1. Scenario Planning of Energy-related Crises in East Asia International Energy Workshop 2005 July 5-7, 2005 Kyoto Ryota OMORI Japan Science and Technology Agency Hideyuki HORII University of Tokyo, Graduate School of Engineering

2. Table of Contents Introduction  Scenario Planning  Energy Problems in East Asia  Purposes of this Study Scenario Analysis of Energy-related Crises in East Asia  Analysis of Risk factors  Crisis scenarios: ‘Resource Competition’ Scenario & ‘Isolated Japan’ Scenario Policy Implications  Viewpoints needed for Japan’s S&T Strategy

3. Scenario Planning It is not a forecast. Future is uncertain and unknown. ex. international relations, social trends, technological development ・・・ Experts from a variety of fields, - analyze the present situation and risks for the future; - identify the most critical factors; - and, develop scenarios for possible images of the future. It enables us  to understand the structure of the possibilities of the future,  to make proper decisions,  to adapt quickly to the environmental changes. （ IEEJ Kakuwa ） Present Analysis Future World 1 Future World 2 Branching Point

4. Scenario Planning for S&T Policy Design To develop a robust strategy that can accommodate many possibilities of the future; →A long-term strategy is needed for R&D To extract new needs for R&D strategy from scenarios; To evaluate individual R&D themes from scenarios.

5. East Asia’s Energy Problems Growing Energy Demand (especially China and India) Increasing dependency on imported oil (over 75% in 2020, especially from Middle Eastern Countries) ↓ High Energy Price Decline in the economic and political power of the East Asian Countries International Conflicts over Energy Resources 20002020 2020/ 2000 East Asia2,4234,5701.9 China9322,0632.2 Japan5255611.1 India3226842.1 Korea1913031.6 Indonesia982092.1 Primary Energy Consumption Outlook (MTOE) (IEEJ 2004)

6. Purposes of this study To understand risks for energy crises in East Asia using scenario planning To evaluate R&D themes from the following viewpoints  Contributing to energy security in East Asia Japan, a industrialized country in Asia, which is almost 100% dependent on imports for its energy supply, should seek to avoid energy crises in cooperation with the East Asian countries.  Maintaining security and welfare of Japan It’s paramount that Japan’s national security and prosperity be ensured through such efforts.

7. Scenario Investigation Committee LeaderHideyuki HORIIProf. Tokyo Univ. Sub-leaderRyota OMORIResearch Inst. S&T for Society FacilitatorMasahiro KAKUWAInstitute of Energy Economics MemberMasahiro ATSUMIInstitute for Int’l Policy Studies Hiroshi UJITAInstitute of Applied Energy Tatsujiro SUZUKIInstitute of Energy Economics Atsushi SUNAMINat’l Graduate Inst. Policy Studies Katsuhisa FURUKAWAResearch Inst. S&T for Society Yoshimitsu MIMUROTOInstitute of Energy Economics Masahiro YORIMOTOJpn Inst. Middle Eastern Economics

8. Sharing of Problem Consciousness - Master Plan - Ensuring regional energy security in East Asia is essential for the security of Japan Energy-related technologies are important part of the national resources and Japan should utilize them for maintaining its security and welfare.

9. Master Plan Establishment of Risk Categories Enumeration of Risk Factors Determination of Scenario Structures Writing Scenarios

10. Risks and Crises to be examined Risks for the Master Plan towards ～ 2020  securing energy supply in East Asia  maintaining security and welfare of Japan Energy Crises?  Contingent Crises Surge in energy prices Disruption of energy supply  Structural Crises Decline in the economic and political power of the East Asian Countries International conflict over energy resources

11. Risk Categories China’s Resource Nationalism China’s S&T systems and policies Geopolitics and International Relations in East Asia Supply Chain Crises (accidents, terrorism) Progress of Motorization Electric Power Crises Nuclear Accidents and Proliferation Environmental Issues

12. 18 Highly Uncertain and Influential Factors （１） 1.Will Japan be able to maintain its competitive edge in energy technologies? 2.Will the post-Kyoto Protocol regime be in place? 3.Will an international cooperation system be in place to safeguard transportation routes for Middle Eastern resources? 4.Will China continue aggressive upstream investments? 5.Will awareness of energy saving and environmental protection grow among consumers? 6.Will China introduce market mechanisms into the energy sector? 7.Will gas-electric hybrid vehicles become widespread? (What about the fuel economy of conventional vehicles?) 7.Will serious nuclear accidents take place? 8.Will China take measures to reduce its greenhouse gas emissions?

