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1、1Southeast Asias Green Economy Cracking the CodeReportGLOBAL SUSTAINABILITY INNOVATION CENTER2 2he information in this report is provided on an“as-is”basis.This document was produced by Bain&Company,Temasek,DisclaimerThe authors or any of their affiliates and any third party involved make no represe
2、ntation or warranty,either expressed or implied,as to the accuracy or completeness of the information in this report and shall not be liable for any loss arising from the use hereof.Inclusion of companies featured in this report does not indicate endorsement in any shape or form from the authors of
3、this report.Copyright in the materials,text,articles,and information created by third parties and the rights under copyright of such parties referenced in this report are hereby acknowledged.Copyright in all other materials not belonging to third parties and in these materials as a compilation vests
4、 and shall remain,at all times,as the copyright of the authors of this report,and should not be reproduced or used except for business purposes on behalf of the authors or with the express prior written consent of an authorized signatory of the authors.The information included in this report should
5、be sourced as“Bain&Company,Temasek,GenZero,and Amazon Web Services,Southeast Asias Green Economy 2023 Report:Cracking the Code.”ReferenceGenZero,and Amazon Web Services(“the authors”)as of the date of writing and is subject to change.This document has been prepared solely for informational purposes
6、over a limited time period and for providing a perspective on the market.Projected market and financial information,analyses,and conclusions contained herein should not be construed as definitive forecasts or guarantees of future performance or results.T3 3AuthorsAcknowledgmentsThe“Southeast Asias(S
7、EA)Green Economy 2023 Report:Cracking the Code”is jointly produced by a collaboration between Bain&Company,Temasek,GenZero,and AWS.Contributing authors are as follows:We would like to thank the team who has worked tirelessly to develop this report:Brad Denig,Associate PartnerGwyneth Fries,Senior Man
8、agerIain Tan,ConsultantZhang HuiZhong,ConsultantFillarry Susanto,ConsultantNicholas Oon,Senior Associate ConsultantJaime Teo,Associate ConsultantAudrey Simandjaja,Associate ConsultantCelia Chandra,Associate ConsultantJessy Chua,Senior Manager,SEA Market ReputationMichele Koe,Manager,SEA Market Reput
9、ationBain&Company Anh Vu Nguyen,DirectorAllan Arthur Leyeza Cabrera,Vice PresidentWai-Hoong Fock,Managing DirectorKeith Lin,DirectorTemasek Ashley Chan,DirectorGenZeroKen Haig,Head of Energy and Sustainability Policy,Asia-Pacific and JapanAmazon Web ServicesThe insights and content of this report al
10、so benefited from the wisdom of more than 50 leading industry experts across SEA and beyond.The richness and clarity of thought in this report would not have been possible without the input from these individuals.To all who answered our call or wrote a thoughtful emailwe owe you our deepest thanks.D
11、ale HardcastleGlobal Sustainability Innovation Center Director and Partner,Bain&CompanyNunchanok MekmasinSenior Manager,Bain&CompanyFrederick TeoCEO,GenZeroAre KaspersenAssociate Partner,Bain&CompanyGenevieve DingHead of Sustainability Policy Strategy,Asia-Pacific and Japan,Amazon Web ServicesKrishn
12、an NarayanAdvisor,Energy and Sustainability,Bain&Company4 4Foreword by Bain&CompanyRegional Managing Partner,Asia-Pacific,Bain&CompanyThe past 12 months have reinforced the need for concerted global action on climate change,and specifically for greater urgency and commitment from governments across
13、the world.This has been equally true across Southeast Asia where,encouragingly,there has been a steady uptick in commitments from all stakeholders.Four governments have raised climate commitments,and seven are now considering carbon pricing measures to promote action.There has been a four-fold incre
14、ase in corporate commitments to set science-based targets,and many leaders have outlined ambitious multi-billion-dollar investment programs to decarbonize their businesses.Yet in climate action,as in business and life,the real test of a strategy is not the targets we set,but the concrete steps we ta
15、ke to accelerate progress and deliver the impact we have committed to.The green transition in SEA is at a tricky period where the bold ambition is meeting the realities of the day.Southeast Asia governments are grappling with the challenges of rising energy demand(that will grow by nearly 42%over th
16、e decade to 2030),a burgeoning middle class,strong pressure not to increase already low energy and electricity prices,and the need to deliver just and equitable growthbefore even considering ambitious plans to decarbonize and build the industries of tomorrow.Corporates and investors are keen to play
17、 their part.Yet uncertainties about the transition path and supporting regulation and policies(central to any translation of climate commitments to reality)make it difficult to take decisive action at scale and invest the billions of dollars that are needed to ensure a speedy and effective transitio
18、n.To break this logjam,the largest corporates and investors,including the multilateral financial institutions,need to act with urgency and conviction to lead the way.Despite the uncertainties,there is much that can be done in the“here and now.”There are several actions that are“no regrets”moves and
19、tap proven levers for decarbonization across various industries.Similarly,there are policies that governments can implement to address nature loss and protect carbon sinks that dont require difficult trade-offs.This years Green Economy report speaks to both the challenges on the road to“Net Zero”and
20、 the immediate actions we can take today to accelerate the transition.While the challenges are considerable,there is much room for optimism,as at least the first wave of available levers can meet much of the regions decarbonization commitments to 2030 if executed with collective commitment and colla
21、boration.In parallel,a focus on defining longer-term solutions that government,corporations,and investors align on will deliver just and sustainable growth in this dynamic region.We invite all stakeholders to work together to reaffirm their commitment to the green transition and take action today.Sa
22、tish Shankar5 5Vice Chairman,Sustainability,TemasekForeword by TemasekThe cost of the climate emergency is rising at an alarming pace,with radical environmental consequences that threaten our collective future.More frequent and extreme weather events,exacerbated by climate change,are disrupting supp
23、ly chains,displacing people from their homes,and causing disaster response and recovery costs to skyrocket.Southeast Asia is disproportionately affected by climate change,with its long coastlines and abundant low-lying areas.Yet,it is uniquely positioned to drive progress in the worlds journey to Ne
24、t Zero.Home to 620 million people today with more than half under 30 years of age,the regions vibrant economies,boosted by the accelerated digitization of businesses and services,makes it one with immense potential to become an engine of global decarbonization.But no country,community,or company can
25、 do it alone.Getting to Net Zero by 2050 requires a holistic approach on decarbonization and a concerted effort across all stakeholders including,governments,businesses,academia,and individualsthere is no one silver bullet in this journey.This is true especially for Southeast Asia,where we need a di
26、versified and calibrated approach across different solution pathwaysnature,technology,and carbon markets.Our efforts must be scaled practically across communities that may be reliant on traditional ways of life,so that we can embark on the green transition in a just and inclusive manner.As a long-te
27、rm investor,Temasek has a fiduciary duty to invest responsibly for sustainable returns and create a better future for generations to come.We believe there are also tremendous opportunities to be seized as we collectively tackle and adapt to the climate crisis.These include opportunities to catalyze
28、growth and innovation through the transition to Net Zero,and opportunities to foster resilience in our economies,communities,and businesses.To this end,scaling nature-based solutions is one of the most holistic and cost-effective approaches to climate mitigation.Southeast Asia holds some of the most
29、 biodiverse ecosystems in the world and is home to an estimated 15%of the worlds tropical forests.It is therefore well positioned to drive this shift and develop replicable models in working with nature to address the global climate crisis.Achieving our Net Zero goals will also require an accelerati
30、on of the energy transition,and technological developments will be key to unlocking scalable climate impact.This is especially true in Southeast Asia,where dramatic improvements in access and affordability for renewable energy sources like solar and wind have enabled them to grow at an unprecedented
31、 rate.We are seeing countries like Vietnam and the Philippines lead the way in deploying renewable energy and transforming their power generation systems in parallel.To further accelerate the development of sustainable infrastructure here in Southeast Asia,we have partnered with HSBC to establish Pe
32、ntagreen Capital,a debt financing platform that aims to close the funding gap for marginally bankable clean infrastructure projects.Our carbon solutions platform GenZerois also working closely with Climate Impact X,a global marketplace and exchange we set up with DBS,the Singapore Exchange,and Stand
33、ard Chartered,to scale the voluntary carbon market with trusted,high-quality carbon credits.Southeast Asia is well-placed to create a lasting,meaningful impact in the global climate transition.We hope this report will provide useful insights into the transformational opportunities that the regions g
34、reen economy is ushering in,and join us in accelerating bold,collaborative action toward our shared future.Steve Howard6 6CEO,GenZeroForeword by GenZeroGenZero was founded by Temasek as an investment platform company focused on accelerating decarbonization globally.We are proud to contribute to this
35、 report,which provides an overview of the green economy landscape in Southeast Asia,including the regions potential,decarbonization challenges,and opportunities for green investments.The takeaway is clear:For Net Zero to become a reality,countries,corporates,and communities need to take a collective
36、 and constructive approach to decarbonization.As a region,Southeast Asia is brimming with potential.It is home to some of the worlds fastest growing cities,with a large and youthful population that is growing alongside its rapidly growing middle class.Southeast Asia has an important role to play in
37、global climate action and decarbonization.While countries in the region have stepped up their commitments(with 8 out of 10 countries having Net Zero pledges),key obstacles remain.In a region that remains heavily dependent on fossil fuels,growing energy demands will drive emissions increase.Southeast
38、 Asia will have to strike a delicate balance between economic growth and a just transition,while stepping up decarbonization efforts to make meaningful climate action.Energy and nature sectors are the most critical levers for Southeast Asia,given their potential to contribute 85%of emissions reducti
39、on needed.Proven solutions such as increasing renewable deployment,grid enhancement,and accelerating nature-based solutions development,as well as building and scaling the carbon market,can help close the emissions gap of 2.4Gt toward the regions unconditional 2030 targets.The opportunities for gree
40、n investments,initiatives,and innovative technologies in Southeast Asia are immense.The regions growing green energy capacity,coupled with its abundant natural resources,presents an opportunity to create sustainable industries and jobs,while also helping to advance the global transition to a Net Zer
41、o economy.Regional collaborationcan catalyze transition and unlock further renewable energy and nature-based solutions potential,for instance through cross-border regional grid,carbon trading,and harmonization of technical standards.At GenZero,we are committed to driving climate action through our i
42、nvestments and partnerships.Through our investments in nature-based solutions,technology-based solutions,and carbon ecosystem enablers,we seek to accelerate decarbonization,while creating positive impact for local communities,businesses,and the environment.We seek to deliver positive climate impact
