Title: Policy Study on CrossBorder Energy Trade and its Impact on the Poor
1Policy Study on Cross-Border Energy Trade and its
Impact on the Poor
- Presented to
- UNDP Technical Review Committee
- 23-24 March 2006, Bangkok
- Econ Analysis
2Study Objectives
- Review recent developments in cross-border trade
in energy at global, regional, sub-regional and
bilateral levels involving AsiaPacific
countries. - Assess the overall economic, social,
environmental and energy security impacts of
cross border energy trade from the perspectives
of both exporting and importing regional
countries. - Assess the economic, social, environmental and
energy access impacts of cross-border trade on
the poor. - Assess the qualitative and quantitative impact
of energy trade on various components of MDGs and
relate the outcomes to progress made towards
meeting the MDGs. - Identify opportunities and barriers for
cross-border energy trade involving Asia-Pacific
countries, and make recommendations on strategic
directions and policy options for regional
governments, with special reference to the
economic, social and energy needs of the poor.
3Coverage of Interim Reports
- Global assessment
- overall macro-economic impacts at
international level based on secondary data and
live consultations - Regional assessment
- region-specific impacts, accounting for
sub-regional diversities, based on secondary data
and live consultations - National assessment
- macro level assessment based on secondary
data, combined with micro level survey of poor
communities in 2 villages in India
4Key Findings of Global AssessmentTrade in Oil,
2003
5Key Findings of Global AssessmentTrade in gas,
2004
6Key Findings of Global AssessmentTrade in coal,
2004
7Key Findings of Global AssessmentTrade in
electricity, 2000-2003
8Key Findings of Global AssessmentOutlook for
energy goods trade by 2030
- Share of oil trade expected to increase by more
than 50 - Share of gas trade to double
- Share of coal trade in coal to remain the same
- Share of electricity trade to increase as demand
in Asia more than doubles - Much of additional oil and gas exports to come
from Middle-East, with imports by Asia rising
threefold - Most of world coal trade to remain in Asia
- Several new electricity interconnection projects
under consideration within Asia
9Key Findings of Global AssessmentFDI flows in
energy, gas and water services 1989-2003 (million
USD)
10Key Findings of Global AssessmentInvestments in
energy infrastructure with private sector
participation, 1990-2003
11Key Findings of Regional AssessmentPotential
impacts of energy goods trade on exporters
- Increased revenue for trading company, with
possible knock-on benefits for economy () - Increase in government revenues ()
- Additional finance for increasing access to poor
people () - Financing new infrastructure with dual
domestic/export use () - System benefits of electricity grid
interconnection () - Possible lower or higher domestic prices (/-)
- Risk of Dutch disease and commodity price
volatility (-) - Corruption, predatory governance and conflict (-)
- Environmental damage (-)
- Social dislocation and disruption (-)
12Key Findings of Regional AssessmentPotential
impacts of energy goods trade on importers
- Savings by importer can mean lower costs/tariffs
() - Savings by importer can mean more capital for
expansion of access () - Greater supply reliability and diversity ()
- Decreased need for government subsidies to energy
importer () - Avoidance of pollution from domestic energy
production () - Eventual improvements to reliability and access
to modern energy will help lower unsustainable
biomass use () - Exposure to price volatility (-)
- Greater environmental impact from higher economic
activity (-)
13Key Findings of Regional AssessmentPotential
impacts of energy services trade on importers
- Reduced investment costs for government ()
- Transfer of technology and know-how can lower
costs, improve reliability () - Eventual lower costs present opportunity to lower
tariffs () - Eventual lower costs and imported technology
provide opportunities to increase access though
government leverage to impose it will be more
limited (/-) - Constraint on governments ability to impose
public service regulations (/-) - Effects of energy market liberalisation
- Lower costs due to competition could lead to
lower tariffs () - Competitive markets may not promote investment
(-) - Liberalisation of off-grid market may lead to
increased rural access ()
14Key Findings of Regional AssessmentEnergy trade
trends in China
- Continued high reliance on coal, but declining
share in total energy consumption - Interest in expanding coal exports within region
- Rapid increase in oil demand 3-5 p.a. over
next 25 yrs. with 80 to be imported - Rapid increase in gas demand 5-12 over next
15-25 yrs. switch to net importer status by
2010 - Ongoing expansion of global sourcing of oil and
gas from a growing number of countries
15Key Findings of Regional AssessmentEnergy trade
trends in Indonesia, Malaysia and Thailand
- Indonesia became a net oil importer in 2004 due
to decline in crude production, but gas
production in increasing and coal production is
planned to double regional gas and coal exports
set to rise in future - Malaysias oil production stable with new
production-sharing ventures aimed at increasing
net supply, gas production on the rise regional
gas exports set to increase - Thailands oil import dependency declining but
remains high (92), coal imports (33), gas
imports (21) and electricity imports (3) - All three countries replacing oil with natural gas
16Key Findings of Regional AssessmentEnergy trade
trends in Pacific Island Countries
- All countries, except Papua New Guinea, are oil
importers - Papua New Guineas oil reserves are depleting
and, in any case, it is a net importer in the
absence of refining capacity - All countries import mainly from Singapore, a few
from Australia - Fuel import costs have increased 60 during
2000-2004 for PICs, forming a significant part of
their trade deficits - Several countries now exploring biofuel options
from palm oil, coconut oil and cassava for fuel
and electricity
17Key Findings of National AssessmentIndonesia
Macroeconomic impacts of energy trade (exports)
- Export of energy resources (oil, gas and coal)
