Four Paths to a Climate-Friendly Energy Transition for Asia and the Pacific

A smooth energy transition promotes sustainable development and climate resilience but it requires efforts on multiple fronts.

Developing countries in Asia and the Pacific are facing greater challenges in transforming their energy systems from fossil fuels to renewables in response to climate concerns. Political and economic concerns, along with the impact of the pandemic, have accentuated these challenges.

Recent geo-political events have further heightened the need to develop robust resilient mechanisms for ensuring a smooth transition to cleaner energy sources. A lack of diversified energy sources creates enormous risks and huge volatility to energy supply and prices.

In the transition to renewables, there is an inherent tradeoff that needs to be managed.  Economic growth requires a stable base load power, which is currently serviced by fossil fuels. This must be carefully balanced against the longer term need to switch to renewable sources.

In the transition to renewables, there is an inherent tradeoff that needs to be managed.

For a successful energy transition, developing countries in the region need to work with their partners to address geopolitical issues, technological limitations, and financial constraints. This will require:

• Shifting the focus of oil companies – Increasingly, oil companies are on the front lines of the energy transition, moving from conventional energy sources into alternative renewable sources, such as hydrogen, solar, wind and electric vehicle charging. They will need to leverage their base assets and operating expertise, while increasing participation and investment in renewables.
• Changes to the economics of energy generation and integration – A major driver in the energy transition is economic viability. Today, solar and wind power have become among the lowest-cost forms of electricity, often at prices lower than new natural gas plants and, in many cases, existing coal facilities, making them viable alternatives to fossil fuels. Even so, challenges remain in effective storage and grid integration of renewable power.
• Promoting electrification of transport – The Asia-Pacific’s share of global transportation carbon dioxide (CO2) emissions in 2020 is 33%. The adoption of electric vehicles continues to increase as the battery cost declines. Recent advances have created a wide range of solutions for electrical mobility. The public and private sector need to work in tandem to develop policies and infrastructure to support this transition.
• Promoting wider use of environment, social and governance (ESG) scores – ESG scores have the potential to attract trillions of dollars in private sector capital to address climate goals by better aligning incentives and promoting an orderly energy transition. Institutional investors increasingly consider ESG as part of their portfolio decisions. ESG and sustainability have attracted record capital flows in 2020 and companies across multiple industries are accelerating the transition to an environmentally sustainable economy by addressing greenhouse gas emissions, pollution, waste, and resource constraints.

As a recent ADB assessment found, a smooth energy transition is a key enabler of sustainable development and climate resilience, requiring concerted efforts on multiple fronts, including regulatory, policy, corporate governance, investor engagement, consumer and social focus, and breakthrough technological advancement.

Source : Asian Development Blog