Asia-Pacific companies have recently showed a shift in attitudes, significantly improving awareness and actions of decarbonization, driven by push from the West, domestic regulations, as well as investor and consumer interests, Malavika Bambawale, managing director, sustainability solutions – APAC with ENGIE Impact, said in an interview.
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ENGIE Impact is the sustainability consulting division of French energy company ENGIE. Bambawale said she saw "a very solid momentum" toward addressing climate issues, despite the shocks brought by geopolitical tension, COVID-19, and economic downturn.
As a result, the demand for carbon offsets and clean energy solutions have significantly increased in this region, she said.
Push from the West
Bambawale said stakeholders in the West have become one of the key drivers that push APAC companies to adopt decarbonization solutions.
"Corporates in the West are really embracing this change, and they are also driving investments in APAC, because APAC is their Scope 3," she said.
According to Greenhouse Gas Protocol, Scope 3 emissions of a company refer to all indirect emissions of the company, including both upstream and downstream emissions incurred by parties along the company's supply chains, except for emissions from purchased electricity, which is covered in Scope 2.
The Western companies have set manufacturing bases and data centers in various APAC countries, such as Indonesia, Malaysia, Vietnam, and Singapore, Bambawale said, adding that these market players now really have a sense of urgency and were driving the regional demand growth of renewables and carbon offsets.
The Carbon Border Adjustment Mechanism or CBAM, proposed by the European Union, has also become "a headache" for APAC companies, Bambawale said.
Once CBAM is implemented, heavy carbon taxes will be imposed on APAC companies that export goods to European markets, which is expected to severely impact their profitability and cost-competitiveness. The taxes under CBAM can be waived if the exporter countries have domestic mechanisms to put a meaningful price on carbon.
"Even within our own boundaries, we have got more and more regulations coming," Bambawale said, adding that more and more governments in this region have announced carbon neutrality targets, which also accelerates the push on low-carbon transformation.
Undervalued natural capitals
Bambawale also called for valuing APAC's natural capitals, which are severely undervalued now and need a much higher, reasonable price.
Natural capitals are defined as the stocks of natural assets, such as forests, mangroves, soil, water and other potential, natural carbon sinks. Nature-based carbon offsets can be generated from protecting and restoring these natural assets.
"Indonesia, for example, is not selling their carbon offsets [to foreign markets], because they perhaps realize there's a lot more value," she said.
Platts assessed nature-based carbon credits at $9.35/mtCO2e on June 16, according to data from S&P Global Commodity Insights.
Bambawale added that, voluntary carbon offsets, despite their steady demand growths, are insufficient to resolve the climate issues.
"We don't have enough land and we don't have enough projects to just get there by offsets," she said, adding that policy instruments like carbon taxes or compliance emission trading schemes are also expected to play important roles to push APAC's decarbonization to progress.
Ecosystem for clean energy
Bambawale emphasized that an ecosystem for clean energy is crucial in APAC, especially infrastructures and market mechanisms that support clean energy trading across national boundaries.
It is widely believed that clean energy solutions are essential to avoid emissions in the first place, and using carbon credits to offset hard-to-abate emissions should come later. Nevertheless, for countries with limited land space and resources for solar, wind, and renewable-based hydrogen projects, they need to import clean energy.
Bambawale said, just like we import and export crude oil through pipelines, and LNG through shipping, the transportation infrastructures, facilities, and fleets for clean energy need to be established and scaled up.
Besides transportation, she added the power grid needs to be upgraded to adapt to clean energy, and, overall, the changing landscape on the technology side is key to drive the low-carbon transformation.
Meanwhile, she said effective mechanisms are needed to enable the trade of energy in the region, emphasizing that trade and markets are important to get resources in the right place.