Asia is set to generate over half of global GDP by 2050 and it will need a stable supply of energy to fuel its growth. Otherwise, it could face slower economic growth and a stark energy future, according to the Asian Development Outlook 2013, which features a special chapter on Asia's energy challenges and outlines key policy responses by governments.
This year's Outlook report pointed out that energy consumption in Asia will rise two-fold from 2010 to 2035.
"Asia could be consuming more than half the world's energy supply by 2035, and without radical changes, carbon dioxide emissions will double," ADB Chief Economist Changyong Rhee said.
"Asia must both contain rising demand and explore cleaner energy options, which will require creativity and resolve, with policymakers having to grapple with politically difficult issues like fuel subsidies and regional energy market integration," he added.
Sustainable and inclusive growth, said the report, could be achieved with a unified Asian energy market, lower energy use, a cleaner energy supply and affordable access.
To meet sustainability goals, Asia will also have to pursue a combination of renewable energy as well as cleaner non-renewable sources and technologies that make carbon-based fuels cleaner to use. This could be done by aggressively exploring and investing in a good mix of supply sources and technologies, in line with each country's specific needs and comparative advantage, the report added.
But this strategy will also come with challenges. Currently, the cost of clean energy acts as a deterrent to renewables making a major difference in Asia's energy future, and shale gas extraction in Asia faces potential hiccups due to tough geological conditions and the high cost of extraction.
Developing future technologies will require government support in the early stages and coordination across the region can make the most of individual countries' efforts to boost their energy security.
Cross-border energy markets and infrastructure connectivity have so far been largely ignored in regional cooperation and integration. Asian countries' complementary comparative advantages in the energy sector mean that the construction of energy trade infrastructure such as pipelines offers potentially huge benefits.
This is evident in cooperation already achieved. Hydropower resources in Bhutan, the Lao PDR, and Myanmar have been developed to provide clean, inexpensive energy in Southeast Asia and a natural gas pipeline supplies energy to Singapore from Indonesia. These regional projects have benefited energy buyers and sellers alike and have helped to constrain dependence on fossil fuels.
In the report, the ADB urged countries to provide affordable and universal access to energy for all, noting that energy is both a basic human need and a tool that can empower the poor to be more productive and contribute to industrial growth. "True energy security is not possible without addressing the energy needs of the poor and low-income countries, and narrowing the wide gaps between Asian countries will promote inclusive growth across Asia," the report said.
At the same time, Asian governments must also take the lead in changing the public's attitude toward energy use.
The value of behavioural change is underscored by Japan's success in curbing demand since the oil shocks of the 1970s and again following the Fukushima disaster. Japan's energy intensity has improved by 25 percent since 1980 and it currently leads the world in the value of output per unit of energy.
The Asian Development Bank's Outlook 2013: Asia's Energy Challenge was published in April. This provides a comprehensive analysis of economic performance for the past year and offers forecasts for the next two years for the 45 economies in Asia Pacific. Chapter 2 is a special chapter focusing on Asia's energy challenges.
By: Asian Development Bank (ADB)