Energy security and sustainability in Northeast Asia

Energy Policy 39 (2011) 6719–6730

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Energy security and sustainability in Northeast Asia David von Hippel a,, Tatsujiro Suzuki b, James H. Williams c,a, Timothy Savage a, Peter Hayes d a

The Nautilus Institute, University of San Francisco Center for the Pacific Rim, 2130 Fulton Street LM 200, San Francisco, CA 94117, USA Graduate School of Public Policy (GRASPP), The University of Tokyo, 7-3-1, Hongo, Bunkyo-ku, Tokyo 113-0033, Japan Monterey Institute of International Studies, 460 Pierce Street, Monterey, CA 93940, USA d Royal Melbourne Institute of Technology, and the Nautilus Institute, University of San Francisco Center for the Pacific Rim, 2130 Fulton Street LM 200, San Francisco, CA 94117, USA b c

a r t i c l e in fo

abstract

Article history: Received 12 December 2008 Accepted 6 July 2009 Available online 3 August 2009

‘‘Energy Security’’ has typically, to those involved in making energy policy, meant mostly securing access to oil and other fossil fuels. With increasingly global, diverse energy markets, however, and increasingly transnational problems resulting from energy transformation and use, old energy security rationales are less salient, and other issues, including climate change and other environmental, economic, and international considerations are becoming increasingly important. As a consequence, a more comprehensive operating definition of ‘‘Energy Security’’ is needed, along with a workable framework for analysis of which future energy paths or scenarios are likely to yield greater Energy Security in a broader, more comprehensive sense. Work done as a part of the Nautilus Institute’s ‘‘Pacific Asia Regional Energy Security’’ (PARES) project developed a broader definition of Energy Security, and described an analytical framework designed to help to compare the energy security characteristics – both positive and negative – of different quantitative energy paths as developed using software tools such as the LEAP (Long-range Energy Alternatives Planning) system. & 2009 Elsevier Ltd. All rights reserved.

Keywords: Energy security East Asia

1. Introduction to the concept of energy security ‘‘Energy Security’’ has typically, to those involved in making energy policy, meant mostly securing access to oil and other fossil fuels. With increasingly global, diverse energy markets, however, and increasingly transnational problems resulting from energy transformation and use, old energy security rationales are less salient, and other issues, including climate change and other environmental, economic, and international considerations are becoming increasingly important. As a consequence, a more comprehensive operating definition of ‘‘Energy Security’’ is needed, along with a workable framework for analysis of which future energy paths or scenarios are likely to yield greater Energy Security in a broader, more comprehensive sense. Work done as a part of the Nautilus Institute’s ‘‘Pacific Asia Regional Energy Security’’ (PARES) project developed a broader definition of Energy Security, and described an analytical framework designed to help to compare the energy security characteristics – both positive and negative – of different quantitative energy paths as developed using software tools such as the LEAP (Long-range Energy Alternatives Planning) system. This analytical framework has been elaborated and adapted for use in the ongoing Asian Energy Security project, as discussed briefly in the introductory article to this Special Issue. Additional details of

 Corresponding author. Tel./fax: +1 541 687 9275.

E-mail address: [email protected] (D. von Hippel). 0301-4215/$ - see front matter & 2009 Elsevier Ltd. All rights reserved. doi:10.1016/j.enpol.2009.07.001

the PARES project’s achievements can be found in the report A Framework for Energy Security Analysis and Application to a Case Study of Japan, available from Nautilus Institute at http://www.nautilus.org/archives/pares/PARES_Synthesis_Report. PDF and http://69.44.62.160/archives/pares/PARES_Synthesis_Report. PDF (Suzuki et al., 1998). This article draws from PARES project documents, as well as from a summary of the PARES energy security analysis approach published earlier (von Hippel, 2004), and developed in related articles (e.g. Hayes and von Hippel, 2006). Key elements of the development of the PARES energy security definition are described below.

2. Defining energy security and sustainability 2.1. Security in general The concept of energy security is based on the concept of security in general. It is therefore appropriate to begin a discussion of energy security by clarifying what is meant by the word ‘‘security’’ as it relates to military and non-military policy. Tanaka (1997) defines three key questions or components of security policy as follows:

 What to protect?  What risks to be protected from?  How to protect?

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Tanaka also discusses the five principles of security policy which help ensure risk minimization. They can be referred to as ‘‘insurance’’ principles and are as follows:

    

cost sharing cost minimization multi-dimensionality, or ‘‘multi-purposeness’’ flexibility or ‘‘switchability’’ expectation of non-return.

‘‘Cost sharing’’ refers to the fact that to ensure risk minimization all beneficiaries need to share the total security costs fairly. This entails clarifying who will get what benefits. Burden sharing often becomes a subject of political discussion and thus clarification of cost/benefits is critically important to define security policy. ‘‘Cost minimization’’ refers to avoidance of over-committing to any one path or insurance policy and that risk minimization should not put an excessive burden on society. ‘‘Multi-dimensionality or multi-purposeness’’ refers to the fact that risk minimization should be designed to deal with many types of risks, not just one or two. ‘‘Flexibility or switchability’’ refers to the need for any robust security policy to adjust to external changes. Finally, ‘‘expectation of non-return’’ refers to the fact that although security costs may not generate any visible return, the insurance provided is essential. Though the above principles offer useful guidelines to the development of security policy, in reality the weight given to any one or combination of the principles varies significantly depending on the nature of three components of security policy (what to protect, what risks to protect from, and how to protect) described above. For example, if a particular event or circumstance will have catastrophic results, even if the probability of the event is very uncertain and low, cost minimization as an insurance strategy would be of lower importance; one would be willing to spend more to prevent the risk of such events from being realized. Nuclear deterrence policy is a good example of an insurance policy against this type of catastrophic risk. On the other hand, if the risks are very uncertain and long-term, types of security measures with multiple purposes may bring some benefits even if the risks turned out not to be real. The so-called ‘‘no-regrets policies’’ taken by the US government on the global climate change issue during the George Herbert Walker Bush Administration (in the 1990s) is an example of this type of approach, though with hindsight those policies appear inadequate to address climate change risks as we understand them today. If the risks are relatively certain and controllable, the minimum cost principle is more important than the multi-purpose principle. Individual private travel insurance or automobile insurance are good examples of such measures. Though the five principles above cannot be rigidly applied in all cases, they nevertheless provide a useful framework for examining the concept of energy security.

