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Lively. Informative. Hard hitting. ADB Insight is a new series that looks at the key development issues facing Asia & the Pacific.

Episode 3: Green and Resilient Recovery
5 February 2020

Asia and the Pacific does not have the time or the financing to deal with the economic recovery from COVID-19 and combating climate change separately. Smart climate policy will lead to more economic efficiency, it will drive new technologies, and it will lower risk. But what does a green and resilient recovery look like? What are the incentives for building back greener? And does the collective will exist to make it happen?

Nisha Pillai:

Hello, and welcome to ADB Insight, a webcast from the Asian Development Bank, focusing on the key development issues facing the Asia Pacific region. I'm Nisha Pillai. Coming up in this episode: could the COVID-19 pandemic act as a springboard towards green and more resilient economies in our region? We'll be asking, as we grapple with the triple whammy of the pandemic, the economic shock and the spectrum of climate change, could this be paradoxically, a once-in-a-lifetime opportunity for a green and resilient recovery? The recent slump in global and regional energy demand has slashed emissions of environment-ravaging fossil fuels. Green activists say we can rebuild our economies with jobs and cleaner technologies to help build a net zero future. But what does a green and resilient recovery really look like? What are the incentives to build a bank greener? What are the obstacles? And is there now the collective will to make it happen? Later in the show, we'll be hearing from an esteemed panel of experts. But first, I'd like to welcome Andrew Steer, President and CEO of the World Resources Institute, an organization dedicated to promoting economic development, while protecting the natural environment. Andrew Steer, welcome to ADB Insight on the green recovery. I'd like to start by asking you, here we are still in the thick of combating the economic and of course, the health impacts of the COVID pandemic. Is it too soon to be talking about the green recovery?

Andrew Steer:

There are two kinds of people in the world making decisions right now. There are those that are saying for heaven's sake, we're in the worst economic, the worst health crisis in the last 100 years, let's focus on that and don't worry too much about sustainability and climate change now, thank you very much, we'll come to that later. There's another group of people a growing number that say, actually, if we want to recover from the crisis in a smart way, this is precisely the time to be looking at issues of climate change. Now, why is that? It's because policymakers have to focus primarily on their citizens right now, on their health and their employment and their economic prospects. The smartest way to generate jobs quickly, is by aiming towards tomorrow's economy and not yesterday, investing in renewable energy, in energy efficiency, in public transport, in nature-based solutions. All of those will generate more jobs per dollar invested. And they will do it quicker than if you invest in yesterday's economy.

Nisha Pillai:

If you do a quick reckoning for us, looking at the climate commitments that have been made by countries in the Asia Pacific region, where do we stand?

Andrew Steer:

Well, recent months have been very encouraging when President Xi Jinping announced in September at the United Nations General Assembly that China would move towards net zero emissions by 2060. And this was a remarkable statement, and very encouraging that shortly thereafter, Japan made a commitment to go to net zero by 2050. So we're starting to see the ball rolling. Now the really important thing now is not just to focus on these very good long-term commitments, which are important, but to show that you have a roadmap to get there. And so that's where the commitments to the Paris deal come in the so called NDCs, nationally determined contributions. Those are commitments now to 2030. So far, relatively few countries have come out with NDCs. Over 50 countries worldwide have said they're going to go towards net zero by the middle of the century. We now need to see that -whether it's in Asia or Latin America, or in Europe or in the United States - we need to see that translated into a real roadmap, which of course, is what the COP26 requires. It's what the Paris deal requires - five years after the Paris deal, countries are supposed to come back raise their level of ambition.

Nisha Pillai:

I'd like to now ask you to look at specific areas which countries can tackle, and for instance, let's target energy. Asia seems to be an area, a region of the world, which is still committed to building coal-fired power stations. This is dirty energy. Whereas the rest of the world seemed to have woken up quite a bit of time ago to the fact that renewable energy is so much cheaper and more cost effective. What is going on?

Andrew Steer:

You're right that a number of Asian countries are still investing in coal. Now, we have to be honest here as well, though, and give credit where it is do countries like China, whilst they are still investing in coal, are investing more in renewable energy. I mean, China is investing twice as much in renewable energy recently as Europe or the United States has.