43、alongside long-term sustainable financial returns by investing in opportunities that can be nurtured into impactful and scalable solutions.Since our launch in June 2022,we have deployed capital across a diverse range of solutions in the region with the objective of accelerating impact.Through a join
44、t investment in C-Quest Capital,we funded the deployment of clean,energy efficient cookstoves to 650,000 rural households across Thailand,Vietnam,Cambodia,and Laos to reduce carbon emissions.We have also invested in New Forests Tropical Asia Forest Fund 2,which aims to develop a diversified portfoli
45、o of sustainable forest plantation assets in Southeast Asia and support the regions transition toward responsible forestry management.To broaden and deepen the voluntary carbon market,we are also invested in Climate Impact X,a global marketplace,auctions house,and exchange for trusted high-quality c
46、arbon credits.Our investments and partnerships globally also provide us with learnings and potential solutions that can be helpful for Southeast Asia.There is no panacea to the climate change conundrumto achieve Net Zero,our approach must be dynamic and diversified across all solution pathways.We ho
47、pe that this report will be a useful resource and encouragement for investors,corporates,policymakers,and other stakeholders looking to support,catalyze and grow the regions green economy opportunities.Frederick Teo7 7Foreword by Amazon Web ServicesThe“Green Economy”is becoming a major focus for cou
48、ntries in Southeast Asia(SEA),as they strive to set and meet ambitious decarbonization goals while collaborating with the private sector to accelerate these goals.This years report highlights the untapped opportunities across clean power and nature in particular,as well as rising regional ambitions
49、to do more.At Amazon,we are committed to achieving Net Zero carbon across our business worldwide by 2040,a decade ahead of the Paris Agreement,and we co-founded The Climate Pledge to encourage others to work together and solve decarbonization challenges.Amazon has been the worlds largest corporate p
50、urchaser of renewable energy since 2020.We now have over 400 renewable energy projects around the world,across 22 countries,representing more than 20 GW of renewable capacity to date.Once every project is fully operational,the energy generated by these projects is expected to help avoid more than 21
51、 million metric tons of carbon emissions annually.Amazon is already powered with 85%renewable energy across our global operations,and we are on a path to 100%renewable energy by 2025.Southeast Asia faces challenges in scaling renewable energy due to limited availability,undue regulatory complexity,a
52、nd high costs.Enabling corporate renewable energy investments is one area where SEA can do much more by increasing market availability.Corporate consumer demand can help the renewable energy sector growhelping governments meet national climate targets without additional fiscal burden,and bringing wi
53、th it associated capital,green jobs,and the proliferation of green technologies.Amazon supports regulatory frameworks that incentivize varied,affordable,and additional renewable power purchasing options,beyond what is available on the grid today.Amazon also recognizes the important role of nature,an
54、d especially the potential for blue carbon in SEAs decarbonization.While SEA holds over one-third of the worlds mangrove forests,the greatest loss of mangrove forests has also occurred in the region.Amazon is proud to partner with Conservation International to support the establishment of the Intern
55、ational Blue Carbon Institute to work with governments across SEA to support the restoration and protection of regional coastal blue carbon ecosystems.Cloud computing can also help regional governments as well as the public and private sectors leverage digital technologies to drive deeper decarboniz
56、ation and sustainability across their operations.For example,moving on-premises workloads to Amazon Web Services(AWS)can lower the workload carbon footprint by nearly 80%,and up to 96%once AWS is powered with 100%renewable energy,by 2025.Furthermore,cloud-enabled technologies such as artificial inte
57、lligence,machine learning,big data analytics,and Internet of Things,enable acceleration of the sustainability innovation process itself.There are a number of use cases from among customers in the power and nature sectors already that you will see in the report.To further democratize access to climat
58、e research and spark innovation,we provide open access to climate-related data sets through the Amazon Sustainability Data Initiative.We hope this years report can raise awareness of opportunity to accelerate our path to sustainability in SEA,prompt new and innovative ways of thinking to solve clima
59、te change challenges in region,and catalyze meaningful near-term actions by governments and organizations across the region.Head of Energy and Sustainability Policy,Asia-Pacific and Japan,Amazon Web ServicesKen Haig8 8Context|About the Southeast Asia Green Economy ReportPathway to full potentialOppo
60、rtunities on the road to Net ZeroInvesting behind the new realitiesCracking the code2020202120222023Assess SEAs green economy potential and strategic pathwaysDevelop a collective action plan for SEA to capture economic opportunitiesIdentify investable opportunities to accelerate the Net Zero transit
61、ionUnderstand SEAs progress vs.climate commitments and how to unlock its potential in energy transition and natureExtensive foundation for the 4thedition of the report10SEA countries assessed for progress toward 2030 targets(with country deep dives for each of the ASEAN-6 countries)50interviews with
62、 corporates,investors,project developers,and start-ups,as well as sector and SEA policy experts500government documents and company reports referred to(and 30 databases and secondary sources)12kSEA-based deals screened between 2020 and 20229 9The 2023 report in numbersNote:(1)Includes transactions in
63、volving corporates,PE/VC,infrastructure funds,climate-focused“green”funds,and sovereign wealth funds and government-affiliated companies;(2)By targets,we refer to Nationally Determined Contributions;of SEAs top 4 emitters(Indonesia,Vietnam,Thailand,Malaysia),all except Malaysia are unlikely to be on
64、 track;(3)Based on a starting carbon price of$5.8/tCO2;(4)Investments in energy and nature sectors needed in order to meet SEA NDCs by 2030 a proportion of an estimated$2T investment needed for the economy overallSource:Country NDCs;SBTi;Preqin;S&P Capital IQ;Pitchbook;AVCJ;Climate Watch;Industry pa
65、rticipant interviews;Peer-reviewed journals;Lit.search;Bain analysis20222030Rising Commitments Reality on the Ground33%target emission reduction to 20303 out of 4 top emitting countries may be at risk of not achieving targets24xSEA companies committing to science-based targets2xincrease in intraregi
66、onal green investment vs.2021$5.2B green investment in SEA in 2022142%increase in energy needs to 2030Meeting NDC commitments is possible with action,collaboration,and proven solutions.SEA has committed to:2.4 GtCO2e unconditional reduction in emissions from forecasted level in 2030Proven solutions
67、in nature and energy could deliver up to 85%of needed action to close the emissions gapSignificant,consistent investment is needed up to 2030$1.5T Estimated cumulative investment needed to meet 2030 targets4$1.1TEstimated investment need in clean,efficient energy$400BEstimated investment need in nat
68、ure31010“Actions of ASEAN will be critical to meeting global environmental targets.The decisions leaders make now about decarbonization will determine our collective future.”World Economic Forum,2023SEA has a critical role to play in global climate action and decarbonizationNotes:(1)Compare Southeas
69、t Asia region with other individual countries in the world;(2)Land-Use Change and Forestry;(3)Except for Brunei and Singapore;(4)Based on renewable energy technical potential,which factors in geographical information,generation patterns and hourly profiles,and system and topographic constraints,but
70、does not include economic(e.g.,cost competitiveness,grid connectivity)and market factors(e.g.,investor interest);solar&wind potential excludes settlements and urban areas to consider wind parks and utility-scale PV systems(does not assess rooftop solar potential)Sources:IEA;ADB;S&P Global;World Econ
71、omics Forum;IRENA70%contribution to global emissions from land use change and forestry 15%of worlds forestland come from SEA4thlargest energy consumer in the world18out of 10 SEA countries have sufficient RE technical potential to meet electricity demand3,480%of energy derived from fossil fuel4out o
72、f 10SEA countries export or plan to export electricity generated from renewable sources and has potential to accelerate the energy transitionSEA is a key contributor to global GHG emissions 1111Yet the region is not on track to deliver its 2030 climate targetsWork underway but uncertainty about deli
73、very of national plans Pace of development faster than decarbonizationRecent slowdown in green capital deployment4/10countries have published long-term policy strategy documents,but most still lack actionable implementation detailsof SEAs top emitters are unlikely to be on track to deliver on Nation
74、ally Determined Contributions(NDCs)4%$1.5T3/442%$5.2Bannual SEA nominal GDP growth over the past decade(vs.world average 2.5%)increase in energy consumptionexpected from 2020 to 2030 under current policiescumulative investment needed for energy and nature sectors to reach NDC targets by 2030green in
75、vestment in SEA in 2022(7%decrease from 5.6B in 2021)What Can We Do?1Develop holistic plans at industry and national levels 2Scale proven solutions while building for the future3Ensure capital use is optimized for high-impact solutions4Recognize that SEA can deliver solutions together1212Four priori
76、ty actions can deliver commitments and impactDevelop holistic plans at industry and national levels Develop clear roadmap to 2030,with economically viable initiatives in key sectors Investors and corporates dont need perfect plansbut they do need a clear directionScale proven solutions while buildin
77、g for the futureKnown,near-term and high-potential levers that can deliver 2030 Nationally Determined Contributions(NDCs)should be prioritizedCollective action needed now to enhance grids,value nature,promote EVs,etc.for the futureEnsure capital use is optimized for high-impact solutionsConnect capi
78、tal to most important levers,ensuring funding meets impact Pilot innovation and market solutions to phase out coal,value nature,and tax carbonRecognize that SEA can deliver solutions togetherSEA has the resources needed to decarbonize and thrivenot just at a country level,but also regional levelBila
79、teral and regional collaboration need to be accelerated tomaximize impact12341313Improved collaboration between corporates and governments will unlock actionCorporatesGovernmentsSEA corporate investments are not scaling as needed Promises to do more are held up by limited investable opportunities,ma
80、rket access,and finance Despite roadblocks,there are actions that corporates can take to enable change and impactTOP FOUR ACTIONSSet structured climate action and resourcesEvaluate operations and set up enablers for reportingSelectively invest in high-impact solutionsBuild decarboni-zationcapability
81、 and awarenessPolicy is now setting pace of climate action and investment Incentives and rules have transformed investment and action in US and EU over the past 12 months SEA leaders need to work with the private sector to solve the triple challenge of growth,people,and carbonGovernments and compani
82、es must rethink individual vs.collective action to scale resultsTOP FOUR ACTIONSEstablish integrated transition roadmapsAccelerate new grid and renewables infrastructureEnhance voluntary carbon marketsEnforce conservation and incentivize protection1414Create domestic and bilateral grid connectionsSc
83、ale blended financing to fund grid and RE infraEarly retirement of coal power plantsEnforcement of existing conservation policiesIncentivize forestland restoration/protectionAdopt carbon pricingTime matters:Prioritize solutions that can deliver results todayThis report has assessed solutions with a