2.2. Energy security Many of the existing definitions of energy security begin, and usually end, with a focus on maintaining energy supplies—and particularly supplies of oil (see, for example, Clawson, 1997). This supply-based focus has as its cornerstones reducing vulnerability to foreign threats or pressure, preventing a supply crisis from occurring, and minimizing the economic and military impact of a supply crisis once it has occurred. Current national and international energy policies, however, have been facing many new challenges, and have at their disposal new tools that need to be considered as key components of new energy security concepts.

Why has oil been the primary focus of energy security policy? There are good reasons behind this particular focus. First, oil is still the dominant fuel (36%) in global primary energy supply (as of 2006; British Petroleum Company, 2007). Second, the Middle East, where the largest oil reserves exist, is still one of the most unstable areas in the world. Third, and related to the second reason, oil supply and prices are often influenced by political decisions of oil suppliers and buyers. Fourth, world economic conditions, as aptly demonstrated in the last year, are still vulnerable to oil price volatility, since there are certain key sectors that are heavily dependent on oil (such as transportation, petrochemicals, agriculture, and others) with limited short-term alternatives for substitution. Fifth, the keywords here are ‘‘volatility’’ and ‘‘instability’’. Although globalization has improved the transparency of the oil market, oil prices remain to some extent at the mercy of speculators, as well as being affected by fluctuations in currency values, subject to manipulation by oil suppliers and, of course, sensitive to the forces of market supply and demand (for a discussion of the impact of speculation on the oil market, see Harris, 2008). This has been dramatically shown recently, with oil prices roughly doubling between mid-2007 and mid-2008, followed by a 75 percent decline in price by early 2009, followed by a return to mid-2007 price levels by mid-2009. (USDOE EIA, 2009). Few works have made a serious attempt to clarify the concept of energy security. One attempt at a clear definition of energy security was that of the Working Group on Asian Energy and Security at the Massachusetts Institute of Technology (MIT)’s Center for International Studies. The MIT Working Group defined three distinct goals of energy security (Samuels, 1997): 1. reducing vulnerability to foreign threats or pressure, 2. preventing a supply crisis from occurring, and 3. minimizing the economic and military impact of a supply crisis once it has occurred. These goals implicitly assume that an ‘‘oil supply crisis’’ is the central focus of energy security policy. In essence, the central tenets of conventional energy security policy are: (1) reduction of threats to oil supply, and (2) operating in a mode of crisis management. These tenets constitute a shared view among key energy policy-makers in both the East and West. Analyzing the conventional (oil supply-focused) view of the energy security concept in terms of the three key components of security policy enumerated above yields the following. 2.2.1. What to protect? As has already been stated, oil supply is the dominant ‘‘what’’ to be protected in conventional energy security thinking. In developed countries and most developing countries, oil remains the dominant fuel in the total primary energy supply picture, at least with regards to imports. Oil is also the most strategic fuel, in particular for the transport and military sectors (see, for example, Hayes and von Hippel, 1997). Therefore, securing oil is an essential condition for a nation’s security and economic welfare. In addition to physical supply, stable oil prices are also a paramount condition and concern for security and economic welfare. 2.2.2. What risks to be protected from? Sudden oil supply disruption (which can be caused by a variety of circumstances such as a supplier’s embargo, accidents, or bad weather) is the foremost risk that a nation or an economy is to be protected from in the conventional view of energy security. Longterm oil resource depletion periodically – and with increasing frequency – receives serious consideration, but is currently not at

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the center of the supply debate, as constraints in oil supply capacity are the chief worry in the near-term (for example, the next 2–5 years). Similar to sudden oil supply disruption, sudden price shock is a critical risk to be protected from. In fact, during the two ‘‘energy crises’’ in the l970s, physical shortage of oil supply was less important than the price shock. Thus, keeping oil prices stable is a principal component of conventional energy security policy. Price shocks and sudden supply disruptions are heavily, but not 100 percent, correlated. Price shocks could happen at any time with merely the expectation of a supply shortage, which in turn could be brought on by various events or perceived risks, including the risk of international political conflict or disruption. A recent short-term rise in oil prices, for example, was blamed in part on concerns about possible supply disruptions of conflict after Iran’s test-firing of missiles (Reuters, 2008). 2.2.3. How to protect (or prevent)? Prevention is the best way to minimize the risk. Fostering friendly diplomatic relations with oil supplier countries (such as US relations with Saudi Arabia over most of the 1980s through 2001, and Chinese relations with Sudan; Nwazota, 2006), while at the same time shifting away from heavy dependence on oil are the major policy measures of large oil-consuming countries. For example, promotion of nuclear power generation and increased utilization of non-oil fossil fuels (coal and natural gas) have been primary vehicles for reducing oil dependency in countries such as Japan. Many countries have invested large sums of money in R&D to move away from oil, including investments in alternative energy technologies such as coal liquefaction, coal gasification, and solar thermal power generation. Such R&D programs have met with both success and failure. Some of the alternative energy sources, such as wind and geothermal, have had commercial success. But success in deploying alternative energy technologies, at least at a level sufficient to have a significant impact on fossil energy use, seems to have depended largely on local and national political and economic support, and of course on favorable availability of renewable resources. Despite the best efforts to prevent a supply crisis, one can still occur. In this instance, energy security thinking dictates minimizing the impact of the crisis on national security and economic welfare. Strategic stockpiles, often owned and managed by the government, are one of the most effective ways to deal with a supply disruption crisis and/or price shock. Although stockpiles have not actually been used in the case of shortages, they are considered essential to minimize price impact during a crisis situation. US Strategic Petroleum Reserves were tapped to reassure oil markets in 1990/1991, prior to and during the first Gulf War, and in 2005, when Hurricane Katrina resulted in the shutting down of considerable Gulf of Mexico oil and gas production (USDOE, 2008). Other crisis management measures include both diplomatic and military actions. Although military actions are typically carried out only as a last resort, the first Gulf War is an example of a joint military venture designed (in large part) to protect oil supply. 2.3. Differences in energy security policies If the above characterization of conventional energy security thinking is shared by the major energy consuming/importing countries, does this mean that there are no critical differences in energy security policy among them? No. Although many countries share the above broad characteristics, it is also true that there are significant differences. What are the differences and why do they exist? One important factor is, of course, natural and geopolitical

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conditions. One country might have abundant natural resources and another may not. Some consuming countries are located close to energy-producing countries, and some are distant, and thus need transportation of fuel over long distances. Those conditional differences can lead to basic differences in energy security perceptions. In sum, there are three major attributes that define the differences in energy security thinking between countries: (1) the degree to which a country is energy resource-rich or energy resource-poor, (2) the degree to which market forces are allowed to operate as compared to the use of government intervention to set prices, and (3) the degree to which long-term vs. short-term planning is employed. Each of these sources of energy security policy differences will be discussed below, using the United States and Japan as key examples of different situations.