Nisha Pillai:

I want to ask you about the demand side of the equation. When we talk about the green revolution and the green recovery, is enough effort being put into reducing the massive amount of energy that we use to keep our buildings cool, to build our cities; we have some of the mega cities of the world in Asia, why is not more effort being put into making sure that we use less energy in our cities?

Andrew Steer:

Well, you're right asking the question, because this is really a puzzle. Energy efficiency is such a no brainer that we should do it everywhere. I mean, essentially, investing in more energy-efficient buildings pays back for itself in two or three years. And then you have a return that lasts indefinitely, so to speak. It's not happening at anywhere near the pace. There are a number of reasons. One is that the people that build buildings are often not the people that live in them. That's called the principal agent problem. And so the person who builds the building wants to do it as cheap as possible. And whilst the person who rents it is the person who paysthe heating and the cooling costs. So that's one reason. But there's a more important institutional reason as well. It's amazing but true that only one-third of the countries in the world have national level urban strategies. In other words, there's not that kind of line of sight that goes from central government, to local government, and roughly speaking, everything that needs to happen in a city in order to address climate change, roughly speaking, half of the things that need to be done in the average country, half of the things that need to be done can be determined at the city level or the province level, and half of them have to be decided at the national level, you've got to get those two in line in order to get the breakthrough that we need. And we're not yet seeing it, although there are some extremely encouraging signs. There are organisations such as C40, a group of 100 major megacities committed to climate action that are doing a great job, and ICLEI and other organisations like the World Resources Institute are doing a lot. And by the way, the Asian Development Bank is also playing a very, very positive role in this regard.

Nisha Pillai

So, Andrew, say if you were sitting in front of a policymaker and a government ministry in say, Jakarta or in Manila, for instance, what would you say to them? What could they do immediately to get immediate benefits from the green recovery? And what's the longer-term heavy work that they should be embarking on?

Andrew Steer:

Well, I would say, first of all, congratulations on having such an important job. Please look at the economics of the 21st century, not at the economics of the 20th century. Please understand that actually, investing in smart climate action is not a burdensome cost, it is an investment in a much greener and much better future. Just remember that smart climate policy will lead to more economic efficiency, it will drive new technologies, and it will lower risk. Those three things combined will lead to more confidence on the part of investors more investment, it'll lead to greater competitiveness, it will lead to more jobs. And it will lead actually, to a greener, healthier, safer, more equal world. So what are you waiting for?

Nisha Pillai:

What indeed! Andrew Steer, thank you so very much for joining us on ADB insight.

Thank you very much.

And now to our panel discussion. Joining us from the ADB is Kate Hughes, a senior climate change specialist, Patrice Clausse the Chief Operating Officer of AC Energy International, one of the biggest power generators in the Philippines. And Claire Shakya is the Climate Change Director at the International Institute for Environment and Development, the IIED. Welcome to you all. Now, I'd like to start with Kate, if I may. What two things do you think that government should be prioritising right now?

Kate Hughes:

We don't have the time to deal with the climate, COVID and biodiversity crisises separately, and the hard-fought development gains of the Asia Pacific region are really at risk. So ADB needs to continue to be a leader in terms of supporting countries to design and implement climate action and mobilise the finance to support this.

Nisha Pillai:

And give me some examples.

Kate Hughes:

You know, reducing energy consumptions in buildings is an easy example, particularly with rapid urbanisation in Asian Pacific. Or nature-based solutions, you know, they're very labor intensive, they can engage the community, but they also build resilience. And then renewable energy, which is known as a critical low-carbon solution is relatively quick build and cost effective now, but it can also build resilience to future shocks by having more flexible and distributed energy systems.

Nisha Pillai:

Patrice Clausse, can I bring you in there? Is it true that renewable energy is also quick to build and not just cost effective? I didn't know that.

Patrice Clausse:

You know, it certainly is very critical. I mean, a solar plant be built in six months to a year, easily, a windfarm, maybe a year to year and a half, maximum two years, compared to a coal plant, which in the best case is three years, more likely for five years to build.

Nisha Pillai:

So, by investing in a solar plant, for instance, you're not just aiming for a cleaner, greener energy, but you can also help the post-COVID economic recovery?

