Southeast Asia needs to accelerate decarbonisation of its global value chains (GVCs) as the region could face up to a 30% loss of GDP annually by 2100 due to climate change, according to the Asian Development Bank (ADB).
Speaking at a conference in Bali, ADB deputy director-general Winfried Wicklein said Asean is one of the most vulnerable regions in terms of the impact of climate change.
"In the wake of the pandemic, countries are now facing the massive challenge of combatting climate change while maintaining robust economic growth," he said.
According to the ADB's report, Asia, including Asean, emits more greenhouse gas (GHG) during production than anywhere in the world, while acting as the world's factory.
By 2100, the region will feel climate change's collective impact on its agriculture, tourism, energy demand, labour productivity, human health and ecosystems.
"Asean economies must strengthen their positions in GVCs to bolster long-term competitiveness and resilience against new challenges including climate change through policies that promote decarbonisation," it noted.
The Global Value Chain Development report found that one of four key elements in GVCs that fuel global emissions include GVC supply and production with longer distance to travel between source, production and distribution networks. The study reveals that this causes extra emissions that are responsible for 3.5% of global emissions.
Asean is committed to covering its 50% increase in energy demand over the current decade by increasingly using renewables. The region is targeting 23% in renewable primary energy by 2025, up from 9.4% in 2014.
Sri Mulyani Indrawati, Indonesia's finance minister, said in order to achieve the net-zero commitment, financing is very critical.
"According to one estimation, total climate finance that is required for our nationally determined contribution [NDC] is US$281 billion until 2030. It was projected to be fulfilled with public and private investment," she said.
Thailand and Indonesia are among the countries in the region that have successfully ventured into the green bond market, with Thailand raising almost $6 billion from sustainability bond issuance in 2020 to finance its infrastructure needs.
"That is why it is imperative for all of us to be able to design the right policy framework and regulatory framework so that we are able to attract more private participation both domestically and globally," she added.
According to an assessment by the International Energy Agency, carbon capture, utilisation and storage can help cut emissions and fulfil Asean's climate targets.
"These policies will, among other things, design non-tariff measures and set low [or zero] tariffs on climate-smart goods. They should accelerate trade digitalisation and promote climate-smart trade, green transport infrastructure and carbon pricing," the ADB noted.