Japan has offered ASEAN energy ministers $10 billion in public finance for renewables and LNG projects, as part of a package of measures aimed at helping the group of 10 Southeastern Asian economies accelerate their moves toward energy transition.
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The offer, made during an extraordinary ministerial meeting June 21, comes at a time of increasing pressure in the financial sector to restrict finance for fossil fuel projects.
"For us in Asia, we should not miss this trend on board and see this an opportunity to seek both transition to cleaner society system and sustainable growth," Japan's Minister of Economy, Trade and Industry Hiroshi Kajiyama told the online meeting.
"In particular in Asia, where energy demand will grow hereafter, it is essential to seek diverse and realistic energy transition, by utilizing possible energy sources and technology, while taking into account each country's peculiarity of difference in geographic characteristics and development phase," Kajiyama said.
Japan's move came after Prime Minister Yoshihide Suga's pledge during the recent G7 summit to provide comprehensive support to developing countries' realistic transition to decarbonization based on individual countries' situations.
Japan's package of actions, dubbed the Asia Energy Transition Initiative (AETI) and set to include a wide range of support measures for energy transition in ASEAN countries, was welcomed by ASEAN energy ministers, according to a joint statement issued following the meeting.
The members of the ASEAN union are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
As part of the package, Japan has proposed to help ASEAN members formulate individual roadmaps for energy transition toward carbon neutrality, with regional and individual carbon neutrality outlooks for 2050, 2060 and 2070 provisionally calculated by the Economic Research Institute for ASEAN and East Asia, or ERIA.
"Currently, ERIA is working on drawing roadmaps for each ASEAN country to achieve its carbon neutrality," Takeshi Soda, director for international affairs at METI's Agency for Natural Resources and Energy, told S&P Global Platts. "By using these kinds of analysis, Japan will support individual countries to formulate their roadmaps as we already have specific support requests from some countries."
Japan also proposed the idea of the Asia Energy Transition Finance scheme, as the region will need finance to achieve its diverse energy transition arrangements, with projects such as gas-fired power plants potentially not able to secure needed finance in the face of global headwinds against fossil fuels.
Public financial institutions such as the Asian Development Bank and the World Bank Group's International Finance Corp have been instrumental in building LNG production as well as import and distribution infrastructure in emerging Asian countries, whose low credit ratings prevent access to commercial finance.
However, this may change, with the ADB recently issuing a draft energy policy suggesting it "will not finance any coal mining, oil and natural gas field exploration, drilling or extraction activities" to support the low carbon transition in Asia Pacific, which will guide its funding strategy in the coming years.
In April, the World Bank published a report saying LNG is likely to play a limited role in the decarbonization of shipping, and recommended that "countries should avoid new public policy that supports LNG as a bunker fuel, reconsider existing policy support, and continue to regulate methane emissions."
Japan's proposed energy transition finance idea would provide ASEAN countries up to $10 billion in financial support for projects that form part of their carbon neutrality roadmaps, following individual declaration of carbon neutrality, Soda said.
"In order to secure overseas funds, we are asking [ASEAN countries] to declare carbon neutrality without a specific time frame, and we are asking the countries to draw roadmaps toward carbon neutrality," Soda said. "Japan will provide finance for projects, activities and technology that are part of the roadmap."
The $10 billion financial support aims to help ASEAN countries introduce renewables and energy conservation as well as LNG to transit away from coal. Japan also suggested that ASEAN countries could share its technological development and deployment support for offshore wind power generation, fuel ammonia and hydrogen, among other fields.
Japan now aims to reach agreement to seek realistic energy transition beyond ASEAN members at its maiden ministerial-level meeting on the Asia green growth partnership on Oct. 4, with countries such as India, Bangladesh, Pakistan, as well as with Australia, the US, Canada and the Middle Eastern countries, Soda said.