Governments across Southeast Asia (SEA) have set climate ambitions, but not enough action has been taken to meet nationally determined contribution (NDC) targets by 2030, this is according to Southeast Asia’s Green Economy 2023 Report: Cracking the code, published by Bain & Company, Temasek, GenZero and Amazon Web Services (AWS).
The report found that to achieve its NDC or emissions reduction commitments and unlock the green economy potential, the region will need to reduce greenhouse gas emissions by 33% from business-as-usual levels in 2030. Public and private sectors across SEA must also harness a collective will to challenge the status quo.
Since the publication of the 2022 report, four SEA countries – Indonesia, Singapore, Thailand, and Vietnam – have committed to material emission reduction targets by 2030. Eight out of 10 SEA countries have set carbon neutrality goals, while seven of them are either considering or have implemented carbon pricing mechanisms. The number of SEA businesses signing on to Science-Based Targets Initiative commitments has also quadrupled to 109 in 2022.
However, green investments dipped 7% to US$5.2 billion in 2022 compared to 2021 continuing a downward trend from previous years.
While foreign investors continued to account for most of the region’s green investments, the nature of foreign investment in the SEA green economy is shifting. In 2022, foreign investment from outside of SEA had fallen by over 50% compared to 2021 and 2020. Meanwhile, intraregional investments doubled.
Over half of the green investments in the region go towards Indonesia and Singapore, which have been steadily growing over the last couple of years, with renewable energy continuing to be investors’ favorite theme as the share of renewables investments remained stable at 70-75%.
“SEA governments need to focus first on proven solutions to balance rising energy demand while reducing carbon emissions. The everything, everywhere all at once mantra is not going to get the job done nor build the clarity needed to scale investment and impact,” said Dale Hardcastle, Global Head of Carbon Markets and Director of Global Sustainability Innovation Center at Bain & Company, based in Singapore.
“Regulations and investment should be focused on the deployment of proven and profitable technologies that are here today and can have impact, while we lay the track to take on hard-to-abate industries with new technologies and innovation in the longer term.”
SEA faces a unique set of challenges, making decarbonisation particularly difficult. Collectively, the region’s largest challenges are high dependency on fossil fuels and reliance on international funding. Adapting economies to change in the face of an emerging middle class that is driving energy demand, while simultaneously reducing carbon emissions, is an enormous task for governments and leaders in the region.
SEA will therefore need to double down on its decarbonisation efforts to achieve the dual purpose of economic growth and decarbonization, the report concludes.