The economic, political, strategic and cultural dynamism in Southeast Asia has gained added relevance in recent years with the spectacular rise of giant economies in East and South Asia. This has drawn greater attention to the region and to the enhanced role it now plays in international relations and global economics.

The sustained effort made by Southeast Asian nations since 1967 towards a peaceful and gradual integration of their economies has had indubitable success, and perhaps as a consequence of this, most of these countries are undergoing deep political and social changes domestically and are constructing innovative solutions to meet new international challenges. Big Power tensions continue to be played out in the neighbourhood despite the tradition of neutrality exercised by the Association of Southeast Asian Nations (ASEAN).

The Trends in Southeast Asia series acts as a platform for serious analyses by selected authors who are experts in their fields. It is aimed at encouraging policymakers and scholars to contemplate the diversity and dynamism of this exciting region.

THE EDITORS

Series Chairman:

Series Editor:

Editorial Committee:

EXECUTIVE SUMMARY

• • Malaysia pledged to reduce greenhouse gas (GHG) emissions by 45 per cent by 2030 in relation to its 2005 GDP figure. The sectors listed as the main focus of this effort included: energy, industrial processes, waste, agriculture, land use, land-use change and forestry (LULUCF). Several initiatives under myriad governments have been launched to reduce Malaysia's climate change impacts; among those has been the emphasis on renewable energy (RE).

• • Malaysia's current energy mix relies heavily on coal and natural gas. Long-entrenched subsidies on these energy sources, coupled with greatly depreciating prices make it difficult for new RE producers to enter the market and increase their market share. This is in spite of positive developments in RE infrastructure and reduced RE material costs.

• • Solar, biogas, biomass and mini-hydro have been put forward as the RE sources with the most potential, but all have issues of consistency and reliability. Because small energy generators cannot guarantee infallible energy production, they may not be the most viable options for the long term. Their size also denies them the economies of scale that would reduce their costs. Instead, these higher costs may be transferred to the consumer.

• • Other issues include the competition for land in the development of large-scale solar farms, including the possible loss of community farmlands and hence livelihoods, if not displacement. A push for biomass and biogas as a source of energy might also lead to increased oil palm production to meet the need for consistent supplies of oil palm waste. Biogas from municipal landfills is made even more challenging given that Malaysian municipal waste is not sorted at source.

• • One possible solution is the use of hybrid RE in rural areas, comprising a mix of micro-hydro, solar and diesel-based energy generation as a back-up. However an immediate win is to ensure energy efficiency and public education to encourage emissions reduction and climate change impacts on the individual consumer.

Under the Paris Agreement, Malaysia committed to reducing greenhouse gas (GHG) emissions by 45 per cent by 2030 in relation to its 2005 GDP figure. The target includes a caveat for an unconditional reduction by 35 per cent, and an additional 10 per cent reduction upon receipt of climate financing, technology transfer and capacity building from more developed nations (MITI, 2017).

Malaysia's commitment to climate change began with then Prime Minister Mahathir Mohamad's insistence at the 1992 Rio Earth Summit that poorer nations had already been exploited by developed countries (who were guilty of higher carbon emissions), and should be allowed to continue to develop, albeit sustainably (Varkkey 2019). This was when Malaysia first pledged to keep at least 50 per cent of the country under forest cover. Since then, several initiatives under myriad governments have been launched to reduce Malaysia's climate change impacts.

On the ground in Malaysia, many feel and see the effects of climate change; increasingly frequent and extreme weather ranging from violent storms to extended droughts, changes in the winds and monsoon seasons affecting farmers and fishermen, as well as rising sea levels encroaching on coastal communities. Studies have shown that climate change will have an extensive impact beyond those that are immediately physically visible; reduced crop yields and food insecurity, biodiversity loss and disease, increased flood intensities, coral bleaching, decrease in freshwater availability from seawater encroachment and novel human illnesses (Abdul Rahman 2018; MESTECC 2018).

However, not everyone necessarily connects the changes in these natural phenomena with climate change. Only 32 to 40 per cent of the general public are aware of climate change and its impacts (Varkkey 2019). This thus hampers the government's efforts to encourage Malaysian citizens and residents to take ownership of climate change issues. While there are several non-governmental organizations (NGOs) and research centres that focus on climate change awareness and action, broad-scale efforts for institutional change to accommodate and mitigate climate change impacts have necessarily been top-down (but not necessarily effective) in nature.

