ASIA’S CLIMATE GOALS AT RISK - THE URGENT NEED FOR GREATER ACCORD
Asia’s climate goals and energy transition strategies are increasingly at risk as the current state of world affairs impacts the decision making of many corporate organisations and governments in the region.
The urgency for climate action is nowhere more obvious than in Asia Pacific (APAC). A report released by the United Nations Economic Commission for Asia and the Pacific (ESCAP), the United Nations Environment Programme (UNEP) and UNICEF in August 2022 found that countries in the region “needed to increase and accelerate their climate ambitions to meet emissions reduction targets.”
The UNEP report noted that 38 out of 49 APAC countries, which together contribute 95% of regional emissions, have submitted updated Nationally Determined Contributions (NDCs). However, most of the major emitters are lagging – Australia and the Republic of Korea are the only countries in this group that have stepped up their ambitions in 2022.
Collectively, the 49 countries in APAC were responsible for more than half of global greenhouse gas emissions in 2020. Their current NDC commitments are projected to result in a 16% increase from 2010 levels rather than the 45% reduction required for the 1.5°C pathway.
In Southeast Asia (SEA), most governments have pledged ambitious targets to reach neutrality and curb their reliance on coal-fired power. Under the second phase of ASEAN’s Plan of Action for Energy Cooperation (APAEC) 2021-2025, its members have laid out an aspirational five-year sustainability roadmap towards achieving net zero. ASEAN governments agreed to set a target of 23% share of renewable energy in total primary energy supply and 35% in installed power capacity by 2025.
The International Energy Agency (IEA) also stated in its 2022 Energy Outlook Report for Southeast Asia that the region’s policy choices will have huge implications for its future energy mix.
Beyond public sector policies, growing uncertainty weighs heavily on corporate minds, hampering the move towards greener energy sources in the short term, as this study and research into the region’s energy needs suggest.
The reasons are clear. Over the last few years, the energy outlook within APAC has been affected not just by a global pandemic but also by intensifying international conflicts, high and volatile prices of energy, as well as multiple other headwinds such as high-interest rates that might jeopardise funding for climate tech projects.
The larger implications of the Russia-Ukraine war continue to concern decision-making among Asia’s corporate leaders as they plan for the immediate energy future of their organisations. Political uncertainty and regulatory complexities have turned their transition agendas increasingly murky. Countries pursue their own pathways, and finding a consensus within APAC seems almost impossible.
To understand the repercussions of external factors and the onslaught of challenges presented by internal elements, this commissioned report by BayWa r.e. and conducted by Kantar provides valuable insights into the resources required for corporations to overcome these hurdles – from cost factors to regulatory barriers – and the position that corporate leaders have to take in order to advance renewable energy goals.
As the report shows, corporate leaders believe that the transition to clean energy sources is at the heart of a more sustainable world, especially as close to half (47%) revealed that affordable and clean energy is among their top 3 sustainability goals.
Top 3 Sustainability Goals
Affordable and clean energy
Carbon and greenhouse gas emissions reduction
Responsible consumption and production
Close to half of the corporations have also made this transition a priority, with 48% of APAC companies aiming to increase the use of renewable energy by more than 40% over this decade.
While encouraging, there is still a gap between the renewable energy ambitions of corporations and the reality of what’s happening on the ground, resulting in difficulties for their energy transition.
Challenges notwithstanding, governments will play a pivotal role in the clean energy transition within APAC. While the private sector is key to delivery, governments are the key enablers.
Ranked top five in the list of barriers to renewables, a third of respondents (36%) noted the lack of government implementation for renewable energy policy as a clear roadblock for corporations, with a similar fraction (33%) highlighting the unpredictable regional policy environment.
Top 5 barriers to renewables
Investment costs too high/limited budget:
Lack of government implementation for renewable energy policies:
Unpredictable policy environment:
Payback time too long:
Lack of service providers that can deliver global standards:
“Big corporates are continuing to push their renewable energy target views on their most strategic suppliers, encouraging increased renewable energy adoption in the region. More and more corporates are moving from a nice-to-have approach to mandating low-carbon manufacturing in their supplier evaluation criteria. The new reality for suppliers is that if they do not adopt these targets, they would not be chosen as a supplier.”
- Rasmus Nedergaard, Managing Director, act renewable
With the timely implementation of policies and the provision of financial support structures, the transition to green energy can be accelerated so that the region can reach its climate goals.
In addition to further supporting policies for renewable energy, corporations (42%) also suggested that higher tariffs on brown energy could work as a negative incentive while also boosting the transition to renewable energy.
However, despite the headwinds and pressure, there is cause for optimism.
As shown in this report, corporate leaders understand the need to take the initiative and provide advice when it comes to intra-regional cooperation. Regardless of the business and policy environments in which they are engaged within their countries, there is clear intent on the part of leaders to continue on their energy journey leading into the future.
Internal expertise and investment outlay will be the game-changer in the green transition, and corporations in APAC can be the first wave of changemakers.
Companies that are leading this change are looking to band together to put pressure on fellow competitors and governments to accelerate the transition, with a majority (68%) of those surveyed for this report strongly agreeing that companies should form coalitions and work together to achieve their sustainability goals.
Within companies who are leading the charge towards renewable energy...
strongly agree that companies should work together (form coalitions) to achieve their sustainability goals
strongly agree that countries in APAC should work together to provide renewable energy
Along with corporate coalitions, renewable energy consultants can serve as important enablers to drive the renewable energy transition within the region, as they work with corporations to help them overcome obstacles and find the solutions they desire. Crucially, they can help fill any knowledge and resource gaps.
Those consultants, too, are able to move the needle towards renewables in APAC. They can identify cost-saving opportunities, seek out new energy-sourcing options, and help corporations keep up with changes in the energy space.
% of companies who specified the following activities as the energy consultant’s responsibility
In another encouraging finding, the majority of corporations (81%) have indicated that they are already engaging the expertise of renewable energy consultants, while a significant remainder (83%) are planning to engage one within the next year.
As this study suggests, given the options and opportunities available for corporations, the perspective for a successful transition within APAC is good, but time is of the essence.
While there are still many apparent challenges, riding on the waves of the region’s renewable energy ambitions will help corporations in APAC overcome most of these. However, alignment of factors such as time, cost, and government support will be critical in preventing further delay, cushioning any further impediment to corporations’ renewable energy goals. It is the extent of this delay that is so crucial as the region, and the rest of the world, now experience the real-world impacts of the climate crisis.
“The downturn in the world economy due to inflation, increasing interest rates, and War in Europe does impact production in Asia and will result in a dampening effect on private investments in the Renewable Energy transition in Asia, as some sectors are facing a significant reduction in their production, not expecting to pick up until Q4 2023. Despite this downturn, the big corporates remain faithful to the emission targets and commitments made.”
- Rasmus Nedergaard, Managing Director, act renewable