Multipronged approaches needed in driving climate actions adoption by the private sector and achieving climate aspirations of ASEAN 

Kuala Lumpur, 18 August 2022 —  Organised by the ASEAN Business Advisory Council (ASEAN-BAC) Malaysia, the Green and Sustainable Economy Webinar titled “Road to Net Zero: Energy Transition and Business Synergies in ASEAN” was held today to raise awareness of the effects of climate change on business in the ASEAN region and explore ways to incentivise climate actions in the private sector.

The webinar featured a keynote address delivered by Yang Berhormat Datuk Seri Takiyuddin bin Hassan, the Minister of Energy and Natural Resources of Malaysia. The panellists are Yang Berbahagia Dato’ Seri Ir Dr Zaini Ujang, Secretary General of the Ministry of Environment and Water of Malaysia, Ms Andriah Feby Misna, Director of Various New Energy and Renewable Energy of Ministry of Energy and Mineral Resources of Indonesia, Ms Kavita Sinha, Director of Private Sector Facility of Green Climate Fund (GCF), and ​​Dr Andy Tirta, Manager for Energy Modelling and Policy Planning Department of ASEAN Centre of Energy.  Ms Jukhee Hong, Chair of ASEAN-BAC Green and Sustainable Economy Working Group (GSE WG) moderated the session.

1. Malaysia’s energy transition needs whole-of-nation support for meaningful energy transition with a projected RM20 billion economic spillover by 2025

Datuk Seri Takiyuddin bin Hassan urged the general public and private sector to fully support the Malaysia Renewable Energy Roadmap (MyRER) in translating its strategies into meaningful actions. “The MyRER is a forward-looking document outlining related strategies in accelerating renewable energy (RE) deployment until 2035 to enable Malaysia to increase its RE capacity with a balanced approach while fulfilling Malaysia’s climate change commitments. The roadmap is expected to generate an economic spillover of about RM20 billion by 2025 and RM33 billion by 2035. It is also projected to create an estimated 47,000 employment opportunities in the RE-related field”, said the minister.

He said the ministry of energy and natural resources of Malaysia has the difficult task of striking a delicate balance among the three elements of the energy trilemma, namely energy security, affordability, and sustainability. Malaysia has set the target of 31% of RE contribution in installed generation capacity in 2025 and 40% in 2035, as well as the gradual reduction in coal generation capacity in the generation mix and eventually phasing out coal-fired generation from the system. Malaysia will also increase the grid flexibility through the integration of technologies and digitalisation to pave the way for the smart grid and continue to collaborate with ASEAN member states (AMS) through the ASEAN Plan of Action for Energy Cooperation to explore low-carbon opportunities under the ASEAN power grid program.

2. Malaysia’s NDC road map is underway and business sector transformation is crucial toward a green economy and sustainable development

Dato’ Seri Ir. Dr Zaini Ujang, Secretary General of the Ministry of Environment and Water in his presentation, informed that the ministry has outlined a few policies and initiatives to achieve Malaysia’s climate targets, including the Malaysia Climate Change Council chaired by the Honourable Prime Minister of Malaysia and the development of the National Low Carbon Cities Master Plan approved by the cabinet in 2021.

The Ministry of Environment and Water has been tasked to establish the national carbon pricing and carbon market policy; as well as the domestic emission trading scheme. Some other initiatives which are underway and expected to be finalised by the end of this year are the review of the 2009 National Climate Change Policy, Malaysia’s long-term low emission development strategy (LT-LEDS) and the National Adaptation Plan and the Climate Change Act. In 2021, Malaysia has updated its Nationally Determined Contributions (NDCs) targets and intends to reduce its economy-wide carbon intensity against GDP by 45% in 2030 compared to the 2005 level, an increase of 10% from the earlier submission and the GHG coverage has been expanded to 7 greenhouse gases.

“Business sector transformation is crucial in driving towards a green economy and sustainable development. At the national level, there are several key enablers such as mainstreaming the ESG approach; investing in greener business operations using new technology, renewable energy, and energy efficiency; Implementing sustainability measures such as tree planting and recycling; and utilising carbon pricing initiatives in the context of the carbon market and carbon tax,” said Dr Zaini Ujang.