This paper examines some of Malaysia's efforts at climate change mitigation, thereafter focusing on the country's emphasis on renewable energy (RE) as a key tool to reduce GHG emissions and meet its reduction targets.

CHINA'S RISE AND SOUTHEAST ASIA

This book has been motivated largely by the rapid rise of China and its consequent influence in the world, particularly in Southeast Asia. As an emerging power in East Asia, China is the main driver behind the geopolitical and economic reconfiguration that is taking place in Asia. Southeast Asia is one of the areas that is affected most directly by the rise of China. On the other hand, interactions between China and ASEAN (Association of Southeast Asian Nations) will, to a great extent, affect the future and prospect of the entire Asia, leading East Asia to become the world's new economic centre of gravity, and affect the world economic and energy map.

In East Asia, few relations have evolved as much as that between China and ASEAN. The threat of China looms large in the history of the relations between China and Southeast Asian countries. In particular, Chinese support for local communist groups during the 1960s and its views of ASEAN as an anti-Chinese, anti-communist alliance created distrust and frictions in China–ASEAN relations. China's siding with ASEAN during Vietnam's occupation of Cambodia contributed to re-establishing relations with Thailand, Malaysia, and the Philippines, but those between China and Brunei, Indonesia, and Singapore were not restored until 1990–91. Mutual suspicion lingered through much of the 1990s, due to memories of its support for communist insurgencies and the Chinese tendency to dismiss these smaller countries as puppets of U.S. imperialism.

The end of the Cold War was a pivotal turning point in China–ASEAN relations. ASEAN and China began to perceive complementary advantages in closer cooperation. Southeast Asia had energy resources which China did not have; China was modernizing rapidly and could contribute to modernization in Southeast Asia. China embarked on a new policy that was more geared toward the East, with Southeast Asia as a major focus. China's “good neighbour policy” was aimed at strengthening regional relations so as to surround itself with benevolent states, which would allow China to focus on its economic development.

The twenty-first century is known to be the Asia century. The coming decades will see global economic growth increasingly being generated by Asian emerging economies. ASEAN is seeking to build political security and sociocultural communities as well as the economic community. With the rising population and economic growth resulting in an increasing share of global gross domestic product (GDP), Southeast Asia is seeing rapid growth in its energy demand and is consequently shifting the centre of gravity of world energy demand to Asia, along with its neighbours of China and India. These countries will account for an increasing share of international trade, investment flows, and energy resource demand. Such dramatic and rapid changes and shifts have created challenges in providing for energy resource supply, energy security, and environmental managements, as well as challenges to the international relations in the region.

COOPERATION OR CONFLICTS?

The previous chapters have analysed that, from an economic point of view, Asia is increasingly regarded as the most important region in the world. Indeed, it is widely thought to be the next most important focal point of the world economy that may soon replace the United States as the engine of global economic growth. The rise of China, the ASEAN Community, and other Asian countries like India economically has prompted East Asia to become the world's new economic centre of gravity and created a great impact on the world energy resource market, and will hence accelerate the changes in the world energy system, accelerating the energy shift from west to east.

In the background of rapid economic growth and increasing energy resource shortage, China's broader energy security strategy has been to pursue supply diversity, to find more and develop more offshore oil and gas resources in Southeast Asia. China has the intention to invest more on natural gas sectors in some ASEAN countries, such as Indonesia, Myanmar, and Malaysia. China expanded its foreign direct investment (FDI) to Southeast Asia after the global financial crisis in 2008, and China–ASEAN energy cooperation has developed to a new level, extending from energy trade to energy resource exploration and related infrastructure-building.

China's search for energy resources in Southeast Asia can help deepen China–ASEAN relations in cooperative terms. It can also be a cause for possible conflicts. Rising energy prices, fears of supply scarcity, and rapid increase in oil-import dependence in China and ASEAN countries have helped drive resource nationalism among regional governments and local communities. In the South China Sea, the question of access to maritime energy resources is interlinked with national sovereignty issues, making the South China Sea disputes more complex. This chapter will try to analyse two critical questions: whether the potential energy reserves in the South China Sea has contributed to aggravating these territorial disputes and thus intensified regional suspicions of China's hegemonic ambition; or whether these potential energy reserve can instead provide a means for the parties to seek cooperative and collaborative solutions, and thus improve China– ASEAN relations.

