Southeast Asia’s importance to the global goal of limiting global warming to 1.5 degrees Celsius cannot be overstated.

The region’s rapid economic development, coupled with growing climate ambition, provide myriad opportunities for decarbonisation and a strong imperative to act.

Southeast Asia’s rise in the global political economy over the last thirty years has been underpinned by a steep growth trajectory as well as the region’s strategically important geographical orientation.

Accounting for 8.5 per cent of the global population, 3.4 per cent of the world’s GDP respectively and one-fifth of global foreign direct investment inflows, the Association of Southeast Asian Nations’ (ASEAN) ten member states constitute the fifth largest economy worldwide, with GDP per capita having increased 32-fold since the Association’s establishment.

Yet this trajectory has come at a significant environmental cost, as noted in the ASEAN Development Outlook (2021).

As the region’s transformation began in earnest, emissions growth rates were among the highest globally, a trend that has continued as a combination of a high dependence on carbon-intensive energy sources, sharp energy demand growth that outstrips the global average, and increasing land-use changes and deforestation have driven development gains.

In addition to these costs ASEAN’s member states face acute climate risks as a result of growing emissions: Myanmar, the Philippines, Vietnam and Thailand are among 10 countries that have been most impacted by extreme climate events this century. 

There is growing recognition of the need to decouple economic development from emissions growth in pursuit of the global 1.5 degrees Celsius goal enshrined in the Paris Agreement, as well as the benefits to ASEAN nations in doing so.

The economic prospects of a comprehensive low-carbon transition are vast.

Varying estimates place the region’s green economy potential at up to US$1 trillion by 2030 and US$28 trillion by 2070, while formulating stronger policies around the region’s abundant natural capital can yield substantial social and economic benefits. Additionally, analysis co-developed by Climateworks Centre finds high comparative advantages across low-carbon value chains that can be seized by Indonesia, the Philippines and Vietnam. 

A distinct, but related benefit is the role Southeast Asia’s renewables potential can play in bolstering energy security.

The region is already a net oil importer, on the cusp of being a net gas importer, and will become a net coal importer in 2039. Fossil fuel price volatility in 2022 has underscored the potential long-term risks, as spikes necessitate fiscal expenditure to soften cost impacts for consumers, while new fossil fuel infrastructure is increasingly exposed to stranded asset risks. A faster shift also enables indirect economic benefits from the cessation of fossil fuel subsidies.

In good news, ambition among ASEAN’s member states is growing.

Eight of ASEAN’s 10 member states have announced net zero targets. Nationally determined contributions (NDCs) have been submitted by all member states, and in some cases revised upward. Of the five governments that have laid out sectoral NDC targets, proposed emissions reductions are in line with the largest emissions drivers with energy, and agriculture, forestry and other land use (AFOLU) reductions constituting on average 46 per cent of 44 per cent of governments’ targets respectively.

As Climateworks Centre has documented, national power and development plans, and policy frameworks are following suit. At the regional level, ASEAN Member States have set the targets of 35 per cent renewables in total primary energy supply, and an energy intensity reduction of 32 per cent by 2025.

While ambition has been partially translated into action across the region, support is urgently required to keep 1.5 degrees Celsius alignment within reach. 

Despite increasing ambition, action to date falls short of the targets governments have set.

While installed renewables capacity has been growing, ASEAN’s 7th Energy Outlook projects that existing policies will fall short of states’ meeting the regional renewables and energy intensity targets. 

The estimated US$15 billion in total low-carbon investment accumulated since 2020 falls well short of what is required for the energy transition alone. The International Energy Agency calculates that an almost three-fold increase in investment over current levels is required to meet stated policies across ASEAN, and for a trajectory under 2C, that figure expands to a five-fold increase. According to IRENA, the total average annual investment needed until 2050 for the region to reach 1.5C alignment is approximately US$210 billion, covering renewable energy, energy efficiency, ancillary technologies and infrastructural support. When considering other priority sectors, including AFOLU, transport and industry, the figure grows further, laying bare the need for catalytic public, private and philanthropic investment at an unprecedented scale.

