Shaping Asia’s Energy Future | Asian Development Bank

Shaping Asia’s Energy Future

Article | 10 April 2017

Fatih Birol on what should drive energy investment decisions in Asia and why the region is critical in the fight against climate change.

Manila – Fatih Birol is Executive Director of the International Energy Agency. Forbes magazine has called him one of the most influential players on the world’s energy scene. On a recent visit to the Asian Development Bank to sign a cooperation agreement and speak with staff, Mr. Birol shared his thoughts on Asia’s energy future and the region’s central role in addressing global climate change. Edited excerpts follow.

What is the energy outlook for Asia?

Asia’s energy demand is growing very strongly. In fact, Asia is the engine of global energy demand growth. [People’s Republic of] China, more and more India, but also Southeast Asia, are the engines of growth. Oil, coal, gas, electricity, renewables—all of them are driven by the Asian countries.

The decisions that will be taken in Beijing or New Delhi or Jakarta will affect everybody. Therefore, we all hope that they take the decisions taking into consideration sustainability for their countries, and for the region and the globe as well.

“The success of Asia in addressing climate change will determine the success of the world in addressing climate change.”

What do countries need to consider when making energy investment decisions?

Energy investments are critical. They are critical for economic growth and social life. When you look at the lead time of energy investments they are very, very long. When you build a power plant you have to live with this plant for 40 or 50 years. Therefore, you have to make the right choices.

Perhaps three suggestions for when you look at energy investments, the right energy investment decisions.

Number 1: Countries need to read the global energy markets, what’s happening, carefully. No country today is an energy island. They have to see what’s happening to oil, gas, renewables markets.

Number 2: Countries need to learn from each other—from their mistakes, from their achievements—in order to have a source of inspiration for their own policies. So best practice learning.

Number 3: I would suggest not to take the decisions on ideological terms but more pragmatic terms. What is good for my own country? What is good for business, economic growth, social life, and environment? Be more pragmatic.

How can Asia contribute to “decarbonization” and the Paris Agreement goals?

Asia has two major environmental challenges. One of them is climate change and the other one is air pollution. I think Asian countries should take the responsibility, in line with their contributions to these problems, to find a solution.

What they can do is, number one, using energy much more efficiently. Energy efficiency, in our view, is the first fuel and using energy efficiently at home, in cars, in industrial sectors is the key priority. This doesn’t need new discoveries. With existing technologies and with the right policies, we can use energy much more efficiently and reduce the carbon footprint and local pollutants such as SO2, NOX, and particulate matter.

In addition to energy efficiency, of course, make the most out of renewable energy. It can be hydropower; it can be solar, wind, geothermal. I think we have to make the most out of this in the context of affordability.

But there are other options. Some countries may want to make use of nuclear power, such as PRC and India are doing today. Some countries may want to switch from coal to natural gas to reduce their emissions. So there is not one single option. There are different options and every country needs to make their best menu in line with their economic and social responsibilities and the challenges they have in front of them.

The success of Asia in addressing climate change will also determine the success of the world in addressing climate change as the bulk of emissions are coming from this very important and economically growing region.

How can countries mobilize private sector investment in energy?

Energy investments, in general, are capital intensive decisions. Those decisions need to be taken very carefully. The private sector needs to see that there is a strong profit for them. Money goes where it makes profits rather than where it is needed. This is why governments need to provide an attractive investment framework.

It can be renewables, it can be oil or gas or others, but the important thing is to have the right investment framework and provide predictability for investors. If you give an impression to investors—as has been the case in some countries—one step forward, two steps backwards, and you do not give the right, predictable investment framework I am afraid it will be very difficult to raise investment from the private sector.

Predictability is key.