COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 18.07.1996 
COM(96) 308 final 
COMMUNICATION FROM THE COMMISSION 
EUROPE-AStA 
CO-OPERATION STRATEGY 
FOR ENERGY 

Table of contents 
SUMMARY 3 
INTRODUCTION 4 
PART I: BACKGROUND 5 
1. THE ENERGY SECTOR IN ASIA, FUTURE CHALLENGES AND HIGH 
STAKES FOR EUROPE 5 
1.1. A wide diversity of socio-economic conditions 
1.2. High growth rates 
1.3. A new energy crisis 
1.4. The need for private sector involvement 
1.5. Major impacts on the environment 
1.6. Reforms in the energy sector 
1.7. Major consequences for Europe 
2. EXISTING ENERGY CO-OPERATION FRAMEWORKS 8 
2.1. The European Community 
2.2. The Member States 
2.3. Other donors and lending agencies 
PART II: STRATEGY 11 
3. A NEW STRATEGY FOR ENERGY CO-OPERATION WITH ASIA 11 
3.1. Three objectives 
3.2. The new Community framework 
3.3. A global intervention 
3.4. A specific approach 
4. SELECTION CRITERIA FOR COMMUNITY ACTIVITIES IN THE AREA OF 
ENERGY CO-OPERATION 12 
4.1. Mutual interest and partnership 
4.2. Subsidiarity in regard to action by Member States 
4.3. Synergy with other International Donors and Lending Agencies 
4.4. Sustainability 
5. PRIORITIES FOR CO-OPERATION IN THE ENERGY SECTOR 13 
5.1. Priority areas 
5.2. Other sectors 
6. IMPLEMENTATION 15 
6.1. Creating dialogue 
6.2. Targeting actions 
6.2.1 Increasing awareness 
6.2.2 Adapting institutional frameworks 
6.2.3. Supporting European energy companies and operators 
6.3. Allocating sufficient resources to meet challenges 
CONCLUSION 18 
SUMMARY 
Due to the demographic and economic growth taking place in Asia, the demand for energy could double 
between now and 2005. This growth will have repercussions for Europe in three areas : on security of 
supply (Europe will be dependent on the outside world for 55% of its requirements in 2005 and 75% in 
2015), on the European energy industry (Asia already represents half the world market) and on the 
global environment (protective measures implemented in Europe will have only limited effect unless 
action is taken simultaneously in Asia). 
The energy sector therefore deserves special attention in the context of relations between Europe and 
Asia, so it is worthwhile to work out a strategy for co-operation in this area. This new strategy is all the 
more necessary since the co-operation activities currently being carried out by the Community, the 
Member States and other providers of capital are yielding useful but only partial solutions to the 
challenges facing the sector in Asia. 
Working within the framework of the new Asian strategy on the one hand and current considerations 
about a European energy policy on the other, there are three objectives which need to be considered in 
respect of energy co-operation between Europe and Asia : strengthening the security of supplies of Asia 
and Europe, participating in Asia's energy markets and protecting the global environment. 
More specifically. Community co-operation will aim to establish a dialogue in the area of energy policy 
and will help to mobilise the private sector (which is being asked to play an increasingly important part 
because of the amounts of money involved), while preserving the long-term public interest by taking 
into account the social and environmental aspects of energy development. These actions will at one and 
the same time affect energy supply, through optimal development of local resources, and also demand, 
through consumption management. 
Community activities will be selected according to the criteria of mutual interest, subsidiarity - taking 
into account the activities of Member States - synergy with other international donors and lending 
agencies and considerations of sustainability. 
Given this approach, priority will be given to the electricity, natural gas and coal sectors, energy 
efficiency and the energy supply of rural areas in particular by an increased use of new/renewable 
energies. 
The implementation of this strategy will first require the creation of an on-going dialogue on energy 
policies with the Asian authorities. Depending on specific geographical factors and on selected sectoral 
priorities, the Community will intervene progressively on several different levels : information on 
European solutions, adaptation of institutional frameworks and also assistance to companies and energy 
operators. With this aim, it is necessary to consolidate the Community instruments already established 
and to target existing resources. 
IimUJÏMJCTlW 
Because of the economic and political importance of Asia, the European Union, at the European Council 
meeting held at Essen from 8 to 10 December 1994, confirmed its intention to strengthen co-operation 
and dialogue with countries and organisations of the region. The Council invited the Commission to 
propose concrete initiatives to this effect, within the framework of the new Asia strategy. 
In addition, the White Paper entitled "An Energy Policy for the European Union " introduced by the 
Commission in December 1995, underlines the importance of developing international relations in the 
field of energy and recommends the elaboration of an Asia energy sector strategy. 
This strategy, the subject of the Communication, is presented within the framework of policy options 
already established both at the geographical and sectoral levels. The first section highlights the main 
problems facing the Asian energy sector and the related issues for Europe, as well as the existing 
international co-operation frameworks. The main features of a new Community co-operation strategy 
include three complementary objectives, plus priority sectors, selection criteria and guidelines for a 
future action plan. These are described in the second section of the Communication. 
