disperse risks, and preparing for possible energy supply disruptions.

In this context, another important issue is to eliminate fuel subsidies, which clearly disturb efforts to improve energy efficiency, as soon as possible. It is not easy to carry out politically because it might lower the social welfare and dissatisfy the general public. Replacing fuel subsidy by general subsidy could be a politically digestible solution to this problem.

In the process of ensuring energy security, consideration should be given to “affordability” and “environmental sustainability.” Affordability means that no country has any choice but to use cheap energy as far as average income levels are low. Environmental sustainability implies that if energy consumption causes a grave environmental problem, it may affect national interests. Given the lock-in effect of energy infrastructure, it is desirable to adopt the best available technology (BAT) for investment.

Generally, however, BAT is expensive. In this way, affordability conflicts with environmental sustainability. Affordability may be given priority in the initial phase, with priority shifting gradually to environmental sustainability. Developing countries should thus implement policies according to their respective economic development stages. Financial assistance from developed economies, in one form or another, can accelerate this shift.

What developing countries should learn from precedents in developed nations includes the importance of preemptive measures for energy security. Most developed countries have made efforts, including those requiring substantial costs, to address various energy problems that have emerged in line with economic development. Developing countries can take advantage of successful and unsuccessful experiences in developed countries to plot their own path forward. This means that developing countries may be able to address or avoid energy security problems more efficiently than developed countries did in the past.

The Global Energy Architecture Performance Index Report 2016 is available now.