Energy Security White Paper: Policy Direction for Inclusive and Sustainable Development for Lao PDR

Han PhouminAnousak PhongsavathEdited by Energy Security White Paper: Policy Directions for Inclusive and Sustainable Development for Lao PDR and the Implications for ASEAN © Economic Research Institute for ASEAN and East Asia, 2024. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted inany form by any means electronic or mechanical without prior written notice to and permission from ERIA. The findings, interpretations, conclusions, and views expressed in their respective chapters are entirely those ofthe author/s and do not necessarily reflect the views and policies of the Economic Research Institute for ASEANand East Asia, its Governing Board, Academic Advisory Council, or the institutions and governments they represent.Any error in content or citation in the respective chapters is the sole responsibility of the author/s. Material in this publication may be freely quoted or reprinted with proper acknowledgement. Cover Art by ArtmosphereBook Design by ArtmosphereNational Library of Indonesia Cataloguing-in-Publication DataISBN no. 978-602-5460-57-9 Photo cover note; clockwise from top left Sepon Mine Vilabouly district, Savannakhet Province, Southern Lao Foreword Saleumxay KommasithDeputy Prime Minister and Minister of Foreign AffairsLao People’s Democratic Republic Over the past decades, rapid economic development has transformed Southeast Asia, preparing theregion to join the international production network. This transformation has enabled vibrant exportsof manufacturing products, textiles, and other high-valued-added goods, including energy, from theAssociation of Southeast Asia Nations (ASEAN) to the global market. This success is largely due to globalinvestments attracted by the region’s favourable labour force, growing connectivity, innovation, andregional political stability driven by ASEAN’s vision. This achievement reflects the collective efforts of ten Southeast Asian countries to promote mutual trustand cooperation, broadening collaboration with nations worldwide forregional prosperity. However,the ASEAN region, like others, faces numerous challenges, including maintaining economic growth,addressing climate change, managing natural disasters, and tackling both traditional and non-traditionalsecurity issues. Lao PDR, in particular, must broaden its macroeconomic structure and policies toaddress current economic issues – such as inflation, currency depreciation, and employment – andfuture challenges related to green growth for sustainable development. In 2024, Lao PDR has set the theme for its ASEAN Chairmanship as ‘ASEAN: Enhancing Connectivity andResilience.’ Under this theme, energy security remains a key priority for ASEAN, supporting inclusive adsustainable economic growth in the region. ASEAN countries are parties to the Paris Agreement, committing to reducing global greenhouse gasemissions (GHGs) as outlined in each country’s Nationally Determined Contributions (NDCs). To achievethe carbon neutrality target by mid-century, countries must pursue alternative fuel pathways, shiftingfrom fossil fuel-based energy systems to cleaner energy systems. Multiple decarbonisation pathwaysare essential. Amongst the policies and measures encouraging investment in a sustainable energysystem and energy security, energy efficiency and conservation are considered low-hanging fruits forcurbing energy consumption and reducing CO2emissions. Many ASEAN countries are rich in natural resources and renewable energy, including solar, wind,biomass, geothermal, and hydropower. With the right policies, the region can accelerate the deploymentof these renewable resources to green its energy system. Lao PDR, in particular, can play a significantrole in contributing renewable electricity to help decarbonise the ASEAN grid through power connectivityand trade. The gradual adoption of hydrogen and ammonia as fuel presents untapped potential for cleanenergy, converting surplus renewable energy from hydropower, solar, wind, and biomass into clean fuelmolecules like hydrogen and ammonia. These could be used in transportation, power generation, andindustries, benefiting countries that can produce green hydrogen and ammonia. Lao PDR stands to gainsignificantly from this, given its abundant renewable resources. Despite exporting electricity to neighbouring countries, Lao PDR has a high dependency on importedfinished petroleum products such as gasoline, diesel, liquefied petroleum gas (LPG), and kerosene fordomestic consumption in transportation, commercial, and residential sectors. This dependency makesLao PDR’s energy supply security vulnerable, necessitating an appropriate energy security strategy tomitigate potential risks. This White Paper provides key policy directions for all involved sectors, emphasising the importanceof cooperation, collaboration, and investment in creating a resilient, inclusive, and sustainable energysystem. Sustainable finance