DATUK SERI PANGLIMA DR. MAXIMUS JOHNITY ONGKILI MINISTER OF ENERGY, GREEN TECHNOLOGY & WATER, MALAYSIA

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DATUK SERI PANGLIMA DR. MAXIMUS JOHNITY ONGKILI MINISTER OF ENERGY, GREEN TECHNOLOGY & WATER, MALAYSIA

ASTANA EXPO 2017 MINISTERIAL CONFERENCE

TOPIC: “ENERGY-CLIMATE-FOOD NEXUS: TOWARDS A CIRCULAR ECONOMY”

(11 JUNE 2017, ASTANA, REPUBLIC OF KAZAKHSTAN)

1. Today, the world in general is faced with the challenges of rapid industrialisation, urbanisation and population increase as well as economic growth. This inevitably leads to an increased pressure on demand for the planet’s scarce resources. At the same time, climate change, which is a direct result of anthropogenic activities, has impacted mankind from the perspective of availability of water, which in turn affects the production of energy and food resources. A move towards a circular economy is, therefore, critical for ensuring economic and socio- political stability in the world.

2. According to projections in the latest World Population Data Sheet from the Population Reference Bureau (PRB), the world population is expected to reach 9.9 billion in 2050, up by 33 per cent from the current estimate of 7.4 billion. Such a rapid population growth will certainly compound the challenges in attaining the Sustainable Development Goals and add pressure to the scarcity of natural resources.

3. As the world population rises, pressures on water, energy and food resources will rise, potentially posing a significant global challenge. By 2050, the FAO projects a 70% increase in food production while the World Energy Council expects a 100% increase in energy supply to meet the increase in demand. The Organisation for Economic Cooperation and Development (OECD) estimates that more than 40% of the world population will live in river basins under severe stress.

4. There is increasing evidence that the quality and availability of natural resources can affect the economy. The OECD Environmental Outlook to 2050: Consequences of Inaction projected that, without more ambitious policies, by year 2050 the costs and consequences of inaction on climate change, biodiversity loss, water scarcity and health impacts of pollution could be significant. Therefore, more ambitious policies and concerted efforts are needed to reconcile economic growth with the conservation of the environment and sustainable use of natural resources. The challenge will grow over the next decades as the effects of climate change become more significant, affecting the availability and demand for water, energy and food. For example, climate change will affect the future availability of water for energy production and changes in precipitation, crop yields and temperatures will strongly influence both food and bioenergy production.

Energy and Water Nexus
5. Energy and water are inter-linked in two ways. First, water is used in the production of almost every type of energy (i.e. coal, geothermal, hydro, oil and gas, nuclear etc.). Second, energy is a dominant cost factor in providing water and wastewater services. In Asia, increasing access to energy is a priority as around 700 million people lack access to electricity and 1.9 billion rely on biomass (e.g. wood) for heating and cooking. Despite the development of alternative energy sources such as renewable energy and energy efficiency, over 80% of the expected increase in energy use by year 2035 will still come from fossil fuels, particularly coal. The production of these energy supply tends to be water-intensive and will have implications on global warming, further exacerbating water scarcity.

6. One of the most challenging aspects of the energy-water nexus is that low- carbon growth targets for energy generation place stress on water availability. Among the renewable energy sources available, hydropower is likely to become the dominant source of low-carbon energy. However, not only does hydropower consume water through evaporation from open surfaces of reservoirs, but it also impacts availability water for downstream users such as agriculture, fisheries, industry and municipalities.

Food and Water Nexus
7. Agriculture is the largest consumer of water in the global economy and accounts for around 70% of water withdrawals. However, increases in population growth, urbanization and economic growth, along with changes in diet as prosperity increases, mean that demand for food will increase significantly. For instance, a change in lifestyle and diets in Asia will increase the demand for water-intensive products such as meat and dairy products. Globally, demand for phosphate as a fertilizer nutrient will increase from 43.8 million tonnes per annum in 2015 to 52.9 million tonnes in 2030. Currently, Asia accounts for almost 60% of the world’s total nutrient use, with China and India consuming around 55% and 29%, respectively, of Asia’s total consumption of fertilizer.

