The EIU's report further explains that "[t]his dilemma explains why, despite being the world's biggest market for renewable energy investment, Asia's dependency on coal is far from waning." In fact countries such as "China, India and Indonesia, among other countries in the region, are still approving and building new coal-fired power plants. Furthermore, governments' bets on coal have only increased since Russia invaded Ukraine earlier this year, intensifying an already acute global crunch in gas supplies."
However, the EIU expects "renewables to increase their share in power generation over the next ten years. In China, the share of energy from non-hydro renewables in total generated electricity will rise from 15% currently to about 26% in 2031, while in India this share will grow from 11% to 21%. In Japan and South Korea, renewables will also grow strongly, from 15% to 23% and from 7.5% to 19.5% respectively."
Below are the report's key findings:
- The global energy crisis has forced Asian governments to balance the need for energy security against the need to minimize climate change. This will undermine progress at the COP-27 climate talks in November.
- Asia will be the fastest-growing region for electricity consumption over EIU's ten-year forecast period, but is also the region that relies most heavily on coal for its power generation. Decarbonization will be a major challenge.
- Asia will continue to be the world's biggest market for renewable energy investment, with the lion’s share going to China, India, Japan and South Korea. Solar energy will get more capacity additions until 2031, when wind power capacity will accelerate.
- Many governments in the region are now looking at nuclear energy as a way to become less reliant on imported energy, but it will not help with the short-term energy crunch.
- Given these dynamics, developed countries will be under pressure to ramp up financing for Asia's energy transition at COP27, despite the weakness of the global economy.
"The varying economic and climatic fundamentals of Asian countries will govern the positions that they take on key issues at the upcoming COP27, the UN climate change conference to be held in Egypt in November 2022," the EIU notes. "Although most major Asian countries have submitted net-zero pledges, their Nationally Determined Contributions (NDCs) still lack detailed plans on how they intend to reach their emission-reduction targets."
The UK-based organization concludes its report with the following:
This report provides a good summary on the trajectory of Asia's energy mix over the EIU's ten-year forecast period. What are the implications of Asia being the fastest-growing region for electricity consumption during the next decade? How do you think the region will overcome challenges of decarbonization to meet the increasing demand for electricity?
The negotiations at the COP27 are likely to be contentious, and it is difficult to foresee any significant progress. Owing to a volatile economic and geopolitical environment, developing Asian countries such as India and Indonesia will find it ever more difficult to secure meaningful commitments from the developed world to finance their energy transition. The lack of sufficient mitigation finance, a monetary tightening cycle in major Western economies and high material costs for renewable projects will make energy transition costlier. This will result in countries showing greater resistance to wean themselves off dirty fuels such as coal, and could weaken the climate policy stance taken by developing Asia at the conference. Furthermore, recent extreme weather events in Europe and the US are likely to shift domestic public sentiment in those countries towards channeling climate adaptation funds towards domestic needs before committing to assist other countries. This will be detrimental to negotiations on providing financial support for adaptation to climate change, which is a major cause for concern for many developing Asian countries.
Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.
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