Why green growth is the key to Southeast Asia's future

The “grow now, clean up later” approach which has dominated economic development for the past century just isn't working anymore as multiple environmental crises prove. Green growth may be a better way forward for Asia and the world.

Multiple environmental crises facing the planet today such as climate change and dwindling resources send a clear message to the global community: “Business-as-usual” ways of production and consumption are no longer acceptable. 

The good news is, there is no shortage of ideas to halt global warming and conserve resources. Frequently-cited solutions include replacing oil, coal, and gas with renewable wind, solar, and hydropower; integrating more public transport into cities; and reducing the private sector’s carbon footprint.

Delivering these solutions, however, will require massive investments in new technologies and infrastructure, as well as policy measures which promote efficient, low-carbon practices.

Critics say this transition to a low-carbon economy is a prohibitively expensive venture. But for others, the need to reduce emissions represents new opportunities for business growth.

This strategy of aligning climate mitigation and economic progress goes by many names—green economy, climate prosperity, and green growth, among others.

As Yvo de Boer, director general of the Global Green Growth Institute (GGGI)—a Seoul-based international organisation promoting green growth in emerging economies—notes in a recent interview, “sustainability is an opportunity for growth through innovation”.

Green growth strategies not only boost the development of technological solutions which countries can export, but they also help countries and organisations save on energy, water, and raw material costs by promoting greater resource efficiency, notes de Boer. The value of sustainability to a company’s brand image is yet another benefit, he adds. 

Also the former chief of the United Nations Framework Convention on Climate Change, de Boer dismisses claims that environmental action is expensive as a misconception arising from a failure to understand the hidden costs of unsustainable practices.

“Sure, coal is cheaper than natural gas or renewables,” he says. “But if you factor in the healthcare spending on pollution-related ailments and premature deaths, coal is actually very expensive to society”.

Sustainability is an opportunity for growth through innovation.

Yvo de Boer, director-general, Global Green Growth Institute

Gaining ground

The idea of a green economy, heavily focused on the business case for sustainability, has amassed a large following among private and public sector leaders in recent years. 

Last September, for example, the UN adopted sustainable economic growth as one of its 17 Sustainable Development Goals, which will guide international development efforts until 2030. 

In December last year in Paris, global leaders also reached the first ever universal climate deal, which is a step towards the goal of achieving zero net emissions by the second half of the century. The deal also recognised the importance of financing technology development to fulfil its aims. 

Analysts expect the treaty to boost investment in sectors such as renewable energy and green buildings, amplifying the momentum of industries that have been booming in recent years.

According to Bloomberg New Energy Finance, for example, renewable energy investment hit a record high of US$285.9 billion last year, up 5 per cent from 2014. 

At the same time, the rapid growth of green bonds—financial instruments which raise funding for projects with a positive environmental impact—highlights the untapped opportunities for sustainable businesses. 

According to global consultancy KPMG, for example, the green bonds market more than tripled in size from US$11 billion in 2013 to US$36.6 billion in 2014. This figure was set to hit US$100 billion by end 2015.

Faced with a carbon-constrained world, more companies are also creating new products which promote energy efficiency and conservation, such as mobile phone applications, smart metering software, and renewable energy technologies, says de Boer.  

All eyes on Southeast Asia

Green growth is a strategy with universal advantages, but economic experts note that Southeast Asia is an especially promising candidate to reap its benefits.

The rapidly modernising region is expected to grow at a robust rate of 5.2 per cent between 2016 and 2020, according the Organisation for Economic Co-Operation and Development (OECD).

Historically, much of Southeast Asia’s growth has placed less focus on environmental protection, thus depleting natural ecosystems such as forests and oceans. This has resulted in consequences like widespread deforestation, air pollution, and water scarcity.

But, says the OECD in a recent report, much of the region’s infrastructure and industrial models are developing, and it has “a golden opportunity to leapfrog over the low-performing, polluting, resource-inefficient technologies and practices of more developed countries”.

Making business and policy decisions which prioritise environmental concerns has multiple benefits, notes OECD.

First, Southeast Asia’s natural resources are an important source of wealth, and managing them properly will ensure the long-term survival of key economic activities such as agriculture and forestry.

Second, the region is set to undergo rapid urbanisation, and by investing in low-carbon infrastructure, country leaders can shape cities which are energy-efficient, pollution-free, and climate-resilient.

Lastly, OECD notes that by adopting sustainable policy and economic models, Southeast Asia has the opportunity to become a hub for green investment.

Private and state funds alike are increasingly seeking investments which are both economically and environmentally sustainable. With the right strategies in place, Southeast Asia is perfectly positioned to cash in on the green investment trend, says OECD.

Southeast Asia has a golden opportunity to leapfrog over the low-performing, polluting, resource-inefficient technologies and practices of more developed countries.

OECD report

GGGI’s de Boer notes that scaling up renewable energy deployment, developing more resource-efficient agricultural techniques, and putting a price on pollution are just a few measures that countries can take to align themselves with green growth.

Not only do such measures achieve economic growth, they aid in environmental protection and also improve the lives of socio-economically marginalised people, says de Boer.

