ASEAN at 50

19/08/2017

Alexandra Tracy

In 1967, during a period of substantial regional turbulence, the Association of South East Asian Nations (ASEAN) came into being.  Its lofty purpose was to foster peace, cooperation and collaboration among the grouping and with its neighbours, and this goal has been largely met.

Fifty years on, ASEAN has matured into diverse community of ten countries promoting trade, economic integration and development.  The group has presided over unprecedented growth, becoming the world’s seventh largest market, and expected to become its fourth largest economic bloc by 2030.

Today, the ASEAN region faces new challenges associated with continuing its economic growth in such a way that environmental and social demands can be met adequately.  Its leaders are extremely aware of their countries’ vulnerability to climate change impacts – over the last two years, Cambodia suffered widespread drought and there was water rationing in Thailand, fisheries were reduced in Vietnam and the Philippines, Indonesia had the worst forest fires for decades and flooding in several ASEAN capital cities devastated local economies.

This is especially significant for a region that seeks to alleviate poverty and improve the livelihoods of many of its people.  The poor are most affected by food and water insecurity, often live in low lying areas and tend to depend on climate sensitive sectors, such as agriculture, for their livelihood.  According to Asian Development Bank (ADB) estimates, if rapid mitigation measures are not taken, economic losses across South East Asia could result in 11% lower GDP by 2100.

ASEAN’s Commitment to Climate Change Policy

As a region, ASEAN has committed to making climate change a central goal of policy making.  Its ten member states are signatories to the Paris Agreement and have all submitted plans regarding their Nationally Determined Contributions (NDCs), including strategies for adaptation.  ASEAN’s joint statement to the 2016 COP emphasised the need to ramp up mitigation actions and to strengthen the management of its diverse landscapes and ecosystems in order to improve climate resilience.  A raft of collaborative initiatives are under way, including the ASEAN UN Action Plan on Environment and Climate Change and the ASEAN Climate Change Initiative.

ASEAN 50th Anniversary celebrations. Photo: Asia Society

ASEAN is, however, merely the sum of its parts – and its member nations differ widely in terms of economic development, maturity of policy making and prioritisation of issues.  Some members have taken action to address climate change in recent years: for example, Indonesia, Malaysia, Singapore and the Philippines have all announced voluntary mitigation targets.

Fossil Fuels Still Dominant

Across much of the group, however, governments continue to rely on (and to subsidise) fossil fuels to maintain the growth trajectory, preserve stability of supply, and in some cases, support their indigenous fossil fuel industries.  In the twenty years to 2010, South East Asia’s emissions from fossil fuels surged 227%, the highest and fastest build up in the world.  The share of coal in power generation is expected to rise from 32% to 50% to help meet energy needs in the region, with Vietnam, for example, planning to build around 30 new plants by 2030 and Indonesia pushing for extensive new construction to utilise domestic fuel reserves.

While all the ASEAN country NDCs contain emissions reductions targets and mitigation activities, including increased input from renewable energy sources, more detail on specific measure and policies will be required to evaluate their ability to deliver on their stated targets and to manage the still considerable contribution of fossil fuels.

Forest Preservation is Key

South East Asia has the third-largest tropical forest in the world, covering almost half of its total land area.  For several ASEAN countries, the greatest opportunity for emissions reduction will be control of deforestation together with promotion of sustainable land management.

This is most starkly realised in Indonesia, the largest country in the grouping and already fifth in the world in terms of greenhouse gas emissions.  85% of these are created by land use activities, with 37% due to deforestation and 27% coming from peat fires, according to the National Council on Climate Change.  In addition to causing an estimated US$14 billion in losses, Indonesia’s forest fires of 2015 had a devastating climate impact.  During that two month period, average daily emissions were ten times greater than normal.

For Malaysia, Burma, Cambodia and Laos, forest cover is an important feature of the NDCs.  Cambodia committed to increasing forest cover to 60% of the total land area (from an estimated 57% in 2010) by 2030, and maintaining it thereafter.  This will involve reclassifying 2 million hectares as community forestry.  Potential financing under the REDD+ mechanism is highlighted in Cambodia’s NDC, as well as those of the Philippines, Burma and Vietnam.

Improving City Development
ASEAN 50th Anniversary celebrations. Photo: Asia Society

ASEAN’s rapidly growing urban centres will largely define its energy future.  Sustainable urban development is a priority in many of the region’s NDCs.  Improved waste management is important for Thailand, Vietnam and Cambodia, as is promotion of low carbon and energy efficient road transport.  Indonesia and Laos identify greater climate resilience of their cities as a key goal.

