Asia-Pacific Region Seen as Key in Global Decarbonization Push

11 major countries from the Asia-Pacific (APAC) region, with economies spanning Australia to Thailand, will play a vital role in global decarbonization efforts, Goldman Sachs reported in a recent study.

“APAC’s relevance for the global race to net zero will continue to increase due to the region’s dominance in the global green supply chain, and its significant emissions footprint, which accounted for over half of global fossil-fuel related emissions in 2020,” Goldman wrote Nov. 20 in its ‘APAC Decarbonization’ research report.

The consultancy believes “the path towards net zero will bring unique opportunities and challenges in Asia, considering the role that governments, companies and consumers will have to play in driving balanced outcomes for socio-economic growth while mitigating the region’s impact on the global climate system.”

The 11 APAC countries tracked in the study include Australia, China, India, Indonesia, Japan, Malaysia, New Zealand, Philippines, Singapore, South Korea and Thailand. Of those economies, the top two (China and India) are responsible for 39.2% of the 52% total global CO2 emissions. They are also home to a combined population of 2.8 billion people, according to Worldometer, a major tracker of world statistics from population to coronavirus cases.

As part of a global race to net zero, APAC countries will see absolute emissions grow while driving down emissions per GDP this decade, the report said. Emissions reductions are needed to reach the Paris Agreement’s goal to limit global warming to well below 2 C, and preferably to 1.5 C, compared to pre-industrial levels.

China, the largest source of emissions among APAC countries, has pledged to bring the country's carbon emissions to a peak by 2030 and achieve carbon neutrality by 2060, Reuters reported in November.

“Absolute emissions from APAC should increase by approximately 5% by 2030 compared to 2020 despite a 50% cumulative growth in GDP.” – Goldman Sachs

Nevertheless, China is still moving ahead with an additional 197 GW of coal-fired power generation to maintain the stability of its power grid.

Emissions to escalate before tapering off

“Absolute emissions from APAC should increase by approximately 5% by 2030 compared to 2020 despite a 50% cumulative growth in GDP,” Goldman said. “While this would lead to a 30% reduction in emissions per GDP this decade, requiring significant investments to transition the existing energy infrastructure and improve energy efficiency, accelerated pathways may be needed beyond this decade globally to meet the Paris Agreement’s objectives.”

This compared to developed economies like the European Union and the U.S., which are forecasting a reduction between 33%-36% in absolute emissions by 2030 versus 2020, the report said.

“Nationally determined contributions targets set by major APAC economies imply a divergence in absolute emissions footprints, with advanced economies mostly decreasing absolute emissions while emerging counterparts continue to see growth through 2030,” the consultancy said. “On an intensity basis, most countries will achieve 4%-45% cumulative reductions in emissions per GDP this decade.”

Goldman also said that “despite the lack of absolute emissions reductions through this decade, targets set by Asian economies will require a significant transformation in the region’s energy system to offset the environmental impact of economic growth where renewables and energy efficiency will play critical roles.”

COP27 prompts stronger decarbonization targets

The recent COP27 held in Sharm El-Sheikh, a resort town on Egypt’s eastern coast, saw representatives from nearly 200 countries, including more than 100 heads of state, meet with a shared aim to strengthen the international response to the climate crisis. Climate change has continued to wreak havoc across the globe from Africa to Europe and in the Americas from the U.S. to Brazil.

This year alone, five APAC countries represented at COP27 ­­— Australia, India, Indonesia, Singapore and Thailand — have established stronger 2030 decarbonization targets despite macro headwinds and rising energy security and inflation. Collectively, the five countries enhanced their emissions reduction ambitions between 2pp-17pp from previous goals.

Goldman Sachs’ estimated percentage point (pp) reductions by 2030 for APAC countries include:

• Australia’s aims to reduce absolute emissions by 43% compared to 2005. Australia was previously targeting a 26%-28% reduction, which implies strengthening absolute emissions reduction goals by 15pp-17pp;
• India, which wants to reduce emissions per GDP by 45% compared to 2005. Previously, India was targeting a 33%-35% reduction in emissions per GDP, which implies strengthening emissions per GDP reduction goals by 10pp-12pp;
• Indonesia’s plans to reduce emissions by 32% compared to 29% previously compared to a business-as-usual (BAU) scenario, with conditional targets to reduce emissions by 43% compared to 41% previously, which implies strengthening absolute emissions reduction goals by 2pp-3pp;
• Singapore’s intention to reduce emissions to around 60 million tons of greenhouse gases (GHG) by 2030, after achieving peak emissions prior to 2030, which implies strengthening an absolute emissions reduction goal by 8pp; and
• Thailand’s goal would reduce GHG emissions by 30% by 2030 compared to a BAU scenario, with conditional targets (with international support) to reduce GHG by 40%, which implies strengthening absolute emissions reduction goals by 10pp-15pp.

While most major Asian economies have set net-zero targets, the timeline for reaching those goals vary largely due to differences in the stage of each country’s economic development, Goldman Sach’s report said.

“The ability for these countries to reach net zero will largely hinge on potential cost breakthroughs in green technologies and the level of coordination between stakeholders including corporates, consumers and governments to shore up capital to meet investment needs,” Goldman said.

APAC accounts for more than half of global emissions