How to achieve a just and responsible energy transition in ASEAN

ASEAN stands as the world's fourth-largest energy consumer, with a fast-growing population reaching close to 700 million. The region saw a 3% annual growth rate in energy consumption over the last 20 years, a trend expected to persist for the rest of this decade. Consequently, the region's carbon emissions have been steadily rising, surpassing the global average of 1% in 2022, with an annual increase of approximately 3%.

Yet, ASEAN countries are also acutely vulnerable to the impacts of climate change due to their exposure to low-lying coastal areas, agricultural dependence, and limited adaptive capacity. Rising temperatures and sea levels, seasonal air pollution, and more frequent extreme weather events are threatening ASEAN’s economy and population. With global anthropogenic emissions showing no signs of slowing down, ASEAN countries are embarking on an inevitable journey to adapt, mitigate, and become resilient to climate change. And the primary emitting sector, power, needs an urgent revamp.

The current socio-economic situation in ASEAN poses challenges to this essential energy transition. Most ASEAN countries are developing economies with young populations, striving to expand their economies and improve living standards. Simultaneously, its economic development needs to be decoupled from emissions, while the scale of the decarbonization challenge is simply too large.

As the home of one of the youngest coal fleets in the world, ASEAN – in particular, Indonesia, a leading coal producer – has many communities that have been entrenched in the coal economy for generations. In addition, existing transmission infrastructure was designed and built to deliver dispatchable power from conventional thermal power plants, vastly different from intermittent renewable energy power that may come from remote locations.

The energy trilemma is the core of ASEAN’s energy transition conundrum, whereby governments need to ensure energy security, affordability, and sustainability while ensuring economic development during the transition.

An estimated $150 billion annual clean energy investment will be needed by 2030 for ASEAN to be on a Paris-aligned trajectory. However, ASEAN countries attracted no more than $30 billion annually in 2021, indicating a significant investment gap.

The energy transition is expensive. ASEAN states need to prioritize unlocking investment and mobilizing funding to de-risk investment areas that are deemed unattractive by private investors such as early retirement of coal plants and grid infrastructure development, which are capital-intensive and unlikely to be profitable undertakings. There are budding mechanisms for concessional finance such as the Just Energy Transition Partnership (JETP) and Energy Transition Mechanism (ETM) and ASEAN states will need to work closer with more countries and agencies to mobilize more funds into the region.

Roongrote Rangsiyopash, President and Chief Executive Officer of Siam Cement Group (SCG) (until end of 2023) said, "While countries must find their unique energy transition pathways, public-private, regional and international cooperation is the unifying theme of securing a prosperous and just energy future for the region.”

Collaboration across all levels — national, regional, and global — is key to ramping up efforts, specifically in the policy and technology areas. Aligning relevant high-level policies like taxonomy for sustainable activities and carbon tax across ASEAN states could create a strong signal of commitment and help attract international investors. On the technology front, the ASEAN region should seek knowledge transfer on essential technologies for transition like carbon capture, utilization, and storage (CCUS), smart grid, and green hydrogen. ASEAN states also have to double down efforts to facilitate regional infrastructure expansion such as the ASEAN Power Grid (APG) which enables more cross-border renewable energy trades.

Finally, ASEAN states must collectively leverage the workforce across sectors, including power, transport, and industry, by reskilling and providing reemployment opportunities. Policy-makers and industry players need to engage communities to secure buy-in and distribute the benefits of the energy transition — e.g., local economy stimulation and lower energy costs in the long term — to the people.

Climate change goes beyond national borders and timelines. The cost of inaction is simply too much, with the physical and transition risks of climate change quickly being realized. However, with challenges, there come opportunities. Mutual trust and cooperation within ASEAN states would unveil more pragmatic pathways for a shared aspiration of a just, responsible energy transition.

In view of the necessity for collaboration, a CEO community of key ASEAN business leaders, facilitated by the World Economic Forum, has called for action under their Shared Aspirations Statement a short document that outlines a coherent and unified narrative for ASEAN on the challenges and priorities in accelerating ASEAN’s energy transition.

“Executing a just and responsible energy transition without compromising economic and socio-political stability is the driving force which launched the ASEAN Leaders for Just Energy Transition community.

"It has become even more imperative that ASEAN asserts more inclusivity and representation in the context of the global energy transition. The Shared Aspirations encapsulates a clear voice from the region where our priority is to take necessary and realistic steps by working together with partners across the value chain and different stakeholder groups. The Community aims to formulate the solutions that will get us closer to a net zero future where no one is left behind,” said Tengku Muhammad Taufik, President and Group Chief Executive Officer of PETRONAS.