background image

Beyond carbon pricing: a systems approach for ASEAN's net zero journey

author image

By Alex Hong

· 18 min read

Introduction: The tightrope walk of ASEAN's net zero journey

The ASEAN countries are at a turning point. The region's ecological stability, economic growth, and general well-being are all at risk from the spectre of climate change, which is looming large. In light of the effects of climate change, Southeast Asia may suffer yearly losses of up to $1.3 trillion by 2050, according to a new World Bank estimate. Existential dangers to the region's future include rising sea levels, harsh weather, and interruptions to agricultural output. In order to protect the region's development trajectory as well as the environment, it is now essential to achieve net zero emissions, which is achieved by balancing anthropogenic greenhouse gas emissions with removals. 

In the fight against climate change, carbon pricing—through mechanisms like carbon taxes or emissions trading schemes—has become a key weapon for policymakers. Businesses and individuals are encouraged to lower their carbon footprint and embrace cleaner technology by placing a price on carbon emissions. Although carbon price is a useful tool in the ASEAN toolbox, concentrating only on it may hinder the region's efforts to achieve net zero. As economists that specialise in the environment and development, we understand the importance of a multifaceted strategy that takes into account the behavioural as well as the economic components of emissions reduction.

II. Limitations of carbon pricing

A. Economic perspective: Balancing growth with green ambition

As far as development economics and the environment are concerned, carbon pricing in the ASEAN region poses a special problem. The World Bank continues to classify certain countries in the region, like Laos, as lower-middle income, while other nations, like Singapore, have high-income economies. The region is distinguished by a striking variation in economic development. Establishing a consistent carbon pricing throughout the area turns into a challenging balancing act.

  • The Quest for the golden price: Reducing emissions will not be significantly impacted by an excessively low carbon price. On the other hand, a price that is set too high may hinder the development of the economies of emerging member states, which may spark popular dissatisfaction and political resistance. therefore is difficult to find the "goldilocks" pricing threshold, which encourages emissions reduction without impeding development, and therefore necessitates carefully analysing the economic conditions of each country.

  • The carbon leakage conundrum: The possibility of carbon leakage is another financial issue related to carbon pricing. Businesses in ASEAN that are subject to high carbon taxes may be inclined to move their operations to nations with laxer laws. If this practice is allowed to continue, it may jeopardise local efforts to reduce emissions and provide unfair competition for companies that are dedicated to sustainability. The danger of leakage can be reduced by well-designed carbon pricing schemes and strong border carbon adjustments, according to studies conducted by the International Monetary Fund (IMF).

B. Human behavioural perspective: beyond price signals

Carbon pricing can be ineffective in changing deeply rooted consumption behaviours, even when it sends a clear economic signal. Studies in behavioural economics show that people are frequently swayed by a wide range of variables other than price, including social conventions, convenience, and ignorance of sustainable options.

  • The habit trap: Even with price adjustments, consumers frequently fall into well-established purchasing patterns that are challenging to disrupt. For example, if public transport or electric cars are seen as less attractive or cumbersome, a carbon price on petrol may not be sufficient to encourage a significant shift in behaviour.

  • The Nudge Factor: Complementary policies are required in order to really encourage people to make sustainable decisions. Together with carbon pricing, targeted information campaigns, the construction of cleaner transportation infrastructure, and energy-efficient appliance subsidies can all help to provide a more complete framework for behaviour change.

  • Singular solution fallacy: Consumers as well as corporation are often trapped in a linear mindset and are often clamouring for singular solutions for increasingly multifaceted situation. This is especially true for global challenges such a climate change and the sustainability pivot where all problem statements need to be contextualised for multi-stakeholders as we as understand problems (as well as solutions) from systems approach. Carbon taxes/pricing can be one of the solutions but will not be the singular miracle for our net zero future. 

Carbon pricing is an important instrument, but it is obviously insufficient on its own to help ASEAN reach net zero. Developing a successful decarbonisation strategy requires addressing the regional economic differences and understanding the complexity of human behaviour.

