APEC economies signal enhanced energy cooperation

10 September 2014

Energy ministers from the 21-nation Asia-Pacific Economic Cooperation (APEC) alliance gathered last week in Beijing, China, in a bid to ramp up commitments around energy cooperation in the region.

The 11th APEC Energy Ministerial Meeting held from 2-3 September, part of a series of technical events being held ahead of a leaders’ summit scheduled for November in the Chinese capital, resulted in a “Beijing Declaration.”

A key thrust of declaration is around shoring up a diverse energy supply to secure Asia Pacific’s competitiveness and energy access. The document also draws attention to the sustainability angle, namely the need to scale-up clean energy sources, in order to ease environmental pressures.

Accordingly, the political document outlines a series of actions for cooperation among member economies in the areas of renewable energy, energy security, energy investment and trade, energy efficiency and sustainable consumption, and clean energy.

Taken as a group, APEC economies account for the lion’s share of world energy flows, making up 55 percent of global energy production and 60 percent of total energy consumption.

At present, the economic alliance is forecast to continue to rely on fossil fuels, with experts lately predicting that these will constitute up to 80 percent of Asia-Pacific’s energy by 2030, in part due to increased access to shale gas and liquefied natural gas (LNG) reserves.

“Important changes are taking place in the global energy supply and demand structure,” said Wu Xinxiong, head of China’s National Energy Administration, and APEC Energy Ministerial meet chair.

“We need to strike a balance among economic growth, energy security, and environmental protection,” he continued, speaking last Wednesday.  The newly-minted declaration also reiterates key energy commitments made by APEC leaders in recent years. This includes reaffirming a 2011 pledge made in Honolulu, Hawaii to rationalise and phase out inefficient fossil fuel subsidies that encourage wasteful consumption.

In addition, the document reaffirms a promise to reduce APEC’s combined energy intensity by 45 percent from 2005 levels by 2035 and to double the share of renewables in the region’s energy mix from 2010 levels by 2030.

Among other things, burning fossil fuels causes the release of greenhouse gas (GHG) emissions into the atmosphere, with unsustainable levels resulting in far reaching climate consequences according to UN climate scientists. (See BioRes, 14 April 2014)

Moreover this week the World Meteorological Organization released a bulletin indicating that the level of emissions in the atmosphere had reached a new high in 2013. The international weather monitoring body warned that apparent effects include a rate of ocean acidification higher than any proxy-estimates over the last 300 million years.

Environmental goods trade?

Although the document calls for “vigorous” cooperative efforts among APEC member economies around renewable energy – including a mention of eliminating trade protection and restrictive measures that could hinder development in the sector – no reference is included to an environmental goods tariff reduction pledge made by the group.  

APEC leaders in 2012 meeting in Vladivostok, Russia agreed to liberalise trade by reducing applied tariff rates to five percent or less on a list of 54 environmental goods by the end of 2015. That list – set in motion in the group’s Honolulu Declaration the year before – includes a number of sustainable energy related products such as solar panels and wind turbines.

Dr Alan Bollard, Executive Director of the APEC Secretariat, nevertheless last Wednesday said that the region’s efforts to ramp up environmental goods trade were important. 

 “The tariff reductions on environmental goods underway within the region, combined with the development of new technologies and standards that support, clean, renewable energy, are putting us on a path to sustainability,” he said, alleging that energy was at the “centre” of APEC’s policy challenges.

A two-week meet last month confirmed that work is moving forward on the application of APEC’s environmental goods trade commitment. The August talks were intended to build technical capacity among members ahead of next year’s deadline. (See BioRes, 22 August 2014)

Last week’s document does, however, establish a new multibillion dollar APEC Sustainable Energy Centre (APSEC) geared towards enhancing cooperation among members in the sector.

The China-based centre will serve as a platform to share best practices, as well as research and development results in sustainable energy systems, in addition to developing Asia-Pacific intellectual networks.

Regional gas market

Last week’s declaration also confirms the launch of a new “LNG Trade Facilitation Initiative.” According to energy ministers the new initiative should help to scale-up the development of an APEC natural gas market through, among other things, harnessing partnerships with the private sector and market-based pricing.

Recognising the likely future growth of an Asia-Pacific gas market in the years ahead, the document encourages member economies to put in place favourable trade and investment conditions to support LNG intra-regional commerce, including by relaxing destination clauses. These specific conditions prohibit the re-selling of LNG outside the original delivery country or region.

Natural gas trade has caused a stir in the global energy mix in recent years as a result of advances in technology that have facilitated the viable extraction of “shale gas” – deposits trapped under rock formations or buried under bodies of water.

The trade and climate impacts of LNG, which is derived from shale gas, remain open to debate among experts.

On the one hand, supporters argue that emissions from shale gas are lower than those from coal consumption, and that shale abundance has the potential to bring down energy prices.

Critics, however, have pointed to uncertainty around the volume of methane leaked in shale exploration, extraction, and transportation processes. Methane is roughly 30 times more potent than carbon dioxide as a heat-trapping gas. (See BioRes, 13 May 2014)

The US, an APEC member, is the currently the main commercial player in the shale gas trade. Other countries, however, are in the process of scaling up facilities and a number of questions exist as to what potential trade flows will look like.  

According to exports, LNG gasification facilities for export and de-gasification for imports cost around US410 billion to construct.

US-Russia strain

The meet also reportedly witnessed tension between the US and Russia in relation to recent economic sanctions put in place by Washington in response to the ongoing Ukraine-Russia conflict.

The Wall Street Journal reported that Russian Energy Minister Alexander Novak accused the  sanctions as being disruptive and unhelpful to the global energy supply, which triggered a targeted response from his American counterpart, US Energy Secretary Daniel Poneman.

The US official allegedly said that the sanctions were in place to protect international principles of territorial integrity and not to intentionally disrupt energy security.

Officials reported that the closed-door quarrel did not impede the main work of the session; as also evinced by the outcome declaration.

Nonetheless, the spat could raise warning flags for officials preparing for the upcoming leaders’ Beijing meet in November, set to be attended by both US President Barack Obama and Russian President Vladimir Putin.

Elsewhere, energy considerations as a result of the Russia-Ukraine crisis also prompted EU trade chief Karel De Gucht to urge the US to commit to exporting oil and natural gas to Europe as part of a potential transatlantic trade deal, currently under negotiation between the two economies.

“You may have noticed that some things are going on in Europe,” De Gucht told reporters in Washington D.C., US, referring to Brussels’ concerns around dependence on Russia gas imports.

ICTSD reporting; “Tension Between Russia and US on Display at APEC Forum in Beijing,” THE WALL STREET JOURNAL, 2 September 2014; “EU pushes for urgent energy deal in U.S. trade pact,” 9 September 2014. 

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