O 
Part I. BACKGROUND 
THE ENERGY SECTOR IN ASIA. FUTURE CHALLENGES AND HIGH STAKES FOR 
£HRQEE 
1.1. A wide diversity of socio-economic conditions 
Asia now has a population of some 3 billion inhabitants and it is undergoing a process of rapid 
urbanisation. The countries under consideration here,1 mostly developing countries, generated a Gross 
National Product (GNP) of more than 1500 billion dollars in 1994. Nevertheless, the average annual 
income per inhabitant in these countries varies between less than 150 ECU and more than 12,000 ECU, 
which indicates a wide range of economic and social contexts (Annex I). These imbalances are also 
reflected in the energy sector, with some countries such as Bhutan and Nepal consuming the equivalent 
of less than 20 kg of oil per capita each year, while others such as China, Thailand, Malaysia and 
Singapore consume more than 600 kg of oil equivalent per capita, compared with 4000 kg for Europe 
and about 8000 kg for USA. The proportion of households supplied with electricity varies from less 
than 15% in some countries to almost 100% in others. In today's Asia more than a billion people 
exclusively use either wood or vegetable or animal waste as their principal source of energy for cooking 
and heating. 
1.2. High growth rates 
The economies of most of these Asian countries have GNP figures which are growing at some of the 
highest rates in the world (almost 10% per year, or more in some cases). The Asian region is therefore 
becoming a prominent market, with half the human race and more than a billion consumers who will 
have significant buying power by the year 2000. 
In 1995, the total annual consumption of primary .energy in Asia will be equivalent to just over 1.7 
billion tonnes of oil, which is already 1.3 times the total consumption in the European Union, without 
counting Japan, which consumes 0.45 billion tonnes of oil equivalent by itself. However, according to 
the predictions of the World Bank and the Asian Development Bank, this figure could double between 
1990 and 2005, with oil products levelling off, coal accounting for a larger share and a rapid increase in 
the use of electricity and natural gas. Hence in 200$, Asia could be consuming 28% of the world's 
energy, Europe 13%, Latin America 6% and the countries of the Mediterranean and the Middle East 5% 
(Annex 2). 
The electricity sector should grow more rapidly still with an installed capacity tripling from 250 GW in 
1992 to about 750 GW by 2005, an increase which is equivalent to the total installed capacity in the 
European Union in 1993. This will involve almost 400 billion ECU in investment during that period. 
Natural gas is also expected to grow very rapidly (at a rate of more than 10% per year), with a 
considerable increase in proven reserves and implementation of major national and regional production, 
transport and distribution programmes. 
'Countries presently benefiting from Community cooperation: Afghanistan, Bangladesh, Bhutan, Brunei, Cambodia, 
China, India, Indonesia, Laos, Malaysia, Maldives, Nepal, Pakistan, Philippines, Singapore, Sri Lanka, Thailand and 
Vietnam. 
1.3. A new energy crisis 
The explosion of the energy demand in Asia, caused by this very rapid economic growth, is 
unfortunately being confronted with energy production capacities which are often inadequate. Major 
energy losses whether at production, transmission, distribution or end-user's stage contribute to 
exacerbating those difficulties. 
These imbalances between energy supply and demand are causing very severe economic and social 
disturbances in many countries in the region, both in cities and in rural areas. The virtually permanent 
electrical load-shedding which takes place in China, India, Indonesia and the Philippines has had 
particularly negative effects in recent years, costing more than 1% of GNP in some cases. Losses of 
electricity due to both technical and non-technical reasons exceed 20% in many countries in the region, 
compared with less than 12% in Europe. 
The explosion in the demand for the transportation of both people and goods is also causing, and may be 
expected to continue to cause, a very high rate of growth in the demand for oil products resulting in 
particular from, on the one hand, increased demand for private vehicles, and on the other, increased 
transport of goods by road. Furthermore, in most Asian countries this growth may be expected to be 
more rapid than the growth of the economy as a whole. Reducing the dependence on oil is a common 
concern in Asia today : in India, the oil bill has been a major import item for many years; Indonesia, 
which is an oil producer and a member of OPEC, is now becoming a net importer, and China, which 
until recently was producing enough (145 million tonnes annually) to meet its requirements, may also 
have to start buying from the world market in the near future. 
1.4. The need for private sector involvement 
The (insufficient) expansion of the energy sector in Asia over the past decade, mainly based on public 
investment, has contributed towards the accumulation of large public foreign debts (totalling about 300 
billion ECU) which are worrying governments. Faced with the tremendous amount of capital needed for 
growth in the energy sector, which is estimated at one hundred billion dollars per year, and taking into 
account the limited capacity of multilateral lending agencies (about 5 billion ECU per year for the 
energy sector from the World Bank and the Asian Development Bank put together), many Asian 
Governments are attempting to mobilise private capital, either nationally or internationally. 
This situation is currently causing radical structural changes, since the main obstacle to the mobilisation 
of the private sector is not so much the lack of financial resources - to some extent available locally - but 
rather the present legislative, institutional and pricing structure which means that investment in energy is 
not sufficiently attractive. 
1.5. Major impacts on the environment 
Even now the development of the energy sector in Asia is already causing significant environmental 
damage at national, regional and global level ; for example China and India burn 1.5 billion tonnes of 
highly polluting coal each year (accounting for about 12% of world energy consumption) and recent 
predictions (Annex 3) indicate that these two countries alone will be emitting about one-quarter of the 
world's CO2 into the environment by 2010. 
Both China and India have ratified the UN Framework Convention on Climate Change which aims, inter 
alia, to reduce global C02 emissions. It is difficult to see how the vast increase in coal use planned with 
the foreseeable future in these countries is compatible with their position under the Convention. Without 
a strong effort in this regard, the increase in C02 output from Asian (and other) developing countries 
threatens to eclipse or at least seriously compromise the efforts to reduce global C02 emissions. 
In parallel with this, large-scale deforestation (only due partly to the consumption of wood or charcoal to 
meet the energy requirements of rural and urban populations) is further worsening the pressure on the 
environment in some countries. This last aspect affects the poorest population groups, particularly 
women and children, who are forced to make long journeys to meet these basic needs. Finally, the 
creation of large dams causes major environmental and social problems which are often badly managed. 