84、bias toward proven solutions that can deliver significant decarbonization in the near term.Actions prioritized based on time value of carbonNo scientific breakthroughs are required to realize their potential today;challenges are addressable through intentional coordinationNear-Term PrioritiesDriven
85、byGovernmentsInvestorsCorporatesDecarbonization potentialShort-termLong-termEmerging Opportunities(R&D needed to understand long-term contributions)Time to realize impactLow potentialFocus up to 2030Near-Term Priorities(High-impact,proven solutions)High potentialNon-exhaustive1515Energy solutions|Ne
86、ar-term priorities like grid infrastructure,renewables,and financing require partnership to accelerateNotes:(1)Multilateral development bank;(2)Energy efficiency;(3)Coal-fired power plant;(4)Carbon capture utilization and storage;(5)Commercial and IndustrialKey takeawaysPolicy and partnership-orient
87、ed levers are both highly impactful and relatively actionable in the near term to accelerate decarbonization Government actions to introduce carbon taxes,financial incentives,development funding,and grid investments are most critical in the immediate term Private sector to participate more in RE dep
88、loyment through financing and partnership agreements Highly impactful levers within emerging technologies and regional grid networks are longer-term solutions requiring high R&D and financial investment.However,interim steps can be taken today to accelerate these levers,e.g.,Strategic opportunities
89、for battery storage investments to complement RE infrastructure deployment Cross-border RE trade deals e.g.,Singapores arrangements with Laos,Cambodia,and IndonesiaHighpotentialLow potentialShort-termMedium-termLong-termDecarbonization potentialTime to realize impactIncrease financial attractiveness
90、Promote competitive market structureAccelerate infrastructure developmentDevelop existing and emerging technologies Realize a regionalcross-border gridLeverage private financing/MDB1partnerships for grid and RESupport early retirement of CFPP3Accelerate solutions toaddress RE intermittencyPromote EV
91、 adoption and regional supply chainsEstablish open-access power marketsFormalize dedicated RE deployment zonesAccelerate effort in grid upgradesStreamline RE permitting and approval processAdopt carbon pricingDouble down on power master plansAlign technical standards,frameworks,and role of regional
92、power coordinatorCreate domestic and bilateral grid connectionsPlan and build interconnection projectsInvest in EE2 andconservation leversPromote captiveand C&I5power generationIntroduce financial incentives Allow access to virtual PPAsand cross-border investmentNear-term prioritiesLonger-term prior
93、itiesAccelerate EV charging infrastructureAdvance alternative fuel,hydrogen,and CCUS4Directional1616Nature solutions|Near-term solutions include incentives for protection/restoration,enforcing conservation,and promoting carbon marketsNotes:(1)Measurement,reporting,and verificationKey takeawaysPolicy
94、 incentives and enforcement are critical to meet 2030 commitments Protecting/restoring ecosystems must be economically competitive with commodity production Both tech and active forest management can improve enforcementBeyond policy,an ecosystem of players can act to tackle gaps to accelerate NBS mo
95、mentum Build NBS talent pipeline with training programs/accelerators Train smallholders in sustainable agriculture practices;leverage certifications Support development and use of NBS tech for project lifecycle and market development(MRV,etc.)Bilateral/regional agreements on project standards and cr
96、edit trading aligned with international agreements(Article 6)HighpotentialLow potentialShort-ermMedium-termLong-termDecarbonization potentialTime to realize impactAccelerate NBS developmentBuild and scale carbon marketsEnforce domestic policies and increase incentivesSustainable agriculturePromote R
97、&D and tech innovationNear-term prioritiesLonger-term prioritiesSmallholder capability for sustainable certification standardsNBS and carbon services workforce developmentSmallholder capability-building on sustainable and regen.practicesBest practice MRV1standards for high-quality offsetsPurchase of
98、 credits as alternative to carbon taxVCM1regulatory harmonizationIncentivize forestland restoration/protectionEnforcement of existing conservation policiesGeospatial monitoring and land optimization tech implementationExport measures for carbon creditsInnovative financing for NBS developmentInternat
99、ionally aligned domestic carbon project standardsInvestments in agritech and regen.agricultureIncentivize mangrove and peatland restoration/protectionAwareness-building initiatives on NBS decarb.role and co-benefitsDigitally enabled smallholder microfinance platformsFund and establish research insti
100、tutesDirectional1717reduction in GHG emissions1vs.BAU33%regional power generation fulfilled by renewables25%electricity access across all SEA countries 100%in new investment to transition across SEAs economies2Up to$2Tnew jobs created through SEA green economy56MCO2e/year in full abatement potential
101、 from nature-based solutions1.7GtTaking action will alter SEAs trajectory and allow it to meet economic and climate goalsNotes:(1)Reduction from forecast emissions in 2030 estimated to meet unconditional emissions targets(2)Investment needed to meet current stated policies and commitments(unconditio
102、nal NDCs,adjusted down from 1.5C pathway established in 2022 Green Economy Report.Sources:Country NDCs,IRENA,ASEAN Centre for Energy;peer-reviewed journals;Bain analysis By harnessing collective will to challenge the status quo and lead the carbon transition,SEA in 2030 can achieve:Collaboration acr
103、oss stakeholder groupsSignificant green investment unlockedClear plan and results-driven prioritization1818ContentsIntroduction:Context and challengesProgress towards decarbonizationAccelerating the energy transitionValuing nature for impactRecommendations and call for action19Introduction2020SE Asi
104、a is a unique region with a young population&strong economic prospectsNotes:(1)ADB projection;(2)Measured by total GDP,projected by US-ASEAN Business Council,based on ASEAN annual growth rate of 5.5%;(3)As of 2021,stability ranking refers to global political stability index;(4)As of 2022,IEA researc
105、h Sources:IEA;ADB;S&P Global;World Economics Forum;World Bank4%annual nominal GDP growth over thepast decade(vs.world average 2.5%)380Mresidents(60%of total population)are under the age of 354thlargest economy by 20502,overtakingEU and Japan,behind US,China,and India 3rdlargest labor force supplier
106、in theworld(only behind China and India)“ASEAN has stood up well to the globaleconomic slowdown,partly due to appropriatemonetary and macroeconomic policy responses,sound export performance,and robust domestic demand in some countries.”OECD50%of population will join the middleclass by 20301,doubling
107、 in size vs.2020“Given the increasing volatility and uncertaintyin the global economy,turning this diversity intoa strength will be essential for ASEAN to sustainrobust economic growth and development.Asian Development BankGlobal top 11 in GDP per capita and political stability ranking3Worlds top 3
108、largest reserves for nickel,tin,and rare earth(key elements for batteries and electronics)4 Worlds top 3 largest solarPV module manufacturers4Worlds 11thlargest car manufacturer,potential to become EV hub4SEA has favorable demographicsand a rapidly growing middle classSEA will continue to seesignifi
109、cant,above-average growthEach country has unique advantagesand roles to play in the global economy2121 yet climate goals need to be delivered while fulfilling energy demand Energy security,accessibility,and affordability remain top priorities for the region SEA needs to manage competing priorities o
110、n the road to 2030Notes:(1)As of 2021,based on World Bank database;(2)Modeled based on Stated Policies Scenario(STEPS)where policies that have been implemented and announced by each country and sector are considered for their impact on emissions reduction;(3)Million barrels per day,IEA projection;(4
111、)Unconditional emissions target of 5 GtCO2e by 2030 committed by SEA countries,whereas business as usual(BAU)emissions represents regional emissions in absence of climate intervention Sources:IEA;ADB;S&P Global;World Economics Forum;World Bank40%of SEA energy consumption from fossil fuels relies on
112、imports by 2030 under current policies25%of SEA households still dont have access to electricity(vs.1%in India)%Electricity access by household1(showing only SEA countries with 55%green investments comefrom foreign investors(esp.investors outside SEA)+10%increase in SEA greenhousegas emissions(20182
113、019)3+23%increase in emissions from environmental degradation3More details in the following pages Governments2323Four SEA countries strengthened commitments;others moving to price carbon(1)Relative to 2022 Green Economy report;(2)Committed to carbon neutrality by 2050,no direct commitments on Net Ze
114、ro(expecting 2050+);(3)2050 at earliest;(4)Emissions reduction targets by 2030 from BAU.Unconditional reduction targets are non-dependent on external support.Conditional targets dependent on sufficient support from international community;(5)Reflects emissions intensity of GDP relative to BAU;(6)Abs
115、olute target emission level by 2030;(7)Target has not been revised since 2011;(8)Laos is in discussion with JICA(Japan International Cooperation Agency)to set out a plan to restore forest coverage to 70%by 2035(9)If G7 pledges are met under the JETP;otherwise,31%.Sources:UNFCCC NDC Registry;UNFCCC;C
116、limate Watch;New Straits Times;Climate Action Tracker;Government of Philippines;Business Inquirer;IEA;Bloomberg;Government of Thailand;Singapore National Climate Change Secretariat;Singapore Energy Market Authority;EU;the Edge Markets;ASEAN Briefing;Carbon Pulse;ASEAN Centre for Energy;Vietnam Plus;
117、Industry participant interviewsSEA decarbonization scorecard Positive developments1No changes1Does not existNegative developments1Regional target of 35%by 2025(from 24%in 2018)Carbon pricing to be implemented by 2025Carbon tax and ETS under considerationNACarbon tax or ETS under considerationNACarbo
118、n tax for coal power delayed,ETS for coal launched in Q1 2023NAETS exchange launched,carbon tax under considerationCarbon tax($4/tCO2e)implemented,to increase to$40$60 by 2030ETS legalized Pilot Carbon Exchange from 2025Forest reserves increased from 41%to 55%by 2035Net loss in natural forests,mangr
119、oves and seagrass cover eliminated by 2028Forest under public protection increased to 30%of total area by 203020%of terrestrial and 10%of coastal areas protected by 2025Forest cover increased to 70%of total area(conditional)by 20302M ha of peatlands and 12M ha of degraded landrestored by 2030 Forest
120、 increase cover to 60%of total area by 2030Forest cover increased to 55%of total area by 20371M more trees planted by 2030 and add 130ha of new parks by 2026Forest cover increased to 42%of total area by 203030%generationby 203535%generationby 203039%generationby 203040%capacityby 203530%consumptionb
121、y 2025734%generationby 203025%generationby 203030%consumptionby 20372GWp solar by2030,4GW low-carbon imports by 203547%generationby 203092050NANA(2050+)320502060(2050+)2206520502050BruneiPhilippinesMyanmarMalaysiaLao PDRIndonesiaCambodiaThailandSingaporeVietnam20%3%45%460%32%30%60MtCO2e616%75%67%43%
122、42%40%44%Dec 2020Apr 2021Aug 2021Jul 2021May 2021Sep 2022Dec 2020Nov 2022Nov 2022Sep 2020415 MtCO2e245 MtCO2eNet Zero Emissions4NDC date of submissionUnconditionalConditionalCarbon pricing(in USD)Renewable energy mix targetsNaturetargets2424Corporate commitments to science-based targets have materia
123、lly acceleratedNotes:(1)Science-Based Target initiatives are emission reduction targets that are aligned from a climate science perspective to Paris Agreement goals(efforts to limit warming to 1.5C by 2050);The Science-Based Targets Initiative(SBTi)works to collect and validate targets set by privat
124、e sector companies;(2)Based on SBTis adoption of the diffusion of innovations theory;SBTi set a critical mass target of 20%high-impact companies having SBTi commitments,after which rapid adoption would be achieved;Target passed in 2021(27%)Source:SBTiIncreased awareness of SBTi leading to surpassing
125、 of critical mass2target for rapid adoption of SBTi in 2021Simplified commitmentsubmission mechanism for SMEsIncreased climate change awareness and expectations from end customers and shareholdersSeveral large firms across SEA set new SBTi commitments or targets in 20224xgrowth in number of SBTi com
