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How green are Asia’s post-Covid economic recovery plans?

Stimulus packages to kickstart pandemic-hit economies can either shape a low-carbon future or lock the world into a fossil fuel system. Which countries in Asia are leading the green transition?

More than a global health emergency, Covid-19 has also brought about an economic crisis that will leave long-lasting scars for years to come. The full extent of the economic impacts of the pandemic are still playing out, but forecasts provide an increasingly downbeat outlook for the economy.

In May, the International Monetary Fund projected the global economy would shrink by 3 per cent this year. But the latest prediction from the World Bank is a 5.2 per cent contraction. Worse still, the Organisation for Economic Co-operation and Development (OECD) is expecting a 7.5 per cent downturn.

In the region, Asia’s economic growth is projected to come to a standstill in 2020, the worst performance in almost 60 years.

Across the globe, governments have rolled out US$9 trillion in economic recovery measures to rebuild their economies. While most packages have focused on addressing the hand-to-mouth immediate issues, the unprecedented amount of stimulus that is being pumped into the economy is a pivotal moment for climate action.

“Learning from the last financial crisis, there’s evidence that green infrastructure created more jobs than brown infrastructure in the US and the EU. To meet the global climate goals, we need to see more countries with green recoveries this time.”

Helena Wright, vice president of Asia Sustainable Finance, World Wide Fund for Nature

In a webcast by Asia Society Policy Institute, Laurence Tubiana, chief executive officer of Europe Climate Foundation, described the deployment of recovery funds as a “make-or-break moment for climate risk”.

“These resources that will be spent by the government in the next six months to a year will not be available for anything else after. If we don’t make the right choices and put employment and well-being of people at the centre, we need to prepare for more catastrophes in the future,” she said.

Leading the green recovery, Europe has set aside a quarter of its €750 billion (US$840 billion) recovery fund for climate action, which includes a transition away from fossil fuels, investments in electric vehicles and retrofitting old buildings to be more energy-efficient.

New research has found that a green recovery could not only shift the world closer to a net-zero emissions pathway, but also offer the best economic returns.

Echoing this sentiment, Helena Wright, vice president of Asia Sustainable Finance at World Wide Fund for Nature (WWF) told Eco-Business: “Learning from the last financial crisis, there’s evidence that green infrastructure created more jobs than brown infrastructure in the US and the EU. To meet global climate goals, we need to see more countries with green recoveries this time.”

“There’s a great opportunity for a green recovery in Asia as many countries aren’t burdened by the inertia of existing infrastructure and industry. They can shape it however they want and choose to focus on a green transition,” said Ian Woods, climate change and sustainability investment specialist at Chronos Sustainability, a sustainability advisory firm. 

So what efforts have countries in Asia taken towards a green recovery?

South Korea: Green New Deal

South Korea’s ‘stunningly ambitious’ Green New Deal is part of its plan to spend about $110 billion to save the country from recession. The Green New Deal includes investments in renewables, phasing out domestic and overseas coal financing by public sector institutions and the introduction of a carbon tax.

The seventh biggest national carbon emitter also announced a goal of reaching net zero emissions by 2050, with shorter-term goals of increasing the share of renewables from 4 to 20 per cent by the end of this decade. To support workers as they move to jobs in more sustainable sectors, South Korea will establish a Regional Energy Transition Centre.

But critics say that the Green New Deal lacks a clear roadmap of addressing the climate crisis and is of too small a scale of KRW 12.9 trillion (S$14.9 billion) over the next two years to lead a significant transformation of the carbon-based socioeconomic system.

“We are disappointed by the Green New Deal plan announced on 1 June. If the plan becomes the final plan by the government, we are pessimistic about the Green New Deal,” Daul Jang, government relations and advocacy specialist of Greenpeace Korea, said.

Implementing the Green New Deal will be riddled with many challenges as it requires huge changes to industrial, energy, transport and building systems. It also lacks any mention of the phasing out of internal combustion energy vehicles, another concern by Greenpeace Korea.

“We have 23 million cars and the share of electric vehicles (EV) is 2 per cent. None of our big companies have committed to RE100 [a group of over 200 companies committed to powering their entire operations with renewables]. The current share of renewables in our power generation is four per cent and the current target for renewables is not enough. These are big problems,” said Jang.