Patrice Clausse:

Yes, you certainly can because you can actually get a plant started in the sense of start the construction within three months, maybe six months, where it would take three years to plan a coal plant.

Nisha Pillai:

Important point there. Claire Shakya, the IIED works with impoverished rural communities across the Asia Pacific region. How relevant do you think that investing in a green recovery is for the kinds of communities that you work with?

Claire Shakya:

The pandemic has exposed and further entrenched vulnerabilities and inequalities across society. We know communities and multitasking with different risks - climate, economic, and now health risks. So, the green recovery really represents an opportunity to strengthen to build those resilient and adaptable societies that can respond agilely to shocks of all natures. But it really requires us to start to work in a different way, a seismic shift to business unusual.

Nisha Pillai:

I'd like to take a deep dive into power generation for a minute. Kate Hughes, many Asian governments are still committed to building new coal-fired power stations, whereas in the rest of the world, people seem to have moved on from that. Can you put this in context for us? Why is it so important to tackle power generation emissions if we're going to meet our primary Paris, climate accord targets?

Kate Hughes:

Yeah, absolutely. You know, there's a lot of statistics. But for example, in 2018, nearly two-thirds of the global growth in emissions was due to growth in power sector emissions. And now Asia Pacific represents over 50% of global emissions. So, you can't talk about reaching the Paris Agreement goals without talking about how to decarbonize energy systems in Asia. This includes both rapid increase in rolling out renewable power, but also decarbonizing end users. But at the same time, energy demand is growing rapidly in the region. And we know that without affordable and reliable energy access, we can't meet the Sustainable Development Goals. So there's really a challenge there for countries of how they're going to meet this growing energy demand, but at the same time, start the shift towards net zero. And then you have the pandemic on top of that. So how do we roll out permanent and sustained reductions? And yes, that challenge is enormous, but it's not impossible. Technology options have significantly improved, prices have dropped, particularly for renewable energy and energy storage. But we need to look at the whole package. It's not just about the technology. We need to look at the policy and regulatory frameworks, the standards, and also the people. You know, what skills do they need? How are we going to take societies with us towards that net-zero future?

Nisha Pillai:

Patrice Clausse, can you shed some light on this for us? Why is it that so many Asian countries are still committed to building new coal-fired power stations when other countries have recognised that renewable power is cheaper. Does coal still have a cost advantage in Asia?

Patrice Clausse:

Well, I mean, first of all, while a lot of countries in Asia are still committed to coal, you can notice a significant shif. In the last few months ago, Vietnam has reduced the amount of coal plants in their plan, Philippines has banned the construction of new coal plants which weren't already planned, so there is a notable reduction. Having said that, coal is probably more expensive for most of these countries, on a per kilowatt hour basis. The one thing that is still struggling with it to some degree is intermittance. What do you do on a unwindy dark night when the wind power does not tend to generate? And I think that one of the solutions there will certainly be batteries which have come down at a very very fast pace in price, and therefore are now at the cusp where they can actually provide the stabilising force which renewables would really to really compete head-on with coal.

Nisha Pillai:

So it sounds like even for baseload power, coal and renewable energy are pretty much the same, coal only has a small advantage. If countries continue to build coal-fired power stations, do they risk building stranded assets, white elephants,

Patrice Clausse:

Given that coal costs are flat, and have been flat for the last 20 years, whereas renewables is coming down, in 10 years’ time, five years’ time, 20 years’ time for sure renewables will be cheaper. And therefore building an asset that you're supposed to be using for 20, 30, 40 years at this point, investing in a coal plant poses a very material risk of a white elephant.

Nisha Pillai:

Very interesting. So Claire Shakya clearly, we're running the risk of stranded assets, but also possibly stranded communities. If coal-fired plants and coal mines are shut down, what does the IIIED's work on a just transition suggest about how to support these communities?