3. Multi-pronged approach needed in assisting SMEs hopping on the energy transition bandwagon

Jukhee Hong highlighted the three risks that the private sector is confronting and it is imperative that the private sector, especially the SMEs, need to mitigate them. “Businesses today are experiencing increased climate risk. The IPCC report projected that global warming would result in the change of climatic-impact-drivers (CID) in almost every region in the world in the next 20 to 30 years around 2050,” she said. Businesses, especially SMEs, also risk being excluded from green supply chains as governments around the world are adopting sustainability measures and reporting requirements, especially large companies, as well as the risk of decreased competitiveness and profit.

Mr Raja Singham cautioned that SMEs are facing various business challenges and need government support to transition to a low-carbon economy. He believes that greater awareness of education among the smaller companies is critical to getting people on board and making lifestyle changes. “We need to be mindful that not all businesses are in a position to carry out the demands of climate actions and energy transition. Existing RE alternatives cannot fill the gaps of energy demand and no single solution such as energy, regulation or digital transformation can get us to Net Zero targets, therefore, a multi-pronged approach is needed especially considering the needs of the private sector.

4. Green climate fund aims to catalyse private sector action through a four-pronged approach

Ms Kavita Sinha highlighted that the transition to low emission climate resilience pathways requires a paradigm shift to unlock the trillions of dollars of investments required by the developing countries and the critical role that the private sector plays. “Together,  we can remove barriers to private sector investments and develop innovative solutions for climate change adaptation and mitigation technologies as well as innovative business models to deliver the paradigm shift that is needed”.

Ms Sinha pointed out that to date, GCF has committed US$10.8 billion through grants, loans, equities and guarantees of which the share of private sector financing is over 34%. The total value of projects including co-financing now exceeds US$40 billion. Delivering on the promise of innovation will require significantly increased amounts of investment. The IPCC estimates that US$ 1.6 trillion to US$3.8 trillion in new climate investments are needed annually through 2050 to limit global warming below 1.5°C and an additional US$ 140 billion to US$300 billion is needed annually to adapt to the impacts of climate change.

She shared the four-pronged approach by GCF to catalyse private sector action that includes (1) promoting a conducive policy and institutional environment for novel climate solutions; (2) accelerating climate innovation by piloting new technologies, business models, financing instruments and practices to establish proof of concept; (3) using blended finance instruments to de-risk early investments that will establish a commercial track record for new climate solutions and crowd-in private finance; and (4) strengthening domestic and regional financial institutions to scale up private finance.

5. Challenges in transitioning to RE in Indonesia and ASEAN

Ms Andriah Feby Misna said published data shows that 46% of the season zones in Indonesia experience longer dry seasons of up to two months than the normal duration. The long drought in 2019 resulted in a nearly 10% decline In rice production, and the country also suffered losses to forest fires of around IDR 73 trillion (approximately US$ 4.9 billion) in 2019. Indonesia commits to reducing 29% of its greenhouse gas emission by 2030 unconditionally and can scale up to 41% with international support.

“The total potential of renewable energy in Indonesia is around 3600 GW. However, our current renewable energy capacity is around 11,600 MW, which is only 0.3% of our total new Renewable energy potential. Indonesia has ambitious targets but faces challenges such as the difficulty to match demand despite renewable energy potential as the terrain is spread out; intermittent characteristics of renewable energy. higher production costs, and limited financial support”. She said that the Indonesian government had taken multiple policy measures in overcoming the problems that arise in renewable energy developments.

According to Dr Andy Tirta, ASEAN countries acknowledge the need for transitioning into a low-carbon economy and existing policies implemented by AMS have driven large uptake of renewables in past years, and are expected to drive an increase in RE installed capacity in the long-term. However, fossil-based generation is still expected to dominate the energy mix in the region to secure its energy supply.

“ASEAN GHG emissions should be reduced as low as possible, and it could be accelerated with breakthrough inventions, effective and innovative technology in all energy sectors. ASEAN has to work together through the ASEAN Plan of Action for Energy Cooperation Phase (APAEC) II: 2021-2025, to enhance energy connectivity in ASEAN as well as to achieve energy security, accessibility, affordability and sustainability for all,” said Dr Andy.

According to the ASEAN Centre for Energy’s projections, the total investment required for power capacity expansion between 2018-2040 is US$ 584 billion in the baseline scenario, US$ 486 billion in the AMS Targets Scenarios (ATS), and US$ 508 billion in the APAEC Target Scenario (APS).