III. A multi-pronged approach for Net Zero ASEAN

Considering the shortcomings of carbon pricing, we need to push for a multifaceted strategy that addresses emissions reduction from several fronts. A wide range of legislative measures, monetary incentives, and cooperative projects at the local, state, and federal levels ought to be included in this plan.

A. Policy measures: Setting clear guardrails

  • Stricter emission standards: The shift to cleaner technologies can be accelerated greatly by imposing tighter emission regulations on automobiles and industry. One excellent example is the European Union's achievement in lowering vehicle emissions through strict restrictions. Member states of ASEAN may enact such laws that are customised for their own situations in order to phase out harmful technology and encourage cleaner alternatives.

  • Investing in renewables and efficiency: It is essential to make a big move towards renewable energy sources like solar and wind power. Reliance on fossil fuels can be significantly decreased by public and private investments in renewable energy infrastructure combined with energy efficiency improvements in houses and industry. Southeast Asia has enormous potential for the development of renewable energy, with the region having the capacity to produce over 460 GW of solar and wind power by 2030, according to studies conducted by the International Renewable Energy Agency (IRENA). 

Multiple projects ranging from the use of HVDC power transmission upgrades, expansion of Battery Energy Storage Systems (BESS) on an industrial or even build environments, the exploration of hydropower storage systems, a shared ASEAN power grid and many more are being explored.

  • Land-use policies for sustainability: Integrating sustainable land-use practices is essential to reducing the effects of climate change. It is crucial to have policies that support reforestation, ethical farming methods, and the preservation of natural carbon sinks like peatlands. According to a 2021 study that was published in Nature Research Earth & Environment, massive forest restoration projects in Southeast Asia have the potential to absorb up to 1.3 billion tonnes of CO2 from the atmosphere by the year 2050.

  • High-speed rail networks: Many ASEAN countries are facing the dual challenge of reducing urban sprawl and urban pollution. Studies have indicated that 29% of ASEAN’s energy related emissions come from the transportation sector. By creating an efficient High Speed Rail (HSR) networks in ASEAN, member countries are able to reduce urban sprawl and drastically reduce vehicular traffic in cities thereby reducing the health risk. The knowledge that rail transport for short haul travel emits only 4% of the emissions compared to that of a short haul domestic flight (as reported from a Eurostar example recently) will motivate countries to explore greater investments into rail systems such as the HSR and the rail networks that was launched in Indonesia. Node-based, efficient rail transportation will be critical for ASEAN’s development as well as our net-zero ambition. 

Alternative text

(Source: S&P Global)

B. Incentives: Greening the financial landscape

  • Green financing schemes: Establishing specialised green funding programmes can encourage companies to invest in sustainable practices and clean technology adoption. Businesses that show a commitment to decarbonisation may be eligible for tax benefits, low-interest loans, or loan guarantees under these programmes. By 2030, emerging nations in Asia are expected to need an annual investment of $1.3 trillion in climate-smart infrastructure, according to the IFC's green finance platform.

  • Subsidies for sustainability: A well-thought-out subsidy programme can motivate people to embrace sustainable lifestyles. Customers may find energy-efficient appliances, electric cars, or sustainable farming practices more appealing and accessible with subsidies. According to a World Resources Institute research, China's adoption of electric vehicles has been greatly aided by subsidies, which has resulted in a notable drop in emissions.

  • Carbon offset markets: Companies can use the carbon offset market to fund emission reduction initiatives in other countries in order to offset their own emissions. Well-regulated carbon offset markets can encourage the development of renewable energy projects and support carbon sequestration efforts, but they cannot replace direct emissions reduction.

IV. Systems thinking: A holistic approach for Net Zero ASEAN

Moving past discrete economic tools and policy initiatives is necessary for ASEAN to reach net zero. We need to adopt a systems thinking methodology that acknowledges the interdependence of the environment, society, and economy. Developing measures that address the underlying causes of emissions rather than just their symptoms would require a holistic approach.

Environmental sustainability has historically been sacrificed in the name of economic prosperity. A systems thinking approach, however, recognises the long-term economic concerns linked to climate change, including broken supply chains, infrastructure damage from increasing sea levels, and decreased agricultural production. Investing in a sustainable future is a wise financial move for long-term prosperity as well as an environmental need.

