National Energy Plans in the Asia–Pacific Region: Proceedings of Workshop III of the Asia–Pacific Energy Studies Consultative Group (APESC)

National Energy Plans in the Asia-Pacific Region is a collection of papers presented at Workshop III of the Asia-Pacific Energy Studies Consultative Group, held in Honolulu, Hawaii, at the East-West Center, from 25-28 February 1980. The collection presents a framework for energy policies in the Asia-Pacific Region; energy policies of the United States, oil-exporting countries, industrial oil-importing countries, and countries importing more than and less than 50% of their oil requirements; and the role of international institutions in energy research. International energy policy makers and researchers will find the book invaluable.

• Language: English
• Publisher: Elsevier Science
• Release date: Oct 22, 2013
• ISBN: 9781483190396

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BACKGROUND PAPER

Abstract

This Background Paper was written by Harrison Brown, Guy J. Pauker, and Kirk R. Smith in early 1978. It was circulated among those invited to attend Workshop I of the Asia-Pacific Energy Studies Consultative Group (APESC), as a basis for their initial discussions. The paper provides general guidelines for the APESC Workshops, and is an appropriate introduction to this special issue of ENERGY.

I INTRODUCTION

All countries, developed and developing alike, are currently facing the challenge of formulating and implementing national energy policies under conditions of great uncertainty. The 1973-1974 escalation of the price of crude oil marked the end of the era of inexpensive energy which benefited those countries which had an early start in the first 200 years of the Industrial Revolution. In the future, rapid rates of economic growth will be contingent to a substantial degree on the price and availability of energy resources, while in turn economic development and industrial modernization will modify the demand for energy, nationally and globally.

While most governments have responded vigorously and expeditiously to the challenge of the latent and manifest aspects of the energy crisis–which has become the dominant specter haunting the world economic order–the formulation and implementation of policies is seriously handicapped by a wide range of uncertainties, the most renown of which include: (1) the magnitude of total energy demand as well as its profile, which results in estimates for the year 2000 diverging from the lowest to the highest figures by a factor of five for total demand and even more for certain fuels; (2) the quantity, location, and availability of various energy sources under a broad range of assumptions, including future energy prices; (3) the difficulty of assessing accurately the technical and economic prospects of various alternative energy systems within a time frame relevant to policy makers today; (4) interrelations between economic development planning and energy policy, including industrial location, rural electrification, urbanization, and transition from non-commercial to commercial fuels; (5) the constraints imposed upon the selection of mixtures of energy development strategies by the need to manage wastes such as reactor fission products, uranium and coalmine tailings, and carbon dioxide emissions from the combustion of fossil fuels.

In the hope that the range of these and other uncertainties can be reduced, thereby increasing the reliability of the projections which policy makers require, The Resource Systems Institute of the East-West Center has initiated an exploratory conference, to be held in Honolulu, Hawaii, 26-28 July 1978. The role and usefulness will be discussed of an Asia-Pacific Energy Studies Consortium which might serve to stimulate, coordinate, and disseminate research on energy problems within the region.

II ENERGY GROWTH RATES IN PERSPECTIVE

According to the Statistical Office of the United Nations, world aggregate comsumption of the commercial energy increased from 2500 million metric tons of coal equivalent (mmtce) in 1950 to 8000 mmtce in 1975, at an average annual growth rate of 4.6% for 26 years. For North America, the increase was from 1200 mmtce in 1950 to 2600 mmtce in 1975, or an average of 3% per year. In 1975, North America alone consumed more commercial energy than the whole world had in 1950, although energy consumption in North America increased at a rate below the world average. However, energy consumption in the rest of the Asia-Pacific region, starting from a small base, is increasing at a much faster rate. Second only to the Middle East, where energy consumption increased at a rate of 11% during the same period, the increase has been most dramatic in the region that the United Nations identifies as Centrally Planned Asia (People’s Republic of China, Democratic People’s Republic of Korea, Mongolian People’s Republic, and Socialist Republic of Vietnam), where energy consumption increased at 10.8% per year from 45 to 625 mmtce. In the rest of Asia, energy consumption increased from 100 to 675 mmtce or 7.7%, which is higher than the rates for any of the remaining regions of the world.

