IEEJ e-NEWSLETTER No. 54: January 21, 2015ｃ IEEJ 2015○

IEEJ e-NEWSLETTER
No. 54(Based on Japanese No. 136)
Published: January 21, 2015
The Institute of Energy Economics, JapanIEEJ e-Newsletter Editor: Yukari Yamashita, Director
IEEJ Newsletter Editor: Ken Koyama, Managing Director
Inui Bldg. Kachidoki, 13-1 Kachidoki 1-chome, Chuo-ku, Tokyo 104-0054
Tel: +81-3-5547-0211 Fax: +81-3-5547-0223

Contents【Energy Market and Policy Trends】

1. Renewable Energies
2. Energy Conservation
3. Activities Related to Global Warming in 2015
【Global Watch】

4. China: Will the New Normal Succeed?
5. Middle East: A Year without End
6. Russia: Putin Government Stymied by Sanctions and Falling Oil Price
7. US: Low Oil Prices and Shale, and Political Gridlock
8. EU: European Gas Situation and the Ukraine Crisis
9. Energy and Environmental Issues for APEC1IEEJ e-NEWSLETTER No. 54: January 21, 2015ｃ IEEJ 2015○

Summary
1. Renewable Energies
Last year, a detailed review of the FIT system was conducted in response to the rapid increase ofrenewable energy capacities and the consequent withholding of their grid connection. In 2015, the system
will be comprehensively reviewed, focusing on the cost burden and target pace of introduction.

2. Energy Conservation
The draft interim report released by the Resource and Energy Agency's Energy Efficiency andConservation Subcommittee at the end of 2014. There are high hopes for the role of energy conservationin the upcoming discussions on the energy mix.

3. Activities Related to Global Warming in 2015
2015 will be a milestone for both domestic and overseas climate actions, with the international climate
action framework beyond 2020 and the associated GHG emission targets and related measures of Japan due
to be finalized.

4. China: Will the New Normal Succeed?
2015 is the year for firmly establishing the New Normal. The country aims to grow steadily at 7%, but
can it execute the required institutional reforms of the economy? Comprehensive measures for energy andthe environment are expected.

5. Middle East: A Year without End
The “Arab Spring” ended as if in a dream. There is an urgent need to take coordinated action against IS.
Iran's stance in the nuclear talks is not expected to change. Cutting oil production is a tough option.

6. Russia: Putin Government Stymied by Sanctions and Falling Oil Price
In addition to the economic sanctions by the West, the falling oil price is hitting the Russian economy
hard. President Putin remains intransigent, but public support for him could waver if the crisis is prolonged.

7. US: Low Oil Prices and Shale, and Political Gridlock
The plummeting oil price is testing the endurance of shale, which has been supporting the US economy.
Heading into the next presidential election, US politics will remain gridlocked.

8. EU: European Gas Situation and the Ukraine Crisis
The energy situation in the EU is likely to remain unstable due to the Ukraine-Russia gas disputes. The
gas situation will remain in focus particularly in Southern and Eastern Europe.

9. Energy and Environmental Issues for APECIn 2014, APEC agreed on the target of doubling the share of renewable energies in the region. However,2015 will see many challenges, with the definition of renewable energies (whether to include traditional
biofuel and large-scale hydropower) left undecided.

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IEEJ e-NEWSLETTER No. 54: January 21, 2015ｃ IEEJ 2015○

