Scenario Planning of Energy-related Crises in East Asia

1. Scenario Planning of Energy-related Crises in East Asia International Energy Workshop 2005 July 5-7, 2005 Kyoto Ryota OMORI Japan Science and Technology Agency Hideyuki HORII University of Tokyo, Graduate School of Engineering

2. Table of Contents • Introduction • Scenario Planning • Energy Problems in East Asia • Purposes of this Study • Scenario Analysis of Energy-related Crises in East Asia • Analysis of Risk factors • Crisis scenarios: ‘Resource Competition’ Scenario & ‘Isolated Japan’ Scenario • Policy Implications • Viewpoints needed for Japan’s S&T Strategy

3. Scenario Planning • It is not a forecast. Future is uncertain and unknown.ex. international relations, social trends, technological development・・・ • Experts from a variety of fields, • analyze the present situation and risks for the future; • identify the most critical factors; • and, develop scenarios for possible images of the future. • It enables us • to understand the structure of the possibilities of the future, • to make proper decisions, • to adapt quickly to the environmental changes. Future World 1 Branching Point Analysis Present Future World 2 （IEEJ Kakuwa）

4. Scenario Planning for S&T Policy Design • To develop a robust strategy that can accommodate many possibilities of the future;→A long-term strategy is needed for R&D • To extract new needs for R&D strategy from scenarios; • To evaluate individual R&D themes from scenarios.

5. East Asia’s Energy Problems • Growing Energy Demand(especially China and India) • Increasing dependency on imported oil(over 75% in 2020, especially from Middle Eastern Countries) ↓ • High Energy Price • Decline in the economic and political power of the East Asian Countries • International Conflicts over Energy Resources Primary Energy Consumption Outlook (MTOE) (IEEJ 2004)

6. Purposes of this study • To understand risks for energy crises in East Asia using scenario planning • To evaluate R&D themes from the following viewpoints • Contributing to energy security in East AsiaJapan, a industrialized country in Asia, which is almost 100% dependent on imports for its energy supply, should seek to avoid energy crises in cooperation with the East Asian countries. • Maintaining security and welfare of Japan It’s paramount that Japan’s national security and prosperity be ensured through such efforts.

7. Scenario Investigation Committee

8. Sharing of Problem Consciousness- Master Plan - • Ensuringregional energy security in East Asia is essential for the security of Japan • Energy-related technologies are important part of the national resources and Japan should utilize themfor maintaining its security and welfare.

9. Master Plan Establishment of Risk Categories Enumeration of Risk Factors Determination of Scenario Structures Writing Scenarios

10. Risks and Crises to be examined • Risks for the Master Plan towards ～2020 • securing energy supply in East Asia • maintaining security and welfare of Japan • Energy Crises? • Contingent Crises • Surge in energy prices • Disruption of energy supply • Structural Crises • Decline in the economic and political power of the East Asian Countries • International conflict over energy resources

11. China’s Resource Nationalism China’s S&T systems and policies Geopolitics and International Relations in East Asia Supply Chain Crises (accidents, terrorism) Progress of Motorization Electric Power Crises Nuclear Accidents and Proliferation Environmental Issues Risk Categories

12. 18 Highly Uncertain and Influential Factors（１） • Will Japan be able to maintain its competitive edge in energy technologies? • Will the post-Kyoto Protocol regime be in place? • Will an international cooperation system be in place to safeguard transportation routes for Middle Eastern resources? • Will China continue aggressive upstream investments? • Will awareness of energy saving and environmental protection grow among consumers? • Will China introduce market mechanisms into the energy sector? • Will gas-electric hybrid vehicles become widespread?(What about the fuel economy of conventional vehicles?) • Will serious nuclear accidents take place? • Will China take measures to reduce its greenhouse gas emissions?

13. 18 Highly Uncertain and Influential Factors（2） • Will China’s political agenda seriously interfere with its S&T system? • Will terrorism strike Southeast Asia? (What about its magnitude and frequency?) • Will the construction of power plants in China catch up with domestic demand? • Will the geopolitical situation on the Korean Peninsula stabilize? • Will Russia supply its resources to Northeast Asia? • Will trade frictions develop between China and the U.S.? • Will China and the U.S. be in conflict over the security of sea lanes? • Will East Asian countries take sufficient measures to safeguard nuclear power? • Will China’s economic prosperity stabilize domestic politics?

14. The most critical factor for achieving the Master Plan is　“China” We have developed scenarios with focusing on future images of China.

15. Two Future models of China and Scenarios • “Hard China” that follows political logic placing a premium on governance↓“Resource Competition” Scenario • “Open China” that follows scientific and economic logic placing a premium on economic development↓“Isolated Japan” Scenario

16. Analytical Phases of Two Chinas - Scenarios’ Contents - • Domestic policies • Foreign Policies • S&T Policies • Energy Systems • Energy Policies • Energy Demand and Energy Efficiency • Evolution of Energy Technologies • Crises for Master Plan

17. Two models of China

18. Energy Systems in Hard China- Resource Competition Scenario - Energy policies • State-controlled domestic energy prices • Emphasis on energy self-sufficiency • Aggressive upstream investments for domestic and overseas resources ↓ Energy demand and efficiency • Ever-increasing energy demand • Relatively low energy efficiency • Power shortages ↓ Energy technologies • Improvement in the efficiency of conventional coal-fired power plants • Promotion of large-scale centralized power generation • Development of domestic nuclear technology • Promotion of renewable energy to develop rural areas

19. Energy Systems in Open China- Isolation of Japan Scenario - Energy policies • Emphasis on the introduction of market mechanisms into the energy sector • More dependence on the international energy market • Emphasis on energy efficiency ↓ Energy demand and efficiency • Increases in energy efficiency due to the introduction of market mechanisms and advanced technologies ↓ Energy technologies • Introduction and proliferation of energy-saving technologies • Commercialization efforts for advanced technologies (CCT, innovative nuclear systems, hybrid vehicles, fuel-cell vehicles, etc.) • An advance in power network systems

20. Crises for Master Plan

21. Use of the Scenarios for policy implications Two scenarios Extract viewpoints needed for long-term S&T strategy Evaluate individual R&D themes ex. fuel-cell vehicles, innovative nuclear systems, clean coal technology (under examination)

22. Viewpoints needed for Japan’s S&T policy design ‘Resource Competition’ Scenario • R&D to create a climate that discourages resource nationalism • energy-saving technologies, alternative energy technologies for oil・・・ • R&D to improve the reliability and security of energy infrastructures • nuclear safety technologies, energy network control technologies, countermeasures against terrorism・・・ • Cooperation with Europe and U.S. in policies towards China ‘Isolated Japan’ Scenario • R&D of state-of-the-art (energy) technologies to increase Japan’s presence as a technology-oriented country • R&D of (energy) technologies in the fields in which exports are expected to grow • R&D of (energy) technologies as diplomatic measures

23. Summary • Using scenario planning techniques, we have analyzed risk factors for the master plan towards 2020. • The most critical and uncertain factor has been found to be ‘China’. Two visions for China have been created and analyzed. • Based on these visions, ‘Resource competition scenario’ and ‘Isolation of Japan scenario’ have been developed. • Strategic viewpoints needed for science and technology policy design have been examined. • The significance of individual R&D themes will be evaluated from these viewpoints in details.