Asia’s Energy Prices Are Chaotic. Why Should The World Worry?

These are just a few of the more eye-catching scenes unfolding in the Asia Pacific region, where several countries are coping with their biggest energy crises in years — as well as the mounting anger and unrest created by cost-of-living increases.

The sense of crisis is obvious in Sri Lanka and Pakistan. Public outrage has already led to a wave of resignations in Colombo and contributed to Imran Khan’s demise as Prime Minister of Pakistan.

Many observers believe that the political reckoning has only just begun; both countries have been forced into extreme measures, including going cap in hand to the International Monetary Fund and instituting shorter work weeks in an effort to preserve energy. Prime Minister Ranil Wickremesinghe declared on Wednesday that the Sri Lankan economy has “completely collapsed.”

Elsewhere within the region, the symptoms of crisis may be less evident, but the ramifications might be far-reaching. Even in comparatively wealthy countries such as Australia, economic concerns are emerging as consumers feel the sting of rising energy costs.

Wholesale electricity prices were up 141 percent year on year in the first quarter of 2022; households are being urged to reduce usage; and on June 15 – for the first time – the Australian government suspended the national electricity market indefinitely in an effort to bring prices down, relieve pressure on the energy supply chain, and prevent power outages.

However, the experience of India, whose power consumption has lately reached all-time highs, demonstrates most clearly why this is a global — rather than regional — catastrophe.

Following prolonged outages caused by high temperatures, the world’s third-largest carbon emitter announced on May 28 that state-run Coal India will import coal for the first time since 2015.

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While the cost of energy imports has risen dramatically around the world, with international coal prices five times higher than a year ago and natural gas prices up to ten times higher, experts say there are reasons why some Asian economies, particularly import-dependent, developing ones, have been hit the hardest.

Poorer countries that are still developing or newly industrialized are simply less able to compete with more affluent competitors — and the more they need to import, the worse their problem will become, according to Antoine Halff, an adjunct senior research scholar at Columbia University’s Center on Global Energy Policy.

A bigger problem awaits.

How these countries respond may be an even bigger problem than rising costs.

Under public pressure, governments and politicians may be inclined to return to cheaper, dirtier kinds of energy like coal, regardless of the impact on climate change.

And there are indications that this has already begun.

In Australia, the federal government’s Energy Security Board has suggested that all energy providers, including coal-fired ones, be compensated for maintaining additional capacity in the national grid in order to avoid power disruptions. In addition, the New South Wales government has invoked emergency powers to reroute coal from state mines to local generators rather than overseas.

Both policies have been chastised by some who accuse the administration of compromising its commitment to green energy.

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In India, a country of 1.3 billion people that relies on coal for almost 70% of its energy generation, New Delhi’s plan to expand coal imports is expected to have far-reaching environmental consequences.

Scientists argue that dramatic reductions in coal mining are required to minimize the worst consequences of global warming, but this will be difficult to achieve without the cooperation of one of the world’s largest carbon emitters.

“Any country, be it India, be it Germany, be it the US if they double down on any kind of fossil fuel it will eat up the carbon budget. That’s a global problem, ” Sandeep Pai, senior research lead for the Energy Program at the Center for Strategic and International Studies concurred.