1. Renewable Energies
Hisashi Hoshi, Board Member, Director
New and Renewable Energy & International Cooperation Unit
The key events in this area for 2014 were the unexpected rapid expansion of renewable energies andthe consequent withholding of connection of licensed capacity. 2015 will see a broader debate on
Japan's policy for introducing renewable energies.
At the end of last September, five power companies announced that they would stop responding toapplications for licensing and connecting vast amounts of solar PV capacity. This was caused by thenationwide rush of last-minute licensing applications for solar capacity in March to beat the reductionin the purchase price planned from April. The Ministry of Economy, Trade and Industry responded
quickly. It set up the Electricity Systems WG in just two weeks after the announcement, establishedthe capacity that the grid can accommodate, planned a response to the immediate issues and draftedrectification to the FIT system in the New and Renewable Energy Subcommittee, which were thenannounced as the "Revision of the Current System of Operation of the Feed-in Tariff Scheme toward
the Maximum Introduction of Renewable Energy" on December 18, 2014.
Withholding grid connection could have affected investor confidence in renewable energies as an"institutional risk". As it turned out, however, the situation benefited the future of renewable energies
by establishing a common understanding between the power companies and the third-party committee
on the amount of renewable electricity that can be connected, which had been somewhat ambiguous.
Furthermore, the subcommittee has come up with improved framework for curtailment of output
from PV plants and wind farms, an effective means for stabilizing the grid, such as expanding thescope of curtailment to include facilities smaller than 500 kW, shifting from day-based to hour-based
management, and requiring the introduction of a remote control system.
The policy for introducing renewable energies will be keenly discussed in 2015, mainly in the New
and Renewable Energy Subcommittee. One of the concerns raised by the recent surge in licensed
capacity, in addition to the impact on the grid, was the increase in the surcharge. Suppressing the costburden will remain a main theme of the discussions. To achieve it, the purchase price and the pace ofintroduction will need to be set appropriately, as well as a goal for controlling the amount of new
capacity.
If these are to be pursued under the current FIT system, it will be necessary to reflect costs moreaccurately by setting an annual target for the amount of each type of renewable energy and reviewing
the purchase price more frequently. One option could be to apply a variable reduction rate to thepurchase price based on the amount introduced as is done in Germany, rather than full cost pricing.
Other options could include the bidding system and RPS, Renewable Portfolio Standard. Whereas
for the FIT system the price is determined by the government and the volume is determined by the
number of private entrants, with the bidding system the government determines the volume while theelectricity producers decide the price. Bidding could be an effective approach for mature sectors suchas solar PV which has a large number of players and high market fluidity, and where it is relatively
easy to build a healthy competitive environment. The UK has been deciding its CfD strike price bybidding since 2014, and Germany is also planning to introduce it in 2017 or later. A broad range of
discussions in the New and Renewable Energy Subcommittee is keenly awaited.

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2. Energy Conservation
Koichi Sasaki, Senior Researcher, Manager
Energy Conservation Group
Global Environment & Sustainable Development Unit

In 2014, leveling of the demand for electricity was implemented based on the Energy
Conservation Act amended in the previous year, and accordingly, an evaluation of ways tolower peak electricity demand was launched. Further, the Resource and Energy Agency's
Energy Efficiency and Conservation Subcommittee held seven meetings to promote energy
conservation, and released a draft interim report at year-end. The major proposals of the reportare: (1) expansion and improvement of benchmarks of the industrial sector, (2) introduction ofbusiness-specific benchmarks in the commercial sector, and (3) mandatory compliance ofhouses and buildings with the energy conservation standards.
Regarding (1), for which benchmarks have so far been set for ten processes of six
sub-sectors, the draft interim report suggests improving the appropriate benchmark indicesand target levels, and adding more sub-sectors. The benchmark system is expected to drive
efforts for energy conservation, which should preferably be accompanied by promotion of
investment in aging facilities.
Regarding (2), a study group is discussing applying benchmarks, like the ones for theindustrial sector, to commercial sector such as chain stores and department stores in line with
their energy demand structure. Introducing benchmarks would allow an absolute assessmentof the energy conservation status, and enable a fairer evaluation of energy saving efforts.
Regarding (3), specific efforts will be launched based on the Basic Energy Plan approvedby the Cabinet, which requires new houses and buildings to comply, in steps, with the energy
conservation standards by 2020.
An unprecedented level of support would be needed to steadily implement these energy
conservation measures. For energy conservation subsidies, a budget of 75 billion yen has beenrequested for 2015, 1.8 times the budget of 41 billion for 2014. This is expected to boost
energy conservation.
Meanwhile, the highlight of energy conservation overseas was the final approval by theEuropean Council of the EU of the "2030 policy framework for climate and energy". This
framework includes the goal of cutting primary energy consumption by 27% by improving
energy efficiency. However, unlike the goals for GHG reduction and renewable energy
introduction, this goal is a non-binding, best-effort target like that for 2020.
Energy conservation will feature heavily in the upcoming discussions on the energy mix
that underpins the Basic Energy Plan, and further efforts will be needed from the demand side
too. However, it is important to set a realistic target with due consideration of economic
efficiency.
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3. Activities Related to Global Warming in 2015
Hiroki Kudo, Assistant to Managing Director
Global Environment & Sustainable Development Unit

