An “erosion of multilateralism” is changing Asia’s quest for sustainability as countries pursue individual goals of energy security and supply chain resilience rather than “virtue signaling,” says Rahul Ghosh, global head of sustainable finance and emerging markets at Moody’s Ratings.
“Ten years ago the world was moving toward consistent climate policy, but now we are starting to see some divergence,” he says, as countries instead seek what he calls a “pragmatic transition,” one that balances sustainability with energy security and economic affordability — usually by allowing traditional fossil fuels to play a role.
Geopolitical conflicts have driven much of the reassessment of the green transition. First, Russia’s invasion of Ukraine in 2022 caused fuel prices to rise and triggered an energy crisis across much of the developing world.
The U.S. attacks on Iran in February and the resulting closure of the Strait of Hormuz also reduced Asia’s oil and gas supplies, again showing the region’s governments how reliant they were on energy from a volatile Middle East.
Asian governments are currently pursuing a range of energy options to move away from Middle Eastern energy: increased investment in renewables and nuclear energy; Search for alternative sources of oil and gas such as the USA; and, perhaps most worryingly, the return to coal-fired power generation.
On August 25, Japan presented detailed plans accelerate its green transformationincluding building up to five nuclear reactors in the 2040s and 14 in the 2050s. “The Japanese government is currently taking various measures and making every effort to ensure stable supplies of energy and essential goods to protect the lives and livelihoods of the Japanese people,” Japanese Prime Minister Sanae Takaichi said during a press conference in April. “Fuel shortages and supply chain disruptions in Asia…are resulting in significant negative social and economic impacts for Japan.”
Singapore also recently committed 800 million Singapore dollars (US$631 million) to support research into low-carbon energy production and decarbonization technologies in the hope of achieving this Reducing national greenhouse gas emissions to 45 to 50 million tons of CO2 until 2035.
“We are significantly increasing investment in promising solutions to reduce emissions from the energy sector and industry while ensuring a reliable and resilient energy system,” said Tan See Leng, Singapore’s Minister for Energy, Science and Technology, during a Parliament session on March 2nd.
Some Asian countries are also increasingly reliant on fossil fuels. According to the Institute for Energy Economics and Financial Analysis, this is all the case in China, Japan, South Korea and Indonesia increased coal-fired power plant capacity since 2020, despite commitments to decarbonization. When the Philippines declared a national energy crisis in March, its energy secretary, Sharon Garin, said the country planned to do so increase the output of its coal-fired power plants to keep energy costs low.
“Whether in Australia, Singapore or Hong Kong, we have seen a greater focus on protecting transition assets and activities than in Europe,” says Ghosh. “This is a reflection of the decarbonization challenges facing Asia. It is a Area with strong income growth, which has historically led to higher emissions…so Asia needs to figure out how to meet greater demand for vehicles and air conditioning while meeting energy efficiency standards.”
(In contrast, wealthier societies are more recklessly deepening their net-zero commitments. For example, those of the European Union Carbon Border Adjustment Mechanism (CBAM)which imposes costs on imported carbon-intensive goods, became operational in January this year.)
Another global trend – climate change and extreme weather – is encouraging public and private investors to put more capital into climate adaptation and resilience, a category that includes projects such as locks and dams, smart sensing and early warning systems for climate disasters, and drought-resistant crops.
“A lot of the next ten years extreme weather conditions are already blocked due to previous emissions,” explains Ghosh. On Wednesday, the United Nations announced that the The world has failed to limit global warming to 1.5 degrees Celsius compared to pre-industrial timesdespite advances in wind and solar energy technologies since the ratification of the Paris Agreement in 2016.
Last year’s record-breaking monsoon season reinforces the urgency to invest in climate resilience. “Large parts of Asia, including parts of India, China and Southeast Asia, are quite underinsured against natural disasters,” says Ghosh. “This is one of the reasons why there is a greater focus on creating greater climate resilience in this region.”
But even though it seems as if countries are regressing in some aspects of sustainability – and increasingly acting alone rather than together – Ghosh still believes the region is on the right track.
“The process was always non-linear,” he says. However, “over time, we are still moving from a higher-carbon economic system to a lower-carbon economic system.”