Climate change: why hastening Asia’s shift to green energy will not be easy
Even as world leaders at the recent UN High-Level Dialogue on Energy discussed steps to accelerate the global transition to green energy by 2030, there is little evidence that this shift will be fast enough in Asia.
According to a recent commentary by Fitch Solutions Country Risk and Industry Research, some US$1.26 trillion has been earmarked for projects in Asia’s energy and utilities sector, with over 94.5 per cent of that for power projects.
While the demand for power is poised to increase, it is equally anticipated that carbon-neutral commitments will accelerate the energy transition. The question is whether it will be fast enough, and at what risk.
Accelerating the green transition means potentially risking lower economic growth in the short term. Uneven access to vaccinations and waves of new Covid-19 variants have weakened the growth momentum across the region.
According to the Asian Development Bank’s updated outlook for 2021, the region’s economy is expected to expand at a slower rate than forecast earlier in the year. This trend represents a threat to Asia’s transition goals.
Increased perceptions of a trade-off between the green energy transition and income inequality accelerated by the Covid-19 pandemic are likely to reduce the buy-in from countries.
Aside from the tax revenue that mining and exporting fossil fuels brings, a crunch in power and electricity means a domino effect on other sectors, including manufacturing and technology. Therefore, even as governments commit to ambitious green energy road maps, coal and gas are likely to remain dominant in Asia.
Countries that rely on fossil fuels as their most economical and reliable form of electricity – and developers of these power facilities – have been affected by investors and financial institutions shifting away from the sector towards more sustainable financing for the future.
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