Based on energy sector financing and investments flows data from 13 selected Asian countries during the period 2016 to September 2022, the study culminates with two broad and overarching conclusions:
- Asia is experiencing an ‘energy addition’ rather than an energy transition due to the slow uptake of climate and energy policies adopted by Asian policymakers, financial regulators, as well as banks and investors in Asia and beyond. This means that increasing volumes of renewable energy generating capacity are added to currently dirty and fossil-intensive grids, leading to no net change in global greenhouse gas emissions.
- The ‘justice’ element of Asia’s prospective energy transition (or ‘addition’, as argued above) is largely being overlooked and side-lined, particularly its implications for the most at-risk groups in society. Critically pertinent social considerations concerning decent jobs, gender inclusion, and indigenous rights, to name a few, are grossly omitted from national climate and energy policies, which suggests that whatever manifestation of an energy “addition” or “transition” that evolves has the potential to pose major and disadvantageous threats to under-privileged, under-resourced, and vulnerable minority groups across the region.
Linchpin nations for Asia’s energy transition assessed in the report – Cambodia, India, Indonesia, Japan, Pakistan, Philippines, Thailand, Vietnam, Bangladesh, China, Malaysia, Singapore, and South Korea – remain heavily dependent on fossil fuels for power generation. On average, the 13 Asian countries assessed “depend on coal, oil, and natural gas to meet 77% of their electricity demands, with over half (seven out of ten) relying on fossil fuels for at least 80% of power generation”.
The report further underlines that financial institutions are responsible for contributing to Asia’s reliance on fossil fuels. On average, “renewable energy accounts for only 14% of Asian banks’ energy financing over the past six years…with no discernible upward trend.” Meanwhile, only 21% of all “outstanding energy investments” by Asian investors as of September 2022 supported renewable energy-based projects.
“The conclusions from our new report confirm that no meaningful shift in energy financing and investments across Asia is contributing to neither a just nor any actual transition since the Paris Agreement,” said Ms. Bernadette Victorio, Program Lead, FFA. “Funding decisions toward continued fossil fuels financing, as well as unambitious plans to achieve net-zero emissions by Asian governments, derail Asia from aligning with the 1.5 degrees Celsius target. FFA calls on the Asian financial sector and leaders to develop and urgently implement policies that facilitate a real shift from fossil fuels to renewables, while ensuring that the rights and well-being of the most vulnerable communities are safeguarded.”
“Adding renewable energy alternatives alongside more coal-fired power plants will not limit global temperatures from rising above 1.5 degrees Celsius,” said Mr. Niall O’Connor, Centre Director, SEI Asia. “Without stronger government policies that chart a clear, inclusive, and equitable path from fossil fuels to renewables, Asia will continue to experience an ‘energy addition’, as opposed to a ‘just energy transition.’ The most vulnerable and under-privileged communities are already paying the greatest price.”
To overcome obstacles, the report offers Asian governments, financial institutions, and investors detailed recommendations to align with FFA’s 9 principles for a just energy transition. These 9 principles are:
- No financing for new coal projects for electricity generation and phasing out existing coal-based power generation
- Development of a time-bound transition away from other fossil fuels for electricity generation
- Active investment in renewable energy generation
- Long-term planning and strategies to mitigate the adverse environmental and social impacts of renewables
- Respect for land rights and Free, Prior and Informed Consent (FPIC), and clear policies for community participation, gender sensitivity and consultation with CSOs in large energy projects
- Protection of the rights of workers and mainstreaming of Human Rights Due Diligence (HRDD) during the energy transition
- Safeguarding the health, livelihoods, culture and heritage of communities impacted by the continued use of fossil fuels
- Active and meaningful engagement and participation of women in the energy transition
- Investments in access to electricity for all
This report is a follow-up to FFA’s 2021 report, “A Future Without Coal: Banking on Asia’s Just Energy Transition,” which revealed that Asia’s coal sector continued to grow even after the signing of the Paris Agreements in 2015, due to financing by banks and investors operating in the region.
To access the full report, click here.
For more information, contact:
Fair Finance Asia
Stockholm Environment Institute Asia
Fair Finance Asia (FFA) is a regional network of Asian CSOs committed to ensuring that financial institutions’ funding decisions in the region respect the social and environmental well-being of local communities.
For more information about FFA, visit https://fairfinanceasia.org/
The Stockholm Environment Institute (SEI) is an international non-profit research and policy organization that tackles environment and development challenges.
For more information about SEI, visit https://www.sei.org/