Overcoming Asia’s resource challenge

THE AUTHOR

These are historic times for Asia. Recent years have seen the region’s economies enter an unprecedented phase of industrialization and urbanization.

According to McKinsey, the Chinese economy is changing at 10 times the speed of Britain’s during the Industrial Revolution—and on 100 times the scale. The Asia-Pacific region as a whole is experiencing economic growth of around 6 percent each year. At the same time, the number of people living in cities globally is set to rise from 3.6 billion in 2010 to 6.3 billion by 2050—with much of that rise happening in Asia.

Asia’s dynamic economic growth is generating millions of jobs, transforming economies, and steadily lifting entire communities out of poverty. But it is also coinciding with growth of another kind. Global population is rising fast, with the number of people on the planet expected to increase from seven billion today to around nine billion by 2050. As population numbers are rising, so are aspirations. A growing global middle-class means people are striving for a better quality of life, with greater access to goods and services.

Economic success is, of course, something we should celebrate. But it brings its own challenges—for example, in terms of the increasing pressure it can put on natural resources. The Shell Scenarios team have 40 years’ experience of long-term scenario planning. Based on current trends, they expect global demand for energy, water and food all to rise between 40 percent and 50 percent by 2030. Across Asia as a whole, the need for energy is likely to double by 2060.

That’s a massive increase—and a powerful argument for urgent, concerted action. At Shell, we’ve thought long and hard about how best to act. Importantly, we agree with those who argue that there’s a relationship between the key resources of energy, food and water.

How does that relationship work? In simple terms: water is required to extract energy and generate power; energy is required to treat and transport water; and both energy and water are required to grow and process food.

Pressure on those key resources is building. The Asian Development Bank recently warned that water shortages may soon hamper the reliable production of food and energy across the continent.

But there are steps we can take to tackle this. For one thing, we can embrace more innovative urban planning. As Asia’s economies grow so do its cities. In Southeast Asia, for example, the urban population has almost doubled in the past two decades. The simple fact that cities with high population density are more energy efficient than those which sprawl, means smarter urban development can help reduce the burden on the global energy system. Better designed cities—with more efficient, integrated transport systems using cleaner fuels like natural gas—can also help remake the global transport system.

The second key step policymakers can take is to diversify energy supplies. Coal remains a fuel widely used for generating electricity in Asia. It’s readily available and cheap. But natural gas has huge potential as a means of diversifying, and therefore securing, the region’s energy future at a time of rocketing demand. Liquefied natural gas (LNG) makes it increasingly easy to transport natural gas from expanding supply hubs like Qatar and Australia to demand centers across Asia. Singapore and Malaysia began importing LNG last year.

Countries like Thailand, China and India are all expanding their import capacity. With global gas supplies becoming more abundant and more accessible, now is the right time to make the switch.

Importantly, embracing cleaner-burning natural gas will also lower carbon emissions and improve air quality across the region. The Chinese government, for one, has already identified a number of cities where it wants to replace coal-fired power stations with gas-fired stations. Why? To improve the quality of the local air.

The third step needed is for government, business and civil society to embrace a new model of cross-sector, public-private, transnational partnership. Typically, governments tend to focus most keenly on what is happening within their own borders; businesses are often preoccupied with their day-to-day operations; and non-governmental organizations tend to focus on specific interests.

All that needs to change. The International Energy Agency, for example, has identified a series of collaborative projects which are making a difference. One is a project run by the World Resources Institute and the Centre for Science and the Environment in New Delhi to refine bus routes in the Indian capital, making them safer, less congested and more efficient. Another is a public-private initiative in Istanbul which has successfully integrated the city’s huge ferry and bus transport services.

What can this new collaborative thinking offer us? Effective joined-up action, supported by constructive, joined-up policymaking, informed by insightful joined-up thinking.

No one pretends that we can meet the challenges presented by increasing natural resource stress  overnight. They require long-term solutions. But as a business whose success depends on our ability to plan for the future, we know the value of implementing those solutions not tomorrow, but today.

(Author is the Chief Financial Officer for Royal Dutch Shell.)