In those ASEAN countries which will still see huge levels of urbanisation in the coming years, there is strong potential for integration of climate resilience into city planning at an early stage, both to protect the well being of citizens and to promote economic competitiveness.  Some cities have already seen the benefits of this approach: for example, in 2013, when DaNang in Vietnam was hard hit by Typhoon Nari, homes built as part of a resilience project were hardly damaged, while more than 4,000 traditional homes had to be rebuilt.

Potential for Green Buildings

By contrast, Singapore, the most highly developed city in ASEAN, faces the twin tasks of continuing sustainable construction while improving the quality of its existing building stock.  The government has set a target of greening 80% of its buildings by 2030, which will be central to achieving its NDC goal of peaking greenhouse gas emissions in that year, given the limitations on renewable energy within its land area.

In most ASEAN countries, green construction represents a significant near term investment opportunity.  The International Finance Corporation estimates, for example, that nearly US$25 billion will be needed by 2020 by the low carbon building sector in Indonesia to meet the standards of new building codes and energy efficiency incentives.

Financing the Transition

While the scale of the investment potential contained in the NDCs is tremendous, it is equally clear that the ability of countries to deliver on their commitments will be constrained by the availability of financing in practice.  Most of the ASEAN NDCs contain a two stage emissions reduction target – the more ambitious goal being conditional on provision of climate finance and international support.  (Cambodia and the Philippines have submitted conditional targets only).

To access this funding, countries in ASEAN still need to articulate clearly their “conditional” actions and contributions, along with the financing required for such actions.  In order to tap the international climate finance funds, such as the Global Environment Fund or the Green Climate Fund (GCF), countries must also build sufficient capacity and institutional readiness.

For example, to access capital from GCF, the largest climate fund today, a country must establish a National Designated Authority with a clear climate mandate and identify appropriate national implementing or executing entities and project partners.  So far, GCF has approved funding for one ASEAN based project, which aims to improve the resilience of vulnerable coastal communities to climate change related impacts in Vietnam and will be executed by the Ministry of Agriculture and Rural Development.

Much of the funding for NDCs will also come from the traditional development banks, many of whom committed to scale up climate finance at the time of the Paris Agreement.  For South East Asia, ADB has committed to double its contribution to US$6 billion by 2020.

Essential Role for Private Capital

Unlocking the trillions of dollars of private capital in the world is what is essential for the achievement of the NDCs.  Countries need to integrate their NDC commitments into national development strategies and work on strengthening the private sector investment climate.  Greater clarity on the priorities of the NDCs across sectors and closer engagement with commercial financial institutions during the planning phases will help to create private investment pipelines that are strategic and aligned with country ambitions.

There is a wide range of domestic funding sources in the more developed ASEAN markets, led by local banks, which will over time be incentivised by clear and supportive policy measures to support NDC activities.  International climate finance initiatives and public private mechanisms should help to catalyse this flow, as will national government initiatives, such as Malaysia’s Green Technology Financing Scheme and Thailand’s Energy Efficiency Revolving Fund.

Cross Regional Support

The more emerging markets in ASEAN will continue to need assistance from their peers, especially for capacity building and adaptation planning.  While there are huge international resources devoted to climate change, navigating the multilateral and donor communities and accessing appropriate forms of support can be challenging.  At the regional level, ASEAN could consider new initiatives to leverage efficiency and economies of scale and to limit duplication.

For example, direct relationships with the big climate funds, such as GCF and the Adaptation Fund, could be established by the ASEAN Secretariat.  Its accreditation as a regional implementing entity for climate finance could have the potential to expand member countries’ access to funding.  Established structures, such as the ASEAN Climate Resilience Network, might also be utilised to provide funding to local communities.

ASEAN governments have achieved important milestones during the group’s first five decades.  Making the essential shift to a new development pathway for the next five decades will require an equal level of determination, together with unprecedented public private cooperation across member states.

Biography

Alexandra Tracy is President of Hoi Ping Ventures in Hong Kong, which she founded to provide research and consulting on investment in low carbon energy and infrastructure in Asian emerging markets.  Based in Asia for 25 years, she is also a member of the Listing Committee of the Hong Kong Stock Exchange and an Active Private Sector Observer to the United Nations Green Climate Fund. She is also an adviser to NDCi.global

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