2015 is a milestone for both domestic and overseas climate action. At the end of November,the 21st Conference of the Parties (COP21) of the United Nations Framework Convention on
Climate Change (UNFCCC) will be held in Paris, France, to discuss and agree on a climate
framework beyond 2020 encompassing all member countries. COP 20 held in Peru in 2014
discussed the direction of the Intended Nationally Determined Contributions (INDC) beyond
2020 to be submitted by each country. However, opinions differed widely on key points suchas the clear reference to financial aid from developed countries to developing countries, inaddition to GHG emissions reduction targets and the measures to achieve them. It is still notcertain whether an effective framework will be agreed on in COP21.
In contrast to the top-down approach of the Kyoto Protocol, which involved only developed
countries, the new pledge & review approach aims to encompass all countries, including
developing countries where GHG emissions will increase the most. The shift from the former
to the latter will test the very meaning and effectiveness of the UN framework itself; it will beinteresting to see how developed and developing countries deal with this shift in framework.
In particular, the category of "developing countries" is broadening, from emerging countries
such as the BASIC (Brazil, South Africa, India, China) to least-developed countries (LDCs),
and they have slightly different stances in the negotiations. As the main players diverge,
which countries will take the lead in the negotiations? There will be much jockeying forleadership in related international conferences leading up to COP21.
The key point of the new framework is that each country will submit emission targets andrelated policies based on its own circumstances for review in the UNFCCC process. Some
expect that this shift from the Kyoto Protocol will make the numerical targets less binding,but under the new framework, each country will be held strictly accountable for its target
levels and the feasibility and rationality of the means to achieve them. This means that theymust control their own situation and sufficiently assess the intensity of their targets and theeffectiveness of their policies, and the countries will be subject to mutual evaluation by othercountries. Thus, in the future, more attention will be paid to the MRV (measurement,
reporting, verification) procedures for assessment, and how they should be standardized.
The INDC of Japan, which the country has pledged to submit as soon as possible in 2015,
should fully consider these characteristics of the new framework. Although Japan is required
to submit its INDC, including the GHG emissions reduction target, by the promised date,many uncertainties remain regarding the new energy mix, such as the medium- to long-term
nuclear policy, reforms of the energy market structure, and review of the renewable energy
policy. The country must work hard yet carefully in preparing the INDC despite the limited
time remaining, and must make it convincing for the international community. In considering
the INDC, attention will be paid to new mechanisms to evaluate the international contributionof Japan's advanced technologies to curb global warming, such as the Joint Credit Mechanism(JCM), as well as specific measures to introduce them, in addition to ensuring that sustainableeconomic growth is not impeded.
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IEEJ e-NEWSLETTER No. 54: January 21, 2015ｃ IEEJ 2015○