created huge state revenues since oil price boom
of 1970s - In spite of corruption and governance problems,
substantial investments made in infrastructure,
education and health, especially in rural areas - By and large, Dutch disease and other natural
resource curses were avoided, but governance
problems underpinned pace of development - Following Asian economic crisis of 1997,
large-scale decentralization initiated, including
sharing of LNG revenues between central, state
and local governments - Significant poverty reduction gains were induced
by economic growth accompanied by pro-poor,
rural-directed policies but relatively low
priority to social services compared to other
sub-regional countries - Decentralization of resource allocation has
increased regional disparities, with poor
remaining vulnerable - Recent steep reduction in fuel price subsidies,
with eventual intent to remove them altogether,
accompanied by poverty reduction measures but
benefits of these to richest 10 five times more
than those for poorest 10
18Key Findings of National AssessmentIndonesia
oil and gas revenue-sharing arrangements
19Key Findings of National AssessmentIndonesia
investment in social sectors
20Key Findings of National AssessmentIndonesia
poverty reduction measures to offset reduction in
fuel price subsidies
- Direct cash payment to registered poor households
of Rp. 100,000 (equivalent to about US11) per
month, totalling about Rp. 4.7 trillion
(equivalent to US520 million) in 2005. - Operational aids for schools at primary and
junior secondary level. A grant of about Rp. 300
000/pupil/year has reduced school fees throughout
the country. Allocation in the 2005 budget was
Rp. 6.3 trillion (US 700 million). - Basic health care and health insurance for the
poor, through free of charge service at public
health clinics, and free in-patient treatment at
third class hospitals for the poor. The planned
2005 budget for this was Rp. 3.9 trillion (US430
million). - Provision of block grants for rural/village
infrastructure in a set of prioritised districts.
The planned budget was Rp. 3.3 trillion for 2005
(US 370 million).
21Key Findings of National AssessmentIndonesia
microeconomic impacts of energy trade Bontang
township and LNG plant
- PT Badak NGL started in 1977, leading to rapid
development of Bontang township - Significant infrastructure development has taken
place since then roads, market, school, water,
gas, electricity - Several new shops and establishments have emerged
- Fertilizer and coal mining facilities set up
- PT Badak NGLs community development programme
has spent more than USD 6 million in
infrastructure, health, education and
environmental impact mitigation - Poverty levels in Bontang township declined
significantly in comparison to provincial and
national averages - Access to civic amenities and social services of
by Bontang population increased commensurately - However, unemployment levels in Bontang are
higher than provincial average, likely due to
high reliance on migrant workers - Adverse environmental impacts on local population
have risen due to growth in air and water
pollution, and reduction in mangrove forested
areas taken up by the large corporations
22Key Findings of National AssessmentIndonesia
microeconomic impacts of energy trade Poverty
indicators of Bontang township
23Key Findings of National AssessmentIndonesia
microeconomic impacts of energy trade
allocation of PT Badak NGLs community
development funds
24Comments for Follow-Up
- Global Assessment
- More analysis required of global energy
transitions arising from heightened competition
in international energy markets e.g., revival
of interest in nuclear energy, effects of Kyoto
Protocol on fossil fuel demand and clean
technology exports - Trade in energy services not adequately explored
in terms of implications for structural changes
in developing country energy markets - Many changes have occurred and are in progress in
energy market liberalization in the region,
particularly in electricity sector, which should
be more fully captured - A discussion is needed on ongoing debate under
WTOs GATS for liberalization of energy services,
reflecting both developed and developing country
viewpoints (some discussion is currently in
regional assessment) - More disaggregation needed to bring out
investment implications in energy sectors other
than electricity (although electricity is the
most significant)
25Comments for Follow-Up
- Regional Assessment
- Potential impacts of energy market liberalization
need to be discussed in more balanced manner to
bring out negative short-/medium-term price
increases, effects on domestic industry and
access issues for the poor. - Coverage of countries needs to be wider,
following UNDP sub-regional classification. - In particular, more attention is needed on South
Asia, especially in relation to gas and
electricity trade between India and its
neighbours (current discussion relating to Iran
is cursory and not very useful). - Discussion of energy consumption trends in
Pacific Island Countries excessive and unmatched
by similar discussions for other countries
covered. - While poverty and MDGs are summarized for
countries covered, correlation with energy trade
comes through to some extent only for Pacific
Island Countries. Table A-1 attempts to link
energy trade and energy access, but data needs to
be handled cautiously (e.g., Nepal where biomass
consumption has grown despite rise in energy
trade). If further refined, especially for
poverty implications, it can be brought into main
report. - Overall, there is a need to map out energy trade
trends and developments in the region more
systematically, with an eye to their global
geopolitical implications.
26Comments for Follow-Up
- National/micro assessment
- Temporal dimension of poverty not sufficiently
captured in micro assessment, need to assess
poverty trends among indigenous population since
establishment of township - Higher unemployment among local population not
explained and needs further exploration - Environmental impacts not sufficiently
elaborated/quantified - Socio-cultural impacts due to large influx of
migrant population not assessed - On the whole, case study presents an overly
positive picture and needs a better balance
against negative impacts of boom town
phenomenon