- Energy Market Integration in East Asia: Deepening Understanding and Moving Forward ed. by Yanrui Wu, Fukunari Kimura and Xunpeng Shi
This edited volume is a flagship study on energy market integration in East Asia. Conducted by the Economic Research Institute for ASEAN and East Asia (ERIA), it summarizes the progress of regional energy market integration over the past decade. While the volume focuses on Southeast Asia, where the results of regional integration are most evident, it also sheds light on the region’s links with Northeast Asia and South Asia. The result is an engaging academic product and a highly policy-relevant work, not least because of its ERIA sponsorship and insight. [End Page 181]
Energy market integration in East Asia is a timely and important subject because energy demand is expected to grow rapidly in this region, where both decaying and emerging energy exporters co-exist. This includes the anticipated greater utilization of unconventional fossil fuels and renewable energy resources. At the same time, some sub-regions of East Asia are witnessing greater economic integration led by industry, combined with renewed political guidance from institutions such as ASEAN, the Trilateral Cooperation Secretariat and the East Asia Summit (EAS).
Against this policy setting, this volume presents quantitative evidence and qualitative assessments to offer four points on the merits of regional energy market integration. First, energy market integration can improve energy security by bridging the production, consumption and unequal distribution of energy resources. Second, it can boost national economies and narrow development gaps by improving infrastructural connectivity. Third, energy market integration can reduce carbon dioxide emissions by facilitating the development of less carbon-intensive energy systems — including the diffusion of energy efficiency solutions, and the expansion of trade in natural gas and renewably-produced electricity. Finally, energy markets can function as the cross-sectoral spearhead of regional integration for which political demand exists, but remains hindered by historical tensions, border disputes, distrust among the major powers and weak regional institutions.
The theoretical framework of the volume postulates that energy market integration presupposes: trade liberalization; investment liberalization; a regional energy infrastructure; domestic energy market liberalization; and energy pricing reform (including the removal of subsidies for fossil fuels commonly found in this region). This structure is useful because it comprises empirically operationalizable criteria and, therefore, enables the editors to evaluate the progress of regional integration and identify areas that require further work. The biggest constraints prevail in the liberalization of domestic markets and the harmonization of standards for trade and infrastructural connectivity. The liberalization of domestic markets in some countries — such as in Australia, Japan, India and Singapore — discourages investments in countries with non-liberalized domestic markets. Price subsidies create similar problems and are deeply rooted in countries like Indonesia, Malaysia and Vietnam.
The operational strength of this theoretical structure is not, however, fully utilized in the volume. No systematically collected data is presented for each EAS country, unlike in some other reports on this subject. Additionally, the volume would have benefitted from a deeper engagement with the substantial literature on regional integration theory. Likewise, the numerous existing studies on the constraints of formal and informal institutions on East Asian integration would have been useful for deepening the volume’s analysis of the problems of harmonization and historical distrust, which many of its authors refer to.
The framework could also have been better integrated into the chapters that follow the editors’ summary (p. v) of the progress of regional energy market integration. Nevertheless, there are several highly interesting analyses in the compilation. One of them is Philip Andrews-Speed’s regional public goods approach (Chapter 2). He examines the provision of regional public goods in the context of the European Union and concludes that similar aims are best pursued at the sub-regional level in East Asia, and that East Asian states should focus on developing services. These services should support energy market integration and comprise: early warning systems; technological research and development; best practices; emergency stock construction; sea-lane security; cleaning up...