As one of the regions that is most vulnerable to the impact of global warming, Southeast Asia was especially hard-hit in 2022. At least 30 out of Thailand’s 77 provinces submerged due to record rainfall in September, while more than a hundred died in multiple devastating floods across the Philippines.

Although these disasters heighten the urgency of reducing emissions, they also inflict major costs on people’s livelihoods, which would be further impacted if Asian governments moved too hastily to switch to renewable energy sources without balancing the trade-offs and costs.

At the same time, ASEAN’s resolve to decarbonisation is being tested by recent economic headwinds. These include record high energy costs triggered by the Russian-Ukraine war, elevated inflation levels and a global recession which could dampen the region’s economic growth in 2023.

This may put pressure on various ASEAN countries to rely more heavily on cheaper sources of fossil fuels like coal, to support economic output in the shorter term.

Some wonder if all these headwinds could set ASEAN back even further in its progress towards achieving net zero, which refers to reaching a balance between the amount of greenhouse gases we produce and the amount that is removed from the atmosphere.

Eight out of 10 ASEAN member countries aim to achieve net zero carbon emissions between 2050 and 2065. This timeline may seem challenging, given that Southeast Asia’s emissions will only reach their peak in 2029 and begin dropping by 2041, according to S&P Global estimates.

Still, there are grounds for optimism that the region can still meet its net zero goals. Let’s take a close look at the factors and developments supporting ASEAN to achieve a green, inclusive transition – one that can reduce emissions while still advancing sustainable socio-economic development.

Lowering energy costs by switching to renewables

Today’s rising energy costs and disruption could actually spur “determined efforts to accelerate clean energy investment”, according to a recent report by the International Energy Agency. “This means an even stronger push for renewables in the power sector and faster electrification of industrial processes, vehicles and heating”, the IEA stated in its World Energy Outlook 2022 report.

Indeed, rising gas prices have been helping to accelerate the region’s shift to extend electricity use in sectors like end-use transportation. In the electric vehicles sector, Thailand is aiming to halt sales of gas-powered vehicles by 2035 and Singapore by 2040. Meanwhile, Indonesia is targeting to have 2 million electric cars on the road by 2030.

ASEAN’s efforts to switch to renewables will be helped by the gradual decline in average clean energy costs, as commercialisation of clean technologies become more widespread.

For example, solar has become a relatively cheap form of energy as more producers achieve economies of scale. The global weighted-average levelised cost of electricity (LCOE) of solar photovoltaics fell 82 per cent between 2010 and 2019, to USD 0.068/kWh. This can make solar relatively price competitive as a source of energy for powering utilities in Southeast Asian countries, where solar energy is abundant because of their warm tropical climate.

Over time, advances in green technologies such as wind and hydrogen can also complement solar energy and support ASEAN economies’ shift to renewable energy.

Economic benefits of greening the economy

On a broader scale, ASEAN economies increasingly recognise the significant socio-economic benefits of developing a green economy, which is estimated to potentially reach US$1 trillion by 2030 and US$28 trillion by 2070.

The potential to generate significant economic output and jobs from low-carbon industries has prompted Singapore to position itself as the region’s leader in decarbonisation, followed by Thailand and Malaysia, according to various consultancies such as S&P Global.

Greening the economy is more challenging for Vietnam, Indonesia and the Philippines, due to their relatively heavy dependence on coal generation. These countries face difficult trade-offs as they need to help provide adequate cheap energy sources to support rapid urbanisation, job creation and economic development.

That said, their governments are increasingly charting strategies to harness green growth that supports people’s livelihoods, with Indonesia’s Ministry for Development Planning laying out a low-carbon development path that could deliver an average annual GDP growth rate of 6 percent until 2045 and generate an estimated 15.3 million jobs.

Achieving a just transition

The difficult trade-offs mentioned earlier reflect the growing importance of ensuring a just transition of “greening the economy in a way that is as fair and inclusive as possible to everyone concerned, creating decent work opportunities and leaving no one behind”.

In practice, this means advancing green projects that offer inclusive and fair access for all citizens to the benefits of a sustainable transition. For example, a greater diversity of low-carbon transport options can be offered for the elderly and disabled, who are not able to ride e-scooters and e-bikes. Education and support must also be provided to those who are less digitally literate, so that they are not left behind amid the rapid development of smart, sustainable cities that tend to benefit tech-savvy consumers first.

Indeed, “Just Energy Transition Partnerships (JETP)” were a key highlight of recent global gatherings such as the 27th United Nations Climate Change Conference (COP27) and the G20 summit which took place in late 2022. At the G20, a JETP was launched between Indonesia and the International Partners Group, which would mobilise an initial US$20 billion in public and private financing over a three-to-five-year period.

More sustainable financing to close the gap

Such partnerships can help to address the major challenge of financing decarbonisation projects for ASEAN countries. Indonesia, for instance, will need to invest US$150 to US$200 billion per year over the next decade in low-carbon projects to meet its goal of net-zero carbon emissions by 2060.

According to the International Renewable Energy Agency, the total average annual investment needed until 2050 for the region to reach an alignment with the Paris Agreement’s 1.5 degree Celsius goals is about US$210 billion, covering renewable energy, energy efficiency, ancillary technologies and infrastructural support.

More private and philanthropic funding initiatives have been developed across the region to close this gap.

In the banking sector, players such as Maybank are actively supporting clients with green and sustainable financing solutions, while committing to net zero. In August 2022, Maybank became the first financial institution in Malaysia to establish a Scope 3 financial emissions baseline as it began to chart its financed emissions reduction targets against timelines.

Hope in the journey

ASEAN governments have demonstrated their willingness to make the difficult but critical transition to net zero. While significant headwinds and challenges remain, the rise of green finance and the increasing global focus on achieving a just transition offers hope that ASEAN will not just maintain, but accelerate its progress towards net zero.