8. In the case of Malaysia, the Academy of Sciences of Malaysia, in its report in 2015, estimated that about 75 percent of the available water is used for irrigation. Irrigation efficiency varies from 50 percent in the larger systems to 40 percent in the smaller schemes. The challenges faced include competition from rising demand in the industrial and domestic sectors, inefficient water usage, low water productivity of rice crops and poor maintenance of irrigation infrastructures. Therefore, improved efficiency in the use of water is essential for food security in Malaysia, apart from the need to increase rice production.

9. Therefore, the increase in demand for water, energy and food accompanied by the impact of climate change will certainly affect the supply of natural resources. There is likely to be competition and even conflict over scarce water supplies and resources for energy. This will spur the search for new resources and the use of existing resources sustainably and efficiently through new technologies. These challenges provide unprecedented opportunities for the collaboration among the international communities in policy-making and technological expertise in ways that can underpin global security and prosperity in a sustainable manner.

Commitment to International Climate Treaties
10. The year 2015 saw a historic double success for sustainability and climate policy. The 2030 Agenda for Sustainable Development, with its Sustainable Development Goals (SDGs), and the Paris Agreement on climate protection established a system of ambitious policy goals for the world. As a universal and legally binding Agreement, the Paris Agreement sends a clear signal to all stakeholders, investors, businesses, civil society and policy-makers on the global transition to clean energy and the shift away from fossil fuels. It sets out a global action plan to put the world on track to avoid dangerous climate change by limiting global warming to well below 2°C and pursue efforts to limit the temperature increase to 1.5°C by year 2050.

11. The Paris Agreement contains all the indispensable ingredients of a regime that delivers real and effective climate action – including a long- term goal, a 5-year ambition cycle and a transparency and accountability system. The fact that 195 countries agreed on binding targets is a huge achievement that should not be undermined. The Paris Agreement coincides with a ‘grand transition’ in the energy sector that reflects broader global trends, ranging from climate change to the so-called Fourth Industrial Revolution that are fundamentally transforming the economic landscape worldwide.

12. For the energy sector, which will play a vital role in the transition process, the Paris Agreement is being seen in the context of what the World Energy Council calls the energy ‘trilemma’ – balancing the sometimes conflicting priorities of energy security, energy access and sustainability. Nevertheless, in a recent report produced by two global energy agencies, the International Renewable Energy Agency (IRENA) and the International Energy Agency (IEA) reiterated that the Paris Climate Agreement may boost the global economy by USD 19 trillion over the next three decades as countries invest in renewable energy, energy efficiency and zero- emissions transportation. Beyond protecting the planet, all the world's clean-energy spending will grow the global economy by around 0.8 percent
by 2050. These developments might appear to be encouraging in achieving the goals of the Paris Agreement but that really depends on what strategies are adopted by the energy sector.

13. The Sustainable Development Goals (SDG) which was adopted by the world leaders aim to address the interlinked problems of inequality, hunger and climate change. The 17 Sustainable Development Goals (SDGs) and 169 associated targets are aimed at stimulating action over the next 15 years in areas of critical importance for a more equitable and sustainable world. The strong linkages between the SDGs underlines the notion that progress on each goal will be critical for progress on others, with increasing understanding for the implementation of the SDGs through an integrated framework that demands close collaboration at all levels of governance. As a result, the water-energy-food nexus has emerged as a crucial policy and governance approach for integrated planning and implementation of the SDGs and the Paris Agreement.

14. Several countries have begun the long-term planning needed to avoid dangerous climate change which will lead to severe instability in energy, food and water resources. For example, Germany has developed the German Climate Action Plan 2050 that mandates a reduction in greenhouse gases (GHG) of up to 95% below 1990 levels by year 2050. It covers energy, buildings, transport, industry, agriculture and land use, and sets specific milestones and targets for each sector. Canada’s long-term plan aims to reduce GHG emissions by 80% or more below 2005 levels by 2050. Mexico, on the other hand, will reduce its GHG emissions by 50% from 2000 levels.