In the developing parts of the Asia-Pacific region, these figures do not accurately reflect the current patterns of energy use, since a large proportion of the energy consumed consists of firewood and agricultural or animal wastes which do not go through the exchange mechanisms of the economy and are thus left out of national income accounts. As a result, the growth rates indicated by these figures are inflated from what they would be if these misnamed nonconventional sources were to be included.

Economic development and conservation efforts, seeking to slow down environmental degradation caused by rapid deforestation and soil erosion, are going to shift energy consumption patterns increasingly from non-commercial sources of energy. This shift will result in an increased demand in developing countries of the Asia-Pacific region for kerosene, gas, coal, fuel oil, and electricity for household consumption. This demand will be added to the apparently continuing increase in energy demand for industry, commerce, transportation, and services which presently is at a higher rate than in industrialized economies.

The growth potential for energy demand in the Asia-Pacific region is graphically illustrated by contrasting per capita consumption in North America, which according to United Nations’ statistics increased from 7150 kilograms of coal equivalent (KCE) in 1950 to 10,900 KCE in 1975, whereas in Centrally Planned Asia during the same period, the increase was from 80 to 710 KCE and in the rest of Asia from 130 to 550 KCE. To reach North American levels, per capita energy consumption would have to increase over 15 times in the Centrally Planned Economies of the area and 20 times in the rest of Asia, assuming no further increases in North America. Obviously, however, total demand depends equally on the rate of population growth as on the growth rate of per capita consumption.

Of course, energy consumption itself is not something one wishes to maximize. Thus, in addition to providing suitable amounts and kinds of energy sources, there is a need to make sure that they are used in the most efficient manner. For example, in many of the industrial countries, it has been discovered recently (even though not always implemented) that the cheapest way to improve economic welfare is through measures to increase efficiency, not to supply more energy. Always, the links must be examined between energy and the goods and services it helps provide. Much of the needed information is uncertain or unavailable, however, especially in developing economies.

It may be risky to assume that no major discontinuities will occur in the growth rate of energy demand in the Asia-Pacific region in the decades ahead. The quest for rapid economic growth and industrial modernization may become so intense that an entirely new energy situation is created in the region and in the world. The mechanisms by which such economic and cultural pressures would be translated into social action are difficult to anticipate but could create unprecedented tensions with regard to global and regional energy resources management and allocation. Contributing to the uncertainty that makes planning difficult is the wide variation of energy forecasts published by energy analysts about the future growth rate of energy demand, including some which anticipate that in some countries the per capita energy demand will actually decrease in the coming years.

On a global basis, there is no immediate shortage of total energy supplies. In the short- and even medium-term future, there are sufficient total supplies of the current types of energy sources to meet almost any level of demand that could be expected. Over the longer run, however, the present patterns of energy have severe implications for humanity with a disturbingly high probability sometime beyond the next decade.

Such a collision would not occur suddenly and without warning, although political uncertainties would make it difficult to predict the exact time. At present, the world and the countries of the East-West area are experiencing the preliminary signs of this convergence of resource constraints. Just as the first signs of an approaching famine are initially seen in that part of a population which is already malnourished, ill, or separated from the main food supplies, many parts of the world are experiencing the first signs of the upcoming energy shortage in the form of a series of greatly disproportionate or skewed energy distributions.

III DISPROPORTIONATE DISTRIBUTIONS

Energy sources are rarely available in exactly the location or physical form or at the right time that would best suit humanity. These disproportionate energy distributions cause apparent shortages. The first and best known of these skewed distributions is geographical. Some regions have scarce indigenous supplies while other regions are dependent on energy exports as a source of income. The People’s Republic of China is one of the three countries with the richest endowment of energy resources in the world, with an estimated share of 13% of global hydro-power potential, 13-15% of global coal reserves, an estimated 5-10 billion tons of recoverable crude oil reserves and perhaps 5 trillion cubic meters of recoverable natural gas reserves. Japan, by contrast, has a limited resource base and produces less than 10% of its total primary energy consumption. Thus, Japan, which is in an advanced stage of industrial development, is extremely vulnerable to supply failures.