Claire Shakya:

It's really important to understand people's own aspirations and work along with those. It's important also to innovate. So, we need to innovate faster around those aspirations. And you can go faster if you bring together the problem holders and the innovators themselves. There's a really good example, actually from India itself, with Caledas and Banumathedas, who invented a new way of making bricks that doesn't require coal, but is actually using the byproducts of coal, fly ash. Now, this technology has spread really rapidly in India, and it's spread rapidly because the government put into place a policy that required the use of fly ash in areas around coal. And women have really taken advantage of this. The two innovators themselves didn't put a patent on the technology and it allowed communities - women particularly - to set up these new brick kilns, where you don't need to use heat in the same way, you don't have the same drudgery. Instead of being seasonal work. It's all year-round work, and you're also not having to excavate good agricultural soils to create the bricks.

Nisha Pillai:

Let's move on now from power generation to nature-based solutions, which we keep hearing about at the moment. Kate, you were talking to us about nature-based solutions right at the start. How can they be used to try and address the climate challenge?

Kate Hughes:

Yeah, absolutely. You know, nature-based solutions is certainly an area that's gaining increasing attention, and one that ADB is working on with projects in Vietnam, the Philippines, People's Republic of China. Essentially, a nature-based solution refers to actions that restore, protect, or sustainably manage an ecosystem, but at the same time address a specific challenge. And they often avoid the need for a hard infrastructure solution. So for example, ecosystem-based flood protection, such as an artificial wetland in a city, or restoring mangroves along the coastline to mitigate potential storm surges. So healthy ecosystems, which are really at the heart of a nature-based solution. they are really essential in terms of the climate crisis. They strengthen resilience, they can protect community from climate impacts and future shocks. And in certain cases, they can also mitigate the impacts of climate change.

Nisha Pillai:

Claire Shakya, the IIED works on all kinds of projects of exactly this kind with rural communities. How do we make sure that nature-based solutions actually deliver what we want them to, that they're effective on the ground?

Claire Shakya:

it's essential that we use systems that are already reaching communities at real scale. So it's not just sort of gold-plated projects in single places, or a solution that comes from outside that doesn't really fit the context. There's huge diversity in many countries - ecological diversity, social and economic. And at local levels, communities don't see nature, climate and poverty are separate issues. They're coping with these issues, collectively as a set of challenges that they're facing day to day. So in places where they have put resources down at the local level, you're really seeing a different type of response, a much greater agility and diversity of solutions, ones that we wouldn't have come up with at the central level.

Nisha Pillai:

I'd like to bring in Patrice Clausee now. Patrice, we need more money if we're going to invest in all these new projects and in these new areas. What about green finance? What has AC energy's experience been like in issuing green finance, green bonds?

Patrice Clausse:

You're spot on. We need both equity and debt for large-scale projects. And therefore, on the equity side, it is broadly available. On the debt side, the picture is more mixed, clearly green bonds help a lot because they allow you to, force you to invest in specific types of projects, which would help with climate change as an example. But also, there is a broader requirement for the finance institutions to have a more open mind for renewable projects, because they often don't fit the perfect mould of traditional energy projects. So all of these things require a slight change of mind. But it's not phenomenally difficult to get these projects financed with the help of institutions like the ADB and the private sector.

Nisha Pillai:

Good. So a voice for positivity there. I just like to ask you, Kate, are there areas that policymakers are perhaps not putting enough emphasis on, overlooking perhaps, which would give us cost effective solutions - low-hanging fruit, if you like?

Kate Hughes:

Absolutely. You know, one area that comes immediately to mind is energy efficiency. We use vast amounts of energy for heating and cooling in Asian megacities. There's huge scope to save energy in manufacturing and other industrial processes. Energy efficiency retrofits, for example, they're relatively quick to roll out and generally use proven and cost-effective technologies. And they really should be central if we're talking about green recovery packages. Of the clean energy options, they really have high job-generation potential in proportion to spend. But most importantly, investments in energy efficiency will lock in these efficiency gains and the emission reductions. So they should last. And over the longer term, if rolled out at scale, and well, then it can potentially avoid or at least delay investments in new generation, which can be particularly important for budget-constrained governments following COVID.

Nisha Pillai:

Kate Hughes, Patrice Clausse and Claire Shakya, thank you so much for joining us on ADB Insight.

Andrew Steer

Andrew Steer
World Resources Institute

Kate Hughes

Kate Hughes
Asian Development Bank

Patrice Clausse

Patrice Clausse
AC Energy

Clare Shakya

Clare Shakya
International Institute for Environment and Development

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