Economic Impact Analysis of East Asia Energy Market Integration

Policy Report

The East Asian Summit region including ASEAN and six other major economies of Asia is expected to be the economic growth hot spot over the next few decades. Being the growth engine
of economic development, this region needs attainment of dual objectives of sustainable
economic development and achieving the targets of emissions reduction to combat global
warming and climate change. Therefore, it is imperative to have an efficient and integrated energy
market in the region. On one hand, efficient market can bring affordable, reliable and sustainable
supply of energy and can ensure its effective consumption and on the other hand, integrated
market can ensure the trade competitiveness of the countries in the region which can overall
protect the economic development of individual country. In this study, we examined five different
scenarios those are necessary for the regional energy market integration to demonstrate the effects
of such integration on the regional as well as individual economies in the region. EAS region
comprising 16 odd members are varied in economic, social and environmental condition. It
comprises five developed, two transitional and nine developing economies with more than 3
billion population. The region needs around 5 to 6 trillion USD of investment in the energy sector
by 2030 to meet its tremendous energy demand to fuel its economic growth. This study utilizes
Computable General Equilibrium method to estimate the impacts of various market integration
policies those would be required in near future. There are five main policies which are tested here
in this study mainly focusing on energy trade liberalisation, cross border infrastructural linkages,
international and domestic investment liberalisation with energy pricing reform. As a matter of
fact, there is no single policy found to be win-win in nature. Every policy has it merits and
demerits which further instigate the judgmental decision of the law makers. However, this study
shows that any strong and stringent policy overarching all the major issues related to the energy
market could be effective provided properly enforced among the EAS member countries. Finally,
energy market integration can also be considered as a systemic action for mitigation of GHG
emissions in this region.