In Southeast Asia, striking contrasts exist between neighboring countries. Indonesia’s economic development plans rely heavily on oil and gas exports, primarily to Japan and the United States, whereas Thailand and the Philippines have to use between one-fourth and one-third of their export earnings for oil imports. Malaysia will probably be self-sufficient in energy until the end of the century as long as it relies on the export of non-fuel commodities for the financing of its national development. Vietnam may be pressed to explore and develop off-shore oil resources to achieve its development goals.

Australia is richly endowed with uranium, which it currently neither uses nor exports in great amounts, and with bituminous coal of which it exports increasing quantities, primarily to Japan. Australia is now also moving toward self-sufficiency in oil and gas, producing at present two-thirds of its domestic consumption of liquid fossil fuels. The Indian subcontinent provides a dramatic contrast. With a total population second only to that of China, the geographic area occupied by India, Pakistan, Bangladesh, Sri Lanka, and Nepal has basic deficiencies and uneven distribution of energy resources for the current and developmental needs of its 800 million people except for localized deposits of coal, oil, and gas and the not yet exploited resources of solar energy and thorium.

Iran is an oil power, with the third largest proven reserves in OPEC (15% of total) and a reserve to production ratio of 33, but it has recently embarked on a development program of such scope that its contribution to global energy supply may change drastically in the next two decades.

The second disproportionate distribution concerns the physical form in which a fuel is available. While there is no immediate shortage of total fuel supplies, shortages of liquid and gaseous fuels are clearly more imminent than those of solid fuels such as coal and uranium. These various fuels are not easily interchanged particularly in the transportation sector. Substitution rigidities are both technical and financial in nature. Industrial countries may find it difficult to switch because they are currently amortizing their enormous capital investments in energy-intensive technologies, but in principle the price mechanism, new technologies, and government intervention can eventually combine to produce considerable shifts in their mix of energy sources.

In developing countries, with small per capita energy consumption and only limited investments in power generation and transmission, private motorized transportation, energy-intensive industries, and modern household amenities, institutional obstacles can nevertheless interfere with the smooth transition from one source of energy to another. The uncertainties about availability of production and distribution facilities and of qualified manpower are major constraints confronting energy planners.

The heavy dependence on primary liquid fuels, which has developed in the last few decades, is not likely to be suddenly reversed anywhere and may actually increase in developing countries. Even where alternative energy sources, such as coal, hydropower, geothermal power, and uranium are available in commercial amounts, their geographic location, the uncertain lead time involved in their development, and the capital and manpower required for their utilization are serious constraints on efforts to reduce dependence on liquid fuels. Shifts in the mix of energy sources can only be achieved incrementally over decades. In addition, some sources are physically incapable of replacing others, except via costly and inefficient conversions. Thus, it is misleading to assess a country’s energy situation only on the basis of a total resource inventory.

The third disproportionate distribution is temporal. The duration of the age of inexpensive energy was apparently misjudged. What now appears to have been shortsighted attention to immediate concerns has led much of the world into an energy trap. This trap has caused decision makers to take extremely low energy costs for granted and to accept them as the norm to be expected for a long time into the future. Consequently, it has deterred the development of the broadly based industrial and research expertise in the use of alternative energy systems as well as prevented the investment of adequate amounts of capital in known processes for utilizing alternative systems. Most unfortunately, it resulted in a system that unduly favored non-renewable forms of energy, wasteful matches between sources and the tasks required of them, while ignoring the considerable costs of environmental and social externalities. Finally, it led a significant number of countries into a position of extreme dependence on external sources for the energy which provides the necessities of life to their people, thus making them vulnerable to international forces beyond their control. International cooperative arrangements may possibly be able to both decrease resource dependencies and to defuse destructive international forces.

IV TYPES OF CHANGE

Two types of change affect world energy systems in ways that have very different implications for planning and policy making. The first is the relatively slow evolutionary change that is occurring in the systems through development of new kinds of technology, economic growth, shifts in population, the buildup of adverse environmental effects, the decay of natural ecosystems, and the depletion of known energy resource deposits. The second kind of change is more sudden and can be the result of events such as discontinuous rises in world energy prices, imposition of trade barriers, shifts in control over resources, international conflicts, nuclear accidents, and bad weather. In order to make plans for the region’s energy future, both types of change must be taken into account.

