Working Group Report on Energy Security Cooperation in East Asia
 
I. Introduction
 
The East Asian Institute, on behalf of NEAT Singapore, organized the NEAT WG (Network of East Asian Think Tanks Working Group) Meetings on Energy Security Cooperation in East Asia. The first meeting (Phase 1) was held on 6 May 2005 and the second (Phase 2) on 30 June 2006. Both meetings were held in Singapore. Delegates from all 13 APT (ASEAN+3) countries attended the June 2006 meeting.
 
This report identifies the major issues raised by delegates regarding energy security cooperation. In this WG meeting, the participants concentrated on energy conservation and the lessons which can be drawn from the more energy-efficient APT countries. This WG meeting also discussed the maritime dimension of energy security.
 
The goals of the NEAT WG on Energy Security Cooperation are three-fold: promote energy conservation, energy consumption efficiency and energy security in East Asia, share and learn from the experiences of energy-efficient APT countries, and support an East Asian Community in the long run through regional energy cooperation. The 2nd WG meeting on Energy Security Cooperation was particularly timely in the wake of continuing oil price rises and global concern, if not tension, over energy security, especially oil.
 
A preliminary draft was first distributed to all delegates for their comments and acceptance. The final report on energy security cooperation will be presented along with the other WG reports at the Fourth Annual NEAT meeting in Kuala Lumpur in August 2006.
 
 
II. Background
 
The WG meeting had three panels and a general discussion.  Each panel had two sessions: presentation and discussion. Background papers were first read to establish the agenda for discussion. Delegates then freely exchanged their views on the issues concerned. The panels consisted of the following:
 
1. Improving Energy Efficiency
 
This panel focused on the experiences gained and challenges faced in improving energy consumption efficiency in the APT countries. The lead paper was on the impressive efforts of the Japanese industry and society to conserve energy since the 1973 oil shock. Indeed, Japan can be considered the benchmark for energy efficiency and conservation for other APT countries to emulate. (APT energy efficiency statistics are provided in Appendix 1). Delegates from other APT countries also presented papers on their respective countries' experiences as well as shared their national requirements and efforts to improve energy consumption efficiency.
 
While delegates in principle accepted the logic of the market to set energy prices, avoid waste and boost energy efficiency, they were also sensitive to the political and social realities of certain APT countries which provide fuel subsidies to maintain social stability. Nevertheless, APT countries should seriously consider reducing energy price subsidies in the long run to ensure greater efficiency and conservation of energy resources.
 
2. Energy Security Cooperation: The Maritime Dimension
 
This panel explored various potential areas for cooperation among East Asian countries in their search for maritime energy security. One background paper examined China's energy security needs while another focused on the issues of piracy and hypothetical terrorism in the Straits of Malacca. This panel examined the possible role of APT countries for enhancing energy security cooperation in the Straits of Malacca. Analysis of energy security in the Straits is timely especially when Lloyds has labeled the Straits a “war risk" area and hiked insurance premiums.
 
It was concluded that the alleged problems of piracy and terrorism in the Straits of Malacca have been exaggerated. There have actually been few pirate attacks on oil tankers and no terrorist attacks at all within the Straits. Nevertheless, there is still much room among the APT countries to cooperate with the littoral states to prevent potential piracy and terrorism, and ensure the unimpeded flow of energy through the Straits where 60,000 ships transit annually, carrying 525 million tons of cargo worth US$ 390 billion (one-third of world trade). By 2004, 26 tankers heading for Asian ports passed through the Straits each day carrying 11 million barrels of oil. Moreover, with continuing increases of traffic in the Straits, APT countries may need to address the problem of congestion and potential accidents which could delay or disrupt energy flows vital to the region.
 
3. Energy Conservation: National Policies
 
Delegates shared their countries' experiences and policies on energy conservation. This panel also discussed various APT countries' experimentation with bio-fuels and geo-thermal energy which may reduce oil dependence in the future.
 
4. General Economic Framework
 
There are at least four factors which underpin energy conservation: economic, institutional, a “green" strategy to raise public consciousness, and the sharing of national experiences and the need for regional cooperation.
 