4. China: Will the New Normal Succeed?
Li Zhidong, Visiting Researcher
Professor at Nagaoka University of Technology
2014 marked the start of the New Normal. Since its inauguration in 2013, the Xi Jinping leadershiphas consistently shifted its strategic focus from “economic scale and growth rate” to “the quality andefficiency of growth”, and already in its second year, is leading China out of the "old normal" of highgrowth at the expense of the environment. Tolerating economic growth to fall short of the 7.5%
government target is the best evidence of that shift.
The New Normal has also appeared in the energy area. Preliminary statistics show that energy
consumption per GDP (energy-GDP intensity) up to the third quarter of 2014 decreased 4.6%
year-on-year, an equivalent reduction exceeding the annual target by 0.7 points, the highest since 2009.
Coal consumption dropped by 1.2%, marking the first time in 16 years that China's coal consumption
has decreased (based on the results of three quarters). In contrast, non-fossil fuel grew dramatically,
with wind power output increasing 7.6% (in terms of electricity sales) year-on-year, and solar PV
output doubling from the previous year. Natural gas consumption (output + net imports) increased by
6.8%. Consequently, the country managed to reduce its per-GDP CO2 emissions (emission intensity)
by 5.0%.
The long-cherished ambition to reform the energy-related tax system was also achieved. For
instance, the consumption tax for petroleum products was raised twice, on November 29 andDecember 13, capitalizing on the plummeting international oil prices. The per-liter consumption tax
rate was raised by 40% for gasoline from 1 yuan (approx. 20 yen) to 1.4 yuan and by 37.5% for diesel
oil from 0.8 yuan to 1.1 yuan. The incremented tax revenue will be spent solely to fund pollution
prevention, tackling climate change, energy conservation and the promotion of new energy vehicles.
These reforms adapted the comprehensive measures for energy and the environment to the New
Normal.
The New Normal will become firmly established in 2015, which is the last year of the Twelfth
5-Year Plan when the Thirteenth 5-Year Plan will also be finalized.
At the Central Economic Work Conference held last December, the Xi leadership adopted an
economic management policy of "proactive fiscal policy and prudent monetary policy" and "steadyeconomic growth". The leadership is likely to set a growth target of 7%, in line with the New Normalof economic development which is shifting from high-speed to medium-speed growth. To achieve
steady growth, it is necessary to accelerate reforms of the economic system, by reforming theadministrative licensing system and the pricing mechanism and allowing private companies to entermonopolistic industries, capital markets and banking. How far the reforms will be implemented must
be closely monitored.
With the further enhancement of measures particularly for energy conservation and expansion of
non-fossil energies, the goals of the Twelfth 5-Year Plan to reduce energy-GDP intensity by 16% and
CO2 emission intensity by 17% from 2010 levels, and the share of coal in primary energy consumption
from 68% to 65% in 2010, are likely to be achieved. Institutionally, the oil and natural gas industries
are expected to be deregulated and opened up to private companies. We must also closely monitor the
