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2016/EWG52/WKSP1/002

Energy and Economic Competitiveness

Submitted by: APERC

Asia Pacific Energy Research Centre Workshop Moscow, Russia18 October 2016

APERC Workshop at EWG52

Moscow, Russia, 18 October, 2016

2-1. Energy and Economic

Competitiveness

James KendellVice President, APERC

2

2005 to 2014 price changes for natural gas were greater than oil and coal.

Energy price for industry: Fossil fuels

771 913

700

1003 832 786

895 955 834

1138

455 536

279

483 447 469 490 471 578 545

688

479

811

597

997

279

723

531

1106

447

832

469 490

786

582

1106

660

1043

631

925

1280

1770

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2005

2014

2005

2014

2005

2014

2005

2014

2005

2014

2005

2014

2005

2014

2005

2014

2005

2014

2005

2014

2005

2014

USA CDA MEX JPN NZ INA RUS GBR FRA DEU ITA

Tax

Ex-tax price 2005

Ex-tax price 2014

(US￠/kWh)(USD/toe)

237197

864916

268216

141

504

609

507

361302

425 388

231

9859

320 351 378

361

237

323

207

446

934

436

916

247287

98

216

59

141

332

518

367

635

443

576

0

100

200

300

400

500

600

700

800

900

1,000

2005

2014

2005

2014

2005

2014

2005

2014

2005

2014

2005

2014

2005

2014

2005

2014

2005

2014

2005

2014

USA CDA JPN ROK NZ MAS RUS GBR FRA DEU

Tax

Ex-tax price 2005

Ex-tax price 2014

(US￠/kWh)(USD/toe)

80

115 116

206

44

138

71

51

98

142

263

62

0

50

100

150

200

250

300

2005

2014

2005

2014

2005

2014

2005

2014

2005

2014

2005

2014

2005

2014

USA JPN INA THA RUS GBR IND

Tax

Ex-tax price 2014

Ex-tax price 2005

(US￠/kWh)(USD/toe)

130

205

149

192

125

162

102

0

50

100

150

200

250

2005

2014

2005

2014

2005

2014

2005

2014

USA JPN RUS IND

Tax

Ex-tax price 2005

Ex-tax price 2014

(US￠/kW(USD/toe)

Light fuel oilNatural gas

CoalSteam coal Coking coal

Source: IEA Energy Prices and Taxes, official statistics

3

Prices of electricity for industrial use are influenced by the power generation mix, fuel prices, tariff structures, taxes/levies and subsidies.

In APEC, with a high share of coal consumption in the power generation sector, the rise in the electricity price was suppressed.

Energy price for industry: Electricity

28.2

18.8 17.5

15.2 15.1 14.9 13.3

12.2

10.4 10.4 10.1 10.0 10.0 9.6 9.2 8.5 8.2 8.0 7.1

6.2 5.5

32.8

17.9

15.4

12.6

10.7

0

5

10

15

20

25

30

35

PNG JPN RP SIN HKC AUS PRC MEX MAS CHL ROK NZ CT THA BD CDA INA PE USA VN RUS ITA DEU GBR FRA IND

(US￠/kWh)

Electricity price in 2014

Source: IEA Energy Prices and Taxes, official statistics, and power company reports etc.

4

With the energy efficiency improvements and structural change, energy consumption per unit of manufacturing production in APEC has steady decreased.

However, APEC is still worse than EU. There is large energy saving potential in emerging economies.

Energy intensity of manufacturing in APEC

134 163

458

91

129

250

193 192 207

257 242

208

103

0

100

200

300

400

500

USA MEX RUS JPN ROK PRC CT INA MAS THA AUS APEC EU

Other

Gas

Oil

Coal

Electricity

toe/million USD

0

100

200

300

400

500

600

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

toe/million 2005 USD

USA

RUS

THA

PRC

ROK

EUJPN

Energy intensity of manufacturing, 2013Energy intensity of manufacturing, 1995-2013

Source: IEA Energy Balance, World Bank Development Indicators, National Development Council (Chinese Taipei) Statistical Data Book 2015.

5

Energy cost of manufacturing in APEC (1)

Note： Manufacturing excludes the petroleum and coal products industry.

