The Big Issues

Energy

image: Calum Davidson By: Mikkal E. Herberg

The stunning recent rise in oil and energy prices has catapulted energy to near the top of the economic and security agendas from Beijing to Tokyo to New Delhi and Seoul. Although prices have declined, energy remains critical to the future economic prospects of every country in the region. Asia’s explosive energy demand growth over the next decade, especially in China, is likely to intensify a series of critical and growing energy challenges.

Asia faces three inter-related energy dilemmas. First, governments will face a serious challenge just to meet the enormous scale of rising energy needs. Over the past decade, Asia accounted for two-thirds of the entire global rise in energy demand, one half of oil demand growth, and all of world coal demand growth. China’s energy demands alone more than doubled. The result was frequent shortages of electricity, coal, and petrol, most pronounced in China, India and developing Asia, as countries struggled to keep up with demand. Energy demand is expected to double again over the next decade, which will require massive new investment to prevent energy from becoming a serious bottleneck to economic growth, particularly in China and India.

Second, energy security has become a critical challenge. Booming demand, high oil prices, and fears over access to future oil supplies from unstable regions have driven energy security to the top of the strategic agenda. China’s oil demand doubled over the past decade and it now imports 50% of its total oil needs. India is over 70% import dependent, while Japan and Korea remain 100% import dependent for both oil and natural gas. Fears over uncertain future supplies has led to a toxic nationalistic competition among China, Japan, India, and Korea to gain control over new oil supplies around the world that has aggravated key regional geopolitical rivalries.

Third, mushrooming energy demand will make Asia’s severe air pollution and rising greenhouse gas emissions critical challenges to manage. The region’s legendary air pollution continues to worsen due to massive coal use and a boom in motorization in China and India. Pollution has become a critical social issue in China’s big cities, one which Beijing can no longer ignore. Asia also is expected to account for two-thirds of the global rise in carbon emissions over the next 20 years; China alone is likely to account for over one-half. Hence, Asia and China are now at the center of the debate over climate change as demonstrated by the recent Copenhagen meeting. China, India, and the rest of Asia will face serious challenges in reducing the growth in carbon emissions while maintaining high economic growth.

Mikkal E. Herberg is the BP Foundation Senior Research Fellow on International Energy at the Pacific Council on International Policy.

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