1.6. Reforms in the energy sector 
Radical changes are currently being seen in the energy sector in Asia. These are taking place along live 
main lines : 
• re-defining «the role of the State : new forms of public-private partnership are being set up in a 
growing number of countries. This leads progressively to more independent (either mixed or 
private) energy companies, for the purpose of better efficiency, diversification of sources of 
financing and the provision of a wider range of services. Such strategies should allow governmental 
policies to concentrate on long-term orientations and appropriate energy-sector regulations and to 
leave production and distribution to market-oriented operators. 
• implementation of new energy technologies, which are cheaper in terms of both investment and 
running costs, and also cleaner and more efficient (for example combined Cycle power stations and 
gas turbines for cogeneration), 
• the desire to reduce the dependence on oil by pursuing policies in the areas of energy management 
and substitution of primary energy sources (gas and coal), 
• an increasing consideration given to the environmental impact of *energy projects in terms of 
population displacement, the localenvironment, consequences for towns and cities and also on rural 
ecosystems. Despite this, certain large schemes are already underway and are still proceeding 
notwithstanding the recognised negative environmental impact, 
• a greater attention paid to developing viable, decentralised solutions for rural or peri-urban 
electrification. In many countries the rural population still counts for 60% of the total population, 
and often does not have the energy infrastructure wjiich is needed for productive activities. 
1.7. Major consequences for Europe 
These significant changes in Asia, which involve both the economy in general and also the energy sector 
in particular, will have repercussions for Europe in the areas of security, employment and the 
environment : 
• The very rapid growth of the demand for energy in Asia will have a severe effect on the world 
market, particularly the markets for oil, refined products and natural gas, and will certainly also have 
a not inconsiderable impact on the security of the energy supply in Europe. Upward price pressures 
could cause economic problems for the Member States, particularly since Europe's dependence on 
energy imports is due to rise from the current figure of 50% to about 75% in 2015. 
• At the present time, the Asian market for energy equipment already represents 50% of the world 
market and it is still growing. The European market is virtually saturated, with estimated growth 
rates of between 1% and 2% per year over the next 15 years. For energy operators and European 
industrial companies, which employ more than two million people and already have some surplus 
capacity in terms of both staffing levels and production facilities, greater penetration into the Asian 
market through exports and investment is essential if they are to maintain or develop their world 
position and safeguard their jobs or possibly create new ones. The markets for generation equipment 
in other regions (especially Latin America, Middle East, Maghreb, Eastern Europe and Africa) do 
not have the same potential as the Asian markets. 
• Finally, the rising demand for energy in rapidly developing Asian countries which use coal 
constitutes an increasing threat to the regional and global environment. Agreements reached by the 
Community, the Member States and others at the UN Conference on Environment and Development, 
particularly regarding climate change, will have little practical result unless.the negative effect of 
increased coal use is taken into account. 
2. EXISTING ENERGY CO-OPERATION FRAMEWORKS 
Many countries" are engaged in co-operation activities in the Asian energy sector, both at bilateral and 
multilateral level. There follows below a brief summary of the programmes of the European Community 
and the Member States, and also the guidelines which have been laid down by certain donors and 
lending.agencies : the World Bank, the Asian Development Bank and the Global Environmental Fund. 
2.1. The European Community 
Today the Community does not have any instrument dealing specifically with energy co-operation with 
Asia. Nevertheless, the Community has signed, with numerous Asian countries, so-called third 
generation co-operation agreements, which contain provisions on energy co-operation and has set up a 
range of instruments which can be used for international co-operation activities in the field of energy. 
This is shown clearly in the summary table (Annex 4). 
With regard to energy co-operation, one might mention the following programmes : Council Regulation 
443/92 on Co-operation with Asian and Latin American countries which makes it possible to support 
projects involving technical assistance, training and the promotion of technology (in Asia, 16 projects 
since 1987 in 14 countries, totalling 56 million ECU), the SYNERGY programme which centres on co­
operation in the area of energy policy, the SAVE programme, which relates to institutional and 
regulatory aspects of the rational use of energy, and the ALTENER programme which relates to the 
promotion of renewable energy sources and has virtually no Asian activities. Within the fourth 
framework programme for research and development, the JOULE/THERMIE programme, whose 
activities are mainly situated in Europe, aims to develop scientific and technological co-operation links 
with third countries, particularly in the area of renewable energy sources and energy efficiency. Also 
within the fourth framework programme, the International Cooperation Programme for Developing 
Countries (INCO-DC) includes support for policy research with a view to promoting clean and efficient 
energy systems. 
The European Investment Bank (ElB) which has been authorised to operate in the Asian region since 
1993, has already been able to grant loans to the energy sector in India, Indonesia, Thailand, Pakistan 
and China, amounting to a total of 300 million ECU. It must be noted that these loans are more and 
more directed towards financing the European private sector. This approach conforms to subsidiarity 
with other multilateral or bilateral lending agencies, and with the commercial banking sector 
(particularly regarding guarantees). 
2.2. The Member States 
The activities of the Member States in the area of energy co-operation in Asia are mainly aimed at 
promoting generation equipment within the context of major energy investment projects. It should be 
noted that these projects, which are the subject of growing international competition, increasingly 
2 Besides Europe, examples are Japan, the United States, Canada and Australia. 
8 
require the direct financial involvement of the suppliers, as well as local equipment fabrication. 