126、mitments between 2021 and 2022Number of SEA firms with SBTi commitmentsFactors linked to rise in SBTi1commitments include:(non-exhaustive)2525Green investment commitments increased in 2022 but less capital deployedNotes:(1)Figures include private sector deal transactions$10M in size,including privat
127、e placements and excluding IPOs.Figures refined from 2022 report using new allocation methodology.Amount not representative of overall private sector investment;Capex spend on renewable energy infrastructure estimated at$45B across past 3 years Sources:AVCJ;Preqin;S&P Capital IQ;Pitchbook;Industry p
128、articipant interviews;Lit.searchCommitments of new capital from governments and corporates is rising,but has not yet translated into more transactions and spending at scale$35B$17Bcommitted by EU,US,Japan,and other international partners over next 35 years to help Indonesia and Vietnam phase out fos
129、sil fuelscommitted by Singapore to combat climate change under 2030 Green Plan committed to investing$6B in Indonesia over the next 3 years for 6 EV battery projectsannounced$7B to fund green hydrogen projects,including construction of Thai hydrogen plantexpected to commit at least$2B for clean ener
130、gy projects in 2023SEA“green”deal transaction value by investor type(USD B)1Includes one-off$2.8B dealHowever,momentum has not yet translated into capital spend or an upward trajectory as expected“In markets like SEA there are a range of competing priorities that can make ESG challenging to drive fo
131、rward.There are still gaps and much work to be done,but ESG has come a long way in the region over last 20 years,and there is an awareness of the value of ESG”Senior Partner,Global Private Equity FirmIncludes one-off$1.6B dealGovernmentsCorporates2626SEA continues to rely heavily on foreign investme
132、nts;significant capital moving into Singapore,Indonesia,and renewables,but at a slower pace than projectedNote:(1)Figures include private sector deal transactions$10M in size,including private placements and excluding IPOs.Figures refined from 2022 report using new allocation methodology.Amount not
133、representative of overall private sector investment:(2)Others include transport,agricultural productivity,fuel substitution,sustainable biomass/biogas/biofuel,alternative materials,minimal food loss and waste,and othersSources:AVCJ;Preqin;S&P Capital IQ;Pitchbook Private green investments in SEA by
134、theme1(USD B)70%of 2022 green investments in SEA are in renewable energyPrivate green investments by SEA countries1(USD B)50%of 2022 green investments are in Singapore and IndonesiaPrivate green investments in SEA by investor origin1(USD B)55%of 2022 green investments in SEA come from foreign invest
135、orsShare of investments in renewables remains stable(70%75%),though larger push for wind in recent yearsIndonesia and Singapore steadily growing in investments whereas rest of the region experiencing fluctuations driven by large,one-off deals in Philippines and Thailande.g.,JERA has acquired 27%of A
136、boitiz Power for$1.6B,accounting for 55%of the total transaction amount in Philippines during 2021 Singapore is the most active investor in the region,involved in 30%of deals in past 3 years e.g.,GIC acquired 18%of AC Energy Philippines for$0.4B in 2021US was involved in 20%of deals in past 3 years,
137、trailing only Singapore in deal involvemente.g.,KKR raised its stakes in First Gen,Philippines power producer,from 12%to 20%for$0.2B$2.8B equity funding to Yuan Feng New Energy2727Non-exhaustiveWhat will it take to attract more investments?SEA faces distinct challengesSource:Industry participant int
138、erviewsDiversity in economicdevelopment stage of SEA countries“Countries like Indonesia,Vietnam,Philippines,and Thailand all have high energy demandand acceptable offtaker quality compared to less-developed SEA countries where local offtakerrisk is high due to poor credit history.”Senior Portfolio M
139、anagement Officer,Regional Multilateral Development BankHigh cost of capital mixed with insufficient returns“The hurdle rate is the main challenge,especially with investments in RE projects.Financial investors may expect returns higher than 20%,and in todays environment its difficult for RE to gener
140、ate that level of return.”Chief Investment Officer,Climate Impact FundIrregularity and uncertainty ofpolicies“One of the challenges in RE deployment is that there are many changes in offtakingprocesses.Thailand moved from FiT to Quasi-bid offtaking mechanism;Vietnam from FiT to bidding and auction p
141、ricing.”Head of Wind Development,Renewable Solutions CompanyImmature innovationecosystem for novel technologies“The US and EU definitely rank much higher than SEA in terms of how unique the tech is.The whole ecosystem around R&D,talent,and venture capital is just not as strong in SEA,focusing more o
142、n implementation of existing tech.”Director,Late-stage Venture/Growth EquityCapital InvestorLimited green growth policies lower investor confidence“EU frames decarbonization as engine of growth,but the framing is different in SEA.As you decouple energy from GDP,the more service-based your economy is
143、.SEA countries havent reached this stage of development yet”Former Manager,Sustainability Strategy Group2828SEA emissions dipped during the pandemic after steadily increasing Notes:2021 emissions are estimated from average SEA emissions growth rate from 2019 to 2021 from data sources such as Euromon
144、itor and Our World in Data applied to 2019 Climate Watch emissions figures;(1)Due to decreased pandemic economic activities,stronger climate related policies,acceleration of tech;(2)Industrial and construction Sources:Climate Watch,January 2023;Euromonitor;Our World in Data;Industry participant inte
145、rviews;Bain analysis SEA emissions reduced more than global peers in 2021;trend not expected to last as economy recovers post-pandemicIndonesia remains the biggest SEA emitter,whereas energy and nature contribute 75%of emissions in the region“Beyond 2023,emissions will only increase with energy cons
146、umption,while its deceleration will depend heavily on the speed of renewables deployment.”Former Manager,Government Sustainability BodyGHG emissions of various economies(GtCO2e)SEA GHG emissions by country(GtCO2e)SEA GHG emissions by sector(GtCO2e)Brunei,Cambodia,Laos,Singapore(5%)2929 but the comin
147、g decade will see rising energy demand and emissions;SEA needs to intensify its decarbonization efforts to meet a 33%reduction by 2030Notes:(1)Modeled based on Stated Policies Scenario(STEPS)in which policies which have been implemented and announced by each country and for each sector are considere
148、d for their impact on emissions reduction;(2)BAU minus emissions reductions commitments elaborated in Nationally Determined Contribution a countrys official commitment to greenhouse gas emission reduction as submitted to the UNFCCC Sources:UNFCCC Country NDCs;IEA;Bain analysisEnergy demand is rising
149、 to fuel regional economic growth Actual1Business-as-Usual(BAU):Projected emissions level should there be no significant change in technology,economics,or policies such that historical trends continueNDC unconditional target:Emissions level2committed by SEA countries that can be reached with own res
150、ources and capabilities and without international support2Country policies:Projected emissions level based on current and planned policies of each SEA country4NDC conditional target:Emissions level2committed by SEA countries that can be reached subject to international support and/or other condition
151、s3 yet SEA must take actions to keep GHG emissions under control SEA total final energy consumption(EJ)1SEA GHG emissions by country(GtCO2e)12432.4Gtgap in 20303030Where do SEA countriesstand on translating climate commitments into actionand are the countries on track to deliver heading into COP28?H
152、ow can the region accelerate decarbonization and investment in the two highest-emitting sectors in SEA:Energy and Nature?What can SEA do today to accelerate action and punch above its weight as a region vs a collection of individual countries?Given this point of departure,this report seeks to answer
153、 three main questions3131ContentsIntroduction:Context and challengesProgress towards decarbonizationAccelerating the energy transitionValuing nature for impactRecommendations and call for action323333SEA faces a unique set of challenges,making decarbonization challengingNotes:(1)Refers to explicit f
154、ossil fuel subsidy in 2021;(2)ASEAN 2022 figures as of Jan 2023;(3)As of 2020;(4)As of 2017Sources:IEA;Asian Development Bank;Institute for Energy Economics and Financial Analysis;Bloomberg;Equal Times;Malaysia Department of Statistics;IRENA;World Bank;Our World in Data;IESR;Euromonitor;IMF;Lit.sear
155、ch;Industry participant interviews Complex grid connectivityArchipelagic nations have complicated interconnection challenges Increased grid connection among Indonesias main islands achieved by 2028 at the earliest 3%of Philippines and Indonesias population still without access to electricity3Workfor
156、ce transitionHuge workforce in fossil fuel sectors requires just transition plans to switch to green jobsPhasing out of coal will affect 250K workers in Indonesia 35K+people work in petroleum and natural gas in Malaysia4Uneven distribution of renewable resourcesSEAs RE technical potential sufficient
157、 for regions energy needs,but the region suffers from a demand/supply mismatchFor Singapore and Brunei,RE technical potential is insufficient;both will need to import from neighborsRegion remains heavily dependent on fossil fuels for electricity generation Indonesia,Brunei,Malaysia,and Philippines s
158、till subsidize some fossil fuel use1Dependence on fossil fuels for baseline loadSEAs large economies are emerging markets and require foreign investment to transition$1.1T is needed to finance SEAs energy transition over the next decadeVietnam and Indonesia to receive$15.5B and$20B respectively for
159、the managed phase-outof coalStage of economic developmentTension between decarbonizing and achieving quick economic growth“In Southeast Asia,there is a decarbonization cost to economic growth,whereas in Europe,decarbonization is actually perceived as an engine of growth.”Former Manager in Sustainabi
160、lity Strategy GroupBalancing decarbonization and growth3434Different emissions profiles across countries;energy and nature largest sourcesNote:Bunker fuels are not included in accordance with IPCC guidelinesSource:Climate WatchTop 4 countries account for 80%of SEAs total emissionsSEA GHG emissions(M
161、tCO2e)3535Detailed assessments vs.National Development Contributions(NDCs)at a country level are important,given little consensus and historically track recordNotes:(1)Total Primary Energy Supply;(2)Speaking in relation to having the necessary funding to fund emissions reduction projects Sources:IEA
162、;Indonesia Ministry of Energy&Mineral Resources;ASEAN Center of Energy;Lit.Search;UNFCCC“Ministers responded resolutely by underlining the urgency of boosting clean energy investment and financial flows.”Indonesias Minister of Energy&Mineral Resources,Nov 202214%of TPES1in 2020 supplied by renewable
163、s vs.target of 23%in 20254updated country NDCs and new Net Zero targets within the past year“Reaching the NDC commitment cannot be done by the government alone2.We also need corporations and the whole ecosystem to pitch in”Indonesias Minister of Finance,Sept 2021“Southeast Asia is still a long way o
164、ff the pathway consistent with its clean energy ambitions.”IEA Southeast Asia Energy Outlook 2022Lack of consensus view on SEAs decarbonization progressHistorically insufficient progress in meeting past targetsIdentification of concrete actions to close gaps required across stakeholders123Understand
165、ing SEAs status today is critical to identify where interventions are needed3636Target qualityIs the target sufficient to achieve Net Zero?Target settingIs there a target set?Sector-specific targetsAre the targets cascaded to each sector?Corporate-specific targetsAre the targets cascaded to leading
166、corporates?Corporate roadmapDo top corporates1have roadmaps to achieve their ambitions?National sector-level roadmapIs there a clear and actionable roadmap to reach the targets?Financial prerequisiteAre the financial prerequisites for transition met?Regulatory frameworkAre there policies in place to
167、 enable transition?Infra,tech,and human capitalIs underlying infrastructure sufficient to achieve ambition?State of progress based on quantitative metricsWhat is the current state of progress and how big is the gap to achieve targets?To understand state of play for SEA countries,this report has asse