Economic factors: Energy consumption is closely related to GDP growth. Indeed, the levels of energy consumption are closely linked to the level of economic development of a country, or more precisely, the stages of its industrialization. To reduce energy consumption, the price mechanism is most effective, ie, how to get the price right, though it is acknowledged that certain APT countries cannot eliminate energy price subsidies quickly without incurring serious social dislocation. Reducing energy consumption also involves the use of “incentives"; for example, citizens and companies are given awards and publicity for drastically reducing their energy consumption by using electric devices/equipment which the government has labeled “energy efficient" (these consume less power per unit of output, but with higher initial capital outlay), and “disincentives" such as penalizing people and organizations that continue to use old, energy-inefficient equipment.
 
Institutional factors: The state plays an important role in ensuring energy conservation, including the use of tax incentives, a conducive regulatory framework, voluntary guidelines and/or mandatory ones (eg, the setting of air conditioning no lower than 26 degrees Celsius), governmental efforts and commitments to energy saving techniques and R & D (eg, research into new building styles and materials which reduce the need for air cooling and heating), and establishing standards for energy efficient buildings and cars. Simply put, the state has an important role to formulate and implement energy conservation measures.
 
Raising public awareness about energy conservation: governments should inculcate energy-saving behavior in the general public, school children, and industrial/business associations, through energy conservation campaigns and competitions that alert citizens from all walks of life about the quantities of energy that they as individuals, families and workers use for various daily activities and how they could play a part in saving energy at home, school and at work. These activities are highly cost effective from the standpoint of energy conservation.
 
APT countries should share their national experiences and enhance regional cooperation in energy conservation. The papers presented at the workshop sent the “signal" that APT countries are cooperating to make East Asia more efficient in the use of precious energy and friendlier to the environment.
 
III. Policy Recommendations: Energy Conservation
 
Recommendation 1: APT countries should set national targets of energy efficiency with a view to catching up with the world's best standards in the long run. China's target in its 11th Five-Year Plan (2006-10) for reducing energy consumption by 20% per unit of GDP is a case in point.
 
Recommendation 2: APT governments should expand all existing energy conservation efforts. These may include: conducting energy audits and inspections, setting minimum energy consumption efficiency standards, arranging energy efficiency demonstrations, enhancing public education on energy efficiency, and organizing energy-efficiency labeling programs and international technical exchanges (especially from Japan).
 
Recommendation 3: APT states should pay attention to energy-saving activities by introducing (mandatory or voluntary) energy efficiency standards for common household products. These include: air conditioners, heaters, gas cooking appliances, gas water heaters, oil water heaters, refrigerators, freezers, ovens, rice cookers, computers, DVD players, TV sets and fluorescent lights.
 
Recommendation 4: Manufacturing industries should adopt more efficient methods of production by using less energy per unit of output.
 
Recommendation 5: APT governments should promote energy conservation efforts in the consumption of oil -- especially gasoline and diesel -- in the transport sector, developing policies which ensure that the increasing numbers of vehicles on the roads use fuel as efficiently as possible.
 
Recommendation 6: APT countries should hold regular energy conservation campaigns which educate people about the relative quantities of energy they use and waste in the home and at work each day, and instill in them the imperative of practicing energy-conserving behavior at all times.
 
IV. Policy Recommendations: Energy Security Cooperation in the Straits of Malacca
 
Recommendation 1: The more developed APT countries may consider providing material or technical assistance to the less developed littoral states. Besides patrol boats and training ships, these APT countries could help Indonesia build a surveillance radar network in Sumatra to cover the Straits.
 
Recommendation 2: APT countries should participate and cooperate actively in ReCAAP (Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships).
 