2.3.1. Energy resource-rich vs. energy resource-poor In the international arena, it is often the case that energy resource-rich countries have a greater set of energy security options than energy resource-poor countries. And, as a corollary to this greater suite of options, the rich countries are able to emphasize global energy security rather than national energy security. The perception of energy security may significantly differ between those nations that have abundant energy resources and those that do not. Stronger emphasis on ‘‘national energy security’’ is clearly more evident for countries that do not have abundant resources, with Japan, the Republic of Korea, and France serving as key examples. During the 1970s, however, ‘‘national energy security’’ was the dominant subject for energy security policy even for energy-rich countries. Energy-rich countries are not, however, immune to national security considerations, as attested by ‘‘Project Independence’’, initiated by the Nixon Administration immediately following the first oil crisis in 1973. At that time, the goal of energy security policy for most countries was to achieve greater ‘‘independence’’ (that is, reduce oil dependency). Energy resource-poor countries like Japan, the Republic of Korea, and France were spurred to focus on national energy security because of their increased sense of vulnerability. The fact that countries like Japan, whose energy self-sufficiency rate is virtually zero, focus on increasing production from domestic energy sources is not surprising. The heavy dependence on foreign energy sources is one reason that Japan and France have pursued nuclear power development, and in particular nuclear fuel recycling (reprocessing of spent nuclear fuel to separate Plutonium for use in fresh reactor fuel) and breeder reactor development. It is often viewed by energy resource-poor countries that energy-rich countries have the luxury to ignore nuclear power development or to abandon breeder reactor development. On the other hand, there is a growing consensus that since the energy market – especially for oil and for other fuels as well – has become substantially globalized, any supply shortage or price rise will affect almost all countries regardless of dependence on foreign suppliers. According to this view, national energy security concerns lose their grip, and global energy security becomes the primary concern. According to this view, nuclear power and nuclear fuel cycle development – and alternative or complementary approaches such as renewable energy and energy efficiency – can be important even for energy-rich countries because such development will contribute to global energy supply stability (and market stability) and resource conservation – for example by reducing demand for fossil fuels so that existing capacity can meet demand more easily – rather than to national energy independence. In fact, recent trends in France (shutdown of the Superphoenix reactor in February of 1998) and in Japan (the slowing of

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fast breeder reactor development) suggest that national energy independence is no longer a major motive force for nuclear power development. Under globalized energy market conditions, although there are still significant differences in perception of energy security between energy-poor and energy-rich countries, the gap in practical energy security measures will continue to narrow.

2.3.2. Market vs. government Another important source of differences in energy security policy relate to the degree to which market mechanisms or government dictates are employed to handle energy resource transactions. If energy resources are viewed as commodities, it is natural to believe that market mechanisms are the best way to allocate them. If, however, energy resources are viewed as ‘‘strategic materials’’, it is natural to consider the role of government as essential to energy policy. In fact, use of the word ‘‘security’’ itself might imply that the role of government is essential. It is commonly agreed that the role of government is critical in crisis management. In non-crisis situations, however, there are distinct differences of opinion as to the relative benefits of market mechanisms or government control for allocation of resources. Comparing the US and Japan, the US tends to view energy resources as commodities and Japan tends to view them as strategic materials. The US government, for instance, tends to take a laissez-faire approach toward energy resources, as can be seen with steps towards deregulation of the electric utility industry. Also, the US provided minimal support, relative to previous decades (and to a number of other countries) to the nuclear power industry in the 1990s. Support for the US nuclear industry may be poised to increase—witness the loan guarantee programs included in the 2005 Energy Policy Act’s Title XVII, for example (Smith-Kevern, 2008). Japan’s policy toward nuclear power, in the past two to three decades, at least, stands in contrast to that of the US, in that Japan has considered nuclear power a pillar of its energy security policy. There is strong governmental support of the nuclear power industry in Japan. Tax policy offers another contrast in market vs. government intervention approaches between Japan and the United States. Japan effectively utilized electricity and imported oil taxes to deploy power sector infrastructure, carry out research and development, and secure strategic oil stockpiles (Yamanouchi, 1997). The US tried to introduce an energy tax (a BTU tax) in the early 1990s, but the effort failed, and efforts in recent years to promote carbon taxes at the municipal, state, and federal levels – which would accomplish similar goals to a BTU tax – have thus far been largely stymied. Although introduction of new taxes is always difficult for any government, the Japanese and US experiences may reflect genuine differences in attitudes toward the role of government in energy policy in the respective countries. Despite these differences in the perception of the role of government in energy markets, however, there is a shared view that the role of government is critical in crisis management. Under normal circumstances, the government should (1) prevent ‘‘breakdown’’ in global markets, (2) assist private sectors in building long-term infrastructure, and (3) prepare contingency plans to reduce the impact of market breakdown. Differences in approach between countries are somewhat less evident when the discussion shifts toward strategic energy material/technology. Some sort of governmental guidance and control is preferred if energy resource is not a regular commodity. Nuclear power technology and nuclear material are good examples of energy-related products that are not considered

