Clean Energy Should Power Asian Century Emphasise on regional energy markets, utilise shale gas reserves

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 appetite for energy. Asia faces a seemingly irreconcilable paradox: if it can somehow secure sufficient energy resources to maintain robust growth, it will decisively boost rising global CO2 levels in the process, with enormous economic and social costs. If developing Asia maintains 6% annual growth, its share of world GDP will increase from 28% to 44% by 2035, with the energy consumption rising to 56% over the same timeframe. Consumption needs could be even greater, as Asia's leaders face the imperative of ensuring affordable energy for the poor. Yet, getting people connected will require a fivefold increase in yearly energy investments.  Carbon Blot  The region's desperate need for more energy is problematic for other reasons. The region may possess a quarter of world coal reserves, but it has only 16% of conventional gas reserves and 15% of technically recoverable oil and natural gas liquids. To bridge this gap, it will have to triple oil imports by 2035, rendering it even more vulnerable to external energy price shocks. If Asia maintains its current energy mix, coal use will increase by 81%, oil consumption will double, and natural gas use will more than triple. This would raise energy-related CO2 emissions to more than 20 billion tonnes — nearly the level seen by climate change experts as barely globally sustainable — by 2035. In effect, Asia's emissions alone would swamp global targets. The truth is that Asia must act now if it wants power inclusive, sustainable growth this century. Replacing inefficient general fuel subsidies with targeted subsidies, as pioneered by Indonesia, should be the first step. Consumer fuel subsidies impose a tremendous burden on public budgets, exceeding 4% of GDP in Bangladesh and Pakistan, and 2% in India and Indonesia. Those who benefit from subsidies — and invariably resist scrapping them — are rarely the poor. We should not underestimate the importance of behavioural change in managing demand. After Fukushima, Japan succeeded in curbing electricity demand through the Setsuden ("saving electricity") movement, lowering peak usage by 15% during the summer of 2012.  Hail Shale  Delivering cleaner energy is also key. In less than a decade, generating capacity rose from negligible to 82 gigawatts (GW) for wind and to 20 GW for solar, with great potential to further expand both. But many experts predict that it will take decades for them to be commercially cost competitive. Asia can't and shouldn't wait, however. The only way forward is to make conventional energy cleaner and more efficient now. One feasible possibility is for Asia to utilise its reserves of shale gas to offset coal use. Indications are that China has the world's largest shale gas resources – nearly 20% of the total. With India and Pakistan 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 after Fukushima. But if nuclear energy is replaced by current energy mix, CO2 emissions from Asia's power sector would rise 8-13% higher by 2035. More than anything, 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. The reality is that Asia is on an unsustainable path where growth trumps environmental costs. But eventually this imbalance will erode Asia's gains. Action is needed if the Clean Asian Century is to be more than just a slogan.  The writer is chief economist, ADB