15. What about Malaysia? Malaysia had, at the Paris Agreement in 2015, pledged to reduce our carbon intensity by 45 percent in year 2030 compared to the 2005 base year level. From the target of 45 percent, about 35 percent will be implemented on a voluntary basis while the balance of 10 percent will be conditional upon receipt of technology, financial and capacity training assistance from developed countries. We are currently formulating Transformasi Nasional 2050 (TN50), the country’s next long-term development programme. Dialogue sessions will include views on the environment and climate change. Currently, surveys, expert consultations and roadshows to solicit the citizens’ ideas and aspirations for the nation are being carried out which will culminate in a grand plan to be delivered at year’s end, outlining our national aspirations, milestones and concrete targets for the various sectors (including energy, green technology and water) heading toward 2050.

Initiatives Undertaken To Address The Challenge Of Climate Change In Malaysia
16. Energy security is the vital cog to sustain economic growth and numerous key measures have been undertaken to ensure security of energy supply in Malaysia. Concurrently, the growth of renewable energy (RE) or green energy as an alternative energy source is being aggressively pursued under the Renewable Energy Policy and Action Plan (2010) to support the continuous increase of energy demand. Our green energy initiative to address the climate agenda is also being complemented with efforts on energy efficiency (EE) in the country.

Renewable Energy (RE)
17. Malaysia’s Five-Fuel Policy in 2001 recognised the importance of fuel diversification and RE was adopted as the fifth fuel in the energy supply mix alongside natural gas, oil, hydro and coal. This resulted in the formulation and adoption of the Renewable Energy Policy and Action Plan in 2010. Among the measures undertaken was the enactment of the RE Act 2011 and implementation of the Feed- in Tariff (FiT) mechanism to encourage the generation of RE in the country. The Sustainable Energy Development Authority (SEDA), a statutory body, was established by the Government to scale up RE as outlined in the RE Policy and Action Plan. However, due to various challenges encountered in implementing the FiT mechanism, the total installed capacity of RE only increased from 53MW in year 2009 to 471MW in April 2017. This was far below the target of 985MW by year 2015.

18. In line with the strategic thrust to decarbonize the energy sector under the 11th Malaysia Plan (2016-2020), the Government has embarked on two new initiatives to scale up the generation of RE in the country through the Large Scale Solar (LSS) and Net Energy Metering (NEM) mechanisms. These two initiatives will contribute an additional 1750MW of RE by 2020. Under these initiatives, coupled with the Feed-in Tariff mechanism, RE installed capacity in 2020 is expected to reach 2,080MW which translates into GHG emission avoidance estimated at 7.13 million tonnes.

19. Strategies have also been identified on ways to boost RE capacity. For example, studies are being conducted to identify new RE sources such as wind and geothermal in order to diversify the power generation mix in Malaysia. Currently, the national wind mapping exercise which is underway will provide data for a detailed study on the feasibility of developing wind energy. Further, the viability of ocean energy will be considered in order to take advantage of the sea, which surrounds Malaysia.

Energy Efficiency and Conservation (EEC)
20. Moving forward, Malaysia’s next national agenda is to address the need to strongly decarbonize the economy through the Energy Efficiency and Conservation initiatives. Energy Efficiency makes sense in many ways as our economy grows and our demand for electricity rises. Improving energy efficiency are both a smart business investment and an imperative for the global community. Investment in energy efficiency presents great opportunities such as competitive industries through energy cost savings; greater outreach of energy services to the rural poor, among others, through more efficient generation and supply; and technology and employment gains through international best practices. Most importantly, improved energy efficiency is a vital component of the global strategy to reduce the dependence on fossil fuels, strengthen energy security and, therefore, help to reduce greenhouse gas (GHG) emissions and the threat of climate change. In short, it promotes sustainability on multiple fronts simultaneously.