regular commodities due to their potentially undesirable alternative uses, such as diversion for use in nuclear weapons. For example, the United States and the EU have been attempting (without notable success, thus far) to prevent Iran from acquiring and using uranium enrichment technology for fear that it will be used to build a nuclear weapon, not just to produce reactor fuel as Iran claims. The Iran situation in particular has complex roots in national and international policy, including the energy security policies of the many nations that Iran supplies with oil, but the potential diversion of nuclear materials and technologies for weapons use is an important security dimension of nuclear energy that is recognized in most countries. 2.3.3. Long-term vs. short-term A critical source of differences in energy security policy between countries is the time perspective taken when national policies are formulated. For example, emphasis on crisis management rather than resource depletion may arise from a short-term perspective. Emphasis on market mechanisms may also be an indication of a short-term perspective in planning. Countries with longer-term perspectives may emphasize stability over costeffectiveness. These differences will naturally lead to different energy security policies. It is generally viewed that US policy tends to put too much weight on short-term considerations, while Japanese policy tends to over-emphasize the long term. It is not necessarily the case, however, that either a long-term or a short-term perspective generally produces superior energy policy. Long-term thinking may lead a nation to adopt a more flexible energy policy, one more able to adapt to changes, and conversely, an apparently long-term plan may have the characteristic of being resistant to change in the short term. Both short- and long-term perspectives are often used to rationalize particular political objectives. Cutting federal R&D budgets, for example, can be rationalized by the need to deal with short-term budget issues while actually motivated by political considerations, and similarly, supporting projects that are no longer necessary (but are politically expedient) can be explained as being part of long-term energy policy. A rational balance between long-term and shortterm perspectives is needed in development of an energy policy that enhances energy security. Despite the differences in principle as outlined above, however, energy policies in both resource-poor countries and resource-rich countries are arguably converging, as both types of countries recognize the need to face a new paradigm in energy policy. 2.4. Emerging paradigm: toward comprehensive energy security National energy policies in the new century are facing challenges on multiple fronts. The substance of these challenges needs to be incorporated into a new concept of energy security. It is important to note here that energy security policies in various countries are now showing trends of ‘‘convergence’’ rather than ‘‘divergence’’, despite the basic differences in concepts of energy security as discussed above. This convergence does not eliminate regional and national differences, of course, but it is an encouraging sign with regard to minimizing the potential conflict that may come from differences in energy security concepts, as reflected in the different energy security policies that countries adopt. The following is a quick review of the major challenges that will help to bring about a new energy security concept. 2.4.1. Environment Perhaps the most serious challenge to traditional (supplysecurity-oriented) energy policy thinking is the need to protect the environment. If environmental problems are to be solved,

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energy policies will have to be reformulated. International environmental problems present the greatest impetus for change. Two international environmental problems inherently linked with energy consumption, in particular fossil fuel consumption, are acid rain and global climate change (Asuka, 1997; Yamaji, 1997). Trans-boundary air pollution (acid rain) has been an international issue in Europe, and North America, is a developing issue in East Asia, and even has trans-Pacific elements (Wilkening et al., 2000). Global climate change poses an even broader and more complex challenge to energy policy than trans-boundary air pollution. Although there are relatively straightforward (though often not cheap) technical solutions – including flue gas desulfurization devices – to reduce the emissions of acid rain precursors, greenhouse gas emissions cannot so easily be abated by ‘‘end-of-pipe’’ methods. A comprehensive approach toward greenhouse gas emissions is necessary. The climate change issue also brings in a much longer time perspective than business and governments are used to dealing with. Other environmental issues, such as radioactive waste management, also require longterm perspectives. In sum, environmental issues must be incorporated into the energy security concept (Khatib, 2000). 2.4.2. Technology Risks associated with development and deployment of advanced technologies challenge current energy policy thinking. Conventional thinking understates such risks and tends to see them as short-term, not long-term. Risks include nuclear accidents such as those at Three Mile Island in the United States, Chernobyl in the former Soviet Union, natural disasters with impacts on energy infrastructure (such as Hurricane Katrina’s impacts on oil and gas production, or the impact of the July, 2007 earthquake near Niigata, Japan on the seven-unit KashiwazakiKariwa nuclear plant), or the failure of R&D efforts such as the synthetic fuel, fast breeder reactor, and solar thermal programs in the US during the 1970s and 1980s to perform as expected. Technological risks can be transnational; the accident at Chernobyl is a good example of an incident with decidedly transnational implications. Also, markets for advanced technologies are becoming global, and as a result, technological risks can be exported. Nuclear technology, for example, is being exported to a number of developing countries, most notably China and India, but also potentially including Vietnam, Indonesia, Thailand, Pakistan, and Malaysia (IAEA, 2007). As the world moves rapidly toward a ‘‘technology intensive’’ energy society, a new energy security concept must address the various domestic and international risks associated with advanced technologies. 2.4.3. Demand-side management Another challenge to energy policy thinking is the need to address energy demand itself. Conventional energy policy seeks to assure supply while assuming that demand is given. This notion has been changing since the mid-1980s when the concept of demand-side management (DSM) was first incorporated into energy planning. Now, management of energy demand is almost on an equal footing with management of supply, and is recognized as a key tool in the achievement of climate change mitigation and other environmental goals. DSM does not, however, eliminate uncertainties that are inherent in energy policy planning. Unexpected demand surges and drops occur depending on, for instance, changes in weather patterns and economic conditions. There are risks associated with energy demand just as with supply. Conventional energy policy thinking has tended to underestimate demand-side risks. Risks stem from, for example, demand surges (periods of peak demand in response to extreme conditions). These are a serious concern for utility management,

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but managing peak demand is not easy, particularly given uncertainties in consumer behavior. Long recessions are another major concern for energy industry managers, since recession means large supply capacity surpluses. Uncertainty (risk) in the demand side of the total energy picture is therefore a key component of a new concept of energy security. 2.4.4. Social–cultural factors Not in my backyard (NIMBY) and environmental justice concerns are becoming global phenomena, making it increasingly difficult, time-consuming, and costly to site ‘‘nuisance facilities’’ such as large power plants, waste treatment and disposal facilities. Although people may recognize the need for such facilities, many communities prefer not to have the actual plants in their neighborhood. Opposition to plant siting has elevated the importance of local politics in energy policy planning. Who has the right to decide to locate such facilities? Who has the right to refuse? Can any rational policymaking process satisfy all stakeholders? These questions pose not only a challenge to energy security policy, but also to democratic institutions themselves. NIMBY epitomizes the ‘‘social and cultural’’ risks that need to be recognized in policymaking agendas. Various social-cultural factors present a challenge to current energy policy thinking. There are ‘‘enviro-economic’’ concerns as well. It is often the case that the party who bears the risk should get economic compensation. But how much is reasonable and who should be qualified to receive such compensation? These issues are often difficult to decide. Public confidence is also a social factor influencing energy policy. Once lost, public confidence is hard to recover. ‘‘Public confidence’’ should be distinguished from ‘‘public acceptance’’, which is commonly used in traditional energy policy thinking. Promoting public acceptance is often the object of public relations campaigns. Promoting public confidence involves more than public relations. Examples of efforts to increase public confidence in energy decisions include, for example, efforts by the US Department of Energy (DOE) to increase information disclosure, as well as effort by the Japanese government to make the nuclear policymaking process more transparent (for instance by holding roundtable discussions). Accounting for social–cultural factors and increasing public confidence in energy choices are therefore central components of a new concept of energy security. 2.4.5. International relations—military New dimensions in international relations and new military risks are challenging traditional energy policymaking. The end of the Cold War has brought in its wake a new level of uncertainty in international politics. Although the risk of a world war is drastically reduced, the threat of regional conflicts has increased, as demonstrated by ongoing conflicts in the Middle East, the Balkans, and the former Soviet states of the Caucasus, to name just a few. The international politics of plutonium fuel cycle development, with its associated risks of nuclear terrorism and proliferation remains an area where energy security and military security issues meet. The brave new world of post-Cold War international relations must be accounted for in a new concept of energy security. 2.5. Comprehensive concept of energy security The above five key components – environment, technology, demand-side management, social and cultural factors, and postCold War international relations – are central additions to the traditional supply-side point of view in a new Comprehensive Energy Security Concept.

