Introduction
Greetings, President Masa, esteemed colleagues, and distinguished guests. Thank you for inviting me today. Achieving global net-zero emissions requires a significant energy transition in Asia.
The Challenge of Transitioning Asia’s Energy Sector
Asia produces nearly half of the world’s greenhouse gas emissions, with about 25% coming from coal-fired power plants. If these plants continue their operations as planned, they will consume a substantial portion of our remaining carbon budget. Despite this, coal plants currently provide almost 60% of Asia’s electricity, and the region’s power demand is projected to more than double by 2050.
Complexity of Transitioning Asia’s Energy Economy
The transition to cleaner energy in Asia is complicated by the fact that its coal plants are relatively young, often less than 15 years old, and supported by policy incentives and long-term contracts. The coal industry employs around 6.7 million people in Asia, necessitating measures to protect jobs and communities during this shift. While investment in renewable energy is on the rise, it is still insufficient to meet the growing electricity demand and replace fossil fuels.
Essential Elements for a Successful Transition
An ecosystem-based approach is crucial for Asia to transition its energy sector effectively. This approach requires four key elements:
- Policy Commitment:
- Implement carbon pricing mechanisms like coal fees or cap-and-trade systems.
- Set specific energy sector targets with interim milestones.
- Introduce supportive regulations for electrification in high-emission industries such as transportation, manufacturing, and construction.
- Reliable Transition Pathways:
- Develop context-specific energy transition pathways with the help of standard-setting organizations like the International Energy Agency (IEA).
- Establish clear, actionable phase-out plans aligned with a 1.5 degrees Celsius pathway.
- Utilize taxonomies, practical guidance, and regulatory expectations to support these pathways.
- Blended Financing:
- An estimated $29 trillion is needed to replace coal with renewable energy globally, with nearly half required in Asia.
- Blended finance can reduce the cost of capital for energy transition projects by leveraging concessional funds from public and philanthropic sectors to attract private investment.
- Move from bespoke deal structuring to a portfolio or platform approach for efficiency.
Singapore’s Role in Blended Financing
Singapore is launching the Financing Asia’s Transition Partnership (FAST-P) to raise up to $5 billion for green and transition infrastructure in Asia. This initiative aims to mobilize private capital by combining concessional funds and offering technical assistance to lower project risks. FAST-P, in collaboration with the Asian Development Bank (ADB) and the Global Energy Alliance for People and Planet (GEAPP), focuses on phasing out coal, promoting solar power, and decarbonizing challenging sectors like cement and steel production.
Transitional Funds for Economic Viability
Transitional funds can enhance the financial feasibility of transition projects. ADB and MAS are exploring the use of these funds for the retirement of a coal plant in Mindanao under ADB’s Energy Transition Mechanism in the Philippines. This initiative aims to demonstrate how transitional funds can support the economic viability of coal phase-out transactions.
Conclusion
Transitioning to cleaner energy in Asia is challenging but essential to prevent catastrophic climate change. By working together and pooling resources, we can achieve an effective and equitable energy transition in the region. Thank you.
Additional Beneficial Information
Investment in Renewable Energy Infrastructure
Increased investment in renewable energy infrastructure, such as solar and wind power, is crucial for reducing reliance on coal and meeting rising energy demands. Public-private partnerships can accelerate the development of these renewable energy projects.
Technology and Innovation in Energy Storage
Advancements in energy storage technologies are vital for managing the variability of renewable energy sources like solar and wind. Investing in grid infrastructure and storage solutions can help stabilize the energy supply and reduce costs, facilitating a smoother transition to renewable energy.