Winds of Change: Addressing Climate Change in Southeast Asia

With a projected 95% of the growth in GHG emissions over the next 20 years slated to take place in developing countries, many of us devote time in our classes to addressing the prospects for confronting emissions growth in large developing States. A new study by the World Bank and AusAID looks at the prospects for transforming energy systems in Southeast Asian States (China, Indonesia, Malaysia, Philippines & Thailand), Winds of Change: East Asia’s Sustainable Energy Future (World Bank/AusAID, 2010) and demonstrates well both the challenges, yet excellent prospects, for dramatic reductions in emissions in the region.

Among the take-aways from the report:

  1. Energy consumption has more than tripled over the past 3 decades and is expected to double over the next 2 decades.
    • The region’s carbon dioxide emissions have also tripled in the past twenty years;
    • Under a scenario that continues current government policies, carbon dioxide emissions could double again in the next two decades, with coal continuing to be the predominant fuel
  2. Countries in the region are among the most vulnerable to the potential impacts of climate change, including from sea level rise and declines in agricultural production. The region could see a GDP decline greater thanĀ  the 5% global decline projected in the Stern report for business as usual scenarios;
  3. It is possible for States in the region to stabilize carbon dioxide emissions by 2025, with emissions dropping slightly thereafter; this would also reduce climate damage costs by 50%
  4. To effectuate the “Sustainable Emissions Development” (SED) scenario, several measures will have to be taken by States in the region, especially China, who is responsible for the 85% of the regions emissions:
    • In the short term, energy efficiency initiatives can reduce emissions by more than half from current policies by 2030;
    • Low-carbon technologies could meet half of East Asia’s power demand by 2030, requiring a 3-fold increase in the share of low-carbon technologies (renewable energy and nuclear power) from today’s 17%;
  5. Financing the transition to SED would constitute a “formidable challenge,” requiring mobilization of financing of $85 billion per year for energy efficiency initiatives and $35 billion annually for low-carbon technologies. After factoring in $40 billion in savings annually due to energy efficiency savings, the annual requisite investments in the region would be approximately $80 billion annually;
    • While energy savings would result in most of additional investment costs being recouped quickly, upfront financing requirements could be an imposing barrier given the historical constraint that financing in developing countries has posed;
    • The study estimates that concessional financing would be necessary to fill the gap between what the commercial sector likely would be willing to invest in such initiatives and requisite financing; the study projects that concessional financing could amount to approximately 20% of projected $85 billion per year of additional investment
  6. The Clean Development Mechanism has provided, at most, approximately $1 billion in new projects, only one percent of the projected $80 billion in annual investment needs required in the Asia region alone; thus, we will need to scale up otherĀ  sources of funding, e.g. the Clean Development Fund, to bridge the financing gap in Southeast Asia;
  7. As is true in many of the other parts of the world, Southeast Asia is at a critical juncture in terms of energy choices and their impacts on climate. The long lives of energy capital stocks mean that the configuration of investments in energy infrastructure over the course of the next 10 years will likely determine emissions in the region through 2050;
  8. Among the most important policy measures that governments must take to foster a transition to SED include market-based pricing reforms, including removal of fossil fuel subsidies and internalization of energy costs, financial policies to scale up renewable energy, including feed-in tariffs and renewable energy portfolio standards, as well as smart urban planning policies, e.g. higher density and increased investments in mass transportation.

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