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A nation-state is energy secure to the degree that fuel and energy services are available to ensure: (a) survival of the nation, (b) protection of national welfare, and (c) minimization of risks associated with supply and use of fuel and energy services. The five dimensions of energy security include energy supply, economic, technological, environmental, social and cultural, and military/security dimensions. Energy policies must address the domestic and international (regional and global) implications of each of these dimensions. What distinguishes this energy security definition is its emphasis on the imperative to consider extra-territorial implications of the provision of energy and energy services while recognizing the complexity of implementing national energy security policies and measuring national energy security. The definition is also designed to include emerging concepts of environmental security, which include the effects of the state of the environment on human security and military security, and the effects of security institutions on the environment and on prospects for international environmental cooperation (Matthew, 1995). 2.6. Sustainability and sustainable development As environmental and other considerations, apart from energy supply, play increasing roles in the development of energy policies both in industrialized and developing nations, the concepts of sustainability and sustainable development are becoming intimately entwined with the goals of energy policy. An understanding of what these concepts mean, and what they may mean for energy security, is therefore helpful. 2.6.1. Sustainability A strict definition of sustainability is as follows (Holdren et al., 1995): ‘‘A sustainable process or condition is one that can be maintained indefinitely without progressive diminution of valued qualities inside or outside the system in which the process operates or the condition prevails’’. Further, from a biophysical perspective, sustainability means ‘‘maintaining or improving the life support systems of earth’’. Due to recent ‘‘intense and pervasive’’ human activity, ‘‘biophysical sustainability must, therefore, mean the sustainability of the biosphere minus humanity. Humanity’s role has to be considered separately as economic or social sustainability. Likewise, sustainable development should mean both sustainability of the biophysical medium or environment and sustainability of human development, with the latter sustaining the former’’. The related concept of environmental sustainability has been defined by Herman Daly (as quoted in Holdren et al., 1995) as including the following ingredients:

environmental and labor management practices’’ in business, to a definition of sustainable development that includes ‘‘a vast, diverse set of goals, such as poverty elimination and fair and transparent governance’’ (Marshall and Toffel, 2005). Marshall and Toffel offer the following hierarchy of actions to be avoided to ensure sustainability from a human perspective. 1. ‘‘Actions that, if continued at the current or forecasted rate, endanger the survival of humans; 2. actions that significantly reduce life expectancy or other basic health indicators; 3. actions that may cause species extinction or that violate human rights; 4. actions that decrease the quality of life or are inconsistent with other values, beliefs or aesthetic preferences’’. Like ensuring energy security, sustainable development includes addressing numerous, often conflicting issues, including (Holdren et al., 1995):

    

The forces driving these issues – also forces affecting energy security – include:

    

 Lack of knowledge about the state of the world, including the environment, both today and in the past.

 Very different time-scales for economic, social, biological, and geological processes (for example).

 Uncertainty as to how human actions or interventions do or

tion rates’’



rates of development of renewable substitutes’’ ‘‘Rates of pollution emission do not exceed the assimilative capacities of the environment’’.

2.6.2. Sustainable development As defined in the report of the 1987 World Commission on Environment and Development: sustainable development is ‘‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’’. Other recent definitions of this concept have spanned the range from ‘‘Corporate Sustainability’’, meaning ‘‘responsible

excessive population growth poor distribution of consumption and investment misuse of technology corruption and mismanagement lack of knowledge/power on the part of victims.

Though sustainable development will arguably never have a single, clear definition, as ‘‘sustainability’’ depends on what is being sustained, and ‘‘development’’ depends on the desired outcomes, it is clear that achieving sustainable development, like achieving energy security, depends on addressing a variety of economic, social, and environmental goals—and these goals are often in conflict. Achieving sustainable development, as with achieving energy security, is hampered by:

 ‘‘Rates of use of renewable resources do not exceed regenera ‘‘Rates of use of non-renewable resources do not exceed the

human poverty impoverishment of the environment the possibility of wars on all different spatial scales oppression of human rights wastage of human potential.



will affect the biosphere, including the linearity or nonlinearity of response of different environmental elements to different stresses and remedies. Uncertainties as to human (social and economic) responses to ‘‘sustainable development’’ measures undertaken.

In addition to these impediments, there are challenges related to, for example, replacing fossil fuels with renewable fuels to move toward sustainable development. Smil (2006) underlines some of the formidable challenges in this area, including the scale of the shift in fuel use required, the relative energy and power densities of fossil vs. renewable fuels and power systems, the intermittency of many renewable fuels, and the geographical distribution of renewable resources relative to where fossil fuels are currently used. These challenges may ultimately mean that a truly sustainable economy must actually produce less in the way

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of goods and services than our global economy does today, rather than using alternative resources to sustain or expand the existing level of output. The International Atomic Energy Agency (IAEA), in cooperation with other agencies, has assembled a list of indicators for sustainable energy development (IAEA, 2005; Vera and Langlois, 2007; Vera et al., 2005). The IAEA list starts with a consideration of the economic, environmental, social, and institutional dimensions of sustainable development, and develops 30 different indicators, most with several sub-components. Many of these indicators touch upon the issues and perspectives noted above, and many are reflected in the discussion of methods and parameters for evaluating energy security that are presented in the next section of this paper. No matter how it is defined and measured, sustainable development will require increasing understanding of the interlinked nature of environmental, social, and economic problems—as addressing single problems without consideration of linkages to other problems may be risky. Sustainable development – and addressing energy security – will also require increasing transparency in planning and decision-making of all types, particularly for large projects, and building human capacity (and societal support for such education) to ensure that the capabilities exist in all ‘‘stakeholder’’ groups (those affected by decisions) to address multifaceted problems and participate in planning processes.

