Because the area’s declining oil output makes it extra reliant on overseas provide, its oil import expenditure may exceed US$200 billion by 2050 – which poses not solely a “important financial burden” to Southeast Asian nations, however exposes them to gas worth volatility dangers “on a scale a lot better than seen in the course of the current world vitality disaster,” stated the IEA.
Underneath current nationwide insurance policies, Southeast Asia’s rising gasoline imports may additionally add one other US$50 billion to the import invoice by 2050.
Sparked off by the world’s largest oil and gasoline exporter Russia’s invasion of Ukraine in 2022, the worldwide vitality disaster has led to spikes in fossil gas costs. Whereas costs have since come down considerably, heightened geopolitical tensions in Europe and the Center East – the supply of 60 per cent of Southeast Asia’s oil imports – makes the area susceptible to gas worth shocks.
Throughout the 2022 vitality disaster, Southeast Asia customers had a point of safety from world market volatility as governments intervened. However this got here at a value to the area, which noticed fossil gas consumption subsidies – measured by the distinction between home gas costs and their worldwide market worth – soar to a report US$105 billion, almost 60 per cent above the earlier peak, discovered the IEA.
Whereas fossil gas consumption subsidies are usually linked to socioeconomic targets, corresponding to to make sure vitality entry or cut back poverty, in follow they’re extremely regressive and sometimes profit higher-income households, stated the worldwide vitality physique.
In Indonesia, as an illustration, regardless of middle- and higher-income households accounting for merely 20 per cent of the inhabitants, they consumed at the least 42 per cent of subsidised diesel and virtually a 3rd of subsidised liquified petroleum gasoline in 2022.
“Clear vitality and better electrification supply the primary avenues to mitigate the danger from rising gas import dependence,” wrote the IEA, which arrange its first regional workplace exterior of its Paris headquarters in Singapore on Monday.
The company added that the worldwide vitality disaster “highlighted the necessity for cautious and clear pricing reform” that takes into consideration the impacts on the poorest households, whereas “[bolstering] the case for funding in cleaner and extra environment friendly applied sciences and to alleviate strains on public budgets.”
So as to meet Southeast Asia’s local weather targets, the IEA estimates that the area’s present spending on renewables, grids and battery storage should scale by fivefold by 2035, to succeed in over US$190 billion.
Excluding Myanmar and the Philippines, all nations within the area have enacted internet zero targets.
Area has but to decouple progress and emissions
Based mostly on pledges made on the COP28 local weather summit final 12 months, the tempo of Southeast Asia’s vitality transition “is sufficient to weaken the hyperlink between gross home product (GDP) progress and emissions, however not sever it totally,” famous the IEA.
So as to decouple financial progress and emissions, IEA advised that past a deliberate doubling of the area’s renewable capability beneath present insurance policies, it additionally has to hurry up vitality effectivity upgrades, tackle methane leaks, broaden grid and storage infrastructure, advance low-emissions fuels and section out inefficient fossil gas subsidies.
Scaling up clear vitality financing according to the IEA’s suggestions remained a degree of dialogue on the Singapore Worldwide Vitality Week (SIEW) which commenced on Monday, regardless of the vitality occasion’s headline sponsor calling for continued investments into oil and gasoline.
On one in every of SIEW’s panels on Tuesday, Gillian Tan, chief sustainability officer on the Financial Authority of Singapore, made the plug for revolutionary financing mechanisms to fulfill the IEA’s advised annual investments of about US$20 billion between 2026 and 2030 for Southeast Asia’s grid growth.
”There is not going to be a transition with out transmission. So we have to double down on investments in grid infrastructure and battery storage due to the firming necessities [i.e. maintaining the output from an intermittent power source like wind or solar for a period of time].”
Tan gave an instance of how transition credit – a novel class of carbon credit generated from phasing out coal crops early, which the central financial institution mooted a 12 months in the past – are being piloted within the Philippines to completely account for not simply the prices wanted to allow a simply transition and renewables substitute, however battery storage.
To extend the quantity of blended finance offers within the area, she additionally pointed to the necessity to transfer past the present method of taking a look at particular person transactions, to ascertain “working platforms” that combination the dangers and returns from a spread of buyers.
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In the event you ask the query of what would drive decarbonisation sooner, I don’t assume the reply is finance… So long as governments train their obligation to [dismantle fossil fuel subsidies and price pollution], cash goes to movement.
Assaad Razzouk, chief government officer, Gurīn Vitality
Nevertheless, Assaad Razzouk, chief government of Singapore-based renewable energy developer Gurīn Vitality, stated that eradicating fossil gas subsidies – which reached a report US$7 trillion in 2022 – and making polluters pay would go an extended method in accelerating the area’s transition away from climate-warming vitality sources, in comparison with tinkering with financing devices.
“In the mean time, the oil, gasoline and coal industries pollute freely as a result of they don’t pay the value for both the air pollution they pump into the sky or the air pollution in your plastic bottles and possibly in half the garments you’re carrying, that are all created from oil and gasoline. Until we worth that, I can’t even think about financing devices,” stated Razzouk on a separate SIEW panel on Wednesday.
”Cash follows bankable initiatives and bankable constructions. Nothing’s going to alter that equation. So the issue, 99 per cent of the time, is just not about monetary methods, capabilities or constructions; it’s not about getting more cash from the World Financial institution, the Asian Infrastructure Funding Financial institution or whoever. We already know that renewable vitality is the most cost effective supply of vitality within the historical past of the world. So for those who ask the query of what would drive decarbonisation sooner, I don’t assume the reply is finance,” he stated.
“60 to 70 per cent of the finance is already current regionally in all these nations… So long as governments train their obligation to [dismantle fossil fuel subsidies and price pollution], cash goes to movement. And I feel we’re all going to be shocked by the velocity at which we’re going to decarbonise on this a part of the world. It’s going to be sooner than projections.”
