Energy & Sustainable Development in Asia & the Pacific Region
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Energy & Sustainable Development in Asia & the Pacific Region. Nandita Mongia, Ph.d Regional Energy Program for Poverty Reduction In Asia & the Pacific (REP-PoR) United Nations Development Program, Regional Centre in Bangkok. 64 th ESCAP Commission April 27, 2008. Regional Centre in Bangkok.

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Energy & Sustainable Development in Asia & the Pacific Region

Nandita Mongia, Ph.d

Regional Energy Program for Poverty Reduction In Asia & the Pacific (REP-PoR)

United Nations Development Program, Regional Centre in Bangkok

64th ESCAP CommissionApril 27, 2008

Regional Centre in Bangkok

Supply- Demand Gaps

Consumption (Btu) - read from left side & Generating Capacity (GW) – read from right side

Since 2003, crude oil prices have risen from $22 to over $100 a barrel. Today it is fluctuating around $115.

Steep rises in the prices of petroleum products used by poor households: diesel, kerosene, propane, gasoline

A new era of expensive oil

Oil products, quarterly prices, 2000-06

Oil consumption and human development index in 1995 & 2004

Poor households will need to increase consumption of modern energy, including oil

Small increments in energy use can trigger a substantial improvement in HDI

Per capita energy use and the human development index

Economic growth has continued..( how long?)

Some increase in inflation

Till now observed macroeconomic impact has been limited

This time the price rises came in the midst of a global economic boom

Rising exports have enabled even some of the poorest countries to finance oil import bills

Inflation was lower because governments subsidized the prices of oil products….the effect is wearing off

Why the small apparent visible macroeconomic impact? …short lived ?

The damages have started to appear, with the future looking unsustainable ecologically & economically - especially if the current high prices continue

Oil-based fuels represent the biggest component of merchandise imports for Pacific island countries

In 2005, fuel imports as a percentage of total merchandise imports ranged from 14 per cent in Vanuatu to 30 per cent in Solomon Islands

In Tonga and Samoa, the value of fuel imports was more than double the aggregate of all merchandise exports in 2005

For the larger PICs - Fiji, Kiribati, Solomon Islands and Vanuatu -fuel imports as a percentage of merchandise exports ranged from 42 per cent for Solomon Islands to 85 per cent for Kiribati (2005)

The 250 per cent rise in imported fuel prices since 2001 translates to a 250 per cent rise in the value of energy imports for the PICs to maintain the level of energy consumption of the early 2000s

Macroeconomic impacts…. Visible in the Pacific already

Economic strength : ( BOP, Budget Balance, Import Cover, Oil import Dependence)

Economic performance: ( GDP Per Capita, Oil intensity of GDP ,or energy intensity to GDP)

Importance of oil to growth: (Real GDP growth rate, share of energy in primary energy consumption )

Capturing Vulnerability to Energy Market Volatility

Based on combination of macro variables impacting both demand and supply issues :

Vulnerability Index:

Low VI - Iran, China, Malaysia

Medium VI - Bhutan, India, Papua New Guinea, Indonesia, Thailand, Mongolia, Viet Nam, Myanmar

High VI - Philippines, Afghanistan, Nepal, Bangladesh, Pakistan, Lao PDR, Fiji, Samoa, Sri Lanka, Solomon Islands, Cambodia, Vanuatu, Maldives

Capturing vulnerability to Oil prices in Asia-Pacific Countries

  • Of the seven most oil price vulnerable Asia-Pacific countries four are PICs

  • Most vulnerable oil price country is a SIDS (i.e. Maldives)

  • PNG, an exporter, is an exception

Managing price risk– Pricing policies, targeted subsidies, financial tools.

Enhancing supply– Strengthening oil exploration and extraction, building refining capacity, diversifying sources of supply, engaging in barter.

Restraining demand– Increasing efficiency in conversion of primary to secondary energy & in end uses

Preparing for emergencies– Building strategic reserves and planning for rationing.

Diversifying fuels– In some cases this may mean using more coal or gas, but for many countries the opportunities will lie in renewable resources.

Policies for reducing vulnerability

Regional Centre in Bangkok

High priority

Pricing of petroleum products

Managing oil subsidies


Financial tools

Improve public transport

Strategic reserves ( Coal Oil Ng)

Medium priority

Fuel efficiency in transport ( oil & coal )

Fuel efficiency in industry ( Oil ,coal, gas)

Bio-fuels in transport ( ??)

