Shanghai Forum - APEC strives for Energy Security and Energy Sustainability
Introduction
At the outset, I would like to express my sincere gratitude to Dr. Wang Sheng Hong, the president of Fudan University and Dr. Kim Jae Youl, the Secretary General of the Korea Foundation of Advanced Studies (KFAS), the two co-sponsors of the Shanghai Forum. It is my great honor to say a few words on behalf of APEC at this prominent Forum.
The topic of this Forum, "Economic Globalization and the Choice of Asia," is quite opportune and pertinent as Shanghai is a successful showcase of the benefits accruing from the economic globalization.
Today, I wish to share with you some insights into the evolution of APEC and its contribution to the energy security to promote the economic sustainability in our region.
Asia-Pacific Economic Cooperation, or APEC, was formed in 1989 at the Ministerial level and elevated to the Leaders' level at Seattle 1993. It is a forum of 21 Member Economies committed to the liberalization of trade and investment as well as the development of an economic community based on shared prosperity and security.
Our Member Economies are vastly different in size, political power, the stage of economic development and the cultural endowments. They stretch from Russia in the west, through North and South-East Asia across the Pacific to five economies in the Americas. APEC Member Economies account for around half of the world's trade and are home to over 2.5 billion people.
The APEC process is itself very unique. While the Annual Economic Leaders' Meeting is the most prominent event on our calendar, each year a significant number of APEC events take place and more than 250 projects are undertaken around the region.
The agenda of APEC ranges from trade and investment liberalization, economic and technical cooperation, anti-corruption and human security which include health security, energy security, cargo and passenger securities.
Energy issues have been given a particularly high priority at APEC events in recent years. There is no doubt that energy is one of the critical factors underpinning the modern global economy and sustainable economic growth is dependent on adequate, reliable and affordable supplies of energy.
It was in Shanghai in 2001 that APEC Leaders identified the risks to the world economy posed by volatility in the oil market and endorsed the APEC Energy Security Initiative (ESI).
In 2004, the Comprehensive Action Initiative was adopted last year in Santiago, which further strengthened the ESI.
This commitment for enhanced energy security was motivated by the serious impact of recent high oil prices on APEC economies and the need to strengthen the counter-terrorism activities.
Today, I would like to highlight three broad issues to which APEC has given higher priorities. These are: 1) energy demand and supply in APEC region; 2) Facilitating energy investment and energy efficiency; 3) Expanding energy sources and technological innovation:
Information Exchange of Energy Demand and Supply in APEC Region
Looking around the Asia-Pacific, energy demand has been remarkably strong for some time, and only looks like strengthening. In recent years annual energy consumption in the APEC Region accounted for around 59% of total world energy consumption. This level of consumption is further expected to increase by over sixty per cent over the period of 1995 to 2020.
The APEC region is in fact an overall net energy importer, and these energy imports are projected to increase exponentially in the coming years. According to the report of Asia Pacific Energy Research Center, or APERC, regional dependence on imported oil will increase to 55% by 2020 from its current level of 36%.
This growing appetite for energy poses a serious energy security concern throughout the region. To address the requirement for accurate data on energy demand and supply in the APEC region, APEC has adopted a number of actions.
One of the notable achievements is the operation of the Asia Pacific Energy Research Center, which was established on Japan's initiative. APERC is a joint research institution tasked with evaluating energy supply and demand outlook in APEC region.
APEC also continued through the EWG Expert Group on Energy Data and Analysis to collect and report monthly oil data to the global Joint Oil Data Initiative (JODI). This has served as a means to improve the accuracy, coverage and timeliness of data and transparency in the global oil market.
Moreover, an Internet-based Real-time Emergency Information Sharing System is being developed to deal with potential issues such as earthquakes, tsunamis, sudden power blackouts, and terrorist attacks.
Facilitating Energy Investment and Energy Efficiency
Upward pressure on energy prices is attributable to many different reasons such as the strong energy demand from Asia and North America, geopolitical instability in key energy exporting countries, constraints on infrastructure to deliver energy sources to the market and volatility of financial markets.
If steps are not taken to attract investment in a timely manner, this situation is expected to worsen. According to APEC projections, this substantial and ever-increasing demand for energy poses significant challenges in mobilising private capital and international financial resources to meet regional needs. It is estimated that around US$3.4 trillion to US$4.4 trillion will be required in energy investments over the next 20 years.
Developing economies are faced with greater challenges with energy investment requirements being larger while at the same time their domestic capital markets are often underdeveloped. There are also problems for industrialized economies where regulatory uncertainty may often make it harder to attract capital to develop energy infrastructure.
Under the current economic environment, APEC's priority has been given to facilitating investment in the energy sector, fostering efficient capital markets, and engaging international financial institutions and the private sector.
APEC presented recommendations in the EWG's 'Energy Investment Report.' This report was developed working closely with the private sector through the Energy Working Group Business Network and representatives from the financial community.
In addition, APEC has undertaken several projects that seek to build support for establishing standardized methods and procedures for financing Energy Efficiency Projects, or EEPs to alleviate investor's concerns.
APEC has also worked together on energy standards to enhance energy efficiency. As part of these efforts APEC has carried out a 'Pledge and Review Program' by developing guidelines and has supported the Energy Standards and Labeling Cooperation Initiative.
Expanding Energy Choices and Technological Innovations
The high reliance on the use of fossil fuels in the Asia-Pacific contributes directly to pollution of the environment, increasing levels of greenhouse gases in the atmosphere, increased health problems, global warming, climate instability and acid rain.
In many instances, renewable energy can provide a cheap, clean and reliable source of electricity, but the role of these renewable energy sources is currently limited in the marketplace.
The development of new and renewable energy involves a large allocation of resources and advanced technology, which developing countries often find difficult to finance. APEC has placed great priority on supporting the development of viable new and renewable energy technologies by encouraging information exchange, technology transfer, capacity building and market development.
APEC has also supported the research and development of hydrogen and alternative transportation fuels and methane hydrates. Some APEC Leaders have characterized the future APEC economy as the hydrogen economy, and work towards the development of hydrogen technology. APEC also encourages interested members to cooperate on nuclear powers in accordance with the framework agreed by members.
Closing Remarks
The sustainable and secure energy supplies are precondition for the sustained trade flow, the creation of new jobs and ultimately the future prosperity of our region. APEC Member Economies are committed to undertaking joint and individual activities to promote energy development, to seek opportunities to enhance the attractiveness of investment in the energy sector, and to develop new and renewable energy sources.
APEC also bears in mind that around 200 million people still have no access to electricity in this region, and will continue to give priority to sustainable development, poverty reduction and environmental consideration.
APEC Energy Ministers have met six times since 1996 when 14 non-binding energy policy principles were adopted. In light of sustained high oil prices and its possible adverse impact on APEC economic growth, APEC Energy Ministers have also agreed to hold an extraordinary meeting in Korea in October 2005. I hope sincerely that this Ministerial meeting will provide substantial input to alleviating current energy concerns faced by this region.
Finally, I wish to thank the Fudan University and KFAS for the excellent arrangements of this important event with prominent figures. I am confident that our discussion in this forum will certainly contribute to the strengthening of the energy security of this region.
Thank you.