It has been found that the Member States have a wide range of tools for pre-financing engineering 
studies, guaranteeing commercial loans and setting up demonstrations in order to secure good positions 
for their companies in these markets, and that their intervention in the energy sector does not often take 
the form of grants. There are essentially three sources of financing : 
• Public development aid, of which the proportion allocated to energy varies from one country to 
another, but is usually less than 10%. This is mainly directed towards the most disadvantaged 
countries and population groups, and mostly involves renewable energy sources in rural areas or 
training and institutional support intended to improve the efficiency of the energy sector. In many 
countries this type of aid has been found to be gradually falling. 
• Own resources of major operators in the European electrical and gas sector, which are prepared to 
make sustainable investments in Asia within the framework of their new business strategies, 
working together with local partners, in order to take up a position in these markets. The amounts 
which these businesses are prepared to invest usually range from about 75 to 100 million ECU per 
year. 
• Loans granted by the European banking system, which is already present and active in Asia. 
However the setting up of major energy projects (more than 500 million ECU per project) is 
becoming a more delicate issue at a time when Asian Governments are increasingly reticent about 
providing guarantees. 
2.3. Other Donors and Lending Agencies 
• The World Bank 
The World Bank has clearly identified the electricity sector and the environmental aspects associated 
with the development of the energy sector as its priorities in Asia. It considers that the level of 
investment needed in the energy sector in Asia is df the order of 100 billion dollars per year. The World 
Bank, with commitments of between 1.5 and 2 billion dollars per year, concentrates on sectoral policies 
and promoting the involvement of private investors in the energy sector. It has specific financial 
structures available for this purpose, such as the International Finance Corporation (IFC) which has 
recently granted two loans of 250 million US$ to electricity companies in India and the Philippines, the 
Multilateral Investment Guarantee Agency (MIGA) and the Expanded Co-financing Operation (ECO). 
The sectoral loans usually include an institutional component, reorganisation in the energy sector and 
environmental impact studies, but in some Asian countries the very liberal approach of the World Bank 
clashes with the Governments' own positions. The grants and subsidised loans which are managed by 
the IDA represent only a tiny proportion of the energy portfolio, and only countries whose GDP per 
inhabitant is below a certain threshold can benefit from these. 
• The Asian Development Bank (ADB) 
In 1994, the ADB redefined its policy on intervention in the energy sector, which now focuses on 6 
points : 
t> structural reforms in the electricity sector, which is in crisis in a number of countries, 
especially with a view to expanding the role played by the private sector, 
> energy efficiency, both on the supply side (reduction of losses) and on the demand side through 
an approach involving integrated resource planning (IRP) and demand side management 
(DSM), 
9 
t> establishing energy pricing structures which are based on costs and market factors, 
> energy development in rural areas, particularly fuelwood, solar and wind energy, 
> regional energy co-operation, particularly for large hydro-electric projects, 
> finally, the environment, with the development of "guidelines" for the implementation of 
energy projects and the promotion of clean coal power stations and combined cycle 
installations. 
• The Global Environmental Fund (GEF) 
This fund, which is based on grants received from industrial countries according to a procedure similar 
to the IDA, makes it possible to finance the additional costs associated with protecting the global 
environment in developing countries, in the areas of biodiversity, international waters, the ozone layer 
and the reduction of greenhouse gases. The GEF has just been reorganised, with a budget of about 1.5 
billion ECU for three years. It is jointly administered by the World Bank, for investment projects, the 
UNDP for technical assistance projects and the UNEP for research programmes. Through its greenhouse 
gas reduction department, the GEF can finance projects in the energy sector whose aims include 
reducing the environmental impact of certain coal-fired thermal power stations, or promoting gas 
turbines and renewable energy sources. 
10 
PartlI. SiRAÉÉG* 
3. A NEW STRATEGY FOR ENERGY CO-OPERATION WITH ASIA 
An analysis of the energy situation in most Asian countries and the existing energy co-operation 
frameworks shows clearly that the European Community can and should play a much more important 
part. It is therefore proposed that a specific strategy should be defined for energy co-operation with 
Asia, according to the following guidelines : 
3.1. Three objectives 
The three main objectives of the Community energy co-operation are : 
> To strengthen the security of supply in Asia and in Europe, 
> To participate in Asian energy markets, 
> To protect the global environment. 
3.2. The Community framework 
These main objectives fit naturally within the framework of more general strategic objectives which are 
already being set by the European Community. On the subject of energy and the Asian region, the 
framework is defined on the basis of the following factors : 
• The "new strategy towards Asia"3, which takes into account Europe's strategic interests in this region 
and the current requirements of its Asian partners, particularly with a view to strengthening the Union's 
economic presence in Asia, contributing towards stability in Asia and encouraging economic 
development in the least prosperous countries and regions of Asia. 
• The White Paper "An Energy Policy for the E.U."4 which shows very clearly that it is absolutely 
essential for Europe to co-operate with Asia to ensure a secure energy supply, to contribute towards the 
considerable energy investments which are anticipated in Asia, and finally to protect the global 
environment. 
• Directives and priorities adopted by the Council, such as Regulation no. 443/92 on financial and 
technical aid and economic co-operation with the countries of Asia and Latin America, the fourth 
framework programme for research and development5 (particularly the JOULE-THERMIE Programme), 
and also the proposed regulation on a programme of co-operation with third countries in the area of 
energy policy (SYNERGY Programme6). 
3.3. A global intervention 
In order to achieve these long-term objectives, Community activities should address equally both energy 
supply and demand, in two main areas : the optimum utilisation of local energy resources, which means 
3 COM (94)314 
4 COM (95) 682 
5 Decision n° 110/94/EC of 26 April 1994 
6 COM (95) 197 
11 
finding substitutes for imported energy sources while also improving the efficiency of existing 
production units, and the management of energy consumption, both now and in the future, which will 
make it possible to reduce the pressure on natural, environmental and financial resources. 
