IEEJ：September 2015ｃ○ IEEJ 2015

Special Bulletin
A Japanese Perspective on the International Energy Landscape (238)September 25, 2015

Energy Challenges in Japan, China and South Korea
and the Regional Cooperation
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn September 24, the second Japan-China-South Korea joint energy workshop took placein Beijing. Representatives of the Institute of Energy Economics, Japan, China's Energy ResearchInstitute and the Korea Energy Economic Institute attended the workshop, following the first one inSeoul last year, to discuss the three countries' energy challenges, initiatives to resolve thesechallenges and their energy cooperation as part of such initiatives.
As noted in my 188th special bulletin on “A Japanese Perspective on the International
Energy Landscape” that summed up discussions at the first trilateral workshop, the international
political situation and tensions regarding Japan, China and South Korea had once prevented the three
institutes from holding their meeting. But the first workshop overcame this problem and launched aconstructive attempt to explore the three countries' energy cooperation and help improve theirrelations by enhancing and deepening discussions among the three institutes. The second one wassignificant for solidifying the momentum gained last year.
Following opening speeches by the heads of the three institutes at the outset of theworkshop, each of the three countries' presentations came in the first session on general energy
policy challenges, the second on energy conservation policies, the third on energy-environment andclimate change policies and the fourth on renewable energy policies. Lastly, participants made lively
discussion to cover the topics in the previous sessions. In the following, I would like to sum up somepoints that were impressive to me in the workshop.
First, I felt that the three countries, though in different conditions, commonly face difficultenergy policy challenges. Japan has at last worked out an energy mix as a desirable picture for
FY2030 under its energy policy. But its realization may not be easy. Japan will have to addressdifficult challenges such as the further enhancement of energy conservation, the restart of nuclear
power plants and the revision of renewable energy policies. China, while pursuing stability in the"New Normal," has seen a faster-than-expected slowdown in economic growth resulting in an energy
demand slump and an oversupply. Under such situation, China is now required to formulate the 13th
five-year development plan and a medium to long-term energy strategy. A major challenge for South1IEEJ：September 2015ｃ
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Korea is to reform its energy market while enhancing energy conservation and renewable energy
diffusion and proceeding with the steady utilization and promotion of nuclear energy. Presentations
by the three countries' institutes indicated their respective problems and efforts to solve them.
Second, I felt that the three countries must take future-oriented initiatives as theinternational situation surrounding these countries, plagued with their respective challenges, isgrowing uncertain. Japan and South Korea, which heavily depend on energy imports, have benefitted
from the recent declines in crude oil and liquefied natural gas prices and the loosening internationalenergy supply-demand balance that has brought about the price drops. China, though depending onimports for only about 15% of its overall primary energy supply, also has a heavy dependence on oil
and to lesser extent on gas imports, being placed in the same situation as Japan and South Korea. But
there are concerns that the present low prices would be reversed over a medium to long term to bereplaced with high prices under a tighter supply-demand balance. I thought that how to takeadvantage of the current situation without being complacent with the easy supply-demand balanceand buyers' markets at present is a challenge common to the three countries amid the uncertainties.
Regarding the abovementioned points, some workshop participants in the discussion
argued that Asian LNG market functions should be strengthened through the invigoration of themarket, the enhancement of transparency and the expansion of the market's flexibility to further
develop the market. Specifically, they called for the three countries to commonly try to relax orrepeal the so-called destination clause in LNG import contracts. Given the three countries' great
presence in the Asian or international LNG market, we should not ignore the possibility that theircooperation in trying to do so could have great impacts. In this sense, we may have to closely watch
future developments regarding the three countries' efforts to address this issue.
Among other topics, workshop participants made various arguments about the importanceof information exchanges on effects and limits of initiatives, institutions and policies for enhancing
energy conservation and diffusing renewable energy while minimizing economic costs. They also
discussed the significance of deepening information exchanges on how to position and use nuclear
energy that has been exposed to serious public criticisms while being basically expected to play a
key role in addressing the 3Es -- economic efficiency, energy security and environmental protection,
as well as on the 3S (safety, security and safeguard) challenges as the base for nuclear energy
utilization. Many workshop participants pointed out that while countries in general should
individually make serious efforts to address energy and environmental problems in principle, theirenergy cooperation to complement individual efforts would be extremely important. Particularly,
Japan-China-South Korea cooperation would be significant because of its great impact and spillover
effects on the three countries' overall relations, they noted, indicating constructive and friendly
discussions.

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Based on the deepened discussions, a proposal came from Japan to host the third trilateralworkshop. The proposal was broadly approved. In the future, I hope that the three countries willproceed with good discussions toward their resolution of energy problems and their relevant
cooperation.

Contact: report@tky.ieej.or.jp
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