But overall, Jang is cautiously optimistic about how the Green New Deal could be developed as there is an unprecedented confluence of a bottom-up push by civil society and a top-down signal by the Moon Jae-in administration and the Parliament to tackle the climate crisis.

China: No economic targets

China, the world’s largest emitter, announced a four trillion yuan (US$559 billion) stimulus package, with US$1.4 trillion around ‘new infrastructure construction’ to save the economy. The new infrastructure include a push for low-carbon transport, high speed rail, 5G, but also a number of coal-fired power plants.

Departing from usual practice, the government did not announce a target for economic growth this year, which came as a relief for environmentalists as it reduces the pressure to turn up the country’s industrial machine quickly.

The economic package also announced additional investments in electric and fuel cell vehicles, new infrastructure supporting digitalisation, EV charging infrastructure and ultra-high electricity transmission. China’s government also extended financial support that had been set to expire at the end of 2020 to 2022 to cushion the impacts of the pandemic on new EV markets.

But there are already signs that China is turning to carbon-intensive projects and heavy industry to kickstart its economy, which shrunk by 6.8 per cent in the first quarter. Within just the first five months of 2020, China has approved 7.9 gigawatts of new coal-fired power plants, more than the 6.3 gigawatts it agreed to last year.

It also dropped to second place in the Renewable Energy Country Attractiveness Index (RECAI) recently as the country moves forward with removing subsidies for renewable energy projects, which will increase competition in the sector.

Indonesia: Business-as-usual or worse

Indonesia recently announced a $1 billion solar power project to drive a green economic recovery, but in light of recent policies that have been passed during the pandemic, environmentalists remain sceptical.

Known as the Solar Archipelago (Surya Nusantara) plan, the renewables project will create 22,000 jobs from installing the solar panels and save public spending on electricity subsidies.

But Tata Mustaya, regional climate and energy campaign coordinator for Greenpeace Indonesia explained that there are technical problems with the current plan, including the aim to install solar panels on the roofs of small houses that were not constructed to support the weight of the panels.

More importantly, the government is still expanding the production of coal power plants and passed the Coal and Mineral Mining Law earlier this month despite strong opposition over its socio-environmental impact and lack of procedural transparency.

“Coal and renewable energy do not go hand-in-hand, we need to choose one. If we continue to expand coal, there will be an over capacity and renewable energy will not be competitive anymore,” said Mustaya.

The draft omnibus law that is aimed at boosting Indonesia’s economy and is expected to pass in July is another indicator of the lack of political commitment to climate action. The bill contains amendments to at least 79 existing laws that include prescribing lighter penalties for environmental violations, scrapping the requirement for environmental impact assessments and deregulating the mining industry.

“The deregulation bill will grant the freedom to pollute and destroy the environment. Overall, we do not have support from key elites for a green economic recovery. We’re either going to go back to business-as-usual, or worse,” Mustaya reiterated.

Malaysia and Myanmar: Solar-powered recoveries

Malaysia has turned to large-scale solar as an engine of the post-Covid recovery plans, targeting smaller and local ventures with its largest tender to date.

The Ministry of Energy and Natural Resources announced 1 gigawatt worth of tender contracts, explicitly linking it with broader Covid-19 recovery efforts. The project is estimated to bring US$927 million in investment and create 12,000 new jobs.

The stimulus plan also includes US$2.9 billion for rooftop solar panels and LED street lighting.

Likewise, Myanmar’s Covid-19 Economic Relief Plan includes the solicitation of renewable energy projects and strategic infrastructure projects. The country is undertaking a first-ever tender for 30 ground-mounted solar projects totalling 1.06 GW capacity.

But business groups say that the one-month deadline is too tight and the proposal includes tough conditions that cannot be met given the travel restrictions.

Japan: Smaller measures

Japan’s economic stimulus, totalling US$2.1 trillion or 40 per cent of its gross domestic product, has relatively low-key green measures that include US$74 million in subsidies for the installation of energy-efficient ventilation systems in public spaces, and the construction of factories powered by renewable energy for companies bringing overseas manufacturing bases back to Japan.

Another US$28.8 million was set aside to maintain Japan’s extensive national parks until foreign visitors can return.

Environment minister Shinjirō Koizumi has also announced a ‘green recovery’ online platform and a ministerial meeting in September for governments to exchange views on how to use carbon-cutting measures to reboot their economies.

For more stories on how the Covid-19 pandemic has affected sustainable development, go here.

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