3.4. A specific approach 
The European Community is different from many other donors and lending agencies as its interventions 
mainly consist of grants (with the exception of the loans granted by the EIB recently). This situation 
allows the European Community to offer a unique advantage towards Asian countries who often hesitate 
to use loan-financing for feasibility studies, research and development or technical assistance. The 
Community can also place its co-operation activities within a long-term perspective and safeguard 
collectivity interests as regards the global environment. 
Neutrality and diversity in technical, institutional and financial experience covering the energy sectors of 
the Member States represent other assets. These are being recognised by the Asian partners. 
The Community can therefore act as a "catalyst" to encourage the best skills in Europe to meet the 
expectations of its partners, while facilitating the activities of its Member States and their operators in 
Asia. In this context, the European Investment Bank would normally support downstream activities. 
With this aim in mind, the approach of Community co-operation will include the following elements : 
• establishing an ongoing dialogue on energy policy between the Community and Asian countries on 
a bilateral basis or through competent international or regional organisations. This is needed 
because of the global consequences of choices which are made in the Asian energy sector, 
mobilising the Asian and European private sector is absolutely necessary because of the major 
capital requirements and because of the need to find a more efficient way of running the sector, 
taking account of social and environmental aspects, particularly the needs of poor urban and rural 
populations. Cooperation with Asia in the field of energy should be sensitive to the need to achieve 
an equilibrium between environmental, social and economic developmental factors. 
4. SELECTION CRITERIA FOR COMMUNITY ACTIVITIES IN THE AREA OF ENERGY 
CO-OPERATION 
Energy co-operation activities will be selected according to a number of criteria : 
4.1. Mutual interest and partnership 
The identification of a mutual interest between Asia and Europe will be the starting point to justify each 
new project, and this will be expressed in terms of benefits for both partners in the short, medium or long 
term. What is more, the concept of partnership implies that resources will be made available by both 
sides in the interests of the project. This principle is well accepted from the Asian point of view, as has 
been seen from recent energy co-operation projects. 
4.2. Subsidiarity with regard to the activities of Member States 
The Community must be particularly vigilant in order to avoid any duplication with bilateral activities 
undertaken by Member States. The Community should also concentrate its efforts on projects which 
clearly have a real European "added value" compared With the bilateral projects carried out by Member 
States. 
12 
In particular, the Community will accord special preference to projects requiring the diversity of the 
European experience or concerning sensitive issues wjhere Asian partners expect a certain neutrality 
regarding technological, legal or institutional options. Similarly, the Community, because of its unique 
experience, is a privileged partner for Asian authorities in the area of regional energy integration. 
4.3. Co-operation with other Multilateral agencies 
Regular consultations with other Multilateral agencies,.(notably EIB, IEA, UNDP, WB and ADB) will 
make it possible to ensure the cohesion and complementarity of the various activities, while also 
enabling the various tools to be used to optimum advantage. 
4.4. Durability 
Community intervention should be seen as a catalyst which makes it possible to initiate dialogue or 
exchanges between Asian and European players. It will therefore only cover a limited period. The 
projects should be designed and implemented in such a way that when the Community support comes to 
an end, the activities are taken over by the players involved (the State, public bodies, energy operators, 
financial institutions or industries). Some prudence will therefore have to be exercised when it comes to 
creating public or semi-public structures. 
5. PRIORITIES FOR CO-OPERATION IN THE ENERGY SECTOR 
5.1. Priority areas 
Having analysed the energy situation in a number of Asian countries,(see Chapter I) and taking into 
account the objectives and specific approach of Community activities, five priority sectors have been 
identified covering both energy supply and demand : 
• Modernising the electricity sector 
The electricity sector alone represents almost 80% of all energy investments in Asia each year, 
amounting to more than ECU 40 billion per year. This sector is undergoing major technical, financial 
and institutional changes, and it provides tremendous scope for Community co-operation, taking into 
account the diversity of the organisational structures of Member States. 
More specifically one might mention the development of energy policies and the adaptation of the 
institutional frameworks which determine how new financing schemes are implemented; the promotion 
of "clean and efficient" technologies for the generation and use of electricity; and also the modernisation' 
of electricity distribution companies. 
• Promoting natural gas 
This sector, which is not yet very well-developed, will become increasingly important as Asian countries 
want to increase their local supply in order to reduce their dependence on the outside world for energy 
and begin to take environmental aspects into account. In particular, very significant developments are 
expected to take place in China, India, Bangladesh, Indonesia and the Philippines. Natural gas is a 
priority sector for most countries and the Asian Development Bank estimates that it could grow at an 
average annual rate of more than 10% in the region. 
• Introducing "clean coal" technologies 
Coal, which is used on a massive scale in some countries such as China and India, is also being 
developed in other countries such as Indonesia which have large reserves. Coal already accounts for 
13 
some 30% of all the energy consumed in Asia. Electricity generation using coal will continue to grow 
very rapidly (60% of the additional installed capacity in China), which will have important 
environmental consequences at local and worldwide level. 
• Rational use of energy (energy efficiency) 
The Community will devote special attention to the five sub-sectors set out below : 
> Reducing losses in the generation process given that considerable savings can be made by the 
major energy operators. 
> The rational use of energy in industry, which is the largest consumer of commercial energy in 
many Asian countries. Although the rapid modernisation will certainly lead to improvements 
in the way energy is used in industry, there is still considerable scope for savings and actions 
in this area will have a strong impact on the environment in the regions in question. 