3. Evaluating and measuring energy security Given the multiple dimensions of energy security identified above, and the linkages/overlaps between energy security dimensions and the dimensions of sustainability and sustainable development, a framework for evaluating and measuring – or at least comparing – the relative attributes of different approaches to energy sector development is needed. Such a framework should be designed to help to identify the relative costs and benefits of different ‘‘energy futures’’—essentially, future scenarios driven by suites of energy (and other social) policies. Below we identify some of the policy issues associated with the dimensions of energy policy presented earlier, and present a framework for evaluating energy security, as broadly defined. 3.1. An energy policy conceptual framework A listing of each dimension of energy security is provided in Table 1. Table 1 also provides a sampling of the policy issues with which each dimension of energy security is associated. The two right-hand columns of Table 1 provide examples, many drawn from the energy security approaches described above, that might be used to address the types of both ‘‘routine’’ and ‘‘radical’’ risk and uncertainty that are faced in the planning, construction, and operation of energy systems. It should be noted that while Table 1 provides what is intended to be a broad, but by no means complete, list of policy issues, even the categories shown are not necessarily independent. Certain energy technologies will be affected by climate change (hydroelectric power and inland nuclear power plants, for example, may be affected by changes in water availability), and there are many other examples of interdependence that need to be carefully thought through in a full consideration of the energy security impacts of candidate energy policies. 3.2. Testing the energy security impacts of different energy scenarios Given the broad definition of energy security provided above, how should a framework for evaluation of energy security impacts

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of different policy approaches be organized? Some of the challenges in setting up such a framework include deciding on manageable but useful level of detail, incorporation of uncertainty, risk considerations, comparison of tangible and intangible costs/benefits, comparing impacts across different spatial levels and time-scales, and balancing analytical comprehensiveness and transparency. To meet these challenges, a framework was devised that is based on a variety of tools, including the elaboration and evaluation of alternative energy/environmental ‘‘paths’’ or ‘‘scenarios’’ for a nation and/or region (for example, with the LEAP software tool used in the Asian Energy Security project), diversity indices, and multiple-attribute (trade-off) analyses, as described below. Central to the application of the framework is its application to search for ‘‘robust’’ solutions—a set of policies that meet multiple energy security and other objectives at the same time. The framework for the analysis of Energy Security (broadly defined) includes the following steps: 1. Define objective and subjective measures of energy (and environmental) security to be evaluated. 2. Collect data, and develop candidate energy paths/scenarios that yield roughly consistent energy services. 3. Test the relative performance of paths/scenarios for each energy security measure included in the analysis. 4. Incorporate elements of risk. 5. Compare path and scenario results. 6. Eliminate paths that lead to clearly suboptimal or unacceptable results, and iterate the analysis as necessary to reach clear conclusions. Some of the possible dimensions of energy security, and potential measures and attributes of those dimensions, are summarized in Table 2. Table 2 also includes, in its right-hand column, a listing of possible ‘‘interpretations’’—that is, a listing of what direction in a given measure would typically indicate greater energy security. It should be noted that many of these dimensions and measures can and do interact—and a solution to one problem may exacerbate another. Formal or informal application of analytical methods such as ‘‘systems thinking’’ can be used to assist in carrying out steps 4 and 5, above. These methods allow the interaction of the different elements of complex processes, and the way that those elements affect and feed back on each other, to be seen more clearly than if pair of systems interactions are viewed independently (see, for example, Aronson, 1998). An energy path or scenario describes the evolution – or potential evolution – of a country’s energy sector assuming that a specific set of energy policies are (or are not) put in place. The level of detail with which an energy path/scenario is described will be a function of the degree of realism required to make the path analysis plausible to an audience of policy-makers, as well as the analytical resources (person–time) and data available to do the analysis. ‘‘Bottom-up’’ quantitative descriptions of energy paths offer the possibility to specify fuels and technologies used, as well as energy system costs and key environmental emissions, in some detail, but can require a considerable amount of work. Simpler econometric models (or models that combine econometric and end-use elements) can also be used, providing that model outputs can include measures of energy security like those presented above. A major criterion to keep in mind, when developing energy paths/scenarios, is that the paths chosen should be both reasonably plausible, yet different enough from each other to yield, when their attributes are compared, significant insight into the ramifications of the energy policy choices that the paths describe.

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Table 1 Energy security conceptual framework. Dimension/criterion of risk and uncertainty associated with energy security

Energy security policy issues

Energy security strategies

Reduction and management of routine risk

1. Energy supply

   

2. Economic

 Cost benefit analysis  Risk-benefit analysis  Social opportunity cost of    

3. Technological

Domestic/imported Absolute scarcity Technology/fuel intensive? Incremental, market friendly, fast, cheap, sustainable?

supply disruption Local manufacturing of equipment Labor Financing aspects No regrets

 R&D failure  Technological monoculture vs. diversification

 New materials dependency in  

4. Environmental

 Local externalities  Regional externalities both  

5. Social–cultural

atmospheric and maritime Global externalities Precautionary Principle

 Consensus/conflict in    

6. Military–security

technological substitution strategies Catastrophic failure Adoption/diffusion or commercialization failure

domestic or foreign policy making coalitions Institutional capacities Siting and downwind distributional impacts Populist revulsion or rejection of technocratic strategies Perceptions and historical lessons

 International management of   

plutonium Proliferation potential Sea lanes and energy shipping Geopolitics of oil/gas supplies

Identification and management of radical uncertainty

 Substitute tech. for energy  Efficiency first

 Technological breakthroughs  Exploration and new reserves

 Compare costs/benefits of insurance

 Export energy intensive industries  Focus on information intensive

 

    

strategies to reduce loss-of-supply disruption Investment to create supplier-consumer inter-dependence Insurance by fuel (U, oil, gas, coal) stockpiling, quotas global (IEA) or regional (energy charters)

Invest in renewables Mixed oxide fuels recycling Plutonium/fast breeder reactors Uranium from seawater Spent fuel management issues

 Risk-benefit analysis and local pollution   

control Treaties Mitigation Technology transfer

     

Transparency Participation Accountability Side payments and compensation Education Training

      

NPT/SG regime Terrorism and energy facilities Status Security alliances Naval power projection Transparency and confidence building Terrorism

Some of the data requirements in defining an energy path/ scenario can include:

 area (state, country, or region, for example) under study. system (over the next 15–30 years, for example) in the area.

