South Asia: Energy imperatives of the Paris Agreement

Asia has significant scope for regional cooperation and collaboration among its energy-deficient and energy-sufficient regions to enhance its overall energy security, writes Partha Pratim Mitra for South Asia Monitor

Partha Pratim Mitra Feb 13, 2021
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The Paris Agreement under the United Nations Framework Convention on Climate Change, also called Paris Climate Agreement or COP21, international treaty, was adopted in December 2015. It aims to strengthen the global response to climate change by keeping the global temperature rise this century well below 2 degrees Celsius above pre-industrial levels, and to pursue efforts to limit the increase to 1.5 degrees. The Paris Agreement requires that all countries put forward and strengthen their best efforts through nationally determined contributions (NDCs) to limit national emissions.

There is a wide variation in commercial energy resource endowment and demand among the countries of the South Asian region. India, Pakistan and Bangladesh account for the major share of natural gas and coal resources in the region. However, these countries also have large area as well as population. The higher resource base of these countries is not commensurate with their energy needs. Bhutan and Nepal, on the other hand, have hydropower potential in excess of their demand for electricity and have a good prospect for intra-regional electricity export.

South Asia’s energy reserves low

A region-wide analysis within Asia showed that despite being the most densely populated region of Asia, South Asia’s energy reserves were very low, particularly for oil and gas, as it held 0.5 percent and 0.8 percent of the world’s total oil and gas reserves in 2007. In contrast, East Asia’s oil, gas and coal reserves were 1.4 percent, 1.4 percent, and 13.0 percent, respectively. For Central and West Asia, the reserves were 4.1 percent, 5.6 percent, and 4.6 percent, respectively. 

Asia has significant scope for regional cooperation and collaboration among its energy-deficient and energy-sufficient regions to enhance its overall energy security.

Regional cooperation and integration refer to policies and initiatives of countries in a region to engage in close economic cooperation and promote the integration of their economies through trade and investment. South Asia needs to deepen inter and intra-regional connectivity through transport, energy, and trade facilitation. Cross-border trading regulations in energy are already underway in South Asia. The proposed market, which will include Myanmar, Sri Lanka, Nepal, Bhutan, and Bangladesh, could aid regional peace and improve utilization of generation assets and efficient price discovery. The emergence of trading regulations must also build in sustainability through adequate use of local resources which goes beyond the usage of fossil fuels.

An important cooperation programme within South Asia has been Subregional Economic Cooperation (SASEC) established in 2001 as a project-based initiative that initially promoted economic cooperation by enhancing cross-border connectivity and facilitating trade between Bangladesh, Bhutan, India, and Nepal. Sri Lanka and the Maldives joined in 2014, and Myanmar in 2017. Priority areas for cooperation include transport, trade facilitation, energy, and economic corridor development. Greater cooperation is needed in the conservation and management of shared natural resources such as rivers, oceans, and forests with large biodiversity to enable sustainable uses of energy to focus on security and equity. As the economies of Asia and the Pacific and their populations continue to grow, the region becomes more important in addressing global issues on environment and climate change with the underlying focus on sustainable energy with less focus on fossil fuels.

Climate investment

The South Asia region includes three of the top five countries in terms of vulnerability to climate change globally. It thus urgently needs climate investment to enhance resilience and unlock opportunities for low carbon growth. Estimates suggest that climate impacts could reduce its annual gross domestic product by an average of 1.8 percent by 2050, rising to 8.8 percent by 2100. South Asia among other countries includes Bangladesh, Bhutan, India, the Maldives, Nepal, and Sri Lanka. All six of these countries have ratified the 2015 Paris Agreement, pledged to adapt and mitigate climate change as part of their ambitious long-term economic growth and sustainable development plans. Climate business activity in the region in key sectors such as renewable energy, green buildings, and energy-efficiency has also increased since the Paris Agreement. For example, between 2014 and 2016, when the agreement came into force, the installed capacity of renewable energy increased by 18 percent to 100 gigawatts (GW) across Bangladesh, India, and Nepal collectively.

The transition to low-carbon and resilient growth will require significant investment, which can only be delivered with the help of strong private sector commitment. The impacts of climate change on business assets, supply chains, and business interruptions are already a major concern for many of the South Asian companies. To gauge business and industry sentiment, international Finance Corporation (IFC) surveyed businesses in the region, which shows that over 85 percent of participating businesses stated that they are either very concerned or concerned about the impacts. Businesses have started to initiate action to address climate risks and opportunities by incorporating environmental considerations into their decision-making processes.

Creating markets for climate-resilient infrastructure, climate-smart agriculture, expanding renewable energy capacity, sustainable transport, and green and resilient buildings, among others, can present very good investment opportunities for the private sector. The opportunity estimated for the six countries of South Asia, representing 7.38 percent of global carbon dioxide emissions focus on those sectors that have the greatest potential to attract private investment, namely renewable energy, transport, green buildings, urban water, climate-smart agriculture, and municipal solid waste management. While the NDCs are an essential building block to signaling a market for climate investments, they need to be supplemented by a comprehensive approach to creating markets for climate business across these sectors.

Asia Pacific:  A renewable energy hub

Although the Asia Pacific region is a renewable energy hub worldwide, the deployment of renewables continues to be much lower than that of traditional energy sources in supplying the region’s rapidly increasing energy needs. Continuing growth in energy demand in the power, heating, and cooling, and transport sectors opens a multi-faceted renewable energy opportunity in the region. Some of the larger countries in size with renewable energy potential still have relatively low shares of renewables in their total final energy consumption. Although the deployment of renewable power is increasing, this is occurring at a slower rate than that of conventional fossil fuels such as natural gas and coal.

The sub-regions with the highest penetrations of renewables in the energy mix are Southeast Asia (45.7 percent on average) and South Asia (42 percent on average), in contrast to sub-regions where renewable energy comprises a smaller share of the total (Central Asia, at 16.2 percent on average, and Northeast Asia, at 11.7 percent on average).

Across the region, traditional biomass, the most widely used renewable energy source, has been gradually replaced by cleaner fuels, although most of these fuels are non-renewable in origin.

Policy analysis shows that, for a resource-constrained future, isolated policy action at the national or sub-national/regional levels cannot resolve most issues related to Asia’s energy security. Therefore, to continue its economic growth and to promote energy security, cross-border cooperation between national governments, as well as collaboration between national and local governments, is urgently called for. Asia needs to forge strategic alliances at the regional level to develop consolidated approaches to overcome various challenges. These include inadequate private sector participation, unavailability of resources in the low-income countries, lack of regional collaboration, and policy and institutional weakness.

The COVID-19 pandemic has made communities and governments recognise the benefits of decreased air pollution, revitalization of natural assets increased solidarity among communities, decentralization and localization of food and energy production. The low emission development pathway curbs climate change creates new economic opportunities and improves the health of human and natural systems. Specifically, local and regional governments should reduce environmentally harmful pollutants and Greenhouse Gas emissions from heating, cooling, lighting and food systems, and reduce noise. 

The aim for carbon neutral infrastructure and operations by mid-century, and usher in a renewable energy era, by committing to 100 percent renewable energy, divesting from fossil fuels and using nature-based solutions

The way forward, therefore, is to keep the energy imperatives of the Paris Agreement in mind and set an inclusive regional development agenda where all countries participate to achieve development sustainability.

(The writer is a retired Indian Economic Service officer who worked in the labour ministry. The views expressed are personal. He can be contacted at ppmitra56@gmail.com)  

References:

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