> The rational use of energy in transport, particularly road transport. In most Asian countries 
more than half of all oil products (60% or more) are consumed by this sector, which is 
growing rapidly and contributing to serious environmental problems e.g. global warming and 
pollution. In the long term, the solutions to these problems depend on policies which go far 
beyond the question of energy to include transport policy, land management and transport 
infrastructures and investment policies, particularly those related to public transport. 
> The rational use of energy in the residential tertiary sector. As standards of living improve, 
energy consumption in the urban areas of Asia is growing rapidly, particularly with the 
introduction of air conditioning. Particular attention should be paid to cost effective solutions 
for low energy buildings. 
> Development and rational use of communication infrastructure to reduce the need for 
transport of goods and persons, to optimise energy distribution as well as to allow for 
environment degradation monitoring. 
• Supplying energy to rural areas by an increased use of new/renewable energies 
It is estimated that one billion people in Asia live in rural or urban peripheral areas which arc 
inadequately supplied with basic energy services, such as modern combustion fuels and stoves (for 
cooking and heating), lighting, small-scale audio-visual equipment and other small machines. 
Taking into account the scale of the problem, Community financing for equipment can only be marginal. 
On the other hand, the Community will be in a position to promote the positive experiences gained by 
European players within the framework of many bilateral and multilateral projects. In particular, 
renewable energy sources (which are not often financially and economically viable, except under very 
specific geographical, technological and economic circumstances) have two essential positive aspects : 
they do not impose a burden on the environment and they require considerable involvement of rural 
users, which gives rise to "development" activity in rural areas. 
The Community will therefore take steps to promote these energy solutions when they are economically 
justified by integrating them into its numerous rural development programmes. These technologies will 
be popularised more effectively by those responsible for rural development, health or education than by 
energy organisations or electricity companies, for whom rural energy supply is often only a secondary 
priority. 
Generally speaking, the Asian agriculture sector consumes very little "commercial energy". There is 
nevertheless, room for improvement in the water-pumping process, transport, storage and product 
treatment. Utilising agro-waste or urban waste as an energy source for agro-industries also offers 
interesting possibilities for energy co-operation at Community level, as a current Euro-ASEAN co­
operation programme illustrates. 
5.2. The other sectors 
Other sectors for intervention are possible but would appear to have a lower priority for Community 
14 
action although this does not mean they might not be important in a more restricted geographical 
context. 
• Nuclear energy 
Nuclear energy is already used for electricity generation in several countries in Asia. Some countries 
are making preparations to use this option, with the support of Western companies, while others have 
recently given it up. As in other parts of the world, the recourse to nuclear energy is the subject of an 
intense and complex debate. 
However, the Asian region is expected to provide the main area of nuclear energy expansion worldwide, 
over the next decades. Accordingly, a priority of the European Community in relation to the nuclear 
programmes under development in Asian countries would be to support and consolidate activities 
conducted at international level to ensure a peaceful and safe use of nuclear energy. 
• Oil and oil products 
On the whole the development of oil resources is being well managed by the Asian countries who are 
already receiving a great deal of technical assistance from international oil companies. 
• Hydropower 
The region still has very considerable hydropower potential and major programmes are planned or are 
being carried out. The implementation of these giant projects poses major environmental problems, 
which are currently being systematically examined by the providers of the capital involved. The 
Community may be able to intervene in these major projects in order to consider aspects which facilitate 
regional energy integration. On a different scale, the Community will continue to encourage the 
development of small hydropower plants within the framework of its rural development projects. 
6. IMPLEMENTATION 
6.1 Creating dialogue 
This new cooperation strategy in the field of energy must fit into the more general framework of the 
cooperation established between the Community and its Asian partners. The Community will therefore 
make efforts, either on a bilateral basis or through competent international or regional organisations, to 
establish an ongoing dialogue with Asian authorities on aspects of energy policy which are of mutual 
interest, particularly in the field of planning, optimum use of resources, new technologies or financing 
schemes. The dialogue thus established will permit the definition of priorities by sector and by type of 
Community intervention in the different countries or regions concerned. 
6.2 Targeting actions 
The sustainable development of the energy sector in Asia requires increasing involvement from the 
private sector, at both the local and international level (particularly Europe). Three conditions have 
however to be fulfilled in order for this to take place : 
> the awareness of tried and tested solutions, 
t> the existence of a framework to promote exchanges and investments, 
> the mobilisation of motivated and confident investors and operators. 
Depending on the sectoral priorities selected within the framework of the established dialogue and 
according to specific geographical factors, the Community will intervene at the most appropriate level to 
best fulfill these conditions. Three levels of intervention are therefore proposed, reflecting a progressive 
15 
commitment of the resources available to the Community, as is illustrated by the activities set out below 
6.2.1 Increasing awareness 
In response to requests from numerous decision makers in government bodies and energy companies in 
Asia, awareness actions will provide more information about the technical or organisational solutions 
being used in Europe. The Community could thus organise short-term visits or information seminars in 
both Europe and Asia, on various themes such as policy and regulatory frameworks, planning methods, 
institutional structures, energy operators and clean technologies. In the area of energy management in 
urban transport, for example, the Community could initiate exchanges of experience with European 
cities which have successfully run campaigns in this area, particularly insofar as it relates to energy-
efficient public transport systems. In respect of energy utilisation in industry, the Community could 
improve the information and awareness capabilities of the major industrial consumers. 
6.2.2 Adapting institutional frameworks 
The mobilisation of national or international private capital and the development of economic exchanges 
in the energy sector cannot take place unless there is an appropriate energy policy, which includes a 
suitable legislative and regulatory framework, clearly defines the rules of the game between energy 
operators and States, and provides the necessary guarantees to investors and commercial partners. 