168、ssed a wide range of characteristics that are essential for effective delivery of climate targetsNotes:Stage of progress,Roadmap,and Enablers are assessed based on relevant indicators at both country and sector-level;Focus on energy and nature sector due to large contribution of 75%to SEAs 2019 GHG
169、emissions;(1)Top 5 local companies considering level of emission and size of the business Sector-agnostic assessmentSector-specific assessment on energy and natureDecarbonization progress assessment frameworkTopicAssessment criteriaAmbition(20%of overall assessment weighting)Roadmap(20%of overall as
170、sessment weighting)Enablers(25%of overall assessment weighting)State of progress(35%of overall assessment weighting)3737There are significant differences in performance across countries;Singapore leads while 3 of the top 4 emitters appear unlikely to deliver 2030 targets Notes:Stage of progress,Road
171、map,Enablers are assessed based on relevant indicators at both country and sector-level;Assessment considers equal weightage for energy and nature sector,except for Singapore;NBS=Nature-based solutions;(1)Top 5 local companies considering level of emission and size of the business Sources:Bain analy
172、sis;Lit.search;Industry participant interviews Key takeawaysA.Singapore leads across criteria;compelling key enablers support energy sectorB.Indonesia and Thailand have sector targets;top corporates have also set targetsC.Indonesia has been slow toprogress,but has the right enablers in placeD.Sector
173、-specific roadmaps are the critical next step for many countriesE.Broadly,key enablers are needed to accelerate progress:Clear regulatory frameworks and streamlined permitting processes Carbon taxes and/or financial incentivesGrid connectivityActive NBS developersHighly unlikely to be on trackUnlike
174、ly to be on trackLikely to be on trackHighly likely to be on trackOverall progress assessmentBruneiIndonesiaLao PDRMalaysiaMyanmarPhilippinesThailandVietnamCambodiaSingaporeIn descending order of GHG emissions contributionCurrent stateWhat is the current state of progress and how big is the gap to a
175、chieve targets?Target cascadingAre the targets cascaded to each sector and major firms?Target setting and qualityIs there a target set?Is the target sufficient?National sector-level roadmapIs there a clear and actionable roadmap to reach the targets?Corporate roadmapDo top corporates1have roadmaps t
176、o achieve ambition?Financial prerequisitesAre there financial prerequisites for transition need?Infrastructure,tech,and human capitalIs underlying infrastructure sufficient to achieve ambition?Regulatory frameworkAre there policies in place to enable transition?ABCDEAmbitionProgressRoadmapEnablers38
177、38Leading countries have translated climate commitments into tangible policies that are catalyzing investments and actions in private sectorSource:Lit.search Achieving 2030 targets is highly dependent on integrated action by SEAs policymakers and private sectorNon-exhaustiveExtends and enhances exis
178、ting energy-related tax credits and incentives spanning renewable energy,carbon capture,EVs,GHG reductions,etc.$369Bof investments in energy security and climate change over the next 10 years$200Bof large-scale investments in manufacturing projects and clean tech from corporations such as LG,LONGICo
179、vers 4 pillars:predictable and simplified regulatory environment,faster access to funding,enhancing skills,and open trade for resilient supply chains$17Bcommitted by European Investment Bank Group in new financing for sustainable energy projects including renewables and efficiency$272Bfor the greeni
180、ng of industry,including tax breaks for businesses investing in Net Zero technologies“The IRA is the most meaningful climate bill ever passed in the US.It has the potential to significantly curb the countrys greenhouse gas emissions(GHG)over the nextfew years.”World Economic Forum“We have a once in
181、a generation opportunity to show the way with speed,ambition,and a sense of purpose to secure the EUs industrial lead in the fast-growing net-zero technology sector.”President of the European CommissionInflation Reduction ActGreen Deal Industrial Plan123939Why is it so hard to translate targets into
182、 an actionable national plan?Lessons learned from the Former UK Climate Advisor at COP26 Integrate efforts from both national and corporate leadersand follow the same playbook to enable a successful transition Recognize the impact to existing businesses that are highly exposed to traditional energy
183、sources and help them navigate Strategize and prioritize opportunitiesnot every business or country can win in every sector Manage the transition carefully and justly for shareholders,employees,customers,regulators,and other stakeholders Build infrastructures right the first time,which is significan
184、tly cheaper than retrofitting clean energy solutions subsequentlythis is a unique advantage for forward-looking developing economies such as SEADirector General for Department for Business Energy&Industrial Strategy(BEIS)in UK(20182021)Experiences in decarbonization:Supported national legislation fo
185、r Net Zero by 2050 Coordinated effort to bid,win,and prepare for COP26 in GlasgowDeveloped Net Zero strategyfor both major carbon emission sectors and key enablersSet up the 6th Carbon Budget(203337),leading 78%reduction from 1990Set up cross-Whitehall governance and Cabinet Climate Committee Julian
186、 CritchlowAdvisory partnerLondonRecommendationsfor SEA leadersThere was broad consensus on the need to take actions on climate change,but navigating the politics of this transition is hardon one hand,we need long-term commitment such as 1.5 trillion investment in infrastructure by 2050,and on the ot
187、her hand,there are short-term turbulences such as Brexit,global pandemic,Ukraine war,etc.During your tenure at UK civil service,what surprised you most in leading policy setting and translating effort ahead of COP26?Before we legislated for Net Zero,the UKs target was an 80%reduction in carbon emiss
188、ions by 2050and everyone assumed that they,uniquely,were in the 20%that did not have to decarbonize as fast!When the target changed to a 100%reduction,every part of government and business realized their role.This had an enormously mobilizing effect with an“everyone is in”mantra,which enabled a full
189、y integrated plan for the energy transition.Clarity of the overall direction is a prerequisite,but the real action is on the ground.This will require bold pragmatic Net Zero strategies and then organizing to deliver.Ignoring the energy transition will not make it go away.The UK has been a leader in
190、driving the alignment of national targets to industry commitments.What was hardest thing about bringing that top-down and bottom-up integration?What lessons can other countries draw from the UKs experience?The strain will particularly fall on the power generation infrastructure,the capacity of which
191、 has been largely flat,or declining because of equipment deteriorating over the years.In a fast-growing developing country like those in Southeast Asia,the challenge will be even larger as the infrastructure may need to increase by 56 times.Why is it particularly hard to do this in fast-developing c
192、ountries like those in Southeast Asia?4040To date,SEAs overall policy effectiveness has been mixed;some countries are making decarbonization progress,but most lack clear and results-driven policyNotes:(1)Long-term low emissions development strategy;(2)Power development plan;(3)Excluding Singapore;(4
193、)Time needed varies by type,scale,and country of respective projects;(5)Voluntary carbon markets Sources:Government websites;UNFCCC;Lit.search;Global Energy Monitor;IRENANon-exhaustiveForest conservation policies have suffered from unforeseen revisions,contradictions across documents,and misalignmen
194、ts across national and state policies.6/10countries lack LT-LEDS1to lay out detailed policy plans and sector specific roadmaps.Grid sufficiency and connectivity continues to be a roadblock to SEAs renewable energy deployment.End to 2018 moratorium on new oil palm concessions caused heightened uncert
195、ainty and illegal activityIndefinite suspension of carbon credit validation and issuance for some NBS projects in Apr 2022 before subsequent reversal in Dec 2022For Example4/10countries have published long-term policy strategy documents,but most still lack actionable implementation details with the
196、progress further impeded by regulatory uncertainty and lack of continuity of policies 2021 Green Plan document sets out specific targets and milestones but lacks sufficient policy details on how to achieve stated targetsNo published LT-LEDS and has delayed the release of the 8thPDP2for over 2 yearsF
197、or ExampleFor ExampleMost SEA countries lack clear policy roadmaps for decarbonizationSlow renewables integration due to grid capabilities and lack of effective policiesInconsistent forest conservation and VCM5policies with uneven enforcement123ASEAN-6 countries3have insufficient grid capacity to ac
198、commodate RE deployment,slowing all investments2/6needed to clear necessary permits for RE deployment4Up to 8 yearscountries with streamlined permitting for RE1/10 that have historically exacerbated less-than-adequate law enforcement efforts.of Indonesias palm oil plantations illegally operating ins
199、ide designated forest areas in 201920%4141SEA countries face unique challenges within energy and nature sectorsNotes:(1)Managed phase-out;(2)Coal-fired power plants;(3)Feed-in Tariff;(4)Long-term low emission development strategy;(5)Payments for ecosystem servicesSources:Berkeley Voluntary Registry
200、Offsets Database;Climate Watch;Government websites;FAO;IRENA;Lit.searchNon-exhaustiveSEAs top 4 emitters make up 80%of total SEA emissions 80%of total 2019 SEA emissions from ID,VN,TH,and MY2019 emissions by country(%of total SEA emissions)but challenges exist across these countries in decarbonizing
201、 energy and nature sectorsEnergyNatureInconsistent policy(e.g.,no net forestland reduction target to replace 2030 zero deforestation pledged in 2021;2020 Omnibus Bill weakened legal protections for natural forests,contradicting the 2019 moratorium)Lack of policy enforcement(e.g.,20%of palm oil plant
202、ations are illegally operating inside designated forest areas)Regulatory uncertainty on NBS project jurisdiction(sold to VCM vs.count for NDC)and carbon credit validation(lack of clear regime)Congested grid and inadequate intra-island connectivity to create reliable power supply Despite coal MPO1com
203、mitment,new CFPP2is still allowed under certain criteria(e.g.,24GW of coal plants still in development stage)Surplus coal capacity has driven down coal power costs250k jobs in the current coal industry need to be transitionedLacks existing NBS development ecosystem despite its abundant forestry natu
204、ral resources Broad carbon pricing regulation exists,but no detailed framework on VCMs and international carbon trading Illegal logging activities remain due to strong demand for timberCongested grid to accommodate RE ambitions(RE plants are curtailed due to grid insufficiency to move power from sou
205、th to north)Lack of policy transparency(e.g.,two-year delay in release of 8thPower Development Plan,lack of corporate PPA regime)High cost of project financing(up to 10%12%)Lack of compliance carbon market regulation and nationwide PES5policy No demonstrated expertise in NBS projects(through Verra)a
206、nd early traction of projects(e.g.,Kuan Kreng Peat Swamp Forest)Climate Change Act still under drafting processLong lead time for RE permitting(up to 8 years)Lack of policy continuity(e.g.,moved from FiT3 to Quasi-bid offtakingmechanism)High dependence on fossil fuel for energy generation(95%of tota
207、l energy supply in 2019)and economic growth(20%of national GDP)Lack of national level sector roadmap to cascade climate target to actions(LT-LEDS4under development)National targets not cascaded,resulting in misaligned policies and strategy at national and state levels Lack of compliance carbon marke
208、t regulationLimited PES5schemes available The only country not yet involved in Article 6 Pilot Project from SEA 4242Nature and energy are where decarbonization efforts should focus in the next 57 years Protecting existing ecosystems accounts for 25%of total emissions reduction Most SEA countries5(ex
