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China's and India's increasing weight in international trade imposes an obligation to contribute to enhancing global energy security, an effort that will also impact the rest of the world. First, the security of supply will be tackled and then we will analyse what can be done to improve the state of the environment. These two issues should be considered together by the countries concerned, as most of the solutions overlap. Indeed, the policies needed to improve the environment also partly improve the security of supply, and vice-versa. They are both part of a so-called sustainable energy future that needs to be devised for Asian countries. The concept of security of energy supply means, basically, the capacity of any given country to have access to adequate, affordable and reliable supplies of energy. This security may be ‘challenged' by energy market instabilities, technical failures or physical security threats. As far as the Asian governments are concerned, the biggest concern is oil. Indeed, gas does not currently represent a very large share of their energy mixes and coal comes mainly from indigenous production and its resources are better shared. Therefore, as we shall see, the strategies of Chinese, Indian and even Japanese governments are focusing on oil resources.
The most common way to measure energy conservation is to use energy intensity which is the amount of energy used to produce one dollar of GDP. Developing Asian countries are not performing very well and there is, in this respect, a good deal of room for improvement. On the other hand, Japan is one of the best countries in this regard. In recent years, China and India have enacted laws to increase their energy savings. For example, China has set intensity targets for its provinces, has closed inefficient power plants and heavy industry and has reduced its subsidies to better reflect international prices, to increase energy efficiency and to make producers take into account their effect on the environment. In 2004, China's medium- and long-term plan for energy conservation, which gives specific targets for a number of sectors (industrial, transport, building), was released. It provided guidance to achieve the required 20 per cent improvement in energy efficiency needed between 2005 and 2010 by the Eleventh Five-Year Plan, although the government still needs to invest more in that area. Lastly, the Top 1,000 Enterprises Energy Efficiency Programme is aimed at setting targets for the largest Chinese firms in terms of energy intensity and the goal of the Energy Conservation in Government Programme, in force since 2006, is to improve the energy efficiency of government institutions.
In India, a Bureau of Energy Efficiency was set up in 2001 to coordinate policies and programmes. It has also decided to introduce compulsory labels in terms of energy efficiency in buildings and to improve existing power plants and networks so that losses are reduced. The Indian Tenth Five-Year Plan set an objective of energy savings of 13 per cent through efficiency improvements, without specifying the expected efficiency gains per sector. Efforts concerning conservation and efficiency have already paid off. Indeed, petrol and diesel consumption increases have slowed thanks to better roads and vehicles.
Even Japan, which is one of the best performing countries, has set a target of reducing its energy consumption per unit of GDP by 30 per cent by 2030. The Asian Development Bank decided to launch a project on energy efficiency improvement that will in the future enable the implementation of lending and non-lending assistance programmes. In the past, the Asian Development Bank has already financed a number of projects such as $150 million for the Industrial Development Bank of India for large industrial energy efficiency improvement projects. Currently, most of the Asian developing countries are heavily reliant on coal. For example, it represents 47 per cent of the energy mix9 in developing Asian countries; while in Japan 47 per cent of its energy is derived from oil. Diversifying would reduce reliance on one or the other of these energy sources and thus they would be less affected in case of an energy crisis. Projects of this kind are currently undertaken in many countries. For example, China is developing its natural gas market both through the construction of liquefied natural gas (LNG) terminals and pipelines and is supporting, as is India, its renewables market. Renewables and nuclear power represent domestic sources of energy and, thus, enable a country to be less reliant on others. Renewable energy sources are also widely distributed and can, therefore, reduce transmission losses and costs for electricity generation.
Projects of hydropower, nuclear power, biomass, biofuels, wind and solar generation have been launched in these two countries. It should be noted that India was, in 2004, the fifth-largest wind energy producer in the world. The Indian Ministry of Petroleum and Natural Gas's Hydrocarbon Vision 2025 report specified that natural gas should become the main Indian source of energy. As for diversification of the energy mix, Japan has set an objective to reduce to less than 40 per cent the share of oil in its energy mix and to increase to 30-40 per cent at least the share of electricity produced by nuclear power. In terms of cooperation, it can be noted that India has been assisting Bhutan and Nepal both technically and financially in the development of their hydropower resources. More generally, China has cooperation projects in the fields of renewables with the Asian Development Bank, the World Bank, the US, Italy, Germany and Britain, while India has renewables projects with UNDP/GEF, the World Bank and the Asian Development Bank. These two countries are also establishing cooperation in the field of renewables through academic committees, forums and manpower sharing.