Recommendation 3: There should be APT multilateral exercises to:
  • handle environmental disasters caused by oil spillage from tankers, tugs and barges in the Straits, and
  • provide humanitarian assistance by mounting search and rescue operations in the Straits. These initiatives can be regarded as CBM (Confidence Building Measures). They aim to boost mutual trust and confidence, reduce suspicion and develop a spirit of cooperation among APT countries.
Recommendation 4: APT countries should also build on the Malaysian June 2006 proposal for a Southeast Asian Disaster Relief Center to provide humanitarian assistance and handle environmental disasters. This proposal can be expanded to cover the Straits of Malacca and potential maritime disasters with the participation of APT countries.
 
V. Conclusion
 
APT governments should do whatever possible to encourage higher energy consumption efficiency and reduce the transitional period between high and low environmental impact of economic development, ie, improve the so-called “Environmental Kuznet's Curve" (see Figure 4). Asia is the fastest developing region in the world. Concomitantly, energy demand is growing at an unparalleled rate. With global energy resource depletion on the one hand, and increasingly worrying energy-related environmental degradation on the other, it is becoming urgent that each unit of energy consumed in Asia be utilized to the fullest degree, and as cleanly as possible.
 
The more developed APT countries are encouraged to transfer energy conservation technology and know-how to the less developed members, which should introduce policy and regulatory framework to absorb them. Thus, APT countries can share all their energy-efficiency experience for mutual benefit and enhance trust within the East Asian Community.
 
Appendix
 
Table 1 – Asia: Intensity Rankings for 1980 and 2004
 
(British Thermal Units per USD using constant Year 2000 dollars and market exchange rates)

1980

 

2004

 

China

101,936

China

32,910

Laos

23,761

Indonesia

28,042

Singapore

19,838

Vietnam

26,000

Indonesia

18,412

Laos

24,123

Myanmar

18,349

Thailand

22,159

Malaysia

16,224

Malaysia

23,000

Vietnam

15,874

Singapore

18,728

US

15,174

Myanmar

16,133

Brunei

14,486

Brunei

16,103

Thailand

13,643

Philippines

14,400

Korea

13,317

Korea

 

 

Network of East Asian Think-Tanks

The Network of East Asian Think-tanks

     
Officially recognized at the “10+3" summit meeting, Network of East Asian Think-tanks (NEAT) is a mechanism for research and academic exchange, and a platform for the second-track diplomacy in the regional cooperation among “10+3" countries in East Asia. It aims at integrating the research resources in East Asia, promoting the academic exchanges and providing intellectual support for East Asian cooperation. To be more specific, by establishing a network among East Asian think-tanks, governments and enterprises and promoting the interaction of these three circles, it intends to study the key issues related to East Asian cooperation, work out strategic ideas and concrete policy suggestions for the regional integration and submit research reports to the “10+3" summit meeting.
 
In 2002, East Asian Studies Group (EASG), the second-track in the mechanism of East Asian cooperation, suggested 17 short-term measures to be taken for closer cooperation among East Asian nations, among which was establishing “Network of East Asian Think-tanks" (NEAT) within the framework of “10+3" regional cooperation. The suggestion was adopted at the informal meeting of “10+3"leaders held in Phnom PenhCambodia in September 2002.
 
The activities of NEAT fall into the following categories: 1) Hold annual conferences of NEAT members to promote exchanges among East Asian think tanks and submit an annual work report to the informal meeting of “10+3" leaders on the basis of the research of the key issues in East Asian integration process; 2) Set up a website of NEAT, bridging the governments with the academic circles, promoting the academic exchanges among scholars about East Asia, and educating the masses in the region; 3) Hold irregular international seminars on East Asian cooperation so as to facilitate the theoretic research on the integration and community building of East Asia and help to shape the theoretic framework, strategies and specific policies conducive to the regional cooperation in East Asia. 4) Cooperate in the research of the key issues in regional cooperation and figure out the solutions.
 
The founding as well as the first annual conference of NEAT was held in Beijing from September 29 to 30, 2003. There were delegates from the think tanks of all the member states at the conference. The three topics discussed were “Towards East Asian Cooperation", Important Steps Leading to East Asian Cooperation" and “Key Areas in East Asia Cooperation". The conference report was not only published, but also distributed at the “10+3" leaders meeting in 2003.