Energy security and environmental sustainability were the main topics for discussion when APEC Energy Ministers, energy sector business leaders and representatives of nongovernmental organizations gathered in Darwin, Australia in May to discuss the region's approach to the issue.

Key outcomes of the Eighth Meeting of APEC Energy Ministers featured an agreement to improve energy efficiency through a range of measures, including the establishment of an Energy Investment and Trade Study and Roundtable, and a voluntary APEC Energy Peer Review Mechanism to improve the operations of energy markets.

"We're now beyond debating the scientific links between CO2 emissions and climate change- it's now time for action," the Honorable Ian Macfarlane, Chair of the APEC Energy Ministers' Meeting and Australia's Minister for Industry, Tourism and Resources, told the forum. "The question is what sort of action, by whom and by when."

The meetings concluded on 30 May with the release of the "Darwin Declaration," which recognized the need to deploy cleaner, more efficient and sustainable energy technologies. The Declaration also examines emergency preparedness to ensure APEC economies manage the consequences of short-term supply disruptions.

The agreement emphasizes the need to develop best practice towards energy-efficient transportation. It encourages international collaboration on alternative fuels and intensification of efforts to develop techniques for the cost-effective use of non-food feedstock. Finally, it calls for improved oil-data sharing and cooperation with other international energy organizations.

The future prosperity of the APEC region relies on securing energy supplies and on clean and efficient energy product development and use. The International Energy Agency's scenarios say CO2 emissions will grow between 35% and 55% in the period to 2030.

The APEC region is the largest energy consumer in the world. In addition to major industrialized economies consuming large amounts of energy, like the United States and Japan, high economic growth in the remaining economies has strongly pushed up the demand for energy - in particular for fossil fuels. Fossil fuels, including coal, provide about 80% of energy demand.

According to the Asia Pacific Energy Research Center, APEC's transport energy demand will almost double from 2002 to 2030 and the transport sector is expected to account for more than 70% of APEC's incremental oil-demand growth. "Dwindling oil production within APEC, coupled with steady growth in the demand for transport oil has caused great concerns over the security of oil supply," says Mr. Kotaro Kimura, president of the Asia Pacific Energy Research Center.

In a presentation to APEC Ministers at the Darwin meeting, APEC's Energy Business Network recommended that Energy Ministers commit to effective regional action and reform of institutional arrangements to progress the APEC Leaders' Ha Noi commitment to address energy security and climate change.

"If you really want to make a difference and contribute to energy security while at the same time minimizing environmental effects, then it can be done, but it is going to take a great deal of political resolve and in some economies the solutions are going to be quite unpalatable," notes David Natusch, chair of the Energy Business Network, (EBN). The EBN was established to advise Energy Ministers directly on the views and requirements of energy business and to promote cooperation between the public and private sector in order to facilitate investment.

The EBN recommended that governments should themselves invest in the energy sector plus create an attractive investment climate for the large amounts of private capital that will be required in long-tem energy development. Economies must encourage private investment by providing appropriate incentives and not create disincentives through inappropriate regulatory actions. Meeting energy demand in APEC will require new investment of at least US$6 trillion to 2030.

The Energy Business Network's recommendations include:
  • Fair and equitable treatment for investors
  • Clear limits on the expropriation of investments
  • Free transfers of capital
  • Reliable third-party dispute resolution mechanisms such as investor-state arbitration followed by prompt payment of arbitrated claims
  • Seamless coverage of existing investments
  • Encourage investment of private capital in emissions abatement and clean technologies; eliminate disincentives such as onerous depreciation regimes, lack of R&D incentives and windfall profit taxes.

Energy Ministers should institute an immediate review of their domestic energy and greenhouse gas reduction policies with an emphasis on establishing an equitable and cooperative mechanism for the pricing of carbon emissions across the region. Says Mr. Natusch: "Doing something that will improve energy security and doing something that will minimize environmental emissions is critical, but it must be done in a way that is economic, otherwise everyone goes broke."

APEC Energy Ministers agreed to develop a peer review mechanism with the initial focus on progress toward attaining energy efficiency goals. "This ministerial directive will lead to the application of best practice policies with significant energy efficiency benefits in many APEC economies," says Mr. John Ryan, lead shepherd for APEC's Energy Working Group. "We will transform ideas into actions."

To meet the rapidly growing demand for energy, APEC Ministers also discussed how to improve the functioning of energy markets. Behind the border barriers to trade and investment were identified as a particular challenge. Ministers tasked the Energy Working Group to identify what measures can be taken to improve the openness and transparency of energy markets. "This analysis will culminate with an industry-government roundtable, which will advise Ministers on which barriers should be removed," adds Mr. Ryan.

The EWG's Expert Group on Clean Fossil Energy (EGCFE) is undertaking research activities in order to share information on technical, economic and policy aspects of clean fossil fuels. The EGCFE conducts workshops, conferences and meetings to enhance understanding on clean fossil fuel production and use and to promote early adoption of clean energy production technologies.

The EWG has also implemented the APEC Energy Security Initiative (ESI), which is responsible for the development of response mechanisms for short-term supply disruptions while pursuing longer term energy security objectives. At the Darwin meeting, the need to find synergies between regional and global action on Energy issues was also identified. Claude Mandil, Executive Director of the International Energy Agency, supported the call from Ministers to increase the collaboration between the EWG and IEA to better meet energy challenges.

Forecasts by the Asia Pacific Energy Research Center indicate that APEC's oil import dependency will rise from 36% in 2002 to 52% in 2030. Actions taken by APEC economies now will help enhance the security of supply in future decades.