introduction of a carbon tax, separation of electricity transmission and distribution, and liberalizationof electricity and natural gas prices. Whether the government can finalize the Thirteenth 5-Year Plan,
which will set the path for its domestic commitment to improve air quality and its international
commitment to achieve early peaking of CO2 emissions, is another key point to watch in 2015.

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IEEJ e-NEWSLETTER No. 54: January 21, 2015ｃ IEEJ 2015○

5. Middle East: A Year without End
Koichiro Tanaka, Managing Director &President of JIME Center

Four years have already passed since the “Arab Spring” and the West’s initial hopes for
democratization have evaporated. Each country is still struggling to achieve reforms but only
in name. The differing views among countries may hamper them from responding quickly tothe threat posed by ISIS, which continued to gain territory in 2014. Further, the Middle East
countries are becoming increasingly aware of the waning interest and involvement of the US
in the region, which could cause them to act on their own. This trend is likely to spreadthroughout the region in 2015.
Egypt is undergoing a second chance for its political transition, with just the parliamentaryelection left to go. However, the shift to democracy has lost momentum and has had little
positive effect on Egyptian society, as evidenced by the acquittal of former President Mubarak.
The country must remain alert to financial crises and extremist attacks, and so will depend
further on the assistance of the Gulf countries, particularly Saudi Arabia. Although the Gulf
countries are being hurt by plunging oil prices, they also see the situation as an opportunity tocounter US shale and thus are unlikely to cut the production of OPEC for now.
Concerned about Iran's influence on their Arab neighbors such as Yemen, the Gulf
kingdoms and emirates are not willing to collaborate with Iran in dealing with the civil war in
Syria and responding to ISIS. This attitude is deterring overall interest, hindering theinternational community’s goal of destroying ISIS. Further, regarding the nuclear talks, whichwere extended for an additional seven months, the kingdoms and emirates are becoming
increasingly distrustful of Iran which seeks to retain its uranium enrichment capabilities, andare frustrated by the West's softening stance. This situation is unlikely to improve dramaticallyin the near-term. Iran is seeking a comprehensive long-term agreement but is running out oftime for negotiations due to the falling oil prices. Although it is seeking the rapid lifting of
economic sanctions, it will not dramatically change its stance that the decision is up to theWest to make.
The reform policy of the al-Abadi administration to ease domestic strife in Iraq, which
played a role in the expansion of ISIS during the first half of 2014, may achieve superficial,rather than sufficient, changes. As heated debate continues on how each country should act to
end the humanitarian crisis caused by ISIS, there is concern over the integrity of Iraq, which
is being buffeted by the moves of the Kurdistan Regional Government (KRG) and theneighboring Turkey. 2015 may see destabilization of the "shape" of the region, which has
been maintained since World War I.
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IEEJ e-NEWSLETTER No. 54: January 21, 2015ｃ IEEJ 2015○

