This is one of the components of multi-pronged strategy proposed by IEA to trigger wide-scale adoption of energy efficiency measures and policies throughout the region. The strategy forms part of IEA’s special report titled Southeast Asia Energy Outlook released on 2 October.

Another major component of strategy calls for elimination of market distortions. The Report says: “Artificially low energy prices remain common place in several Southeast Asian countries. These undervalue energy efficiency returns and discourage consumers and industry to invest in energy-efficient practices and equipment.”

Focusing on fuels smuggling, the Report notes: “The prevalence of fossil-fuel subsidies in Southeast Asia has made fuel smuggling a serious problem by providing an incentive to sell subsidised products in neighbouring countries where prices are higher.”

It continues: “In addition to substantial financial gains for smugglers, this can lead to big losses by way of foregone taxes and excise duties in the recipient countries due to lower legitimate sales and a transfer of income from the subsidising country. Fuel smuggling also has many other negative consequences, such as complicating the collection of reliable energy statistics. Fuel smuggling in Southeast Asia often involves the use of small oil tankers or fishing boats that either bypass normal customs routes altogether or falsely declare their load as products that are exempt from excise taxes.”

The report notes that in the Philippines, which has been the recipient of a lot of smuggled fuel, the government estimates that its tax revenues are being reduced by around $1 billion per year as a result of illegitimate sales.

It says: “Many ASEAN member states are taking steps to stamp out fuel smuggling, typically by stepping up border surveillance. But history has shown that efforts to curtail smuggling can absorb scarce administrative resources and are rarely completely successful. While better border control may be a necessary option for countries that are the recipients of smuggled fuels, a much more effective strategy would be for the originating countries to remove the subsidies, as that would eliminate the incentive to smuggle fuels.”

According to the report, the 10-member countries ASEAN, along with China and India, are shifting the centre of gravity of the global energy system towards Asia. Energy demand in Southeast Asia has expanded by two-and-a-half times since 1990, its rate of growth among the fastest in the world. Economic and demographic trends point to further growth, lifting the region’s energy use per capita from just half of the global average today.