MARITIME ENERGY RESOURCES AND THE “SOVEREIGNTY DILEMMA”

In the South China Sea, maritime energy nationalism is often tied to disputes over territorial claims and fishing rights. Maritime energy resource nationalism is exacerbated by some speculative estimates that the ocean floor is rich of energy resources. Politics, both domestic and diplomatic, supports a predilection for optimistic assessments from the claimant states. Although geographic evidence suggests that the actual prospective areas are quite small, as most of the seabed lacks the characteristics to be seriously prospective, some countries’ estimates on South China Sea resource reserves are at a high level. Some international sources have suggested that the South China Sea could be “Asia's Mediterranean”, a “new Persian Gulf ”, and leading Chinese sources give estimates of the potential oil resources that are far higher than other estimates. In November 2012, the China National Offshore Oil Corporation (CNOOC) estimated that the South China Sea held 125 billion barrels of oil (bbo) and 500 trillion cubic feet (tcf) of gas beneath the South China Sea. In January 2013, the U.S. Geographical Survey published a much lower estimate of 11 bbo in proved and probable reserves, and 190 tcf of gas in undiscovered resources.

Southeast Asia lies at the junction of South Asia and East Asia, and is traditionally seen by the United States, China, Japan, India, and other big powers as their respective spheres of influence. China has been a keen player in this region for historical reasons in view of the existence of a large diaspora, energy resource supply, trade and investment linkages and protection of its maritime interests. Energy resource cooperation is an important part of China–ASEAN relations. It has been driven under the background of China's energy diversification strategy, the development of China–ASEAN FTA (Free Trade Agreement) and regional economic integration. As China expanded its foreign direct investment (FDI) to Southeast Asia after the global financial crisis in 2008, cooperation in this field developed to a new level, extending from energy trade to energy resource exploration and related infrastructure-building.

CHINA'S ENERGY DIVERSIFICATION STRATEGY

China imports much of its oil from the Persian Gulf region through the Strait of Hormuz, where security is dependent on the U.S. Navy. The most prominent issues in the Middle East include the threat posed by Iran's nuclear programme, the emergence of the Islamic State of Iraq and Syria (ISIS) as a destabilizing force in Syria and Iraq, continued instability in North Africa, and the acceleration of Israeli–Palestinian conflicts. These are conflicts involving a great percentage of the world's major energy suppliers. Beijing is concerned about the implications of a potential reduction of U.S. presence in this region. Therefore Chinese leaders are facing questions about what they can and should do to protect the security of energy supply.

China's Approaches to Energy Resource Security

“Mercantilist” or “Liberalist” Approaches?

In a globalized economy, securing the supply of energy resources is a pressing issue for many states. All countries rely on energy to power their electricity and transportation systems, and the emerging economies require mineral resources for their rising industrial sectors. But energy resource production and consumption centres are often located in different national spaces. For emerging economies like China and India that lack local reserves of energy resources, this poses a particular challenge for their energy security. The need to import natural resources exposes these economies to high levels of resource insecurity, and many governments adopt energy resource security strategies to mitigate these risks.

Although Myanmar is a natural resource-rich country, from a global perspective, it does not have particularly notable hydrocarbon reserves. For China, however, from a regional perspective, Myanmar's gas reserves and strategic position are significant in terms of energy security and regional cooperation. However, although China has planned to stake a longterm strategic energy investment in Myanmar and its capital has largely poured into resources and energy-related infrastructural sectors, some factors are pushing the two countries’ energy ties toward competition and conflicts. Chinese foreign direct investment (FDI) in Myanmar no doubt ties the two countries closer together, but also reminds politicians of “new colonialism”, creating concerns and resource nationalism in the local society. Moreover, as Myanmar opens up, the entry or resurgence of more global players like Japan and India provides Myanmar with more options, facilitating its attempts at loosing itself from the Chinese grip. Hence, the questions that require examination are as follows: What direction is the China–Myanmar energy tie going in, cooperation or conflict? How will China adjust its approaches and better embrace the new environment and dynamic changes in the country?