Similarly, the implementation of rational use of energy programmes often requires organisational 
adjustment of the pricing structure for the different energy types, alteration of building construction 
codes and standards, and changes in industrial standards. 
The Community will help with the formulation of policies or adaptation of institutional frameworks, 
depending on specificities and the national priorities of the countries concerned, by making expertise 
available, supporting human resources development and master plans or strategic studies, particularly at 
regional level (network integration and energy exchanges actually increase the overall efficiency of 
national systems : through management of staggered peak consumption times, higher reserve margins 
etc. which help to improve the stability of markets and protect the environment). 
In particular, the Community can support training scholarships in Europe or long-term missions which 
take professionals to Asia, on themes such as programme contracts between the State and energy 
companies, innovative financial schemes ("Build Operate Transfer, Build Operate Own,Third Party 
Financing), or technical, economic or legal aspects relating to the integration of electrical or gas 
networks. 
A desired Community intervention : the need for support activities of this kind 
was clearly expressed in a survey conducted among 150 representatives of the 
Member States, including public administrations, banks and financial institutions, 
energy companies and industries. European investors are actually put off by the 
"blur" of institutional and legislative contexts in many Asian countries, and consider 
that co-ordinated Community action, perhaps linked with commercial negotiations, 
would help to clarify these legislative and regulatory frameworks. 
On these questions of adapting institutional frameworks, synergy will be sought with other multilateral 
agencies, especially the World Bank. 
6.2.3 Supporting European energy companies and operators 
In some sectors, making Asian players aware of European solutions and the existence of an institutional 
framework which is well-suited to economic exchanges may not be enough to set these exchanges off 
spontaneously. The Community may therefore intervene through direct involvement with companies, 
16 
working in different ways depending on the market. 
> As regards the traditional activities of providing equipment or direct involvement in major projects, 
the tools used by the Member States and the resources which are available to large companies have 
generally been found to be adequate. However, the Community can help to find openings for 
European operators in these extremely competitive markets, for example by encouraging "twinning" 
between energy operators in Europe and Asia, or by supporting exchanges of personnel for short 
periods. It should be noted that the success of these operators or European investors is all the more 
important since it allows equipment markets to be opened up to hundreds of European businesses of 
all sizes which work as sub-contractors for these "leaders". 
> With regard to the newer sectors (often covered by SMEs), the Community will help to publicise 
tried and tested European technologies, promote their results and, if necessary, produce the initial 
references, in order to overcome the market's natural reticence when faced with innovative solutions. 
In the interests of both Asian partners and European enterprises, the Community can also facilitate 
and speed up access to these new markets for such companies, particularly by initiating or assisting 
in the formation of business consortia. These "niches" which are new in Asia but mature in Europe 
might include the following: Demand-Side Management (DSM), particularly in specific industrial 
sectors such as the cement industry, textiles, chemical industries, metallurgy, agro-industries, etc.; 
independent power production (IPP); telecommunication systems; Rational Use of Energy; "clean" 
electricity generation technologies (coal-fired power stations with a fluidized bed, smoke treatment 
plants, co-generation plants using natural gas or biomass, and energy recovery systems). 
> Promotion efforts should therefore be undertaken so that companies are encouraged to use the 
existing tools for support financing, in particular the ECIP facilities and also loans from the 
European Investment Bank. Depending on the actual needs, the Community could also develop new 
modalities to support SMEs. 
6.3. Allocating sufficient resources to meet the challenges 
Asian countries need to mobilise yearly about $ 100 billion for energy investments in the form of loans 
or participating interests, both from the public sector and also from the national and international private 
sector. To meet such challenges - and building on existing Community resources within current budgets 
and instruments - the Community could significantly increase, in the next five years, the amount of 
grants available for Euro-Asian energy co-operation (currently, 5-10 million ECU per year). These 
Community funds would of course be supplemented by an appropriate contribution from Asian and 
European partners. 
17 
CONCLUSION 
The expanded outlook for the energy sector in Asia during the next years represents for the European 
Community a tremendous challenge, from either an economic, social or environmental viewpoint. 
Thanks to its "plus points", often recognised by the Asian partners, the Community can contribute more 
than significantly to meeting the energy and environment challenges by supplementing both the actions 
undertaken by its Member States and the initiatives of international financial institutions. 
Equally the European Community can contribute to an increase in the European economic and business 
presence in these fast growing energy markets, which are vital for hundreds of thousands of jobs in 
Europe where the markets are almost saturated. 
The current Community actions, while extremely useful, are highly specialised and need to be focussed 
within an overall strategy for Euro-Asian energy co-operation. Accordingly, such a strategy should be 
agreed and implemented with sufficient resources and means, within existing instruments and budgets, 
to make it credible and efficient. 
Taking all the above into account the Council and the Parliament are invited to adopt the approach 
outlined in this document so it can be used as a basis for Europe-Asia energy co-operation. 
