Huge Capital Needed for Sustainable Energy

The World Bank (WB) has released a report titled “Winds of Change: East Asia’s Sustainable Energy Future” in which it lays out how six major East Asian energy-consuming countries can stabilise their greenhouse gas emissions by 2025 without compromising growth.

The report says major investments in energy efficiency and a concerted switch to renewable sources of power in China, Indonesia, Malaysia, the Philippines, Thailand and Vietnam could simultaneously stabilise greenhouse gas emissions and increase energy security while improving the local environment.

Two scenarios

Underscoring the region’s rapid rise, WB said East Asia achieved a 10-fold increase in GDP over the past three decades, leading to a tripling of energy consumption, which is expected to double again in the next two decades as urban population will increase 50 percent and industrialisation continues in the region.

The report looked at two scenarios; one in which development continues according to current government policies, and an alternative, low-carbon growth path. Under the alternative sustainable energy development (SED) path, the report said renewable energy, including hydropower, wind, biomass, geothermal and solar, could meet a significant portion of the region’s power needs by 2030.

The report also urges governments to take immediate action to transform their energy sectors to be oriented towards much higher efficiency and more widespread use of clean energy before it is too late. “The window of opportunity is closing fast, delaying action will lock the region into a long-lasting, high-carbon infrastructure,” the report says.

Mr Jim Adams, World Bank Vice President for the East Asia & Pacific Region, said: “Countries need to act now to transform the energy sector toward much higher energy efficiency and widespread deployment of low-carbon technologies. While many countries in the region are already taking steps in this direction, accelerating the speed and scaling up the efforts are needed to reach a sustainable energy path.”

Major hurdle

According to the report, to achieve this sustainable energy path, net additional investment of US$80 billion per year is needed over the next two decades, or an average of 0.8 percent of regional GDP. But mobilising this financing is a major hurdle.

The report said the decoupling of energy growth from economic growth is a remarkable achievement. China has made significant progress in reducing energy intensity by 70 percent over the last 25 years. Vietnam also has substantially reduced its energy intensity.

Dr Xiaodong Wang, author of the report and senior energy expert at WB, said: The technical and economic means exist for these transformations, but only strong political will and unprecedented global cooperation will make them happen.

Institutional and policy reform

According to the report, policy and institutional reforms are needed to achieve the huge energy efficiency potential of the region. A mix of energy pricing reforms, regulations such as economy-wide energy intensity targets, and financial incentives are required to promote energy conservation. Since nearly half the region’s energy capital stocks (power plants, buildings, roads) needed by 2020 are yet to be built, this is the most cost-effective option.

The report says countries also need to scale up renewable energy to meet a major proportion of power demand by 2030. This can be achieved through financial incentive policies for renewable energy (wind, biomass, small hydro, geothermal and solar) or tax on fossil fuels to provide a level playing field between renewables and fossil fuels. China is already the world’s largest producer of renewable energy.

The report recommends that countries should accelerate innovation and new clean technologies. While proven technologies can meet the bulk of emissions reductions in the short- to medium-term, innovations and new technologies are critical to bending the emissions curve downwards over the long-term beyond 2030. Given the long lead time for technology development, research, development and demonstration need to ramp up.

At the same time, countries need to work across sectors for smart urban planning. Major reductions in energy demand and CO2 emissions can be achieved through smart urban planning based on higher density, more spatially compact cities, and more mixed-use design that allows growth near city centres and transit corridors to prevent urban sprawl. Smart urban planning also needs to go hand in hand with public transport and clean energy options such as green buildings and efficient vehicles.

Noticeably, developed countries need to transfer substantial financing and low-carbon technologies. Developing countries cannot do it alone. They need the support of the international community. Substantial concessional financing is required to cover the additional costs and risks of energy efficiency and renewable energy. Technology transfer and institutional strengthening is also needed.

Tags: Vietnam energy