209、cl.Laos and Myanmar)have signed the COP26 pledge to halt and reverse forest loss and land degradation by 2030 Renewables(10%15%),energy efficiency(10%15%),and direct electrification(5%10%)account for between 25%and 40%of total emissions reductions SEA aims to achieve 35%renewables in its installed c
210、apacity mix and 23%in its total primary energy supply by 2025,whilst managing a cumulative 42%increase in energy demand by 2030(vs.2020)Nature and energy sectors 85%of cumulative emissions reduction neededNotes:(1)Contribution of key decarbonization levers across energy and nature sectors towards 20
211、30 NDC unconditional targets,estimated through triangulation of countrys commitments and industry expertise;(2)Due to the overlapping nature between agriculture and nature sectors,it can be difficult to draw the distinction between the two sectors Manage NBS excludes improving rice cultivation and c
212、onsiders improving natural forest management,reduce woodfuel harvest,trees in agricultural land,etc.;(3)Includes building-related emission reduction upgrades,alternative fuels and minimal contributions from carbon offsets;(4)Includes other agrifood,industry and construction,and waste-related emissio
213、n reduction levers;(5)Since signing the pledge,Indonesia has reversed their commitment for zero deforestation but instead focuses on offsetting potential deforestation with forest restoration programs.Sources:Climate Watch;Country NDCs;Industry participant interviews;Nature4ClimateDirectional2030 ta
214、rgets can be reached with proven technologies,but not without collaboration across stakeholders and countriesNature(41%)and Energy(44%)are critical sectors to meet SEAs 2030 targetsNature(41%)Energy(44%)Conditional target4343Key takeawaysSEA needs to strike a delicate balance between achieving prima
215、ry developmental objectives(e.g.,economic growth,universal electricity access)and its decarbonization goals(e.g.,NDC targets)1Overall climate action policy effectiveness has been mixed to date(e.g.,6/10 countries lacking LT-LEDS,insufficient grid infrastructure,inconsistent forest conservation polic
216、y)23 of SEAs top 4 emittersIndonesia,Vietnam,and Thailandare unlikely to be on track to 2030 goalgiven slow progress,the lack of specific plans and enablers(e.g.,Vietnams and Indonesias grid,connections)3Prioritizing immediate efforts on the energy and nature sectors will“make or break”the regions a
217、bility to meet 2030 targets given their 85%contribution to SEAs total emissions reduction targets4Specific and actionable plans,enhanced public-private sector and regional collaboration,andinterventions to fix key enablers(e.g.,regulation,grid connectivity,carbon taxes)need to be done now54444Conten
218、tsIntroduction:Context and challengesProgress towards decarbonizationAccelerating the energy transitionValuing nature for impactRecommendations and call for action454646Accelerating the energy transitionKey takeaways2Abundant resources but fundamental challenges holding back progressSurplus of renew
219、able energy technical potential,but only 40%by 2030(vs.2018);countries must balance economics with emissions4747Context&ProgressKey questions in this chapter Why is the energy sector important for SEA countries,and why is it critical to accelerate the energy transition?Why is there inherent tension
220、between energy transition and economic growth,and how can the two work synergistically?What are the most significant barriers that have impeded further progress toward decarbonization in the region?What are the critical levers to overcome barriers and accelerate decarbonization?What are the immediat
221、e priorities that will make material impacts and help the region achieve 2030 targets?How do power,transport,and industry sub-sectors contribute to emissions?Where do SEA countries stand today,and how far are they from achieving 2030 targets?How do carbon abatement potential and cost-effectiveness v
222、ary across technological initiativeswhich levers are critical in the near term?Role of the sectorChallengesRecommendations3 separate sections for Power,Transport,and Industry ABCD48Energys crucial role in economy and decarbonization:45%of SEA emissionsNotes:(1)Includes manufacturing,construction,min
223、ing and quarrying,electricity,gas and water supply;(2)Industrial and construction;(3)70%degree of uncertainty in Nature CO2 emissions vs.8%within fossil fuels from IPCC estimates;(4)Includes emissions from electricity and heat from plants and industries,manufacturing and construction,transport,build
224、ing,combustion of agriculture and fishing,and fugitive emissions;(5)Energy-related emissions from mining and quarrying,construction,and manufacturing Sources:International Labour Organization;The World Bank;Our World in Data;Climate WatchARole of the sectorEnergy is a key growth driver in SEA but al
225、so the largest contributor of emissions in line with economic growthSEA contributes to 1/3of global coal exports today Continued reliance on fossil fuels for growth35%of SEA GDP driven by energy-intensive sectors1Energy-intensive economySEA energy consumption expected to increase by 40%by 2030 Incre
226、asing energy demand60M employments in energy-intensive industries1todayHigh employment in energy-intensive sector45%Power23%Transport20%Industry512%Others49Renewable energy is a critical near-term decarbonization lever;however,other new technologies are also required to reach Net Zero in the longer
227、termNotes:(1)Carbon capture,utilization and storage;(2)Relative to current policies scenario Sources:IRENA;IEA;UN;Lit.searchARole of the sectorRenewables are most critical but alone are not enough for SEA to reach decarbonization goalsSEA portfolio would require a broad mix of technologies to reach
228、Net Zero by 2050SEA energy-related emissions savings2based on 1.5C scenario(GtCO)Renewable energy is one of the key pillars in driving decarbonization across the energy sectorhowever,100%decarbonization using RE alone is challenging Low-carbon solutions are required to meet demand when wind and sola
229、r production are depressed Cloud-enabled solutions(IoT,ML)can dynamically manage demand/supply,reducing intermittency Other technologies,with potential for negative emissions,are required to neutralize positive emissions from hard-to-abate sectors Step change in other pillars of decarbonization are
230、required,in parallel with renewables,to bridge the gap to Net Zero Improvements in energy efficiency to minimize growth in energy consumption Production of cleaner hydrogen and hydrogen-based fuels to shift away from existing fossil energy use,particularly in industry,refineries,and power plants CCU
231、S1use to address emissions from existing assets and hard-to-abate sectors(e.g.,cement manufacturing,bioenergy plants)Electrification of end uses(e.g.,electric vehicles)to directly use low-emissions electricityLimitation of renewablesLeveragingon other technologies5050Power is the largest contributor
232、 to energy-related emissions;a transition to clean power generation via renewables is criticalNotes:(1)Refers to mining and quarrying,construction,and manufacturing of iron and steel,chemical and petrochemical,non-metallic minerals,non-ferrous metals,transport equipment,machinery,food and tobacco,pa
233、per,pulp and printing,wood and wood products,textile and leather,and others;(2)Based on AMS Target Scenarioassuming SEA countries meet their most-recently announced targetsSources:Climate Watch;IRENA;ASEAN Center for EnergyBPowerContext&ProgressRenewable energy only makes up 40%of SEAs energy capaci
234、ty mix by 2030SEA power sector installed capacity(GW)which may grow with rising need and consumption of electricitySEA electricity share of energy consumption(%)Power makes up 45%of SEAs energy emissions SEA energy GHG emissions(GtCO2e,2019)2018 share negligible5151SEA has abundant RE resources;the
235、technical potential is 20 times greater than the capacity required for 2050 demandNotes:(1)Renewable energy technical potential factors in geographical information,generation patterns and hourly profiles,and system and topographic constraints but does not include economic(e.g.,cost competitiveness,g
236、rid connectivity)and market factors(e.g.,investor interest);solar and wind potential excludes settlements and urban areas to consider wind parks and utility-scale PV systems(does not assess rooftop solar potential);(2)41%RE mix in AMS Target Scenario from ACE assuming SEA countries meet their most r
237、ecently announced targets Sources:ASEAN Centre for Energy(ACE);IRENA;Industry participant interviewsBPowerContext&ProgressSEA RE technical potential1vs.expected total power plant capacity(GW)20 x installed capacity in 2050 Key takeaways 17 TW potential accounting for resource,topographic,and geograp
238、hic constraints Addressable potential is expected to be lower mainly due to political considerations,interconnectedness risk,and insufficient infrastructure However,the addressable potential could still cover the regions demand given the abundant resources available Solar and wind are the main renew
239、able resources for SEA,contributing 98%of the total RE potential for the region 5252Key takeawaysDespite this and the fact that SEA has made rapid progress in RE deployment in the past 5 years,it has a long way to go to achieve its RE target in 2030 Notes:(1)Includes plants that have achieved financ
240、ial closure and construction has not yet started;(2)Includes power plant plans that have been announced and there is no significant progress toward getting permitting and financing;(3)Includes plants that have applied or obtained some or all necessary government clearances and approvals;(4)45%RE mix
241、 in PES scenario from IRENA based on most recent policies committed by SEA countries;(5)41%RE mix in AMS Target Scenario from ACEassuming SEA countries meet their most recently announced targets;(6)AMS Target Scenario from ACE;(7)2021 numbers are approximated from 2020 values for PH;(8)Solar power o
242、nlySources:GlobalData;ASEAN Centre for Energy(ACE);IRENA;Industry participant interviewsBPowerContext&Progress Strong growth of 10%p.a.in RE installed capacity from 2017 to 2022,largely driven by rapid installations in Vietnam 90%of planned RE capacity(COD by 2030)is still in an early stage of devel
243、opment(55%in permitting and 35%in announced)50%of upcoming renewable capacity is in PH and VN To meet the 2030 goal,SEA needs to remove barriers and accelerate deployment of projects especially in permitting stage Only Malaysia and Singapore on track to reach future power generation goals Only Malay
244、sia and Singapore on track to reach future power generation goals The majority of RE projects in the pipeline are in early stages of developmentRenewable energy share for power generation(%)SEA current and planned RE power plant capacity(GW)By 2030By 2030By 2030By 2025By 2025IRENA estimate(45%RE sha
245、re)4ACE estimate (41%RE share)5Lower-upper bound of RE in 2030 based on level of uncertainty of projects in pipelineProjects in pipeline53SEA must overcome several challenges to realize its renewables potentialNotes:(1)As of 2021;(2)Time needed varies by type,scale,and country of respective projects
246、Sources:Industry participant interviews;Lit search;IRENA;Global Atlas;Government websitesCPowerChallengesInsufficient financial attractivenessSlow deploymentof infrastructureRegulatory uncertaintyFossil fuel dependencyMismatch of REdemand and supplyRE generation and transmission facilities are not f
247、ully prepared to integrate RE due to lack of clarity over plans and who paysFinancially unattractive due to lack of incentives,high country risk(e.g.,currency and offtake),and shallow debt capital pools Regulatory/political uncertainties and inconsistent implementation dissuades investment and devel
248、opmentFossil fuel has been key contributor to economic development,despite high environmental costsDemand/supply mismatch due to geographical dispersion of RE resources both across and within SEA countries18%Cumulative energy FDI in SEA went to renewables1“Authorities have too much discretionary pow
249、er.This,along with changesand discontinuation ofpolicies,creates uncertaintyand limits investors willingnessto deploy capital.”Head of Wind Development,Renewable Solutions CompanySignificant RE potential in Kalimantan,Sulawesi,and West Papua within Indonesia,areas that lack large demand centers2 out
250、 of 6ASEAN-6 countries are struggling with congested grids“Even though project IRRs maybe lower in developed countries,they have hard currencies,lower perceived risks,and greater pools of debt capital,resulting in better risk adjusted equity returns.”Founder and CEO,Solar Development Companyup to 8
