On December 6, 2022, Fair Finance Asia (FFA), in collaboration with the Stockholm Environment Institute (SEI), launched a new study, “Financing the Just Transition: Powering Asia’s Sustainable Energy Future,” at the 2022 FFA General Assembly (GA) in Bangkok, Thailand.
Based on energy sector financing and investment flows data from 13 selected linchpin Asian countries in the period of 2016 to September 2022, the study culminates with two broad and overarching conclusions:
- Asia is experiencing an ‘energy addition’ rather than an energy ‘transition’ due to the slow uptake of climate and energy policies adopted by Asian policy makers, financial regulators, as well as banks, and investors in Asia and beyond. This means that increasing volumes of renewable energy generating capacity are added to currently dirty and fossil-intensive grids, leading to no net change in global greenhouse gas emissions.
- The ‘justice’ element of Asia’s prospective energy transition (or ‘addition,’ as argued above) is still wanting and comes as an after-thought policy measures from national climate and energy policies, which suggests that whatever manifestation of an energy ‘addition’ or ‘transition’ that evolves has the potential to pose major and disadvantageous threats to under-privileged, under-resourced, and vulnerable minority groups across the region.
FFA-SEI’s report (research partners: Profundo and Strategia Development Research Institute) provides new data on Asia’s readiness not only to shift from fossil fuels to renewables, but also to ensure that the adverse social and environmental impacts of this transition are mitigated and “just.” It reveals Asian economies are heavily reliant on fossil fuels to meet their energy needs. Major economic powerhouses like India, Japan, and China relied on coal, oil, and fossil gas to meet 77%, 88%, and 89% of primary energy demands between 2018-2019, respectively, while the Central Asian region was collectively dependent on fossil fuels for meeting as much as 97% of their primary energy needs.
Phasing out from this dependence and subsequently driving energy transition across the Asian continent (namely, transitions towards low-carbon and high-renewable economies) poses a number of social, economic, ecological, and financial implications, altogether influencing the extent of whether the overall transition will be ‘just’ and protective of society’s most marginalized, under-resourced, and under-privileged fossil fuel dependents.
The study highlights that financial institutions are responsible for contributing to Asia’s reliance on fossil fuels. On average, “renewable energy accounts for only 14% of Asian banks’ energy financing over the past six years … with no discernible upward trend.” Meanwhile, only 21% of all “outstanding energy investments” by Asian investors as of September 2022 supported renewable energy-based projects.
Based on the findings of the study, recommendations were formulated for governments, companies, financial regulators, and financial institutions – all key actors in accelerating the just energy transition in Asia – to achieve the nine principles of the just transition (as outlined by the FFA network through stakeholder interactions and literature review):
- No financing for new coal projects for electricity generation and phasing out existing coal-based power generation
- Development of a time-bound transition away from other fossil fuels for electricity generation
- Active investment in renewable energy generation
- Long-term planning and strategies to mitigate the adverse environmental and social impacts of renewables
- Respect for land rights and Free, Prior and Informed Consent (FPIC), and clear policies for community participation, gender sensitivity and consultation with CSOs in large energy projects
- Protection of the rights of workers and mainstreaming of Human Rights Due Diligence (HRDD) during the energy transition
- Safeguarding the health, livelihoods, culture and heritage of communities impacted by the continued use of fossil fuels
- Active and meaningful engagement and participation of women in the energy transition
- Investments in access to electricity for all
This report is a follow-up to FFA’s 2021 report, “A Future Without Coal: Banking on Asia’s Just Energy Transition,” which revealed continued growth in Asia’s coal sector even after the signing of the Paris Agreement in 2015, due to financing by banks and investors operating in the region.
To read full report click here
To access the Key Findings and Observations of the report click here.
To access the full “A Future Without Coal” study, click here.