While the United States and Europe are considered the pioneers of renewable energy, Asia is emerging as a major player in the renewable energy transition. Although experts predict Asia will remain the fastest growing market for oil, gas, and coal, even as an energy transition takes hold, slowing regional fossil-fuel consumption could have significant market and geopolitical implications—and signal that the world could be moving closer to reaching a peak in global oil demand. The transformation on the horizon, spurred by a shift from energy-intensive growth to improved efficiency and focus on electrification, has already occurred in major Asian economies, providing a model for shifts in the transportation sector, for example, to address the energy security and climate challenges facing the region. So, how plausible is electrification and deep decarbonization of Asia?
In their issue brief, “Asian energy transition: Moving the oil market one step closer to peak demand,” launched at The Atlantic Council’s 2018 Global Energy Forum in Abu Dhabi, Global Energy Center Senior Fellow and Eurasia Group CEO Robert “RJ” Johnston and Eurasia Group Associate for Strategy and Business Analytics Lily Ghebrai argue that the Asian energy market has three critical factors that enable an acceleration away from fossil fuel-intensive energy dependence in the Asian energy market: energy insecurity, climate/environmental policy, and industrial policy.
This brief, part of the Global Energy Center’s project ‘Shifting Gears: The Future of Transportation, Oil Demand, and Energy Geopolitics,’ acknowledges that the electrification of transportation just scratches the surface of a broader energy—and societal—transition waiting to take hold, and barriers to success are high. However, the authors are confident that strategies like the “Made in China 2025” and the support for electric vehicles in China, the advancement of hydrogen in Japan, and the “low-carbon, green-growth” initiative and smart city investment in South Korea will continue to provide inspiration for other transformations in the region.
If successful, what will this transition accomplish? Johnson and Ghebrai predict it will help cement new trade and investment relationships, reduce the rate of oil consumption growth in the region, and present hope for more manageable GHG emissions reductions over time. But, the question remains: will a reduction in the oil consumption growth rate lead, in turn, to a “peak demand” for oil?