Mostafa Monira Firdouse, Green Finance Advisor of Friends of the Earth (HK)
In my view, our living and breathing depend
on THREE core elements; energy, food and appropriate government policy. No
matter where the world moves with geo-political, financial, technology,
innovation, disruption, and more, as living beings, we need these three
elements to sustain ourselves.
I was reading WEF Energy Transition Index 2022, I realized that the current energy crisis has created a silver lining- increasing the speed of the energy transition and strengthening its resilience to future challenges. I echo with this and honestly, I strongly believe in it too. Today, as the risks of high fossil fuel prices and uncertainties about the global energy supply outlook increase, countries can seize the opportunity to strengthen their commitments to clean energy investments.
The global energy transition is upon us.
Public pressure, falling renewable energy costs, and improving technology are
driving the change. The coming decade will be a pivotal point in this
transition and will likely dictate whether we meet several international
climate goals. It falls on the shoulders of each country to meet their
renewable energy commitments.
As we know, electricity generation is the
largest contributor to carbon emissions in Hong Kong. Two power companies have
gradually replaced coal with natural gas from 2015 to 2020, and so the share of
natural gas has significantly increased from around a quarter to almost half.
The HK government introduced the Feed-in Tariff (FiT) Scheme with the power
companies in 2018, in which the power companies purchase RE generated by the
private sector at a rate higher than the electricity tariff.
The two power companies have received a
total of over 16,000 applications from October 2018 to June 2021, of which over
14,000 have been approved. Upon completion of the installation of all approved
solar energy generation systems, about 200 million kWh of electricity is
estimated to be generated each year, which is sufficient to meet the
electricity demand of about 67,000 households, reducing about 140,000 tons of
carbon emissions each year (i.e. about 0.4% of Hong Kong’s total carbon
emissions). Link
While I am writing this article, I am
counting my 15th anniversary of my motherhood; optimism is thus not a choice
for me but survival to remain hopeful for my daughter’s future. I’m looking
forward to seeing home grown renewable energy power my lightbulb.
Alexandra Tracy, Green Finance Advisor of Friends of the Earth (HK)
A new report by Bain & Company, Temasek
and Microsoft is bullish on the opportunities for investing in South East
Asia’s green economy. The report
predicts that 2022 will be an “inflection point” for South East Asia as the
region works to translate COP26 climate commitments into tangible action. Six governments have set net zero targets in
the last year and two (Singapore and Indonesia) are piloting carbon taxes.
The “Southeast Asia’s Green Economy 2022
Report”, released during Temasek’s annual Ecosperity Week conference, identified
five key areas of opportunity in the region over the next decade, representing
as much as US$1 trillion annually.
Five key areas of opportunity
By 2030, the authors expect solar and wind
could generate US$30 billion a year in revenues, building on accelerating
corporate investment in both sectors.
While market reforms and grid upgrades are still needed to allow
renewables to reach their full potential, there are clear opportunities for
solar, especially in Malaysia and the Philippines, and for both onshore and
offshore wind projects in the Philippines and Vietnam.
Electric mobility looks poised to take off
in Indonesia, Thailand and Vietnam, especially for two wheeler electric vehicle
manufacturing and sales, building up to revenues of US$50 billion a year in
2030. Foreign companies currently
dominate vehicle and cell manufacturing, but there are likely to be
opportunities for local players become involved in setting up battery
manufacturing plants in the region.
Meanwhile, urban development represents a US$40
billion opportunity annually by 2030, across many sectors. Green building in Singapore and Indonesia
will be a driver of growth, while the explosion in the number of data centres
in the region will continue to create demand for energy saving technology and
efficient cooling solutions in countries such as Singapore, the Philippines and
Thailand.
Forest conservation is one of the largest
carbon abatement solutions for South East Asia, with the potential to generate
US$20 billion a year in 2030. The
authors expect opportunities for investment to grow significantly, especially
in Malaysia and Indonesia, as trading carbon credits generated by nature based
solutions becomes more widespread.
Closely linked to forest conservation as a
carbon abatement solution, sustainable agriculture could represent a US$30
billion opportunity annually by 2030.
Technology solutions to improve efficiency and reduce wastage, such as
precision agriculture and real time data collection, are likely to see significant
early stage investment, while online platforms to allow farmers to reach
markets more easily are already gaining traction in countries such as Thailand
and Vietnam.
Green investment growth
South East Asia has seen US$15 billion invested
in green sectors since 2020, with the majority going to renewables and the
built environment. Corporates have been
building capacity across the region in renewables and electric vehicle
ecosystems while there has been significant growth in private equity and
venture capital investment, especially in the energy and agrifood sectors.
Short of where it needs to be
While the report is positive about the
momentum in green investment growing across both public and private sectors, it
clearly states that South East Asia is well short of where it needs to be to
reach 2030 goals.
There is still a large emission gap of 2.6
to 3.2 gigatons to reach a target of maximum 1.5 degrees Celsius of warming by 2030,
according to countries’ latest Nationally Determined Contributions and policy
projections. The capital amount needed
to close this gap could be as much as US$3 trillion, the bulk of which will be
required to finance upgrades in energy, industrial and residential urban
development and waste management.
Measured against these targets, the current
investment level is less than US$20 billion.
While private sector green financing is growing, it is insufficient and
public sector needs to play a bigger role to fill financing gaps, particularly
in terms of system costs, such as development of a renewables grid and full
infrastructure for electric vehicles. Meanwhile,
current concerns about energy security, food security and widespread
inflationary pressures are competing with climate change for urgent attention
from policy makers.
What needs to change
The report suggests that there are a number
of actions that could accelerate the pace of green investment in the region.
There needs to be more emphasis on taking
opportunities to roll out proven technology, as opposed to identifying
“revolutionary” decarbonisation solutions.
This could also help to tackle stubborn investment barriers such as
uncertainty about returns and the small scale of many start up projects.
Governments need to do more to clarify system
costs for energy transition, including the phasing out of legacy assets, and to
put in place mechanisms to attract private investment. They can also do more to incentivise the
financial services industry to develop new products that lower the cost of
capital for companies seeking to decarbonise, especially small and medium sized
enterprises.
Finally, steps could be taken to increase
collaboration throughout South East Asia.
Decarbonisation presents different challenges across the region, where demand
might exist in one country, but capital in another, while opportunities need
scale to be delivered at lower costs.
Government and business must look for ways to foster partnerships across
value chain, industries and public/private sectors to allow expertise and
capital to flow most easily to where it is needed.
Check out the above calendar for the fantastic green
finance events for July 2022! Interested
to join and learn more about Green Finance? Browse the links below to check out
the upcoming events.
