Asean faces $2.7 trillion challenge and opportunity to go green, stay competitive: Report

The region needs to tap abundant renewable energy resources and end its reliance on fossil fuels, especially coal.
The region needs to tap abundant renewable energy resources and end its reliance on fossil fuels, especially coal.PHOTO: ST FILE

SINGAPORE - South-east Asia has taken the first key steps to shifting to a greener and cleaner economy but it needs US$2 trillion (S$2.7 trillion) of investment this decade to cut emissions and remain competitive globally, said a report released on Wednesday (Sept 29).

The report by management consultancy Bain & Company, Microsoft and Singapore's Temasek said the region needs to focus on three areas: speeding up the switch to green energy and transport; putting a value on nature; and making the agri-food sector more efficient, less polluting and less environmentally damaging.

Doing so will address about 90 per cent of the region's greenhouse gas emissions from burning fossil fuels, as well as address environmental damage from deforestation and fires, and inefficient agricultural practices, said the report titled Southeast Asia's Green Economy: Opportunities On The Road To Net Zero.

The authors said South-east Asia is the start of many global supply chains, from resources and food such as rubber, rice and palm oil, to manufactured goods such as semiconductors. But right now, many of these supply chains are not climate-friendly, releasing large amounts of carbon dioxide (CO2) that is heating up the planet and fuelling climate change.

That is placing the region and companies at a competitive disadvantage, the authors say, as big global customers increasingly demand doing business with firms whose climate goals are aligned with those of the Paris climate agreement.

The 2015 UN accord aims to keep global warming at well below 2 deg C by the end of the century and, ideally,1.5 deg C above pre-industrial levels. Achieving this means governments and companies must reach net-zero emissions by 2050.

"Rich in natural resources, such as rice and rubber, South-east Asia is the start of many supply chains - making the decarbonisation of South-east Asia a non-negotiable for multinational corporations, which must re-imagine their supply chains to achieve net zero," Mr Satish Shankar, regional managing partner, Bain & Company, Asia-Pacific, said in the report, released during Ecosperity Week - a sustainability conference organised by Temasek.

"While our potential is vast, South-east Asia risks being left behind if we do not act now," he added.

Acting now could lead to about US$1 trillion in economic opportunities with new growth areas contributing about 6 to 8 per cent to the region's gross domestic product (GDP) by 2030, the authors said.

The region needs to shift from resource extraction to electrification, energy efficiency, renewables such as solar and wind, grid modernisation, green transport and emerging carbon capture technology and hydrogen power. Increasingly, the region needs to tap abundant renewable energy resources such as geothermal, solar and offshore wind and end its reliance on fossil fuels, especially coal.

It is a tall order for the rapidly growing region of more than 600 million people with huge energy needs: Forecast electricity demand growth of 5.4 per cent this year is the fastest for any region in the world, the report said. About 45 million people in Asean are still not connected to the power grid.

Yet while the US$2 trillion could help make the transition, the authors found that only US$9 billion was spent on green assets in 2020. The question is where the US$2 trillion will come from.

"The ADB (Asian Development Bank) estimates that about 40 per cent of infrastructure investments in Asia will need to come from the private sector. That South-east Asia's governments are pandemic-strained further highlights the role the private sector must play in climate investments," said Mr Dale Hardcastle, Global Sustainability Innovation Center co-director and partner at Bain & Company.

"Of the US$2 trillion investment needed in South-east Asia, more than half are for sectors that have historically been attractive to private investors, for example, renewable energy, green buildings and construction, electric vehicle ecosystems, and the like."

The region also needs to protect its remaining rainforests, peat swamps and mangroves, which soak up and store large amounts of carbon from the atmosphere, acting as a brake on the pace of climate change.

These natural assets, or capital, lock away billions of tonnes of carbon, making them a hugely valuable resource for nations and investors who protect them, while reducing the region's carbon emissions.

Doing so could create a multi-billion-dollar market for carbon-offset trading to firms that want to cut their emissions by using nature-based solutions. It could also lead to better protection of nature in the region, in which hundreds of thousands of hectares of forests are still being cleared annually.

The authors say that failure to act will only fuel climate change impacts in the region, which is one of the most vulnerable to increasingly extreme storms, floods, droughts and fires, as well as accelerating sea level rise.

The region must do much better in its climate pledges under the Paris Agreement, too, said the authors. None of the nations in South-east Asia has a climate plan that meets the goals of the Paris Agreement.

Only two - Indonesia and Laos - have net-zero commitments. At present, national climate plans put the region on a path to produce between three and four billion tonnes of greenhouse gases above what South-east Asia should be producing by 2030 under the Paris 1.5 deg C warming limit goal.

"Put simply, the world cannot achieve net zero without South-east Asia coming along on the journey," the authors said.