Asian countries must scrap consumer subsidies on energy and invest more in renewable technologies to ensure sustainable energy supply for future prosperity, the Asian Development Bank (ADB) said Tuesday.

“Consumer subsidies artificially reduce the price of energy, diverting it from more efficient uses and disproportionately benefiting the non-poor,” the Manila-based bank said in its annual Asian Development Outlook report.

“If countries around the world eliminated wasteful subsidies, global carbon dioxide emissions would be an estimated 2.6 billion tonnes lower in 2035,” it added.

Subsidies also impose a tremendous burden on public budgets, exceeding 2 per cent of gross domestic product in India, Indonesia and Vietnam, and 4 per cent in Bangladesh and Pakistan, the report said.

Targeted subsidies for the poor similar to the system being set up by Indonesia could replace “inefficient general fuel subsidies” as a politically acceptable approach, it added.

Having energy prices that reflect true costs will send the right signals to households and firms on the need to save and use energy more efficiently, helping ease a burgeoning demand in the region, the report said.

Asia’s share of world energy consumption is expected to rapidly rise from barely a third in 2010 to up to 56 per cent by 2035 to satisfy the region’s economic aspirations, it said.

But Asia has limited indigenous energy resources, making it a challenge for the region to deliver energy to all its citizens while scaling back its reliance on fossil fuels.

“With only 9 per cent of proven global oil reserves, the region is currently on track to almost triple oil imports by 2035, rendering it significantly more vulnerable to external supply shocks,” the ADB said.

Nearly half of the people in the world without electricity live in Asia, and 2.8 billion people in the region still rely on traditional fuels for primary energy that exposes them to health risks, bad services and environmental damage, the report said.

“Since modern energy access is essential for their social and economic advancement, Asia must find the political will and innovation to scrap outdated policies and recalibrate its energy mix,” the bank added.

The report also called for stepped up investment and support for next-generation wind, solar and biofuel technologies that are expected to be more cost competitive than current options and do not compete with food crops.

It also urged countries to look into solutions that make conventional power plants cleaner and more efficient, as well as expanding nuclear power while addressing safety, waste management and proliferation issues.

“Without radical changes to the region’s energy mix, its consumption of fossil fuels would climb, doubling oil consumption and tripling natural gas consumption,” the report said. “Even highly polluting coal consumption would rise by a whopping 81 per cent.”

“This would double carbon dioxide emissions to over 20 billion tonnes by 2035,” the report added. “Asia alone would then emit almost all of 22 billion tonnes that climate change experts see as that year’s maximum sustainable emissions for the whole world.”

(This article was published on April 9, 2013)
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