South Asia - Policy Paper for Regional Energy Trade: Trading Arrangements and Risk Management in International Electricity Trade

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Abstract

Economic Consulting Associates (ECA) and Cambridge Economic Policy Associates (CEPA) have been engaged by Energy Sector Management Assistance Program (ESMAP) and the World Bank to prepare a policy paper for enhanced regional electricity trade involving the Economic Cooperation Council (ECO) countries. The study has reviewed the opportunities for increased electricity trade within the ECO region and exports outside the region, considered the types of trade that will be most likely to develop in the short and evolve over the medium and longer term, and made an assessment of the risks and obstacles to further trade development. Drawing on international experience of national and regional trading arrangements, as well as four case studies of regional trade, the study has reviewed the financing options including risk mitigation products, considered the requirements for good governance of international trade including dispute resolution procedures, and made an initial assessment of the proposed Tajikistan-Afghanistan-Pakistan electricity trade project (TAP). Drawing on all aspects of the research, the final section of the report presents a roadmap for development of electricity trade in ECO.