  

 Costs, applicability, availability, inputs, and efficiencies of the technologies, energy-efficiency measures, and fuels to be used in scenarios.

 Ultimate nuclear waste storage

 Thresholds and radical shifts of state such as sea level rise and polar ice melt rate

 Disposition and disposal of excess nuclear warhead fissile materials

 Military options

 Information on environmental impacts expected (or derivation

 Data on current demand for and supply of fuels, by sector, in the  Existing projections and scenarios for the evolution of the energy

industries

 Export energy or energy technology



of impact estimates) from discrete levels of pollutant emissions (local, regional, and global). Estimates of the environmental costs of major accidents, such as nuclear reactor meltdowns or major oil tanker accidents. Existing methods for ascribing costs to environmental impacts. Existing estimates of climate change impacts and their ramifications. Existing scenarios and analysis of the likely security impacts of proliferation of nuclear power in the region. Costs of security arrangements, including military hardware, armed forces readiness.

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Table 2 Dimensions and measures/attributes of energy security. Dimension of Energy Security

Measures/attributes

Interpretation

Energy supply

Total primary energy Fraction of primary energy as imports Diversification index (by fuel type, primary energy) Diversification index (by supplier, key fuel types) Stocks as a fraction of imports (key fuels)

Higher ¼ indicator of other impacts Lower ¼ preferred Lower index value (indicating greater diversity) preferred based on index formula as derived by Neff (1997) Lower index value preferred (see above) Higher ¼ greater resilience to supply interruption

Economic

Total energy system internal costs Total fuel costs Import fuel costs Economic impact of fuel price increase (as fraction of GNP)

Lower ¼ preferred Lower ¼ preferred Lower ¼ preferred Lower ¼ preferred

Technological

Diversification indices for key industries (such as power generation) by technology type Diversity of R&D spending Reliance on proven technologies Technological adaptability

Lower ¼ preferred Qualitative—higher preferred Qualitative—higher preferred Qualitative—higher preferred

Environmental

GHG emissions (tonnes CO2, CH4) Acid gas emissions (tonnes SOx, NOx) Local air pollutants (tonnes particulates, hydrocarbons, others) Other air and water pollutants (including marine oil pollution) Solid wastes (tonnes bottom ash, fly ash, scrubber sludge) Nuclear waste (tonnes or Curies, by type) Ecosystem and aesthetic impacts Exposure to environmental risk

Lower ¼ preferred Lower ¼ preferred Lower ¼ preferred Lower ¼ preferred Lower ¼ preferred (or at worst neutral, with safe re-use) Lower ¼ preferred, but qualitative component for waste isolation scheme Largely qualitative—lower preferred Qualitative—lower preferred

Social and cultural

Exposure to risk of social or cultural conflict over energy systems Qualitative—lower preferred

Military/security

Exposure to military/security risks Relative level of spending on energy-related security arrangements

Of course, not all of the above information may be applicable to (or available for) a particular energy security analysis. Once the energy paths are specified, the next step is to evaluate the objective and subjective measures listed in Table 1 (or a similar set as defined by the researcher), or as large a subset of those measures as is practicable and desirable. In many cases, the use of economic models (or adaptation of existing results of such models) or other computational tools will be in order to perform measures evaluations.

4. Development of paths/scenarios to improve energy security and test energy security impacts A key goal of energy policy is to improve energy security – whether broadly or narrowly defined – and thus to reduce existing (or looming) ‘‘energy insecurity’’. Development of such an energy policy, at the global, national, or sub-national scales, begins with a review of the problems to be addressed, the attributes and inertias in the current energy system, and the likely determinants of the energy future that policies will hope to address. These considerations shape future paths/scenarios for analysis. 4.1. Problems associated with the global energy system The gravest environmental and social problems – that is, energy insecurities – associated with the current global energy scheme – and shared to various degrees with energy systems in many regions and nations – include the following:

 Global warming due to CO2 and other greenhouse gas 

emissions, and attendant risk of severe climate change and its diverse but not-fully-understood impacts. Local/regional and possibly global air pollution (including

Qualitative—lower preferred Lower ¼ preferred

     



ozone, photochemical smog, acid rain, and particulate matter problems) due to energy sector, industrial, and other emissions of sulfur and nitrogen oxides, soot, metals, and organic compounds, and the impacts of same on human health, economies, and ecosystems (Holdren and Smith, 2000). Land and water stress due to mines, dams, transportation infrastructure, and other energy infrastructure. Conflict/war (and the potential for same) over oil and gas resources in many regions, including the Middle East, Central Asia, and (to an arguably lesser degree) South America. The vulnerability of centralized infrastructure to terrorism. The threat of the spread of nuclear weapons (including both nuclear explosives and ‘‘dirty bombs’’) due to inadequately secured nuclear fuel cycle facilities. The presence, globally, of 2 billion people with inadequate energy supplies to meet their needs for energy services, and 1 billion people without access to electricity (Shell International, 2001). High levels of international debt in many developing countries, including debt often strongly linked to fuel and infrastructure purchases and loans to finance energy supplies and energy sector investments. The absence of a clear – or at least, universally recognized – pathway to a sustainable energy future, with the energy sectors of all industrialized and most developing nations tied to declining reserves of environmentally (and sometimes otherwise) dangerous fossil fuel resources (Oil and Gas Journal, 2003; Motavalli, 2006).

4.2. Advantages of present global energy system, and source of inertia in the system The perceived advantages and disadvantages of the present global energy system depend on a country’s (indeed, an

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individual’s) place in the system. This is because few social and environmental externalities are significantly reflected in the cost of energy, which allows those consumers ‘‘upwind, upstream, and uptime’’ (that is, those substantially unaffected by pollution from energy services production either because of their locations and/or because the impacts of production are not yet manifest) to enjoy convenient services at artificially low prices while those ‘‘downwind, downstream, and downtime’’ face the social and environmental consequences of production. For those with purchasing power in locations that already benefit from developed infrastructure, the advantages of the present energy system include:

 Inexpensive energy: energy expenditures have typically been about 2–5 percent of GDP in industrialized countries.