6. Russia: Putin Government Stymied by Sanctions and Falling Oil Price
Shoichi Itoh, Manager, Senior Analyst
Global Energy Group 2, Strategy Research Unit

On December 16, the Central Bank of Russia raised the policy interest rate for the sixth
time since early last October from 10% to a surprising 17% to prop up the collapsing ruble.
The effort, however, proved to be completely ineffective as the ruble then suffered its greatest
slide since the financial crisis in 1998, hitting a record low of 62.5 rubles to the dollar, almost
halving since the beginning of the year.
Behind the quick deterioration of the Russian economy is the more than 40% drop in oil
prices since last summer, in addition to the economic sanctions by the West over the Ukraine
situation. The Central Bank estimates that the country's GDP growth rate could fall to -4.7%
for 2015 if oil prices remain at around $60/bbl. In short, Russia could be in even deeper
trouble if the international oil market falls further.
On December 18, at an annual press conference with domestic and overseas journalists,
President Putin condemned the West, blaming its sanctions for 25—30% of Russia's economic
deterioration, and emphasized the country's tough stance, likening Russia to a bear and sayingthat "the bear never asks permission". In the annual state-of-the-nation address on December
4, Putin hailed the March annexation of Crimea that triggered the confrontation between
Russia and the West as a notable achievement, and once again stirred public patriotism bydeclaring that the West had been plotting to halt Russia's growth and make it collapse with orwithout the Ukraine crisis. He suggested that the domestic economy will begin to recover
within three to four years and exceed the growth rate of the global economy, although hesounded less than persuasive.
The massive fall of the ruble has caused the domestic inflation rate to exceed 9% (around
6% at the beginning of 2014), and is gradually making life difficult for ordinary people.
Putin’s biggest mistake regarding the Ukraine crisis was believing that he could drive a wedge
between the hard-line US and Europe, which has stronger ties with Russia. If he cannot stop
the confrontation from intensifying and its economy continues to worsen, his hopes tostrengthen the basis of his power by fueling nationalism is also likely to fail. There are morethan three long years until the next presidential election in March 2018. Putin seems tobelieve that Russia can overcome the current predicament by improving its economic
efficiency and by perseverance, but public support cannot be maintained indefinitely just by
acting tough against the West. The Ukraine crisis would likely bring about no winner, whiledamaging the global economy; every effort should be made to resolve the situation swiftly
through diplomatic means.
However, the West also has no idea how to solve the crisis. Putin could toughen his stancein desperation. In addition to further destabilization of Ukraine, Russia’s problems may have abigger impact on the global economy in 2015.
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7. US: Low Oil Prices and Shale, and Political Gridlock
Ayako Sugino, Senior Researcher
Coal & Gas Subunit
Fossil Fuels & Electric Power Industry Unit
For the past five years, the US has been generally optimistic about the supply and demand forenergy. Shale gas, which has been boosting domestic gas production since 2008, has caused gas prices
to fall. From 2010, the drilling shifted to tight oil due to the widening gap between gas and oil prices,causing oil production to soar from late 2011. Meanwhile, gas production rose again in 2013,
impressing that the productivity of shale dramatically improved.
The oil price since June 2014 has tested the robustness of US shale for the first time. The risk andyield ratings of energy stocks worsened in the money market as prices fell, and at year-end, several
upstream oil companies announced that they were scaling down investment plans and postponing the
public offering of new stocks. A fall in the number of drilling licenses was also reported in the media.
Further, in 2014, hydraulic fracturing was banned in several states and municipalities, adding to thepressure on shale development.
Looking back, the growth in shale development resulted from multiple factors: continuous
government investment since 1974 after the first oil crisis in unconventional resources, a consistentlong-term policy of tax breaks for the development of unconventional resources by oil companies aswell as corporate efforts, and the fortunate market environment of the 2000s with high oil prices. With
the launch of the Obama administration in the 2008 elections, some within the Democratic Party
persistently believe that oil companies are enjoying enormous profits with the help of generous
government subsidies. However, shale, which has been propping up jobs and investment in the US
manufacturing sector, is now facing a structural shift in the international supply and demand of oil, andthus a far-sighted, carefully-crafted policy is required.
In the 114th Congress that starts in January 2015, the Republican Party will have the largest numberof seats in the House of Representatives since the Truman administration of 1945, and will be amajority party in the Senate after an eight-year interval. The 2013-14 Congress, which was historicallyunproductive as the two parties locked horns, saw little progress in the discussions on the gun control
and immigration bills, which President Obama was determined to pass, and consequently resulted in a
16-day shutdown of the government in October 2013. After the mid-term election in November 2014,
President Obama and the Republican leadership of Congress each announced their intention tocooperate with the other in running politics. However, on December 16, Senate Majority Leader Mitch
McConnell named the construction bill for the Keystone XL pipeline, which carries Canadian oilsands, as the highest priority, and said that this will not hinder offering the clause rider. This implies
blocking the EPA's environmental controls such as CO2 emission control for power plants and theprocessing of coal ash, which puts the Senate on a collision course with the President. However, as the
GOP does not have enough seats in the Senate to override the Presidential veto or block the filibuster,a further two years of political stagnation looks unavoidable.
In 2015, as they head toward the presidential election in 2016, both parties are suffering internal
confrontation between liberals versus centrists for the Democrats, and conservatives versus centrists
for the GOP. President Obama is likely to push ahead with policies by executive order, which has
historically been strengthened by past Republican administrations. This year, the political game in the
US could expand to encompass the constitutionality of disrespect for Congress and the exercise of
executive orders by the President, in addition to the policies themselves.