Oil substitution in agriculture

Strengthening oil exploration

Refining capacity to process sour crudes

Selection of sub-strategies

Lower priority

  • Better land-use planning

  • Fuel substitution in transport

  • Fuel efficiency in agriculture

  • Diversifying sources of primary energy

  • Barter

  • Oil substitution in industry

Each country will choose its own policy mix, but countries with similar Vulnerability index rankings may use similar overall policy combinations. These will also change according to the fuel price & fuel mixes scenarios.

Bars represent petroleum product based electricity generation costs for alternate oil price scenarios :Baseline, SS shock, Peak Oil Price &Energy security

Renewable systems versus gasoline gensets costs for off-grid electricity

Promising ‘Integrators’ on the ground are:

Micro Finance Institutions

Agencies promoting SMEs and micro-enterprises

NGOs/ CBOs working with a holistic development approach

RET vendors

Community based energy projects

Local and national government

Development Banks & partners

Establishing and strengthening cross-sectoral linkages for delivering rural energy

Substantially increase investments into grid-intertied RETs (and increase rural electrification, and share benefits with local residents,),.

Increase investments into biofuels, but cautiously (and increase employment through community production of oil crops and biofuels to power multi-functional platforms and local transportation as well as for external sales),

Expand access of the poor to off-grid RETs through community-based mini-grid systems and a “commercialization plus” approach for household technologies like biogas and solar PV,

Expand high value applications of RETs in education, health, microenterprise, and telecommunications to benefit the poor.

Strategic Recommendations(to increase private investments into RETs, )

Integrate commercially available RETs into a wide range of ongoing income generation and development activities aimed at reducing poverty - being carried out by government, NGOs/CBOs, micro-finance institutions, and donor financed projects,

Financing policies to increase access to financing so that the poor can afford to access commercially available RETs,

Facilitate the development of CDM projects to provide carbon financing to renewable energy projects with the largest MDG impacts (e.g., community carbon finance initiatives), bundling of small projects

Strategic Recommendations (contd)(to increase private investments into RETs, )

Feeding in renewable electricity to the grid

Policy and Legislation

Set national targets and timetables for renewables

Put in place: Renewable Portfolio Standards, establish feed-in tariff, net-metering, interconnection agreements, standardized power purchase agreements.

Enact laws for sharing royalty from hydropower, wind with local residents for benefit of poor.

Require green IPPs to distribute portion of power for rural electrification.

Fiscal and Financial Incentives

Provide direct investment subsidies, production tax credits, income tax holidays for green IPPs.

Reduce import duties, VAT on equipment for green IPPs

Public Investments

Increase awareness of policy makers, utility officials,

Technical support and training to investors and utility officials

Pilot benefit sharing with local suppliers of inputs (e.g. rice husk)

Policy Recommendations(to increase private investments into RETs)

Sustainable development of biofuels

Policy and Legislation

Implement mandates for blending biofuels into diesel and petrol,with caution

Set standards for biodiesel

Make legal provisions for poor and landless to grow jatropha and other biofuel crops under ‘leasehold forestry’

Limit use of food crops for biofuels (e.g., recent China policy)

Fiscal and Financial Incentives

Provide direct investment subsidies, production tax credits, income tax holidays for biofuels investors.

Reduce import duties, VAT on equipment for biofuels investors.

Public Investments

Invest in R&D to maximize yields

Examine the potential impacts of large-scale biofuels production on land, water, nutrient runoff..

Invest in R&D of small-scale seed press and esterification units for community production of biofuels

Policy Recommendations(to increase private investments into RETs)

Off-grid RETs

Policy and Legislation

Announce targets and timetables for universal access to electricity and non-electricity services (milling, cooking fuels) through off-grid RETs complementing rural electrification

Fiscal and Financial Incentives

Provide direct investment subsidies, production tax credits, income tax holidays for manufacturers and suppliers of RET equipment

Reduce import duties, VAT on equipment on off-grid RETs

Public Investments

Map renewable resources of the country and increase awareness

Invest in public private partnerships for market-based supply of off-grid RETs

Standardize equipment, provide training and quality control

Provide additional grant support to complement commercialization such that the poor, women, and marginalized can access RETs

Policy Recommendations(to increase private investments into RETs)

Help least developed countries overcome balance of payments and fiscal deficits linked to energy

Finance essential structural changes in their energy economies to reduce their dependence on volatile global energy market

Call For Asia-Pacific Compensatory Oil Finance Facility

Rising oil prices have created balance of payments problems for the least developed countries

AP-COIL would:

The bulk of the funds could be mobilized through bonds issued in regional and international capital markets.

AP-COIL - flow of funds

The Time to Act is Now , Thank You

Regional Centre in Bangkok

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