Source: Calculated from Global Trade Analysis Project (GTAP) data

0.1 0.1 0.1 0.1 0.2 0.1 0.2 0.2 0.3 0.3 0.3 0.3 0.3 0.3 0.4 0.4

1.1 0.9

1.4 1.8 2.0

1.4 1.6 1.5 1.7

1.8

2.1 2.1

1.8

1.9 1.7

1.4

1.8 1.8

2.0 2.0

3.5 3.2

3.6

4.1 4.2

3.1

3.7 3.6

4.0 4.2

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1997 2001 2004 2007 2011 1997 2001 2004 2007 2011

APEC EU

%

Electricity

Petroleum and coal products

Natural gas

Coal

6

Cost Structure of major industries in APEC （2011）

Energy cost of manufacturing in APEC (2)

14.7 23.0

13.4 16.4 10.4

16.7 12.1

17.6

11.2

13.5

12.5 14.2

10.2

10.1

8.0

10.7

20.8 2.0

3.0

7.7

13.1 9.6

0.1

0.5

37.1

40.8

43.6

36.6 44.6 46.4

63.9 54.0

11.6 13.1

12.2 10.9 8.3

10.4 13.0 13.8

3.0 3.7

3.2 5.8 2.9

2.7 2.3 2.3 1.6 3.8

12.1 8.4 10.5 4.1

0.7 1.1

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Food and textile

Paper and publishing

chemical Non-metallic mineral

Iron and steel

Non-ferrous metal

Automobile Electric and electronics,

etc.

Energy

Transport

Tertiary industry

Secondary industry

Primary industry

Capital

Labor

Intermediate

input

Gross value

added

Source: Calculated from Global Trade Analysis Project (GTAP) data

7

Competitiveness of APEC manufacturing

JPN

ROK

PRC

CT

INA

MAS

RP

THA

VN

SIN

APEC

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1995 2000 2005 2010 2014

RTB

JPN

ROK

PRC

CT

INAMAS

RP

THAVN

SIN

APEC

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1995 2000 2005 2010 2014

RCA

0

10

20

30

40

50

60

70

80

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

Billion USD

PRC

JPN

ROK

RUS

USA

CT

CDA

MEX

SIN

VN

Other APEC

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

Non APECOther APECVN

SIN

MEX

CDA

CT

USA

RUS

ROK

JPN

PRC

Export value Global export share

Relative Trade Balance (RTB) Revealed Comparative Advantage (RCA)

Indicators of Competitiveness

• Export value

• Global export share

• Relative Trade Balance（RTB)

(Export - Import)/(Export + Import). One of the

indicators of exports competitiveness and the

value is between -1~+1. As the value is the

higher, the exports competitiveness is stronger.

• Revealed Comparative Advantage(RCA)

The share of exports of a certain sector in total

exports in an economy, relative to the share of

this sector in overall world exports. One of the

indicators to show the relative advantage of a

sector on export in an economy.

Example: Competitiveness indicators of APEC manufacturing

Source: APERC

8

Regression analysis was used to assess the effect of three variables on the RTBand RCA of energy-intensive industries.

Industrial competitiveness and energy

Electricity price for industry--particularly the relative level of electricity price--has a significant impact on the competitiveness of energy-intensive industries.

The relationship between energy efficiency and industrial competitiveness was not significant in major APEC economies.

The relationship between the direct energy cost share and industrial competitiveness was also not significant in each economy during 1997 to 2011.

9

Global Trade Analysis Project model cases

Case 1: Lower energy prices

Fossil fuel prices 40% to 50% lower than 2011.

Case 2: Low carbon power generation

Worldwide shift from coal-fired power generation, to advanced fossil fuel generation, nuclear and renewables

Case 3: High energy efficiency

Significant improvement of energy efficiency in the major energy-intensive industries in APEC, due to the enhanced investment in energy conservation.

Impacts of energy on macroeconomy (1): Cases

10

A drop in energy import prices helps increase GDP in economies that import energy. However, the GDP of economies that produce and export energy suffers a negative effect.

Energy price declines and reduced energy costs increase competitiveness in manufacturing by lowering the price of products.

A decline in energy costs might help all economies. By shifting labor and capital from energy industries to other industries, competitiveness in manufacturing may increase in economies that produce and export energy.

Introducing low-carbon technology has different impacts on electricity prices, depending on the economic performance of the technologies and power generation mix.

Introduction of low-carbon power generation and penetration of high energy efficiency technology will help reduce the demand for fossil fuels and lower the price of fossil fuels.

Impacts of energy on macroeconomy (2): Results

11

Policy implications of this study

Promoting the reduction of CO2 emissions requires:

Reducing the cost of renewable energy and constructing energy supply systems that allow introduction of large quantities of renewables.

Use of nuclear power generation where possible.

Highly efficient use of fossil energy.

Reforming the international LNG market to make natural gas easily accessible.

http://aperc.ieej.or.jp/

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