CENTRE ON ASIA AND GLOBALIZATION & LKYSPP | September 10, 2014
The world has become increasingly globalised and interconnected, witnessing what may be a historical transfer of wealth and economic power from the West to the East. However, the unprecedented rates of economic and population growth, positive from so many viewpoints, seem to be overwhelming the pace of progress in curbing environmental and resource pressure. This, in turn, is having negative long-term impacts on the development processes the countries are undergoing.
Natural resource sectors at the global level are facing increasing demands for their outputs driven by the rapid growth of emerging economies like India and China. Yet, stronger policies need to be in place to reduce the environmental impacts that result from the exploitation and use of the very same water, energy, agriculture, fisheries, forestry, and minerals that are fuelling this economic growth.
In a world with increasing energy needs, water availability in terms of quantity and quality becomes not only a necessary, but also a strategic resource for development. At present, some 2-3% of the world energy consumption is used to extract, pump, transport, treat and distribute water only for domestic use. Equally, water is needed for energy consumption as the large-scale generation of electricity invariably requires, and depends, on water.
The global landscape of energy consumption indicates nothing but acceleration in growth. In 2013, energy consumption and production increased for every fuel type except nuclear power. Emerging economies dominated global growth, accounting for 80% of the overall increase in energy consumption. China once again had the largest growth increment followed by the United States. In fact, the dynamic expansion of the Chinese economy is reshaping the global energy markets. This process will have implications of global reach, which are still not totally understood at present.
Overall, global energy demand is expected to continue rising by more than one-third till 2035, with China, India and the Middle East accounting for about 60% of the increase, and Southeast Asia emerging as an expanding demand centre. According to the International Energy Agency, China and India drive the growing dominance of Asia in global energy demand and trade. Together, they are building approximately 40% of the new generation capacity. In 2013, both countries combined accounted for 88% of the increase in the demand for coal and natural gas.
ASIA IS THE NEW CENTRE OF THE WORLD
Based solely on rates of economic growth, China, India and the Association of Southeast Asian Nations – ASEAN- have transferred the so-called global ‘Center of gravity’ to Asia. The combined GDP of the ten ASEAN member countries has increased by around three-quarters since 2000. This is resulting in increasing energy and water use and very different patterns of how these resources are being utilised. Country-specific economic development, natural resources endowment, and political considerations are shaping individual policies on energy and water security, their trade-offs still not been fully realised.
The rise of unconventional oil and gas and of renewable energy sources is transforming the present understanding of the distribution of the world’s energy resources. This would results or should result, in more comprehensive policy and investment decisions which reconcile economic, energy, water, food, and environment objectives, with failures and successes having global implications.
Energy security is increasingly tied to reliance on imported energy. The ASEAN Power Grid and Trans-ASEAN Gas Pipeline are examples of collaboration. Nevertheless, they are still a long way from being implementable due to lack of harmonisation of technical and regulatory standards, phasing out of end-user price subsidies, ensuring third-party grid and pipeline access and the establishment of a regional regulator. Water-related implications do not seem to also have been taken into account.
Sustained and sustainable growth will require strong policies in both the energy and water sectors. A challenging and gigantic task, such policies will need to be implementable and encourage the adoption of the best practices to improve energy and water efficiency. Clearly, the future of energy, and thus water, in the region depends on the interplay of economic, demographic, pricing, and technology related issues, but also on political considerations.
A GLOBAL CHALLENGE
Regarding investments, according to the International Energy Agency, globally, more than US$1600 billion is being invested annually to supply populations with energy, more than double in real terms since 2000. However, investments of some US$53 trillion in energy supply and efficiency are still required to move the world onto a 2oC temperature change path, away from fossil fuels and towards renewables, carbon capture and storage (CCS) and nuclear power.
Challenges abound. Issues to be addressed include enhancing national policy co-ordination and regulatory frameworks, eliminating market distortions, encouraging financing of energy efficiency projects, improving capacity building and data collection and monitoring and evaluating the effectiveness of energy and water efficiency policies. Moreover, realistically speaking, the global trends in energy use, water availability, and water demand suggest that the world will continue to face serious concerns related to the use, management, development, and governance of both water and energy resources.
Given the projected regionalised and global rise in energy demand, the growing burden on natural resources, water being the main one, and climate change considerations, energy savings becomes of strategic importance. Asia is said to be the world’s new centre of gravity. However, whether the region and its giants – China and India – will emerge as global leaders in strong policy development and implementation on water and energy, and not only in generating demand, is yet to be seen.