(Photo credit: EMA)
Dato Sri Peter Chin, Minister of Energy, Green Technology and Water, Malaysia
Distinguished Guests,
Ladies and Gentlemen,
1. The big news for the last couple of days has been the fact that the world population has reached 7 billion. This is supposed to have occurred yesterday or within the last couple of days. And we know that Asia plays host to a significant portion of this population.
2. The other key trend is the fact that we have now reached a point where half the world's population lives in cities. Obviously the consumption patterns of energy and resources in cities are going to be different from that of rural areas. Asia's rapid development also means that there will be even greater thirst for energy. And we know economic growth in emerging Asia is three times more energy-intensive than that of OECD economies, and in fact 28% more carbon-intensive.
3. Asia's energy demand has grown more than 30% since the turn of the millennium, which was just 11 years ago. China's energy demand has doubled in 10 years, and the latest figures put its annual consumption in excess of 2 billion tonnes-of-oil-equivalent (toe). Its fuel mix is still 66.5% coal and oil, 17.2%, in other words, still to very large extent fossil fuel dependent.
4. But at the same time, China also has the world's largest installed capacity of hydropower, the largest solar use for water heating, and has the largest capacity of nuclear power generators under construction, and has the fastest growth in wind power development. If you look at India, it puts its consumption at about one third of China, 620 million toe. 42% of its fuel mix is made up of coal, with 26% coming from traditional renewable sources and waste.
5. What all this shows is that there are trends of increased consumption, but these are some interesting trends that are preparing us for the future. And as you can see, hundreds of millions of people make the transition from rural to city, from poverty to the middle class and we are living in a point of great inflection.
6. The first point I want to make for today is that the investment decisions that are made in the energy field today, will have long-term implications. Just think about it - a thermal plant running on oil will have a lifespan of 20-30 years. We know that there have been coal plants that have been operating in excess of 50 years. A 500MW coal plant will release more than 150 megatons of carbon over its lifetime, and also with varying amounts of sulphur, soot and other pollutants.
7. So the point is, depending on the choices of individual governments, spread out across the world today, our choices of technology will have implications on sustainable development, on fossil fuel use, on carbon emissions for the next three to five decades.
8. The second point I wanted to make was that, as we talk about progress, it is not just about technology alone. We need science and technology because new answers to old questions will need to emerge from that field. It is also dependent on government policies, primarily on the politically challenging point of getting the right pricing and making rational policies in place for the long-term rather than short-term political benefits. And in particular how the next elections are being fought, and I think Malaysia's is next year, in the next one to three years.
9. Even as we see a convergence of rising prices in fossil fuels and greater cost reductions in clean energy, this transition could still take many decades, due to the long lock-in periods of investments that we make. There is also the problem of continued subsidies of local production and consumption of fossil fuels. Last year, I believe, governments and taxpayers across the world spent half a trillion dollars on subsidies and the point I want to make here is that subsidies actually distort the economy, distort consumption and is not actually the right thing to do in the long term.
10. Just as we encourage the right pricing of fossil fuels, we also need to be mindful of what would create greater distortions even as we try to correct the original imbalances. Let me give you an example of that. As some governments seek to provide subsidies or incentives for bio-fuels - in some places that has also led to deforestation in order to have more plantations; in some cases it has also diverted agriculture in food into fuels. And because of the law of perverse outcomes, sometimes it has led to more carbon released into the atmosphere or higher fuel prices and greater economic difficulties, particularly for the people in the developing countries who are least well-off.
11. The issue of pricing must also take into account externalities. And really, the big problem for the last two centuries has been the fact that we have been able to achieve economic growth without paying for the externalities. In the past, we never had to pay for the pollutions of the seas, the degradation of our rivers and water resources. We never had to pay for polluting the world's atmosphere. We never directly had to pay for the health consequences of a degraded environment or the people in a community.
12. So, in a sense, industry has had a free ride in the last two centuries but because they are now reaching a resource constrained, more crowded and more interconnected world, those externalities are no longer free and all those pigeons are coming back to roost. So, one big issue of externality is how we set the correct prices, so that even as rational economic decisions are made, the correct prices are paid. One big problem right now is the whole issue of deciding what is the correct carbon price.
13. There are different methods which have been offered in order to try and get the correct estimate of that. The different methods include trying to quantify the social environment and the health cost of pollutants and carbon in the atmosphere, and then therefore deciding on what the carbon tax should be. Another method is to put an absolute restriction on the volume of emissions, treat carbon space as a property in which future rights to emit can be allocated or traded - that's why the idea of carbon regime comes about. Or create a common organisation, a global organisation which will bind all of us, to specific targets and commitments.
14. But we know, and I can tell you, the climate change negotiations which will be held this year in Durban will not be able to arrive at a global, multilateral, rules-based, legally-binding agreement. There isn't the political will and there isn't the financial resources to make such a deal stay. And basically, the biggest emitters in the world are too busy with their own problems, too worried about dealing with competition from each other in order to arrive at a collective position and make common sacrifices in order for us to act properly.
22. So I thank you all for being here in Singapore and for contributing to the conversations on this very important topic and to join the dots between energy, food, water and ultimately the health and vitality of human needs on our one planet, Earth. Thank you all very much.