East Asia backs risky fossil fuels in SE Asia, ignores $205 billion renewables market

Photo: ETA+ on Unsplash

Southeast Asia’s wind and solar markets will likely be worth $205 billion over the next decade, but key investors in Japan, China and South Korea are missing out on this growth by backing high-risk coal and gas projects, according to a new Greenpeace report.

Editorial

Southeast Asia’s solar and wind energy markets could be worth US$205 billion over the next 10 years, according to a new report by Greenpeace.

The projection would mean that clean energy in the region is worth 2.6 times the value of its coal market over the past decade. But the region’s top energy financiers—China, Japan and South Korea—may be missing out on much of the green growth by continuing to fund fossil field development despite their commitments to curb carbon emissions.

“These three East Asian countries are top global energy investors, with established ties in Southeast Asia. But coal finance is drying up and banks are struggling to get a grip on clean energy finance,” said Insung Lee from Greenpeace Japan.

Public banks in China, Japan and South Korea reportedly invested US$78.9 billion in coal and gas between 2009 and 2019, placing them among the world’s largest public financiers of fossil fuels. Over the same period, these same banks’ wind and solar investments totaled only $9.1 billion, but Lee expressed optimism about the chance for a shift in direction.

“Over the past two decades, we’ve seen East Asian banks skew the margins towards coal to keep the fossil fuel profitable despite ballooning financial risk,” said Lee. “Over the next decade, we’ll see them apply the same ingenuity to unlock renewable energy from the restrictions of their own financial framework.”

The report found that Southeast Asia will see investment opportunities worth US$125.1 billion for solar energy, $48.1 billion for wind and $32.6 billion for other renewable sources in the next 10 years. East Asian financiers are well-positioned to take advantage of this growth but at the moment, their portfolios and their government’s policies aren’t on track to make it happen. 

According to Greenpeace, “transitioning investment to [a renewable energy] pathway will not lessen financial investment opportunity. Rather, future energy demand growth in developing countries will need to be met on the conditions of political mandates for net-zero, which presents a much larger potential market for [renewable energy] and technology.”

Fossil fuel development in Southeast Asia contradicts climate pledges

Continued financing of coal and gas in Southeast Asia also appears to undermine many countries’ pledges to cut greenhouse gas emissions. Just before the release of the new Greenpeace report, world leaders met virtually for the fifth anniversary of the Paris climate accord.

The UN Climate Ambition Summit saw Chinese President Xi Jinping outline parts of his roadmap for China to achieve carbon neutrality by 2060. Japan and South Korea have both set carbon neutrality deadlines of 2050—as has US President-elect Joe Biden.

China’s announcements included commitments to increase the share of non-fossil fuel energy consumption to around 25% and to scale up solar and wind power capacity to over 1.2 billion kilowatts, both by 2030. But while Beijing pushes clean energy at home, Chinese financiers continue to support coal across Southeast Asia. According to Greenpeace Beijing, China is currently building 43 coal-fired power plants in Indonesia, the Philippines and Vietnam. One study by Boston University’s Global Development Policy Center found that from 2000 2018, Beijing backed 777 power plants in 83 countries, 40% of them powered by coal.

Photo: TripodStories- AB / CC BY-SA

For countries along China’s Belt and Road Initiative (BRI), fossil fuel investments present a major risk.

As Han Chen, climate advocate for the US non-profit Natural Resources Defense Council, wrote recently for The Third Pole, “Chinese state-owned enterprises (SOEs) that negotiate large infrastructure projects with host countries have more experience delivering fossil fuel infrastructure, skewing bilateral negotiations towards high-carbon projects that are incompatible with a carbon-neutral future. Countries participating in the BRI must acknowledge the risks this puts on public budgets.”

The same risks apply to partnerships with Korean or Japanese investors. Among the most controversial fossil fuel projects in the region is the Vung Ang 2 power plant in Vietnam, backed by Korea Electric Power, the Japan Bank for International Cooperation (JBIC) and Japan’s Mitsubishi, Mizuho, and Sumitomo Mitsui financial groups. The power plant is a significant undertaking, with a planned capacity of 1,200 megawatts. Critics have cited the plant’s potential impacts on air quality, health and the local environment as well as the fact that it contradicts Japan and Korea’s commitments under the Paris climate accord.

“If overseas investment does not match with net-zero aspirations, [China, Japan and South Korea] will continue to fund the climate emergency as the largest financiers of fossil-fuel based power plants overseas,” read the report from Greenpeace.

The report specifically evaluated the overseas energy investments of public and commercial banks in each East Asian country. For public banks, it evaluated investments by the China Development Bank (CDB), the Export-Import Bank of China (CHEXIM), the Korean Development Bank (KDB), the Export-Import Bank of Korea (KEXIM), the Japan International Cooperation Agency (JICA) and JBIC.

About the Author

ASEAN Today
ASEAN Today is a leading ASEAN commentary site. Our HQ is in Singapore. We publish business, political and fintech commentaries daily, covering ASEAN and Greater China. Twitter: @Asean_Today Facebook: The Asean Today