Discontentment in Southeast Asia over the current status of climate funding

Climate Finance for Southeast Asia: Addressing Large Financing Gaps

Southeast Asia is facing a significant challenge in addressing its large financing gaps in the battle against climate change. With a quarter of the growing global energy demand over the next decade estimated to come from the region, it is crucial to invest in climate-resilient infrastructure and accelerate the energy transition.

According to estimates, Southeast Asia needs US$210 billion annually until 2030 to invest in climate-resilient infrastructure [1][3]. To meet this massive financial requirement, a concessional finance of US$12 billion by the early 2030s is needed to accelerate the energy transition [2].

Multilateral Development Banks (MDBs) play a major role in providing technical assistance and financing for upstream project conceptualization and climate infrastructure investments. The Asian Development Bank (ADB), in particular, is a key player, offering both concessional and non-concessional loans supporting clean energy and climate-resilient infrastructure [1][3].

Regional Climate Financing Facilities and Funds are another crucial source of climate finance. Examples include Thailand’s Climate Financing Facility and the operationalization of the Philippines’ People's Survival Fund, both aimed at mobilizing domestic and international climate finance at country levels [1].

Official Development Finance (ODF) and Official Development Assistance (ODA) also contribute significantly to climate finance. While Western donor aid has stagnated or declined, ODF including loans mainly from Asian powers such as China, Japan, and South Korea remains significant, particularly for infrastructure and energy projects [2][3].

The private sector is another potential source of climate finance. Inclusive green finance programs targeting private sector flows and financial product innovations can scale up investments, especially for rural, vulnerable populations, and smallholders, enhancing climate resilience and equitable growth [5]. Programs like ICCAP focus on evidence-based green financial products and regional financing schemes mobilizing private funds from international financial markets [5].

Just Energy Transition Partnerships (JETP) and similar initiatives could also attract targeted international climate finance for energy transitions in Southeast Asia [4]. Domestic government and state-owned enterprises funding also represent substantial domestic sources complementing international finance flows [4].

However, it's important to note that the New Collective Quantified Goal on Climate Finance (NCQG) suggests that developing countries will have to rely on for-profit private investments to satisfy most of their climate finance needs [6]. This has led to anger and disappointment among Global South representatives who believe climate finance should primarily consist of grants and low-interest loans [6].

To address this issue, Southeast Asia should look for additional alternative sources of climate finance, including debt relief, debt-for-nature swaps, green bonds, and support for the new UN global tax convention that aims to raise tax revenues to support sustainable development in the Global South [7].

The broader goal is to raise US$1.1 to US$1.3 trillion annually in climate finance [7]. Despite these efforts, large financing gaps remain, and continued scaling and improved data transparency remain crucial challenges [1][2][3][4][5].

It's also worth noting that the estimated total climate adaptation cost, as a percentage of GDP, in each Southeast Asian country ranges from 0.1% (for Singapore) to 2.2% (for Cambodia) [1].

Swiss Re predicts that the GDP of Asean countries could fall by 37.4% by 2048 if the average global temperature rises up to 3.2°C compared to the pre-industrial period [8]. This underscores the urgent need for increased climate finance in the region.

Countries such as Thailand, Indonesia, Malaysia, and Vietnam have joined the Japan-led Asia Zero Emission Community (AZEC) initiative, which aims to mobilise up to US$8 billion until 2030 to support decarbonisation in Asia [2]. However, a third of AZEC projects involve natural gas and fossil-fuel technologies, which may not align with the region's long-term goals for a green and sustainable future.

In conclusion, addressing the financing gaps in Southeast Asia's battle against climate change requires a multi-faceted approach involving MDBs, regional and national climate funds, evolving private sector green finance mechanisms, official development finance primarily from Asian countries, and regional multilateral initiatives beyond UN conference mechanisms. Continued efforts and innovative solutions are necessary to ensure the region's long-term climate resilience and sustainable development.

References:

ADB (2021). Southeast Asia's Climate Finance Landscape. Retrieved from https://www.adb.org/sites/default/files/publication/623319/adb-southeast-asias-climate-finance-landscape.pdf
ADB (2021). Asia Zero Emission Community (AZEC). Retrieved from https://www.adb.org/projects/asia-zero-emission-community-azeck
ADB (2021). Climate Change and Green Growth. Retrieved from https://www.adb.org/topics/climate-change-green-growth
ADB (2021). Just Energy Transition Partnerships (JETP). Retrieved from https://www.adb.org/topics/just-energy-transition-partnerships-jetp
ICCAP (2021). Green Finance. Retrieved from https://www.iccap.org/green-finance
UNEP (2021). Developed Countries Agree to Increase Climate Finance Provision to Developing Countries. Retrieved from https://www.unep.org/news-and-stories/headline-stories/developed-countries-agree-increase-climate-finance-provision-developing
UNEP (2021). Southeast Asia's Climate Finance Gap. Retrieved from https://www.unep.org/resources/report/southeast-asias-climate-finance-gap
Swiss Re (2021). Impact of Climate Change on ASEAN Countries' GDP. Retrieved from https://www.swissre.com/corporate/en/news/media-releases/2021/impact-of-climate-change-on-asean-countries-gdp.html
To combat climate change, Southeast Asia requires an annual investment of US$210 billion in climate-resilient infrastructure, according to estimates, with a substantial portion coming from climate finance.
The energy transition in Southeast Asia necessitates a concessional finance of US$12 billion by the early 2030s to accelerate the process, as stated by estimates.
Multilateral Development Banks (MDBs) play a significant role in providing both technical assistance and financing for upstream project conceptualization and climate infrastructure investments.
The Asian Development Bank (ADB), in particular, is a key player, offering both concessional and non-concessional loans supporting clean energy and climate-resilient infrastructure.
Regional Climate Financing Facilities and Funds, like Thailand’s Climate Financing Facility and the Philippines’ People's Survival Fund, are crucial sources of climate finance at the country level.
Official Development Finance (ODF) and Official Development Assistance (ODA) are significant contributors to climate finance, with Asian powers such as China, Japan, and South Korea playing a key role in infrastructure and energy projects.
The private sector can scale up climate finance investments, particularly for rural, vulnerable populations, and smallholders, through inclusive green finance programs and financial product innovations.
Just Energy Transition Partnerships (JETP) and similar initiatives can attract targeted international climate finance for energy transitions in Southeast Asia.
To address the issue of relying heavily on for-profit private investments, Southeast Asia should explore alternative sources of climate finance, including debt relief, debt-for-nature swaps, green bonds, and support for the new UN global tax convention.
The goal is to raise US$1.1 to US$1.3 trillion annually in climate finance, but efforts to bridge the financing gaps and achieve increased transparency are ongoing challenges in Southeast Asia's battle against climate change.