Planning, however, must be made in the face of severe uncertainties. In the case of the second type of change, reducing the range of uncertainty is often beyond the capability of the individual policy maker or government. The first type of change, however uncertain at the moment, is amenable to research which can reduce uncertainty. In fact, by reducing the uncertainty surrounding the longer-term incremental changes, not only will the adverse impact of sudden unexpected changes by reduced, but so also will their likelihood. It is difficult, for example, to predict when an international conflict might lead to changes in trade patterns, but if the longer-term supply and demand constraints are well enough understood and planned around, then such precipitous changes will be both less likely and less devastating should they occur.

Sudden changes in energy flows would require crisis management policy decisions that often have to be made on the basis of imperfect information and analysis and are confronted by immediate political, social, and economic forces that might not be compatible with rational planning. Slow evolutionary changes, on the other hand, offer great opportunities as well as a major challenge to those interested in systematic analysis and rational policy formulation. The longer the time within which changes are expected to occur, the more promising are the opportunities for channeling such changes, by incremental forms of intervention, into desirable directions. International cooperative research and information-sharing arrangements could, under certain circumstances, be useful to policy makers confronted with instant crisis management issues. They are much more likely, however, to be of real value to longer-term policy planners.

The potential impact of both incremental and sudden changes on the energy systems of the Asia-Pacific region will vary greatly, between industrially advanced countries and others in an earlier stage of economic development. In either case, however, there is a need to be able to reduce the uncertainties about the relatively slow incremental changes so that planning could be effective and so that a margin of safety could be developed as a buffer against the more unpredictable sudden changes.

In principle, the energy economies of developing countries could benefit greatly by the reduction of uncertainty. Developing countries seem to have greater elasticities of energy demand in relation to increases in their GNP, apparently because in the early stages of development they tend to add energy-intensive processes to existing economic activities. Rapid urbanization is energy-intensive with regard to the creation of new facilities for the transportation of people, food, and wastes. One of the most important challenges is how to develop energy-saving life styles for the urban population of the future. In addition, developing countries will probably find that relatively small price differentials would provide incentives to resort to alternative energy sources, contrasted with industrialized countries which would have to amortize past investments in all sectors of their economies.

Developed and developing countries share a strong interest in preventing or minimizing adverse environmental impacts from processes associated with today’s expanding economic activities. The full ecological consequences are not always understood and can lead to direct assaults on human well-being as well as to the destruction of those natural systems upon which humans depend. In addition to an obvious need for the transfer of the experience accumulated in such matters (so as to avoid repetitive mistakes, needless delays, and wasteful duplication of efforts), it may also become necessary to initiate research on how to adapt to other circumstances those methods which have been proven useful in the past.

In the coming decades, the Asia-Pacific region will unavoidably have to adjust to slow evolutionary changes in its energy systems. It may also have to cope at any moment with sudden crises comparable in their effect to the 1973-74 fourfold price increase of oil. Of course a country that exports energy commodities might benefit temporarily from a price increase of its particular energy commodity to the extent that its larger profits are not offset by the related increase in the prices of import goods, including food, which are price-sensitive to the cost of fertilizers and other energy inputs. However, most future crisis-linked discontinuities would not benefit any country. A global breakdown of prevailing trade patterns, followed by a rush into nationalistic protectionism, might create extremely detrimental conditions for all countries, importers and exporters of energy alike, developed as well as developing. Nuclear reactor accidents, anywhere, might enhance already existing opposition to nuclear power plants, retard expansion of that source of energy, and unbalance carefully planned long-term energy-production patterns. Severe drought, floods, or frost in certain parts of the world could have a major impact on energy requirements as well as food production and reserves, in the region or globally, and require transportation and distribution of food supplies over long distances to compensate for shortages.

Perhaps the most worrisome discontinuity to be considered is the possibility that scarcity and maldistribution of energy resources could become directly or indirectly the cause of international conflicts. Conversely, an increase of international tensions or domestic unrest, for whatever reason, could result in unmanageable increases in energy demand, in support of growing and more active military