Economic integration and energy efficiency for energy security in ASEAN

The security of energy supply is crucial for rapid growth in Southeast Asia, but it is being increasingly challenged by the region’s fast-growing energy demand. This high demand can be explained by improvements in energy access as well as population and economic growth. The Association of Southeast Asian Nations (ASEAN) is the sixth-largest economy in the world, the third-largest economy in Asia (after the People’s Republic of China (PRC) and Japan), and the third-largest market in the world (after India and the PRC), and it is projected to be the fourth-largest economy in the world by 2030. Since 2000, energy demand in ASEAN has grown by more than 80%, and it is projected that 12% of global energy demand growth will come from Southeast Asia by 2040 (IEA 2019).

Currently, ASEAN as a whole is a net exporter of energy, with six of its 10 member states being net energy exporters. However, with depleting resources and growing energy demand, ASEAN is likely to change from being a net exporter of energy to becoming an importer. Renewable energy in ASEAN is produced mostly from solid biomass, such as firewood and wood chips used for cooking, while renewable energy generation using advanced technologies is low. For example, geothermal energy comprises 6% of generation while hydropower comprises 3% of generation in ASEAN (Liu, Sheng, and Azhgaliyeva 2019a, 2019b). Thus, international energy trade is crucial for energy security in the region.

Classical trade theory suggests that trade between two countries is closely correlated with the distance between them. Although ASEAN member countries have lower energy transportation costs due to the smaller distances between them, their trade in energy is mostly with non-ASEAN countries. The top importers of energy from ASEAN are Japan; the People’s Republic of China (PRC); Australia; the Republic of Korea; Hong Kong, China; India; Taipei,China; the United States; and Bangladesh. Meanwhile, the top exporters of energy to ASEAN are the United Arab Emirates; Saudi Arabia; the Republic of Korea; Qatar; Taipei, China; Kuwait; the PRC; India; Australia; and Oman (Liu, Sheng, and Azhgaliyeva 2019a, 2019b). Thus, distance may not explain the energy trade activities of ASEAN countries since energy trade is conducted mainly with countries from outside rather than within ASEAN.Reaf the full story here.