 Fossil fuels have been (until and possibly even including the    

recent oil price rise) very inexpensive, particularly where subsidized by governments. Gasoline and diesel are ideal transportation fuels—portable, convenient, and delivering unmatched (as yet) energy per unit weight. Electricity is an ideal home energy source—clean, safe, and convenient. Thermal power plants until recently have been the cheapest source of electricity in most cases. Energy end-use equipment – including autos, factory equipment, home appliances, and other devices – are mature technologies, and for those in industrialized countries, relatively inexpensive.

The same system that provides these benefits, however, has built into it a host of elements that make change to address energy security concerns – particularly those not being addressed now – difficult. This list of ‘‘inertial’’ elements looks much like the above list seen from a different point of view, and includes:

 Inexpensive energy, particularly fossil fuels: low-priced fuels 







provide a limited incentive to find a more energy-efficient way of providing goods and services. Gasoline and diesel are ideal transportation fuels, and their portability and convenience thus ‘‘sets the bar’’ high for any substitute – battery- or hydrogen- or human-powered transport, for example – to make inroads into the transport market—even before considering the huge infrastructure for diesel and gasoline distribution already in place. Electricity is an ideal home energy source, and users of electricity have grown used to its convenience, even for enduses – such as heat and water heat (and daylight) – where more efficient (from a fuel-cycle perspective) options exist. Thermal (fossil-fueled) power plants dominate electricity grids in many countries, and the sunk investments in those plants, and in their fuel supply infrastructure, limits the rate at which plants with alternative fuels are likely to be developed. Energy end-use equipment are mature technologies – and the huge stocks of inefficient buildings, appliances, autos, industrial equipment, and other devices – and the physical and social/human infrastructure for marketing, fueling, servicing and repairing those technologies place considerable inertia in end-use energy demand.

4.3. What determines the energy future? How the global energy system (and its national, sub-national, and transnational components) should be optimized to meet future needs depends fundamentally on what question is being asked. Future choices look very different depending on how the

following concerns are prioritized by those with the power to shape the system:

    

consumer preferences (e.g. convenience and low cost) economic efficiency climate protection poverty alleviation/sustainable development security and reliability (Farrell et al., 2004).

While these (and other) concerns do and will continue to shape the development of the global energy system and its component parts, existing determinants of energy demand and supply, both predictable and unpredictable, also must be taken into account when considering future energy paths/scenarios. 4.3.1. Predictable determinants Future energy demand is easier to imagine than the future supply mix. Most energy forecasts assume that regardless of supply options, future demand will be a relatively predictable function of the following variables:

 Changes in population, and related (but not always proportional) changes in the number of households.

 Economic growth and goods/services consumption in industrialized 



countries, tempered in some cases by changes in the intensity with which the economy uses energy to produce goods and services. Rapid development in poor countries leading to explosive growth in the demand for energy services in general, and for electricity and transportation services (including private vehicles and the oil to fuel them; Kleinman, 2005) in particular. Fossil fuel inertia, both technological and political, reflecting the composition of the consuming stock and supply infrastructure, as indicated above.

4.3.2. Unpredictable determinants Both the energy demand and supply mix may be strongly influenced by outcomes that are hard to predict with any degree of confidence at present, or that come as complete surprises. Such events could dramatically affect public perceptions, costs and availability of fuels/technologies, or institutional capacities, and may facilitate (or necessitate) major departures from current demand forecasts or the supply mix status quo.

 Resource scarcity—for example, the ultimate stock of low-cost natural gas is unknown.

 Dramatic evidence of climate change, such as changes in the Gulf Stream.

 Abrupt changes in the climate debate, such as aggressive implementation of the Kyoto Protocol by key countries.

 Abrupt changes in the control of fossil fuel supplies (for example,  

in the Middle East or Central Asia), or related to oil transit ‘‘chokepoints’’ in Southeast Asia (USDOE EIA, 2008; Noer, 1996). Acts of war or terrorism demonstrating unacceptable vulnerability of the current energy system. Major technological breakthroughs (such as reliable and inexpensive carbon sequestration, nuclear fusion, high-efficiency vehicles, or high-efficiency, low-cost solar photovoltaic power, and the use of nano-technologies in a host of areas; Anton et al., 2001; Lovins, 2004).

4.4. Key questions Given where analysis of energy security must start, that is, with the present energy system, and the concerns and factors,

D. von Hippel et al. / Energy Policy 39 (2011) 6719–6730

both predictable and unpredictable, that will shape energy systems in the future, some of the questions that should be addressed by those analyzing the energy security implications of future energy paths/scenarios include:

 What are the least-regrets policy options faced with such wide 





range of uncertainty about energy supply, demand, and security (Williams, 2003)? Will there be more ‘‘oil wars’’, including in places beyond the Middle East/Persian Gulf (such as the Caspian Sea, Latin America, and Africa) that will significantly affect energy supplies (Klare, 2005)? Is nuclear power expansion plausible given the physical, financial, and proliferation constraints on new nuclear units in countries that already have and do not have nuclear power (Lake et al., 2002; Reed, 2000)? Which determinants will most powerfully shape the energy future?

5. Conclusion Energy security, if defined more comprehensively than the typical narrow energy supply (usually oil)-oriented formulation, has many overlaps with the concept of sustainability. As a consequence, many policies that seek to enhance future energy security, be it at the global, regional, national, or sub-national levels, also have the effect of enhancing (or moving toward) sustainability. In order to determine – to the extent possible with any forward-looking activity – whether future national, regional, and global energy policies will lead to improved energy security and sustainability, a systematic method of evaluating the performance of different energy paths/scenarios with regard to the many dimensions of comprehensive energy security is needed. The methods described above, evaluating and taking into account both quantitative and qualitative factors in multiple-attribute, side-by-side analyses of different candidate energy paths, provides at least the beginnings of such a method. Together with other tools, this approach can be used to help guide energy policy by placing the different dimensions of energy decisions before policy-makers in a clear and transparent fashion. To begin to broadly apply the energy security framework described here, and in so doing to address the Key Questions noted above, and other related and follow-on topics, the Nautilus Institute has convened teams of experts throughout East Asia to examine their own countries’ energy security situation, as well as regional and global energy security issues. The remaining articles in this special issue look more closely at the results of the research activities of these individual groups, and of the collaborative project as a whole.

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