21. Our electricity usage has increased in tandem with the country’s economic growth. Recognizing the need to improve on our Energy Efficiency and Conservation initiatives, the Government is giving major focus on the sustainable use of energy with prudent and efficient management of resources under the 11th Malaysia Plan (2016-2020) through the introduction of the National Energy Efficiency Action Plan (2016-2025) or NEEAP 2016-2025. The target is to reduce electricity consumption by 52,233 GWh (8%) over a 10 years period in the industrial, commercial and residential sectors. The NEEAP provides the instruments for successful implementation of Energy Efficiency strategies in the country through a well-coordinated and cost-effective implementation of energy efficiency measures in the three sectors.

Sustainable Water Management
22. An Integrated Water Management approach is being undertaken to ensure efficient water utilisation and sustainability of the water sector in Malaysia. The measures include the following:

    a) integrated river basin management with a freshwater extraction rate of 2 percent in 2015 and 15 percent by 2030;

    b) deployment of innovative water treatment and distribution technology to reduce the Non-Revenue Water from 37 percent in 2015 to 25 percent by 2020;

    c) water harvesting technology whereby 60 percent of towns in Malaysia will be installed with Rainwater Harvesting Systems;

    d) deployment of water utilisation technology to increase the number of water-efficient products such as taps, washing machines, dual flush toilet bowls etc;

    e) deployment of innovative wastewater treatment technology whereby 50 percent of the sludge produced will be recycled for electricity generation; and

    f) proper water tariff setting mechanism based on cost recovery to shape consumer behaviour towards judicious use of water resources

Policy Recommendations For A Circular Economy
23. The policy recommendations on the three-way nexus towards a circular economy involves the following aspects:

    a) deeper understanding of the nexus from a systemic perspective, that is, to see the inter-linkages and connections between the three sectors and resources and to better understand the trade-offs and potential synergies;

    b) the need to take into account the importance of resource efficiency including the circular economy and the importance of having good quality robust data to understand these linkages;

    c) the need to create green banks to provide financial assistance to small and medium enterprises (SME’s) developing circular economy technologies, with additional assistance provided for exporting to strategic markets. In addition to providing capital, assistance could come in the form of business support, coaching and market intelligence. Increasing exports in circular economy technologies will increase jobs and GDP growth;

    d) a dedicated, stand-alone research fund for universities is required to develop curriculum as well as conduct multidisciplinary research in circular economy technology and practices. In particular, for the circular economy to become mainstream, economic, social and technological barriers need to be overcome;

    e) investing in “nexus-friendly” multi-purpose infrastructures can improve sustainable resource management. For example, multi-purpose management of reservoirs can reconcile up-stream and downstream uses and help to alleviate tensions between hydropower and other water users, such as farmers; and

    f) removing harmful subsidies and aligning incentives across the three dimensions of the nexus is key to getting the appropriate levels of investment, innovation and resources. Fossil fuel subsidies imply a host of economic, fiscal, social and environmental costs. Subsidies reduce the incentive to invest in new infrastructure, distort prices, and are inefficient at transferring income to the poor.

Conclusion
24. As businesses are the key actors in a transition towards the circular economy, upstream and downstream decisions need to be better connected, with clear incentives between producers, investors, distributors, consumers and recyclers. In addition to using market mechanisms to ensure the efficient allocation of resources, a functioning secondary materials market needs to be developed. More attention also needs to be paid to enabling entrepreneurs to tap into potential new markets linked to the circular economy. More encouragement should be provided in terms of investment in circular economy innovations and address barriers to mobilizing more private financing for resource efficiency.

25. In the Asia-Pacific region, China, Japan and Korea in particular are starting to implement resource efficiency policies which in a way inspires and influences other countries in the region transitioning towards a circular economy, for the purpose of enhancing the world’s green economy, reducing global greenhouse gas emissions, and achieving global security of scarce resources, including water. Thus, the nexus between energy, climate, food and water are inseparable and an essential contributor to social progress and human well-being, which needs to be approached in an integrated manner to best synergize solutions.

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