A. Beyond the Band-Aid: Addressing root causes

Reducing emissions only at the chimney or tailpipe ignores the systemic causes of those pollutants. Increasing emissions are caused by a number of factors, including energy-intensive sectors, unsustainable land-use practices, and inefficient consumption habits. Policies based on a systems thinking approach should address these underlying causes:

  • Circular economy principles: It is essential to adopt circular economy concepts that reduce waste and increase resource efficiency. This could entail establishing closed-loop production methods that reduce waste generation, supporting remanufacturing and repair rather than disposal, and encouraging long-lasting and recyclable product design. According to estimations from the Ellen MacArthur Foundation, ASEAN's shift to a circular economy might result in $1.3 trillion in economic benefits and the creation of 1.5 million employment by 2030.

  • Sustainable Supply Chains: Reducing emissions can be accomplished to a large extent by encouraging accountability and openness across supply chains. This could entail actions such as product labelling with regard to carbon footprint, certification programmes for sustainable sourcing methods, and extended producer responsibility initiatives that make producers responsible for the products' end of life.

B. A web of interconnected solutions

The possibility of cross-policy benefits is another point of convergence highlighted by systems thinking. For example, spending on renewable energy infrastructure can lower greenhouse gas emissions, improve air quality, and add to energy security all at the same time as producing new jobs. In a similar vein, encouraging cycling and public transport infrastructure can enhance public health outcomes, make cities more liveable, and lower emissions.

ASEAN countries may create a more complete and successful plan for reaching net zero by approaching the opportunities and constraints of decarbonisation via a systems lens.

V. Challenges and opportunities: Navigating the road to net zero

There are obstacles in the way of ASEAN's transition to net zero. It is still difficult to strike a balance between the region's needs for economic development and aspirational environmental goals. Nonetheless, these difficulties present important chances for increased regional resilience, technological advancement, and economic progress.

A. Challenges: Bridging the gaps

  • Balancing economic development and green ambition: A fair transition to a low-carbon economy necessitates handling the possible effects on developing member states with great care. Specific support systems and efforts to increase capacity can assist reduce the risks and guarantee that the ASEAN countries can continue to thrive economically while also achieving environmental sustainability. Nonetheless, because a large portion of the development required is due to debt financing, which needs forward momentum to be viable, it is still usual for ASEAN member countries to remain obsessed on the idea of growth for growth's sake. If ASEAN were to move beyond growth and towards development and eliminating wealth (not income) inequality in the long run, this might need a fundamental rethinking or re-strategizing.

It is also essential to note that it is implausible that ASEAN member countries will give up development for the sake of the regional sustainability pivot. Hence, practical consideration and much contextualisation will have to be sought, envisioned and action implemented to apply systems and technology, to raise living standards and other developmental goals that ASEAN member states aspire to have while engaging in essential sustainability pivot. The understanding of the complexity and diversity of needs will mean future successes or failures. 

  • Equity in the decarbonization equation: In order to ensure that the costs and benefits are allocated equally, the transition to net zero must be egalitarian. This might entail putting in place social safety nets to shield disadvantaged groups from future price rises brought on by carbon pricing or environmentally friendly legislation. It's also critical to make sure that everyone in society can benefit from the green economy, including new jobs in the renewable energy sector. The concept of being “the tide that lifts all boats” may be viewed as the underlying ethos in the decarbonisation effort. 

  • Building a long-term vision: Clear communication and public participation are necessary to maintain political will and public support for long-term decarbonisation initiatives. Gaining more public support can be accomplished by emphasising the financial and health advantages of switching to clean energy. Furthermore, encouraging regional cooperation and knowledge exchange can develop a sense of shared accountability and a group goal for reaching net zero. Regarding the ASEAN sustainability pivot, one of the weaknesses might be the absence of what I dubbed "long-termism." If we want to use sustainability projects that improve communities to make a greater, longer-lasting impact, we need to reconsider how we finance these projects and look for returns on investment.

