Keynote remarks by Bambang Susantono, ADB Vice-President for Knowledge Management and Sustainable Development, at the Regional Dialogue on Carbon Pricing (REdiCAP) in Central Asia, 25 February 2021
Distinguished colleagues, ladies, and gentlemen: A very good afternoon to those joining from Asia, and a pleasant morning and evening to those elsewhere in the world.
On behalf of the Asian Development Bank, it is my pleasure to deliver the keynote remarks at this Regional Dialogue on Carbon Pricing in Central Asia, which ADB is co-organizing together with our United Nations partners—UNFCCC, UNESCAP, UNEP, and UNDP.
I am especially happy to see senior government officials from Kazakhstan, the Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan, joining this regional dialogue.
The COVID-19 pandemic has led to unprecedented economic and health crises—crises that pushed many economies into fiscal deficit and created greater public debt. According to the IMF’s January 2021 update, this caused the global economy to contract by an estimated 3.5% in 2020. For Central Asia, our ADB estimates show a 2.1% contraction in GDP. It is not surprising that policy makers continue to grapple with the often-competing interests of managing health risks on the one hand, while limiting economic damage, on the other hand.
As you may know, in April last year, ADB announced a comprehensive $20 billion support package for our developing member countries, or DMCs, to help governments and businesses in our region tackle the severe macroeconomic fallout and provide needed stimulus to support economic recovery. We committed about $16.3 billion in financial and technical assistance and mobilized $7.8 billion in co-financing for COVID-19 response in 2020.
We have also been working closely with multilateral facilities and institutions to deliver safe and effective vaccines fairly and equitably to our countries. This is through our newly approved $9 billion vaccine initiative called the Asia Pacific Vaccine Access Facility, or APVAX, and our close partners include COVAX, UNICEF, WHO, the World Bank, and many more.
While we prioritize immediate support to our DMCs, we need to appreciate that recovery from COVID-19 must be “green,” inclusive, and sustainable. Championing climate action is an imperative. As we know, global greenhouse gas, or GHG emissions were significantly lower last year than in the recent past. However, with the relaxation of lockdown restrictions and a resurgence of economic activities in many countries, global GHG emissions are rising once again.
To avoid a return to pre-pandemic emission levels, countries need to carefully plan their economic recovery. The objective should be to create transformational change and work toward ambitious mitigation goals. To do this, we need green recovery plans that restrict GHG levels. Such plans must refocus our attention to address the climate crisis and build resilience, while working toward inclusive economic recovery and sustained growth.
The arguments for a green recovery are compelling. A green recovery will not only create better jobs; catalyze capital; and boost the economy—but will also protect the environment; improve the quality of life; and strengthen climate and disaster resilience by supporting a low-carbon transformation.
Our DMCs, however, will need to boost both internal and external financial resources to face the challenges of pursuing a green recovery. This is where carbon pricing instruments can play an increasingly important role in mobilizing domestic and international resources. They will also help provide financial incentives to promote mitigation actions.
Carbon pricing plays a central role in the broader climate policy architecture. A predictable and clear carbon price could be cost effective in achieving environmental goals. This could be done by putting a price on GHG emissions—either through a carbon tax or carbon markets—such as the Emissions Trading Systems or ETS. These measures can also generate additional revenue, which can then be used to contribute toward a green recovery.
I hope you are all aware of the ADB-supported regional cooperation program called Central Asia Regional Economic Cooperation program, or CAREC with 11 country membership. For the CAREC region, robust carbon pricing can help members contribute to a clean energy transition and green economic development, while maintaining energy security and supporting innovation. Carbon pricing instruments can also foster regional cooperation. Collaboration among CAREC countries can unlock the potential of cross-border and regional economic growth that is inclusive, shared, and sustainable.
After 2 decades since its inception, CAREC has matured to serve as a platform for the Central Asia region to address common economic, social, and environmental challenges that impact its citizens and communities. Applying carbon pricing instruments, in particular through market mechanisms, also fits nicely with several members’ climate action plans—as outlined in their Nationally Determined Contributions, or NDCs. Therefore, we remain steadfast in supporting the CAREC countries with the necessary assistance to use carbon pricing instruments as a part of a strategy to achieve national climate ambitions.
In recent years, there has been growing momentum on carbon pricing initiatives. Worldwide, there are 61 carbon pricing initiatives in place or scheduled for implementation—31 ETS; and various forms of carbon taxes covering 30 jurisdictions.
There is also increased impetus in Asia and the Pacific for carbon pricing. Seven carbon pricing initiatives are either implemented or emerging in our region. Kazakhstan, an early mover in the region, launched its ETS in 2013. And earlier this month, the People’s Republic of China began the operational phase of its national ETS. Singapore recently adopted a carbon tax, while Viet Nam is considering an ETS for the steel sector and market-based instruments for the waste sector. Indonesia has also drafted regulations for a pilot ETS.
In addition to domestic carbon pricing initiatives, countries can also take advantage of international carbon markets under Article 6 of the Paris Agreement, as a source of carbon finance to support mitigation action. Cooperative approaches under Article 6 provides a framework for designing bilateral and multilateral carbon market cooperation. Central Asian countries may consider how these can be used to meet their climate ambitions—articulated under their NDCs—in greater cooperation with other CAREC members.
We, at ADB, are committed to support our developing members use carbon pricing as part of their policy mix for a green recovery. It helps navigate the longer-term low-carbon development path and the pursuit of net-zero targets. ADB has long-standing engagements with carbon markets and has been providing technical capacity building and carbon finance to support GHG mitigation activities across the region.
We also see new market mechanisms emerging under the Article 6 of the Paris Agreement as an integral part of the national climate policy framework. These can help our DMCs achieve mitigation targets under their NDCs. In fact, we established an Article 6 Support Facility, or A6SF, to provide technical, capacity building, and policy development support to our DMCs. Our goal is to help them prepare to participate in the new carbon markets as envisaged under the Article 6 framework. Through the A6SF, we want to encourage innovation in developing mitigation actions. The facility also aims to enhance our developing members’ ability to contribute to international negotiations and participation in international carbon markets under the realm of Article 6.
This regional dialogue is very timely. Many countries are still working to revise their NDCs to achieve the Paris Agreement’s long-term goals. Carbon pricing can be an important way to help meet NDC targets, while raising climate awareness and ambition over time.
I would like to reiterate that carbon pricing is a critical element of the broader national climate policy framework. And this is why it has been set as the central theme of this two-day dialogue.
The CAREC region holds great potential in using carbon pricing to help drive a clean energy transition and green economic development. Coupled with the use of carbon pricing to meet NDCs, I believe the Asia and Pacific region can lead in this endeavor. And I can assure you that ADB will remain committed to support our DMCs realize this immense potential. I wish you all a productive dialogue and great success. Thank you.