251、yearsneeded to clear necessary permits for RE deployment22 out of 10SEA countries(Singapore and Brunei)dont have sufficient renewable energy potential to meet 100%of the nations electricity demand80%SEA energy supply isof fossil-fuel origin30%+global coal exportscame from SEA2250Kworkers in Indonesi
252、a potentially at risk if coal is phased out5454Infrastructure|Grids ability to accommodate renewables varies across SEA;tangible actions to upgrade grids are required to accommodate RE expansionSources:IHS Markit;Lit.searchCPowerChallengesCountryGrids current ability to accommodate REAlignment of co
253、untrys grid upgrade and RE expansion plansCommentarySufficient/alignedModerately sufficient/alignedInsufficient/not aligned Current grid is congested,and inter-island connectivity is inadequate,tough challenge in accommodating more renewables as stated in targets Historical investment in coal result
254、ed in surplus of cheap electricity from coal,adding difficulty to the RE transition Grid is sufficient for current relatively low RE penetration Energy commission is implementing measures to upgrade grid system and increase grid resilience Grid is sufficient for current relatively low RE penetration
255、 High flexibility in grid network;plan in place to expand and upgrade aged grid lines to add capacity and allow contingency Grid is sufficient for current relatively low RE penetration Plan to upgrade and transform transmission network in the next decade has been launched Current grid is congested,t
256、ough challenge in accommodating more renewables as stated in targets Grid development is plannedapplication of smart grid and technology 4.0 has been researched and is being consideredIndonesiaMalaysiaPhilippinesThailandVietnam5555Infrastructure|Renewables appear cheaper than fossil fuels,but storag
257、e and integration costs make operating existing coal plants more competitive in realityNotes:(1)Levelized cost of electricity measures all-in expense of producing electricity from a new project,taking into account costs of development,construction and equipment,financing,feedstock,operation and main
258、tenance;(2)Average of Australia,China,India,and Japan LCOE,assuming 50%capacity factor of 4-hour battery storageSources:Bloomberg;Industry participant interviewsCPowerChallengesSolar already cheaper than coal,but true system costs not reflected due to several factorsAverage Asia-Pacific LCOE of sola
259、r+storage2LCOE1by energy type and country as of 31 Dec 2022(USD/kWh)Higher VALCOE The value-adjusted LCOE(VALCOE)accounts for value of electricity generated from power systems VALCOE of solar found to increase with rise of solar share of energy mix in India,making it more expensive than coal due to
260、increased flexibility costs Marginal cost of coal in Australia still found to be cheaper than firmed/integrated wind and solar costsIntermittency Dependence of solar and wind on weather conditions means steady and consistent supply of RE cannot be guaranteed without expansion of battery storage capa
261、city,which is estimated to only be cost-effective post-2030Locked-in coal infrastructure Numerous coal plants still exist in power systems and planned phase-outs can be undermined by launching of coal plants,supported by long-term financial agreements or regulatory loopholesOn the surface,solar alre
262、ady cheaper than coal across ASEAN-6,reflecting its scalability and ease of installation.Indonesia solar cost expected to drop below coal LCOE in 2023However,scaling solar likely less cost-competitive than expected due to costs associated with battery storage and grid integration,as well as the abse
263、nce of construction costs for existing coal plants5656Financing/Regulations|Opportunities to improve market conditions and the regulatory environment to attract more foreign investment into the regionNotes:(1)Foreign Direct Investment;(2)Feed-in Tariffs Sources:IEA;OECD;Industry participant intervie
264、ws;Lit.search CPowerChallengesRenewables FDI1flows in the region have been underperforming relative to OECD countries driven in large part by market and regulatory conditions,as well as the cost of capitalHigher perceived risks lower project bankability“Green infra investment needs are vast in SEA,h
265、owever,only 5%10%of projects are bankable given foreign capitals perception of relative risk reward,due to currency,regulatory risks,etc.”CEO,Debt Financing CompanyHigher offtake riskIn 8/10 SEA countries,RE electricity power is heavily regulated and requires a state-owned utility enterprise to be t
266、he sole offtakerLack of policy continuity“One of the challenges in RE deployment is that there are many changes in offtaking processes.Thailand moved from FiT2to Quasi-bid offtakingmechanism;Vietnam from FiT to bidding and auction pricing.”Head of Wind Development,Renewable Solutions CompanyHigher c
267、osts of capital“Vietnams project financing is famously expensive with rates as high as 10%12%,while in the Philippines,I havent seen as many local banks financing RE projects from smaller developers.”Founder and CEO,Solar Project Development Company“From 20162020,for every dollar invested in RE powe
268、r capacity in SEA,another dollar was invested in unabated fossil fuels,compared with US$0.5 in Sub-Saharan Africa,US$0.3 in China,and US$0.2 in Latin America.Southeast Asia Energy Outlook 2022,IEA5757Mismatch of RE demand and supply|SEA has the renewables potential1to be self-sufficient;regional col
269、laboration can help connect supply with demandNotes:(1)Renewable energy technical potential factors in geographical information,generation patterns and hourly profiles,system and topographic constraints but does not include economic(e.g.,cost competitiveness,grid connectivity)and market factors(e.g.
270、,investor interest);solar and wind potential excludes settlements and urban areas to consider wind parks and utility-scale PV systems(does not assess rooftop solar potential);(2)From technical resource potential vs.demand standpoint without accounting for feasibility due to regulations,economic reas
271、ons,etc.;(3)Based on peak electricity demand by 2050 in 1.5C-compatible pathway Source:IRENACPowerChallengesKey takeaways SEA as a region has adequate renewable resource potential to fulfil regional electricity needs Cambodia,Laos,Thailand,and Indonesia have high potential to be net RE exporters fro
272、m technical resource potential vs future demand standpoint2 Singapore demonstrates the strongest need to import clean energy to achieve its 2030 goal and Net Zero in the longer termRenewable energy(RE)technical potential2(GW)RE sufficiency to meet demandPVOnshore windOffshore windBiomassHydroGeo-the
273、rmalTotal RE resources(GW)2050 electricity demand3(GW)BN2-0.1-24ID2,898205894395303,674261KH1,597389-10-1,6986LA98312-1260.11,0227MM5,3102-140-5,35417MY337-53429-42463PH1234690.211421090SG0.30.1-0.418TH3,50932301815-3,604116VN844313229350.31,241126SEA15,6031041,7,229708Sufficient to meet
274、10 x of demandSufficient to meet 20%mainly driven by increase in non-electric vehicles,and subsequent rise in demand for oilSEA energy GHG emissions1(GtCO2e,2019)SEA non-electric vehicle stock(million units)Projected to increase by 30%3,4+39%energy consumption+21%non-electric vehicles+28%oil demandS
275、EA transport sector energy consumption(EJ)SEA transport sector oil demand(EJ)59Non-exhaustiveThe past year witnessed increased momentum to capitalize on SEAs huge opportunities in the electric mobility supply chain,accelerating green economyNotes:(1)Majority from foreign OEMs;(2)Does not include lea
276、sing/secondhand market;(3)Battery recycling industry is not expected to be sizeable by 2030 as EV industry is still nascent in SEA and average battery life is 10 yearsSources:SEA Green Economy Report 2022;Government websites;Pitchbook;AVCJ;S&P Capital IQ;Preqin;Lit.searchB,CTransportContext&Progress
277、,ChallengesSEA electric mobility supply chain represents$38$52B opportunity by 2030Estimated market size of SEA EV supply chain($B,2030E)Continuing tailwinds expected in electric vehicle production as well as demand,given SEA regional stocks of essential battery minerals(cobalt,nickel,and tin),relat
278、ive affordability of production,high levels of urbanization,government subsidies,and increased price competitiveness over timeIndika Energy and Foxconn are establishing a joint venture to conduct commercial EV and electric battery business in IndonesiaVinFast,the leading Vietnamese EV manufacturer,i
279、s expected to upgrade annual production capacity from 250,000 to 600,000 cars per year by 2026.VinFast recently shipped its first batch of electric four-wheelers to the USGentari,a Malaysian clean energy solutions provider,and Evolt,a Bangkok-based EV charging infrastructure provider,signed an MoU t
280、o explore collaborations in expanding EV charging infrastructure and solutionsacross SEACharge+,an EV charging service provider,won the Singapore governments tender to install and operate 4,000 EV charging stations around Singapore 2530Auto R&D and manufacturing242Vehicle sales and dealership46Charg
281、ing infrastructure691Cell manufacturing and battery mgmt.system13Service,maintenance,and battery recycling3Road transportGreen transport deal transaction value has increased 6%p.a.with leading SEA corporates making ambitious moves to grow the marketNotable SEA corporate activity60Despite momentum,AS
282、EAN-6 will still need to overcome challenges to meet its EV commitments by 2030Notes:(1)MY figures measured with respect to total passenger and commercial vehicles sales,i.e.,not limited to cars;VN figures based on total road transport penetration,i.e.,not sales and not limited to cars;(2)Most targe
283、ts include other green energy engines,e.g.hybrids,aside from EVs;(3)Share of EV cars registered or sold in 2022,VN based on 2021 EV penetration;(4)As of Q22022;2-wheeler TCO estimated using equivalents of Yamaha Y15ZR in each market while EV uses EGAT model in TH,Scorpio in SG,Dat Bike in VN;Eclimo
284、in MY and Gesits in ID,except for PH using motorstar zest X110-III for ICE and motorstar viber for EV,assuming 100%out-of-home charging or battery swapping figure is current as of Q2 2022;(5)Internal combustion engine;(6)As of Q22022;4-wheeler TCO estimated using Hyundai Kona and Hyundai Kona Electr
285、ic models in respective markets except for PH using BYD Dolphin for EV and Mitsubishi Mirage as ICE benchmark;(7)Taking number of CIs as of Q2 2022 over nationwide road distance Sources:Country NDCs;Government roadmaps and energy plans;Government websites;Euromonitor;BMW;Lit.search;Bain analysisB,CT
286、ransportContext&Progress,ChallengesIncreased EV vehicle sales are still far away from 2030 commitmentsThree major challenges hold back EV adoption in SEA,with an important nuance between two-wheelers(2W)and four-wheelers(4W)TCO vs ICE 2W(as of Q2 2022)EV affordabilityTotal cost of ownership(TCO)for
287、locally produced EVs vs ICE5is lower for 2W4but still higher for 4W6Lack of charging infrastructure(CIs)Customer range anxiety from few charging points prevents switching to EVsConsumer perceptionCustomers perceive EVs to be less economical and reliable40%believe 10-year maintenance cost is higher t
288、han ICE(vs.it is lower in reality)Average distance between 4W CIs7(km)Road transportTCO vs ICE 4W(as of Q2 2022)believe EV range is 100km/charge for 4W(vs.current range far exceeds 100km)34%of transport sector emissions54%energy consumption expected from2018 to 2030+30%Electric vehicles share of new
289、 car sales1(%)By 2025By 2030By 2040By 2030By 2035By 20306161Renewable supply constraints due to competing uses for electrification in other modes of transportHigh-impact abatement levers,i.e.,hydrogen and DACCS1,are still in development stage and costly to implementLack of standardized approach to e
290、nsure compatible port facilitiesSEA has seen momentum in decarbonizing maritime and aviation,with more impactful technology solutions under developmentNote:(1)Direct Air Capture with Carbon StorageSources:IRENA;Bain analysis;Company websites;Lit.search B,CTransportContext&Progress,Challenges35%of tr
291、ansport sector emissionsMomentum in the regionMomentum in the regionMaritime and Port Authority of Singapore and Port of Rotterdam signed an MoU to establish the worlds longest Green and Digital Corridor that brings together a coalition of shippers,fuel suppliers,and other companies to work on poten
292、tial alternative fuel solutions and optimize maritime efficiency,safety,and transparent flow of goods through a digital trade laneMalaysia Maritime and Heavy Engineering(MMHE)is collaborating with Silverstream Technologies,a cleantech company that has pioneered an air lubrication system that reduces