GLOBAL ENERGY RESOURCE NATIONALISM

Over the past two decades, there has been a growing recognition that natural resources play an important and complex role in international and regional peace and security. Natural resources can be a source of cooperation and stability, it can as well be a source of hostility or grievances, which may be related to the loss of sovereignty, the inequitable distribution of benefits from natural resources, the lack of opportunities for local people, or environmental and social harm caused by unsustainable extraction of resources. While such hostility or grievances may not be the sole causes of conflicts, they may lead to the rise of resource nationalism which has real potential to spark armed conflicts especially in disputed areas.

The term “resource nationalism” is often defined as a national government's assertion of ownership rights over oil and natural resource reserves within their territorial boundaries, usually in ways that contradict liberal paradigms for encouraging foreign investment, and work against the international energy companies.

China and most ASEAN countries are characterized by high economic growth and rapid increase in energy resource consumption. Although these countries are trying hard to find appropriate energy alternatives, increase energy efficiency, and diversify energy resources, they are becoming increasingly dependent on imported oil and gas, and the unstable Middle East and Africa are set to remain their predominant sources of oil and gas. Thus high dependence on fossil fuels poses several security concerns and challenges, including a widening gap between supply and demand, transportation of oil and gas resources on vulnerable sea routes, and energy-related CO2 emissions. This chapter mainly analyses these three dimensions in the context of regional and global perspectives.

ECONOMIC GROWTH AND ENERGY DEMAND

Energy Demand Drivers

The demand for energy resources in Asia is predominately driven by two factors. The first is “industrial-led” demand related to economic growth, a structural shift from non-mechanized forms of manufacturing and production to more energy-intensive ones, especially for commodities such as iron and steel, cement and glass, paper and pulp, basic chemicals, and non-ferrous metals. The second is “consumption-led” demand as population grows and living standard rises (urbanization), bringing more energy-intensive lifestyles that revolve around automobiles, air conditioning, and disposable goods.

Economic Growth

Over the past decades, China and ASEAN have undergone a profound economic and social transformation. This has largely been attributed to their openness to international trade and foreign investment. Although this region has been affected by the recent global financial crisis, it is assumed that if energy supplies are abundant enough, this region, especially some of its emerging economies, will continue to enjoy economic growth and progress over the long term. China and Vietnam are expected to continue to grow faster than other economies in the region, followed by Indonesia, the Philippines, and Malaysia. China now, as the world's second largest economy, will gradually shift from an investment/exportoriented economy to an import/consumption-oriented economy over the medium to long term and see a gradual productive population fall amid the ageing of its population.

Indonesia is another case example of China's energy relations with ASEAN countries. As the biggest country in Southeast Asia, Indonesia illustrates the diplomatic complexities in its relations with China. Although China has planned to stake a long-term strategic energy investment in the country, the fact that its major trading partner is also seem as a security uncertainty in the region has complicated the resource policies in Indonesia and encouraged domestic resource nationalism. Rising fears that the increasing unbalanced trade relations might affect its national economic security have stirred debates over how Indonesian mineral industries could remain competitive as the country continues its trade ties with Beijing. For the concern of being pulled into China's orbit in a dependent relationship based on supplying raw materials, Jakarta implemented a new law banning the export of unprocessed ore in January 2014. Although the aim is to increase the value added from mineral resources, the new regulations will certainly affect Sino–Indonesian energy cooperation.

OVERVIEW OF ENERGY SECTORS IN INDONESIA

Indonesia is rich in minerals and is in the top ten countries in the world for proven reserves of coal, copper, nickel, tin, bauxite, and coal. Indonesia produces more than 15 per cent of the global nickel supply and 3 per cent of the global copper supply, and it is the world's largest exporter of thermal coal. The total mineral export value more than tripled from US$3 billion to US$11.2 billion in 2013, driven by historically high commodity prices and increasing production. By value, approximately 40 per cent of total mineral export is currently processed; all tin exports are processed, while most copper, nickel, and bauxite exports are unprocessed.

Energy and mineral resources are important sectors in Indonesia's economy. The role of energy and mineral resources to the economy can be observed by three indicators such as its share to the gross domestic product (GDP) and its contribution to economic growth, export, and state revenue. The energy sector has become a buffer of national export and it has made significant contributions to the state revenue, both from tax and non-tax revenue. As seen from Table 5.1, the share of the three main energy sectors in GDP was about 11.5 per cent between 2010 and 2014, and crude oil, gas, and geothermal has the highest share.