Asia's bane: energy inefficiency

Omkar Shrestha, for The Straits Times 18 Aug 08;

ASIA has two-thirds of the world's poor and needs economic growth to tackle this problem. But the more it grows, the more energy it will use - and the more ravaged its environment will become. This will in turn hurt the very people that economic growth is meant to help. But their lot would worsen if there is no economic growth. How does one square this circle?

A solution seems far away, given the scale of the problem. China alone has 135 million people living below the poverty line and one billion Asians have no access to electricity. Of the 1.7 billion Asians who are of working age, about 500 million are underemployed or unemployed. Without gainful employment, they will threaten social stability. Economic growth is thus vital for Asia's survival.

While the region has taken phenomenal strides towards reducing poverty, its growth has been energy-intensive. China, which supplied all of its own energy needs until 1993, now relies on imports for half. For India, the figure is 70 per cent. Asia's consumption of the world's Total Primary Energy Supply jumped from 13.3 per cent in 1973 to 25 per cent in 2003.

Wastefulness has made the problem worse. In 2006, China was 5.5 times less energy-efficient than Japan and 3.5 less than the United States. Economic growth based on such intensive and inefficient use of energy - mainly from fossil fuels - is unsustainable.

The waste is due to several factors - poor transmission lines, high pilferage, unmetered connections, ageing generators and poorly maintained plant equipment. Apart from the infrastructure issues, inappropriate policies have also led to energy inefficiency, as have weak legal protection for investors.

With Asia's greater use of energy, its share of the world's greenhouse gas emissions has also risen - from 8.7 per cent in 1973 to 24.4 per cent in 2003. Although the region's carbon dioxide emissions remain low at the per capita level, climate change will have an immediate and devastating effect on the region. Nearly 40 per cent of Asians live within 100km of the sea coast, making them highly vulnerable to the rising sea level and flooding. New studies indicate that the sea level could rise by 1.5m by the end of the century - considerably higher than the 43cm rise forecast in the 2007 Intergovernmental Panel on Climate Change report.

Given what is at stake, the search for a solution to Asia's energy problems cannot be entrusted to the invisible hand of the market. Nothing will suffice except the combined efforts of economists, ecologists, scientists, businessmen and civil society members brought together and driven by a strong political will.

There is also a need for intensive research to find environment-friendly energy sources apart from hydrogen fuels and solar and wind power. The world cannot wait till its supply of fossil fuels dries up before searching for a substitute.

But innovations require risk capital. China and India may be major energy consumers but they have spent only meagre amounts on energy research and development. In 2006, global energy R&D amounted to US$510 billion (S$723 billion), of which China contributed 0.3 per cent and India 0.1 per cent.

Energy R&D expenditure needs to be significantly increased. The recent emergence of philanthropists interested in climate change is a welcome source of funds to turn innovations into economically viable solutions.

On the policy side, governments need to limit energy subsidies to carefully identified groups, crack down on pilfering and connections without meters - and persuade people to pay their bills. Such measures will encourage the private sector to invest in energy efficiency, delivering adequate rates of return on such investments while reducing carbon dioxide emissions.

Energy, economic growth and the environment each presents a problem to the people of Asia. To solve any one of these problems, Asians will have to solve all three.

The writer is a visiting senior research fellow at the Institute of Southeast Asian Studies, Singapore