ASEAN are great storytellers traditionally but this rich culture does not seem to translate to the ASEAN corporate landscape. Communication specialists that are well-versed in sustainability and sustainability transition need to be sought and to get them to work with corporations to create meaningful engagements to all stakeholders in order to create maximum impact for long-term community-wide benefit as well as enhancing the corporate bottom line. 

B. Opportunities: A greener and more resilient future

Despite the challenges, the transition to net zero presents a multitude of opportunities for ASEAN.

  • Green investments and job creation: Significant green investments can be drawn to the area by making investments in sustainable technology, energy efficiency improvements, and renewable energy infrastructure. This financial infusion may lead to the creation of new jobs in the clean energy industry, promoting economic expansion and diversification. By 2030, the shift to a green economy in Asia and the Pacific region may result in the creation of up to 65 million new employment, according to projections from the International Labour Organisation.

Singapore, a well-established financial hub of ASEAN has the trust of more than 1,500 family office that has called the city state (as its launch pad). There could be much opportunities for family offices to engage in meaningful impact investments even if it means 25% of their portfolio. Such involvements will energise the flow of private equity towards making technological and innovative in-roads to accelerate decarbonisation in ASEAN. 

  • Innovation for a sustainable future: Decarbonisation solutions are desperately needed, and this need can be a tremendous catalyst for innovation. One way to position ASEAN as a leader in the creation of next-generation clean energy solutions is to invest in clean technology research and development, encourage green entrepreneurship, and create collaboration between universities, research institutions, and the commercial sector.

The problem, in my opinion at least, is not with technology (we are always coming up with new things), but rather with how we can harness the enormous potential of ASEAN feedstock—waste from other industries and our agriculture sector, for example—to create goods with greater sustainability and value. Technologies that are reasonably priced exist to convert agricultural feedstock into green fuels, including ethanol, green hydrogen, and the critically important Sustainable Aviation Fuel (SAF). Our imagination is the only thing limiting the possibilities. Nevertheless, a great deal of research and a willingness to work together between feedstock and technology are needed.

  • Resilience in the face of climate change: ASEAN countries may increase their resistance to the unavoidable effects of climate change by embracing a net zero future. While investments in green infrastructure can help alleviate the dangers associated with rising sea levels and extreme weather events, a reduction in reliance on fossil fuels can improve energy security. By 2100, Southeast Asia may lose between $1.7 trillion and $6.7 trillion due to climate change, according to estimates from the Asian Development Bank. I expect the flow of sustainable finance to be greatly enhance with IMF and the World Bank working closely to reform the multilateral development banks (MDBs) and Special Drawing Rights (SDRs).

VI. Call to action: A collective effort for Net Zero ASEAN

Governments, businesses, and private citizens must work together urgently to achieve net zero in ASEAN. The old way of doing things is no longer an option. It is necessary to make a paradigm shift that values cooperation, systems thinking, and shared accountability for the environmental and economic future of the area.

A. Governments: Leading the charge

  • Setting ambitious targets: Governments in the ASEAN region need to set aggressive but doable net zero goals and provide detailed plans detailing how to get there. These objectives must to take into account the particular conditions of the area and be in line with the objectives of the Paris Agreement.

  • Policy frameworks for sustainability: It is crucial to have a coherent and stable policy framework that discourages carbon-intensive activities, encourages investments in clean energy, and supports sustainable growth. This can entail putting in place carbon pricing systems in conjunction with supportive measures like stronger emission regulations, infrastructure expenditures for renewable energy sources, and encouragement of sustainable land-use practices.

  • Resource mobilization for green transition: Putting together resources for the green transition calls for a multifaceted strategy. Governments have the ability to utilise public-private partnerships, investigate novel funding methods such as green bonds, and entice foreign direct investments towards sustainable technologies. The ability to leverage on feedback and ability to work collaboratively will accelerate innovation and buy-in to current and future green transitions.

  • Standardisation via taxonomy: A lot of effort has been made in ASEAN to establish a unified ESG standard, which will facilitate the flow of much-needed sustainable financing and hasten the transformation. It is currently in its second iteration since 2023, and this will open the door to improved fund flow for both present and future sustainability initiatives as well as improved openness and communications. Singapore is also advocating for ASEAN members to address digitalization. In the near future, this might also open the door for quicker and more accurate transactions, which would lower operating costs and aid in the shift towards sustainability.