Rural dwellers with no access to electricity would benefit from an off-grid renewable installation, for example, while sustainable agricultural methods may help farmers struggling to keep up with changing weather patterns.

Success in pivoting to a green economy growth model could also bring with it new jobs and investment for the region, research shows.

For example, the International Renewable Energy Agency (IRENA) last year found that renewable energy jobs hit an estimated 7.7 million in 2014. This trend is on the up-tick, and jobs are shifting to Asia, said the agency. 

At the same time, professional services firm EY earlier this year revealed that Asia Pacific dominates global renewable energy investment tables, clinching US$180 billion in funding in 2015. As energy demand in the region increases, this figure is set to grow, said EY.

Clean technology as a green growth opportunity

Growing recognition of Southeast Asia’s untapped potential to pursue sustainable development and increasing political and financial support have fuelled an upsurge of clean technology businesses in the region.

Canadian sustainability expert Anthony Watanabe, for example, was travelling across Southeast Asia in 2013 when he saw the need for solutions to issues like water scarcity and widespread fossil fuel use. 

He soon relocated from Toronto to Thailand to set up Asia Clean Innovations, which provides business development support to scale up renewable power, smart energy management systems, water conservation tools, and other clean technologies.

Some solutions the company is backing include a system that allows street lighting to run on renewable energy, and a tool which detects leaks in water pipes using signal processing and acoustics technology.

The company started out as a two-person outfit consisting of Watanabe and a local partner, but has now hired two Thai staff and is in the process of hiring two more, shares Watanabe. In its two years, Asia Clean Innovations has also cemented a market presence in Thailand, Indonesia, Malaysia, Philippines, and Cambodia.

“I came to Thailand with one technology in my portfolio, no contacts, and very little knowledge about how the market worked,” Watanabe says. But the rewards of taking such a riskthe growth of the business, a strong network of strategic partners, and learning about financial models in Asiahave been worth it, he adds.

V.S. Hariharan is another entrepreneur who left an 18-year long career at a multinational technology firm in 2011 to start Third Wave Power, a clean energy start-up in Singapore. 

The company makes portable solar chargers for urban consumers; solar powered batteries which can help off-grid rural communities charge their mobile phones; as well as sensors and software to support Singapore’s smart energy goals. 

Since its founding, Third Wave Power has amassed a team of nine, and established a presence in the United States, Japan, Singapore, and India, shares Hariharan. It is also working with distributors in several other countries.

“In our first year, we only had one product,” Hariharan recalls. Today, the company’s offering has ballooned to almost 30 solutions for urban, rural, and smart city applications.

Both founders credit their success to supportive policies that spur the development and uptake of clean technologies in Southeast Asia.

The region is ripe with funding opportunities, says Watanabe. Notable financiers include international government agencies like German development agency GIZ, the United States Agency for International Development (USAID), and Japan’s environment ministry, he notes. 

Third Wave Power’s Hariharan adds that Singapore also “offers much in the way of seed funding, research and development grants, and is doing a lot to explore technology solutions in the smart city and renewable energy space”.

Unlocking green growth’s full potential 

Funding aside, businesses feel there is room for governments to improve on policies that stimulate green growth. 

One common grouse is government subsidies for the fossil fuel industry, which persist in many Asian countries. These create an uneven playing field for renewable technologies, says Watanabe.

GGGI’s de Boer, meanwhile, notes that Singapore is also uniquely placed to use its position as a global finance, shipping and information hub to drive green growth in the region. 

“As a transit point through Asia, Singapore can impose high environmental quality standards before allowing ships to enter its harbour,” notes de Boer.

“Through its universities and the education and research institutions it creates, the country can really become a laboratory for green growth and innovation,” he adds. 

As for the critics who say a transition to sustainable economy will cost jobs, de Boer notes that although certain jobs are disappearing, new ones are being created. 

As a recent report by the International Renewable Energy Agency shows, more than 8.1 million people globally are now employed in renewable energy. Furthermore, doubling the share of renewable energy globally by 2030 would result in more than 24 million jobs worldwide.

It is possible to help workers transition from old jobs to new, cleaner ones, de Boer adds. For example, technicians in automobile factories can be retrained to make electric vehicles as opposed to diesel-powered ones, while energy utility workers can transition to renewable energy or energy efficiency consulting. 

Ultimately, some disagreement between groups with different vested interests is inevitable, notes de Boer.

But, he adds: “If you look at the history of humanity, tensions and change are not unusual. We went from riding on horses to sitting in cars, and from travelling by trains to taking planes. All these transitions came with some job losses and new opportunities for others.”

“So that is not a new challenge,” he says. “The biggest task we now face is managing the sustainable transition well”. 

 

To advance the conversation on green growth in Singapore and the region, Singapore’s National Climate Change Secretariat, Ministry of Trade and Industry, Ministry of the Environment and Water Resources, and the UK’s Foreign & Commonwealth Office are organising the second Green Growth & Business Forum (GGBF) on 12 and 13 July 2016. 

The forum will provide a platform for regional businesses, researchers, entrepreneurs and government representatives to network and forge new partnerships in green growth. Click here to find out more about the event and register.

This article was first published by the National Climate Change Secretariat. Subscribe to their newlsetter here or like their Facebook page to receive regular updates.

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