Carnegie Endowment For International Peace
Date: April 27, 2020
By: Evan A. Feigenbaum and Jen-Yi Hou
Source: Should Wang on Unsplash
Summary: Taiwan needs to look not just to the energy it needs right now but also to the energy it will need ten to twenty years from now if it is to power its future.
Because it imports nearly all of the fuel that powers its economy, Taiwan is unusually vulnerable to energy market risks. Volatility has grown in the world’s major oil-producing regions, especially the Middle East, where the specter of conflict between the United States and Iran looms ever larger. What is more, over the long term, countries dependent on oil export revenue will need to successfully adapt to a world characterized by declining oil demand. They will likely struggle to diversify their economies and ensure employment, yielding another significant source of instability. Meanwhile, commodity markets, from crude oil to natural gas, have been buffeted by geopolitical volatility, political and investment risks, and technological disruption.
Still, Taiwan has had to manage such traditional risks before, and while political and market disruptions can of course be challenging to any economy, it can most likely weather these types of prospective shocks.
Taiwan’s more pressing energy challenge, therefore, is that these risks are being eclipsed by new dynamics that are reshaping future energy security, affordability, and sustainability—the so-called energy trilemma. Bluntly put, a paradigm shift is underway in how major energy stakeholders—such as government policymakers, producers, utility companies, and industrial end-users—approach their energy needs.
Taiwan needs to look not just to the energy it needs right now but also to the energy it will need ten to twenty years from now if it is to power its future. The number one and two drivers of this will be technological change and decarbonization, not necessarily the old drivers of cost and security.