13. 18 Highly Uncertain and Influential Factors （ 2 ） 10.Will China’s political agenda seriously interfere with its S&T system? 11.Will terrorism strike Southeast Asia? (What about its magnitude and frequency?) 12.Will the construction of power plants in China catch up with domestic demand? 13.Will the geopolitical situation on the Korean Peninsula stabilize? 14.Will Russia supply its resources to Northeast Asia? 15.Will trade frictions develop between China and the U.S.? 16.Will China and the U.S. be in conflict over the security of sea lanes? 17.Will East Asian countries take sufficient measures to safeguard nuclear power? 18.Will China’s economic prosperity stabilize domestic politics?

14. The most critical factor for achieving the Master Plan is “China” We have developed scenarios with focusing on future images of China.

15. Two Future models of China and Scenarios “Hard China” that follows political logic placing a premium on governance ↓ “Resource Competition” Scenario “Open China” that follows scientific and economic logic placing a premium on economic development ↓ “Isolated Japan” Scenario

16. Analytical Phases of Two Chinas - Scenarios’ Contents - Domestic policies Foreign Policies S&T Policies Energy Systems  Energy Policies  Energy Demand and Energy Efficiency  Evolution of Energy Technologies Crises for Master Plan

17. Hard China (Resource Competition Scenario) Open China (Isolated Japan Scenario) Domestic Policy Exercise of heavy state power Development of rural areas and the western region Market economy and deregulation Development of coastal big cities Foreign Policy Regional hegemonistic policies International cooperation S&T Policy National R&D projects S&T for politics Policies led by international technocrats Imports of overseas technology Economic development based on advanced technology Two models of China

18. Energy Systems in Hard China - Resource Competition Scenario - Energy policies State-controlled domestic energy prices Emphasis on energy self-sufficiency Aggressive upstream investments for domestic and overseas resources ↓ Energy demand and efficiency Ever-increasing energy demand Relatively low energy efficiency Power shortages ↓ Energy technologies Improvement in the efficiency of conventional coal-fired power plants Promotion of large-scale centralized power generation Development of domestic nuclear technology Promotion of renewable energy to develop rural areas

19. Energy Systems in Open China - Isolation of Japan Scenario - Energy policies Emphasis on the introduction of market mechanisms into the energy sector More dependence on the international energy market Emphasis on energy efficiency ↓ Energy demand and efficiency Increases in energy efficiency due to the introduction of market mechanisms and advanced technologies ↓ Energy technologies Introduction and proliferation of energy-saving technologies Commercialization efforts for advanced technologies (CCT, innovative nuclear systems, hybrid vehicles, fuel-cell vehicles, etc.) An advance in power network systems

20. Hard China -Resource Competition Scenario- Open China -Isolated Japan Scenario- An increase in East Asia’s dependence on Middle Eastern oil Possible upsurge of resource nationalism and international conflicts over resources Malfunction of the international energy market Energy infrastructure crises Intensifying international competition A decline in the international competitiveness of Japan’s technology (→ an aging society and a decrease in R&D expenditures) Isolation of Japan’s energy policy A decrease in the presence of Japan in East Asia Crises for Master Plan

21. Use of the Scenarios for policy implications Two scenarios Extract viewpoints needed for long-term S&T strategy Evaluate individual R&D themes ex. fuel-cell vehicles, innovative nuclear systems, clean coal technology (under examination)

22. Viewpoints needed for Japan’s S&T policy design ‘Resource Competition’ Scenario R&D to create a climate that discourages resource nationalism  energy-saving technologies, alternative energy technologies for oil ・・・ R&D to improve the reliability and security of energy infrastructures  nuclear safety technologies, energy network control technologies, countermeasures against terrorism ・・・ Cooperation with Europe and U.S. in policies towards China ‘ Isolated Japan’ Scenario R&D of state-of-the-art (energy) technologies to increase Japan’s presence as a technology-oriented country R&D of (energy) technologies in the fields in which exports are expected to grow R&D of (energy) technologies as diplomatic measures

23. Summary Using scenario planning techniques, we have analyzed risk factors for the master plan towards 2020. The most critical and uncertain factor has been found to be ‘China’. Two visions for China have been created and analyzed. Based on these visions, ‘Resource competition scenario’ and ‘Isolation of Japan scenario’ have been developed. Strategic viewpoints needed for science and technology policy design have been examined. The significance of individual R&D themes will be evaluated from these viewpoints in details.