18 
ANNEX 1 : SOCIO-ECONOMIC DATA FOR ASIAN COUNTRIES 
COUNTRY Population 
(millions) 
1994 Area 
(1000 km2) GNP 
per capita 
inUSS- 1994 GNP 
in billion US$ 
1994 Urbanisation 
rate 
in %-1992 Average 
annual 
growth 
rate 
in energy 
production Average 
annual 
growth 
rate 
in energy 
consumption 
1980-1992 Energy 
consumption 
per capita 
in kg of oil 
equivalent 
1993 Installed 
electric 
power 
capacity 
inMW 
1992 Household 
supplied 
with 
electricity 
%in 1984 Electricity 
losses as 
% of total 
generated 
in 1990 
BANGLADESH 
BHUTAN 
CAMBODIA 
CHINA 
INDIA 
INDONESIA 
LAOS 
MALAYSIA 
MYANMAR 
NEPAL 
PAKISTAN 
PHILIPPINES 
SINGAPORE 
SRI LANKA 
THAILAND 
VIETNAM 
TOTAL 118 
0.7 
10 
1.191 
914 
190 
5 
19 
46 
21 
126 
66 
3 
18 
59 
72 
2.858,7 144 
47 
181 
9.561 
3.288 
1.905 
237 
330 
677 
141 
796 
300 
1 
66 
513 
330 
18.517 230 
400 
200a 
530 
310 
880 
320 
3.520 
725 
200 
440 
960 
23.360 
640 
2.210 
190 
545 26,6 
0,3 
2,0b 
630,2 
278,7 
167,6 
1,5 
68.7 
37,8 c 
4,1 
55,6 
63,3 
65,8 
11,6 
129,9 
13,8 
1.557,20 18 
6 
20 
27 
26 
32 
20 
45 
25 
12 
33 
44 
100 
22 
23 
25 
27 14 
2 
5 
7 
4 
-1 
13 
- 1 
15 
7 
6 
8 
28 5 
7 
7 
3 
10 
- 1 
8 
7 
3 
7 
1 
10 59 
33 
52 
632 
243 
330 
39 
1.545 
39 
22 
226 
328 
5.563 
110 
673 
77 2.392 
59 
137.890 
74.000 
9.256 
23 
5.280 
808 
8.854 
6.174 
627 
15 
9.650 
2.771 54 
14 
64 
30 
31 
46 
98 
18 
43 15 
19 
21 
17 
16 
36 
27 
24 
19 
11 
Sources : The World Bank Atlas, 1996; World Development Report 1994 : Infrastructure for development, The World Bank. 
M992 
b 1992 
«1992 
ANNEX 2 
Evolution of the world's primary energy consumption 
12000 
10000 
8000 
o S000 
4000 
1985 1990 1995 
Year 2000 2005 O 
CM 
Source : European Commission, DG XVII, (Energy) 
ANNEX 3 
CM 
O o 
c o 
c o Actual / projected C02 emissions for the period 1990 
2020 
10000 
8000 i 
6000 
4000 
2000 
0 Asia 
1990 2020 
Year 
Source: World Energy Council, 1994 : "Energy for tomorrow's world'. 
ANNEX 4 ; INSTRUMENTS OF INTERNATIONAL CO-OPERATION IN THE ENERGY SECTOR 
PROGRAMME 
Fourth framework programme for 
research co-operation with third 
countries 
PHARE 
TACIS 
EURATOM 
ECSC 
EBRD 
Mediterranean Renewal Project 
Lomé Convention 
EIB 
Co-operation with Asia and Latin 
America 
ECIP 
JOULE-THERMIE 
Synergy 
SAVE 
ALTENER TYPE OF PROJECTS BEING 
FINANCED 
Technological research and development, 
including demonstrations 
Technical assistance and co-financing of 
investments 
Technical assistance 
Investments to improve the security and 
reliability of nuclear power stations 
Investments in the coal and steel sectors 
Investments in all sectors, including energy 
* Protocols for each country 
* Regional co-operation 
Investments, training and technical assistance 
for all sectors, including energy 
Investments in all sectors, including energy 
Investments in all sectors, including energy 
Investments in equipment, training and 
technical assistance for all sectors including 
energy 
Co-financing through joint ventures of all 
sectors, including energy 
Technological research and development 
including demonstration : non-nuclear energy 
Energy policy and strategy 
Rational use of energy : promotion, regulatory 
activities, information and exchanges 
Renewable energy sources : promotion, 
regulatory activities, information and 
exchanges GEOGRAPHICAL AREA 
COVERED 
All third countries 
CEEC 
CIS 
CEEC 
+ ex URSS 
CEEC 
CEEC + CIS 
Mediterranean 
70 countries in Africa, the 
Caribbean and the Pacific 
CEEC 
Asian and Lat. American countries 
Asia and Latin America 
AU developing countries 
Community + third countries 
All third countries 
Community + third countries 
Community + third countries DURATION OF THE 
BUDGET 
1994-1998 
annual 
annual 
1994-1998 
since 1990 
unlimited 
1992-1996 
1992-1995 
1994-1996 
1993-1995 
1991-1995 
annual 
1994-1998 
annual 
1991-1995 
1993-1997 PROGRAMME 
(in MECUS) 
540 in total 
1,000 in 1994 
including 58 energy 
510 in 1992, 
including 130 energy 
1,000 
200 
10,000 
2,940 
2,075 
12,000 
3,000 
750 
2,750 
40 + banking funds 
1,002 **** 
8 in 1994 
35**** 
50**** TYPE OF AID 
subsidies 
subsidies 
subsidies 
loans 
loans 
3 % participation in the capital 
of the EBRD 
donations and EIB loans (2,062) 
donations and EIB loans (1,800) 
subsidies and EIB loans (1,200) 
loans 
loans 
subsidy 
interest-free loans 
subsidies which are repayable 
in the event of success 
cost-sharings 
subsidies 
subsidies 
subsidies 
Note : unless otherwise indicated, the amounts shown relate to the entire duration of the programmes 
**** : Total amount including EC 
ISSN 0254-1475 
COM(96) 308 final 
DOCUMENTS 
EN 11 12 
Catalogue number : CB-CO-96-317-EN-C 
ISBN 92-78-05864-5 
Office for Official Publications of the European Communities 
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