293、 ship fuel consumption,leveraging Silverstreams technology and MMHEs technical expertise to accelerate decarbonization through fuel efficiencyCivil Aviation Authority of Singapore,Singapore Airlines,and GenZero piloted blended sustainable aviation fuels(SAFs)on flights departing from Changi Airport
294、and sold SAF credits as part of the pilotPTT Global Chemical formed business alliance with aviation industry players on the study and development of SAFsVietnam Airlines reduced nylon usage to wrap luggage and cargo,and introduced fuel-efficient aircraft models that help cut fuel usage by 16%and emi
295、ssions by 50%Decarbonization challengesDecarbonization challenges2xenergy consumption expected from 20182030MaritimeAviation11%of transport sector emissions+70%energy consumption expected from 20182030 SAF production competes with alternative uses of biomass andagriculture landLack of regulation on
296、SAF mandates and GHG accounting standards to reflect SAFs full lifecycle emissionsHigh-impact abatement levers,i.e.,hydrogen and DACCS are still in development stage and costly to implement6262EV is the main decarbonization lever for light vehicles,whereas other transport segments will rely heavily
297、on alternative fuels in the medium to long term Notes:(1)Estimated cost to abate annual subsector carbon emissions for years before 2030,estimated by product of abatement potential with average abatement costs per tCO2e for each lever;(2)18%of sector emissions is hard to abate and difficult to be ad
298、dressed with currently available technologiesSources:Bain internal Marginal Abatement Cost Curve(MACC)models;Lit.search B,CTransportContext&Progress,ChallengesEstimated annual cost to abate transport emissions in SEA is around USD 30B1;several low-risk investments can be leveraged today across vehic
299、le typesThere are three archetypes of investible solutionsASEAN-6 abatement potential2(MtCO2e)Low-risk investmentsEstimated marginal cost of abatement($/tCO2e):100Effective solutionsDeveloping technologiesSolutions maturity:Non-exhaustiveLow-risk investments Investments that save cost and abate carb
300、onEffective solutions Commercialized technology that is not yet cost-competitive with conventional alternativesDeveloping technologies Technologies in development or demonstration stage that are not yet cost-competitive with conventional alternatives636356%from ammonia plants39%from cement industrya
301、nd othersIndustry1is the 3rdlargest contributor to energy emissions and the hardest-to-abate sector;few relevant emissions targets communicated by governmentsNotes:(1)Refers to mining and quarrying,construction,and manufacturing of iron and steel,chemical and petrochemical,non-metallic minerals,non-
302、ferrous metals,transport equipment,machinery,food and tobacco,paper,pulp and printing,wood and wood products,textile and leather,and others;(2)From 2018 to 2030;(3)Considering current and planned policies;(4)Nationally Determined Contribution,climate action plan by countries to reduce emissions and
303、adapt to climate impactsSources:Climate Watch;IRENA;ASEAN Centre for Energy IndustryOnly ID(in ASEAN-6)communicated industry-specific targets in NDC4Target communicationChallenging abatement as the sector is fast-growing and relies on fossil fuelsIndustry sector emissions come from 4 subsectorsIndus
304、try is another major contributor to SEA emissions and growingSEA energy GHG emissions(GtCO2e,2019)70%Indonesias targets and mitigation actions for each industry subsectors are listed in NDCUnconditional reduction target:7 MtCO2e(4%of overall)Challenges in abating these subsectors Iron and steel,whic
305、h accounts for 7.2%of SEA industrial energy demand,is one of the fastest growing sectors,i.e.,over the past 20 years,SEA steel production nearly quadrupled Cement and other non-metallic minerals make up 22.5%of SEA industrial energy demandEnergy-intensive and fast-growing1 75%of iron/steel energy co
306、nsumption from coal 65%of chemicals energy demand is met with natural gas,oil,and coalFossil fuel reliant2 Limited cost-savings from commercially viable solutions;high abatement technologies are still in developmentCostly abatements3Progress in reaching target Mitsubishi collaborated with Indonesia
307、local industrial players to develop green hydrogen,green ammonia value chain,and CCUS business Pupuk Indonesia,one of the largest fertilizer producer in SEA,started development of hybrid green ammonia Semen Indonesia,the countrys largest cement player with more than 40%market share,secured green loa
308、n of$460M to support decarbonization targetsAmmonia plant joint studies and development agreements have been doneCement players have set targets and improved yearly emissionsProjected to increase by 55%2,3Context&Progress,ChallengesB,CIron and steelCementChemicalsAluminum64Solutions with the highest
309、 abatement potential have yet to reach commercial readiness,with a lack of low-risk abatement levers available todayNotes:(1)Estimated cost to abate annual subsector carbon emissions for years before 2030,estimated by product of abatement potential with average abatement costs per tCO2e for each lev
310、er;(2)37%of sector emissions is hard to abate and difficult to be addressed with currently available technologies;(3)Carbon Capture,Utilization,and Storage;(4)Aside from steel,cement,and chemicals Sources:Bain internal Marginal Abatement Cost Curve(MACC)models,Lit.SearchIndustryIndustry sector is ex
311、pensive to abate;over$45B1per year is needed to abate industry emissions and close to a third of emissions in the sector is hard-to-abateThere are three archetypes of investible solutionsNon-exhaustiveASEAN-6 abatement potential2(MtCO2e)Low-risk investmentsEstimated marginal cost of abatement($/tCO2
312、e):100Effective solutionsDeveloping technologiesSolutions maturity:B,CContext&Progress,ChallengesLow-risk investments Investments that save cost and abate carbonEffective solutions Commercialized technology that is not yet cost-competitive with conventional alternativesDeveloping technologies Techno
313、logies in development or demonstration stage that are not yet cost-competitive with conventional alternatives65Create clear,integrated government plans on energy transition,including details on specific measuring and tracking methodsActions are required across multiple dimensions to drive decarboniz
314、ationNotes:(1)Multilateral development bank;(2)Feed-in tariff;(3)Commercial&Industrial;(4)Carbon capture,utilization,and storage DRecommendationsNon-exhaustiveAccelerate infrastructure developmentGovernmentsInvestorsCorporatesDouble down on power master plans to provide clarity on transition pathAcc
315、elerate effort in grid upgrades for the transitionAccelerate EV charging station infrastructure developmentStreamline permitting and approval process for RE deploymentLeverage private financing/MDB1partnerships for grid and RE development Introduce financial incentives such as FiT2,auction pricing,t
316、ax rebatesAdopt carbon pricing to accelerate decarbonizationOffer funding to supportearly retirement of coalpower plantsAlign standards and allow access to virtual PPAs and cross border investmentOffer support to promote captive and C&I3powergenerationFormalize dedicated zonesfor RE deploymentEstabl
317、ish open-access power markets to enable more stakeholdersPromote EV adoption and build up regional EV supply chainsIncentivize and invest inenergy efficiency and conservation leversMobilize funding to accelerate solutions to address RE intermittencyAdvance alternative fuel,hydrogen and CCUS4developm
318、ent and applicationMobilize resources to plan and build interconnection projects where relevantCreate domestic and bilateral grid connections to promotegrid flexibilityAlign technical standards,frameworks,and role of regional power coordinatorIncrease financialattractivenessPromote competitivemarket
319、 structureDevelop existingand emerging technologiesRealize a regionalcross-border grid66Recommended actions for the short-to-medium termDevelop country power master plans and flesh out into actionable details,supported by key milestones and comprehensive tracking to offer clarity and certainty to in
320、vestors and developers Double down on power master plans to provide clarity on transition pathAmplify efforts to upgrade national grid network to ensure grid capacity and connectivity readiness for future RE demandAccelerate effort in grid upgrades for the transitionEstablish clear permitting requir
321、ements and accelerated process timelines,enabling RE developers to request all necessary permits from a single“one-stop”platformStreamline permitting and approval process for RE deploymentSeek public investments/PPPs1or form corporate joint deployment to install infrastructure for EV charging and ba
322、ttery replacementAccelerate EV charging station infrastructure development Denmarks Integrated National Energy and Climate Plan provides comprehensive guidelines on national targets,policies,measures and transition roadmap For exampleSingapore issued Singapore Green Plan 2030,with detailed targets,a
323、ction plans,and measurements to move toward cleaner energy and reduce carbon emissions UKs Greatest Grid Upgrade,aims to improve existing infrastructure across England and Wales,as part of National Grids program with$20B investments from 20212026 For exampleThe National Grid Corp.of the Philippines(
324、NGCP)plans to invest$8B by 2030 to transform the countrys power grid to be the strongest in SEA Flagship Technical Support Project helps member states establish faster and more transparent RE permitting,including setting up one-stop application for developersFor examplePhilippines Department of Ener
325、gy is working on bringing Energy Virtual One-Stop Shop(EVOSS)to enable coordinated energy project submission and data processingSingapore passed regulation that mandates EV charging points at all new buildings with carparks,with goal to deploy 60k charging points by 2030 For exampleMalaysia governme
326、nt pledged to install 10,000 EV charging stations by 2025 in collaboration with local companies through Low Carbon Mobility BlueprintTangible benefits for SEAGreater effective renewables capacityPace of RE deployment less restricted by grid capacity and connectivity Rapid deployment of RE projectsCl
327、ear transition path and hassle-free permitting processes allow shorter development period for RE infrastructureAccelerated EV adoption Promote EV adoption and migration by ensuring sufficient EV charging infrastructure Infrastructure development|Acceleration of infrastructure deployment crucial for
328、ensuring efficient RE transition and EV adoption Note:(1)Public-Private Partnership Sources:U.S.Trade and Development Agency;U.S.Department of Energy;Thai Metropolitan Electricity Authority;EU;Gov.websites;Industry participant interviews;Lit.searchDRecommendationsNon-exhaustive67Financial attractive
329、ness|Financing and incentives needed to accelerate the energy transition while driving attractive returns for all stakeholdersNotes:(1)Multilateral development bank;(2)Just Energy Transition Partnership;(3)Coal-fired power plant;(4)Feed-in tariffSources:ADB;IEA;Industry participant interviews;Lit.se
330、archDRecommendationsNon-exhaustiveTangible benefits for SEAImproved investor confidenceGreater willingness for investors in SEA drives positive feedback loop for further investmentIncreased green capital inflowsHigher share of investments into energy transition relative to fossil fuels Accelerate de
331、carbon-izationjourneyCarrot and stick and greater bankability to further drive the transitionRecommended actions for the short-to-medium termLeverage MDB1partnerships and private sector involvement to unlock more capital for grid upgrades and RE projectsLeverage private financing/MDB1partnerships fo
332、r grid and RE development Finance gradual phase-out of coal subsidies and provide access to alternative revenue streams,e.g.,sales of avoidance credits,as well as offering financing for CFPP3retrofits to reduce emissionsOffer funding to support early retirement of coal power plants Implement carbon
333、tax or emissions trading scheme(ETS)to accelerate the shift towards green economy and make renewables more attractiveAdopt carbon pricing to accelerate decarbonizationIntroduce attractive financial incentives such as feed-in tariffs,auction pricing,grants,and tax incentives,with consideration of the suitability to national and regional context Introduce financial incentivesADB has approved$692M lo