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IEEJ e-NEWSLETTER No. 54: January 21, 2015ｃ IEEJ 2015○

8. EU: European Gas Situation and the Ukraine Crisis
Wataru Fujisaki, Senior Researcher
Global Energy Group 1
Strategy Research Unit

In the dispute between Russia and Ukraine over gas, Russia's Gazprom agreed to resume
supplying 1 billion m3 of gas for this winter in return for up-front payment by Ukraine's
Naftogaz. However, it takes 4 billion m3 to supply Europe with gas without disruption
throughout the winter, and this amount is yet to be secured.
In eastern Ukraine, the separatists seized the major Donetsk coalfield, causing a serious
shortage of coal in western Ukraine, including Kiev, and forcing the region to urgently importcoal from South Africa and Russia. The retail gas price of Ukraine is kept low for politicalreasons, and residential and industrial gas is sold at 30–40% of the import price. This iscausing the losses of gas supply companies to accumulate daily.
Under these difficult circumstances, the Ukrainian government intends to strengthen its ties
with Western countries in a bid to reduce its dependency on Russian energy. The EU isplanning to support Ukraine by accelerating the upgrading of its energy infrastructure andintegrating the Baltic and East European energy markets. It will invest a total of 647 million
euros in this infrastructure upgrade, which includes the gas pipeline interconnection project inEastern Europe and the environmental assessment for construction of the TANAP pipelinethat connects Azerbaijan and Europe via Georgia and Turkey. Strengthening the gas pipeline
network in Central and Eastern Europe would support Ukraine by enabling more gas to betransported back to the country from storage reserves.
Meanwhile, on December 1, Russia suddenly announced that it was abandoning the SouthStream gas pipeline project. Russia's South Stream has been regarded as one of the mostpromising of the southern gas corridor projects and enjoys the support of many European
countries, after the EU-supported Nabucco Pipeline was discontinued. Russia apparently had
to drop the South Steam project due to the critical financial situation of the country and its
state-owned corporations caused by the collapse of oil prices. Meanwhile, gas consumption isdecreasing in the EU, where gas prices are also falling due to fierce competition with otherfuels.
Russia must urgently find gas buyers outside the EU. The country has signed a gas supply
deal with Turkey as an alternative to South Stream, but it is rumored that Turkey has extracted
a good price, taking advantage of its strong position. Further, the TANAP pipeline has now
become extremely important for Europe, which is seeking to diversify its gas sources, as it is
the only remaining project of the southern gas corridor plan. Turkey, through which thepipeline passes, is now politically stable, being at the beginning of a five-year term of Prime
Minister Erdogan who took office last August. The country is expected to gain importance forboth gas consumers and suppliers as the gas hub for Southern Europe, just as Germany is forNorthern Europe. The moves in Eastern and Southern Europe, including Turkey, must be
closely monitored in 2015.
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IEEJ e-NEWSLETTER No. 54: January 21, 2015ｃ IEEJ 2015○

9. Energy and Environmental Issues for APEC
Kazutomo Irie
General Manager
Asia Pacific Energy Research Centre

For APEC, 2014 was ‘China's year’. China hosted the leaders’ summits and ministerial
meetings. Various issues pertaining to energy policy were discussed at the Energy Ministers’Meeting held in September in Beijing. For example, regarding:• energy security: transportation routes, emergency response capabilities of oil and gas,
and the relationship between energy and economic competitiveness;• energy investment and trade: trade and investment barriers, and connectivity of energy
infrastructure; and• energy efficiency and sustainable community: the Low Carbon Model Town Project,establishment of the APEC Sustainable Energy Center (APSEC), and renewableenergy.
Among these many subjects, the expansion of renewable energies attracted the mostattention even at the preparation stage. The Ministers agreed to aspire to the target of‘doubling the share of renewables in the APEC energy mix, including electricity generation,from 2010 level by 2030’. APEC, however, is not an international organization based on atreaty but rather a flexible forum for regional cooperation. Therefore, its goal of doubling
renewable energies is not binding. As such, consensus was reached without defining whichtypes of renewable energy would be included.
In 2015, energy policy officials will be required to define which renewable energy
technologies should be included within the doubling goal. Specifically, whether firewood, a
traditional biofuel, should be included. Firewood is widely used in homes in developing
regions. It causes health problems due to air contaminants, and contributes to global warming.
The inclusion of firewood makes it harder to achieve the target of doubling renewable energy
uptake, as firewood consumption would decrease as economies grow.
Another issue is whether or not to include large-scale hydropower. Some suggest thatmedium- to small-scale hydropower plants that have low environmental impact should bepromoted over large-scale hydropower plants. The latter is criticized in many developed
countries as it can lead to extensive environmental damage and uptake is likely to be limitedin the future. On the other hand, developing regions with large development potential mostly
consider that large-scale hydropower should be included in the definition of ‘renewableenergy’. Even if the officials regard large-scale hydropower and medium- to small-scalehydropower as distinct categories of renewable energy, practical issues remain, including
defining the parameters of the large-, and medium- to small-scale hydropower and how tocollect data based on categories.
The Asia Pacific Energy Research Centre is currently formulating the APEC Energy
Demand and Supply Outlook 6th Edition, which includes the renewable energy supply
projections. The Outlook will examine the extent to which the share of renewable energy willgrow and whether it would double if the policies of member countries and regions remain as
they are at present, considering the differences in definitions of renewable energy dependingon what types of renewable energy are included. The Outlook will also need to analyze
possible policy options, in case the projection shows that the goal is not likely to be achieved.
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