Climate finance decline threatens Southeast Asia’s green energy future

By Our Reporter
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Representational Photo by Nicholas Doherty on Unsplash

Southeast Asia’s ambitious green energy transition is at risk due to a significant drop in climate development finance, according to a new report from the Lowy Institute. The Southeast Asia Aid Map’s second edition reveals that official development finance to the region plummeted to a record low of $26 billion in 2022, marking the end of a pandemic-induced surge in support.

Climate development finance experienced a worrying 15 per cent decrease compared to the previous year. This decline affects not just fossil fuel investments, which have been reduced, but also renewable energy projects, which are crucial for the region’s transition to low-carbon development.

Southeast Asia, known for its dynamic economic growth, plays a crucial role in global efforts to limit warming to 1.5°C. The Asian Development Bank estimates that the region needs around $210 billion annually in climate finance to achieve its renewable energy goals. However, the Southeast Asia Aid Map shows that between 2015 and 2022, the region received an average of just $8.1 billion per year.

China remains the largest financier of renewable energy in Southeast Asia. Yet, Beijing’s investments, particularly in hydropower projects in Laos, have raised ecological and financial concerns. Laos is currently facing a severe debt crisis, with China as its primary creditor. Overall, new Chinese development financing has dropped sharply, with 2022 disbursements at $3 billion, a third of what they were eight years ago. Despite this, China continues to be the dominant infrastructure financier, involved in 24 out of 34 major infrastructure projects in the region.

The latest Southeast Asia Aid Map compiles extensive data from 2015 to 2022, covering more than 120,000 projects by 107 development partners, amounting to $255 billion across 11 countries: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Timor-Leste, and Vietnam.

This downward trend in climate finance poses a significant challenge for Southeast Asia’s energy needs and its path towards sustainable development. The region’s future hinges on reversing this financial decline and ramping up investments in renewable energy to meet its ambitious climate targets.


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