B. Corporations: Embracing sustainability

Corporations have a pivotal role to play in driving the transition to net zero. Here's how:

  • Sustainable Practices and clean technologies: Businesses need to incorporate sustainability into their main business plans. This entails using greener production techniques, making investments in energy-saving improvements, and investigating the potential of renewable energy sources.

  • Transparency and accountability: Encouraging environmental performance and supply chain openness is essential. Companies ought to be held responsible for their environmental effects, reveal their carbon footprint, and establish aggressive goals for reducing emissions.

  • Advocacy for change: Prominent forward-thinking companies have the power to push for government laws that will benefit their cause and promote the adoption of sustainable practices by the whole sector.

  • Seeking feedstock from the Global South: A significant portion of the shift might depend on our capacity to connect the numerous agricultural and other feedstock resources found in the Global South with cutting-edge technologies to produce new, practical goods like furniture, building materials, and even biofuels like Sustainable Aviation Fuel. This offers developed economies new chances to work with their counterparts in the Global South to create "win-win" situations that will improve entire communities and expand the supply of sustainable products.

C. Individuals: Making a difference

While individual actions may seem like a drop in the bucket, collectively they can create a powerful wave of change. Individuals can contribute to net zero by:

  • Making conscious choices: People may make a difference by minimising their consumption footprints, selecting sustainable products, buying energy-efficient equipment, and using the bus or bicycle whenever feasible.

  • Advocacy and public engagement: By speaking up in favour of climate action, holding companies and governments responsible, and taking part in public consultations on sustainability policy, individuals may increase the effect of their actions.

Collaboration and shared responsibility: The key to success

Ultimately, a cooperative effort based on a shared sense of responsibility is needed for ASEAN to achieve net zero. A cleaner energy future can be achieved more quickly through regional cooperation in information exchange, technological transfer, and cooperative research and development projects. The enormous potential for an effective regional sustainability pivot in ASEAN may be unlocked by governments, businesses, and individuals cooperating. Action must be taken immediately. Building a more resilient and clean future for future generations is a challenge we must take on.

VII. Conclusion: Beyond carbon pricing – A sustainable future for ASEAN

The pressing need for ASEAN to attain net zero emissions necessitates a multifaceted strategy that goes beyond a narrow emphasis on carbon price. Carbon pricing is still a useful tool, but given its limits, a complete approach that takes into account human behaviour patterns, economic realities, and the interdependence of the region's environmental and economic systems is required. A successful regional sustainability pivot requires embracing systems thinking, encouraging collaboration, and realising the shared responsibilities of enterprises, governments, and individuals.

The ASEAN countries may set themselves up for success in the transition to sustainable energy by putting in place a strong combination of legislative measures, financial incentives, and cooperative projects. While reducing the dangers associated with climate change, economic growth can be stimulated by making investments in clean technologies, sustainable land-use practices, and renewable energy infrastructure. Long-term behavioural change can only be attained by cultivating a culture of sustainability through corporate accountability and public involvement.

Incremental change is no longer appropriate. At this turning point, the ASEAN region has the chance to lead the world in sustainable development. The ASEAN countries can assure a more prosperous and resilient future for future generations by adopting a systems-based approach, promoting regional collaboration, and mobilising collective action. Let's take on this challenge and create an ASEAN that is greener and cleaner for everyone.

illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

Did you enjoy this illuminem voice? Support us by sharing this article!
author photo

About the author

Alex Hong is the Executive Director of Digipulse Data and strategic advisor. He is the Chief Sustainability Coordinator of the Youth Networking Business Committee (YNBC). Alex is LinkedIn’s Top Voices (Green) in Singapore 2022 and represents the Global Blockchain Business Council (GBBC) as the Ambassador of Southeast Asia.

Other illuminem Voices

Related Posts

You cannot miss it!

Weekly. Free. Your Top 10 Sustainability & Energy Posts.

You can unsubscribe at any time (read our privacy policy)