IEEJ： July 2014

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Special Bulletin
A Japanese Perspective on the International Energy Landscape (181)

July 30, 2014

Future Scenarios for Northeast Asian Energy and Nuclear Problems
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn July 28-29 in Washington DC, I had an opportunity to exchange views with Americanand Northeast Asian experts on energy and nuclear problems in Northeast Asia including Japan,
China, South Korea and Russia. Based on the present Northeast Asian situation, we discussed
various future scenarios for energy and nuclear problems and their potential impacts. In thefollowing, I would like to summarize impressive points of the discussions.
First, one focus of the discussions was nuclear energy or nuclear power generation as
indicated by the theme. Primarily, participants in the discussions were interested in how theFukushima nuclear plant accident in Japan has affected and will continue to affect Japan's energy
policy and choices. At the same time, we discussed how the Fukushima accident impacted otherNortheast Asian nuclear energy using countries, including South Korea and China, beyond the scopeof Japan. Particularly, we had heated discussions on scenarios for some problems or accidents arisingin China that plans to expand nuclear power generation most substantially and rapidly in the world.
There were intense discussions on how the problems or accidents would (adversely) impact China's
nuclear program and energy policies in Japan and South Korea.
The impacts, though depending on the severity of the problems or accidents, the Chinese
government's response to them and their causes, could develop into grave ones. They may affectnuclear power generation development that China views as important for diversifying electricity
sources away from dominant coal, in response to growing energy and electricity demand. At thesame time, they may exert spillover effects on energy policy discussions in Japan and South Korea,
where people are still sensitive to nuclear safety in the wake of the Fukushima accident. In this sense,
the enhancement of the three nuclear S's (safety, security and safeguards) is a common challenge forNortheast Asian countries (and the whole of Asia). They are in the same boat. Cooperation in sharing
information and securing transparency regarding accidents and in responding to emergency
situations may also be an important challenge for Northeast Asia.
Second, the relationship between Northeast Asia and Russia, as one of the major matters ofconcern to us, attracted attention by becoming one of the topics of the discussions. As international
tensions were growing over the Ukraine situation, we discussed whether Russia would enhance its1

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approach to Northeast Asia to sharply expand oil and gas supply to the region and how suchdevelopment would impact Northeast Asian energy policy and Japan-China-South Korea relations.
As indicated by a large China-Russia gas deal cut earlier this year, the scenario for Russia's enhanced
approach to Northeast Asia has become more plausible. Therefore, the scenario became a major
topic of interest in the discussions. It was noted that China, Japan and South Korea have different
relations with Russia. China is enhancing its strategic relationship with Russia, while Japan must go
along with its Group of Seven partners. A pipeline for oil and gas supply from Russia to South Korea
would have to pass through North Korea. In spite of such differences, it was noted that massive
Russian gas (and oil) flow into Northeast Asia would make great contributions to easing thesupply-demand balance and diversifying supply sources for the region and would be very significant
for the region's gas procurement at competitive prices. As a result, it was pointed out that gas'sgreater competitiveness would exert some impacts on energy policies and choices in Northeast Asiaand on plans for other energy sources like nuclear, coal and renewable energy.
Third, discussions were heated on Northeast Asian environmental problems including how
the growing air pollution issue in China would affect its energy choices. Given the urgency of theissue, the Chinese government is expected to take measures that would produce effects as early aspossible. In this respect, discussion was made that the government would give priority toaccelerating energy conservation measures and the introduction of natural gas. Even if the Chinese
government immediately decides to promote energy conservation and natural gas, however, visible
effects of such decision may emerge over a medium term. In the discussions, substantial accelerationof the nuclear power generation program was cited as a possible long-term option to sharply reducecoal consumption in China. But China has already been developing nuclear power generation at anunprecedented pace. If its nuclear program is further accelerated, its feasibility and safety measures
may become a major challenge. As another problem, it was cited in the discussions that the impactof a sharp expansion in Chinese natural gas demand over a medium to long term on thesupply-demand balance in Asian and international gas markets and on gas procurement competition.
The discussions also covered how nuclear (non-proliferation) problems and strategies
would develop in major Northeast Asian countries including Japan in the presence of complicatedinternational relations involving tensions between major players in the region, Russian policies andthe United States' Asian engagement policy, as well as growing geopolitical tensions. The
discussions, though based on scenario approaches, led me to recognize anew that the nuclear(non-proliferation) problem is an important real and existing challenge for all countries in the region
at a time when international and geopolitical tensions remain high.
In Northeast Asia, there are various problems regarding energy and geopolitics. Japan,
which is geographically located in the region, must strive to solve these Northeast Asian problems
through dialogue and cooperation with other countries in the region and with its key ally, the UnitedStates.
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