While there is a strong case for ASEAN’s governments to increase their climate ambitions, they do not have the capacity to facilitate this alone. This is partially reflected in the significant gap between Member states’ conditional and unconditional NDC targets which also cite a need for ancillary capacity building and technology transfer support. 

It is these structural challenges that require international partners to step in and offer support. 

The focus of Australia’s foreign policy priorities has markedly shifted toward Southeast Asia in recent years, recognising potential to cooperate on impactful and common mitigation priorities.

The last five years have seen a shift in the focus of the Australian government’s foreign policy toward Southeast Asia, and strengthened climate cooperation has followed. The 2017 Foreign Policy White Paper by the previous Australian Government placed bilateral relations with South East Asia as a high diplomatic priority, recognising the region’s strategic orientation and ‘profound significance’ for Australia’s future. 

Between 2015 and 2018, Southeast Asia was the second largest recipient of Australia’s international climate development assistance (ex. multilateral funding), and while adaptation comprised over half of this financing, in recent years a raft of regionally-oriented initiatives aimed at supporting mitigation efforts in the region have followed. 

In 2021, the Australian Government announced a $140 million grant for the Australian Climate Finance Partnership, a concessional financing facility that aims to de-risk, and support the development of, climate projects across various stages. The Indo-Pacific Carbon Offsets Scheme was also established in 2021 to support regional partners with the development of high-integrity carbon markets in line with Article 6 of the Paris Agreement. 

This year has seen financial commitments further strengthened as the incoming Labor government pledged $470 million of additional development assistance for Southeast Asia. Although the exact mitigation share is yet to be confirmed, $200 million of this has already been committed to the Australia-Indonesia climate infrastructure partnership. 

Beyond development assistance, the recently announced Singapore-Australia Green Economy Agreement – spanning green value chain creation and potentially renewable energy trading – sets a new vision for what regional low-carbon economic cooperation looks like, which could serve as a valuable blueprint for Australia to deepen green trade linkages with other ASEAN member states. 

The commonalities around the decarbonisation challenges (large agricultural and manufacturing sectors and moving to shift from fossil fuels) as well as vulnerabilities to climate change (extreme weather and long coastlines) leave Australia uniquely placed to exchange knowledge and boost trade ties while helping Southeast Asian countries’ transition to low carbon economies. Close collaboration with these countries is also a political priority for Australia. Foreign Minister Penny Wong has committed to strengthen partnership with the region and Trade Minister Don Farell has announced an intention to join the Indo-Pacific economic framework, which includes many ASEAN state members. 

As well as facing common challenges, there are many opportunities for shared knowledge and capacity building between Australia and Southeast Asia. Australia is a leader in rooftop solar PV deployment, a significant but largely untapped opportunity across Southeast Asia (with the exception of Vietnam), and has one of the most liberalised and transparent electricity markets in the world. Climateworks has delivered capacity building workshops to this effect, and furthering these knowledge sharing processes around policy, governance, and innovative sustainable finance structures will be vital to ensure Southeast Asia’s climbing renewables capacity leads to reliable generation.

With six years of engagement in the region, Climateworks recognises the opportunities for collaboration across the region in order to achieve our mission of limiting global warming to 1.5 degrees.

We have forged strong partnerships in Southeast Asia with a focus on connecting those working towards a shared goal and building capacity. It is our aim to scale this work in pursuit of facilitating solutions that enable the region to reap the multifaceted benefits of an accelerated low-carbon transition.

With expertise spanning Australian and Southeast Asian contexts, Climateworks Centre is well positioned to support the region’s emergence as a central catalyst toward the realisation of the Paris Agreement’s overarching goals.

Find out more about our work in Southeast Asia