Welcome remarks by Ahmed M. Saeed, ADB Vice-President, Operations 2, at the East Asia Forum, 20 April 2022
Distinguished guests, ladies and gentlemen, a very good morning, afternoon, or evening to all of you. It's my pleasure to welcome you all to the first ever ADB East Asia Forum.
Since I joined ADB, almost exactly three years ago, I have been thinking hard about how we as an organization can work with our developing member countries to move the needle on key development issues. A large part of that time has been spent in helping guide our institution’s response to the COVID-19 pandemic. And there are three lessons for the battle against climate change that I hoped to share with you that I draw from this deeply scarring experience.
The first is that much like issues of global health, the decarbonization process is a key part of the development agenda. There is only one kind of development and that is green development. Just as one cannot fully enjoy the fruits of prosperity without health, we also cannot develop at the expense of our environment. This is of course, no surprise to many of you. The second is that the greatest and most significant challenges ahead lie at the intersection of various disciplines. To address climate change, we must integrate thinking about finance, technology, and policy—all in new ways and at a deeper level than before, much as COVID has forced us to integrate epidemiological insights with macro forecasting, for example. And the final point is that, just as the instruments, institutions, and coordinating ecosystem must evolve to respond to COVID, so too they will need to change and adapt at a structural level to be successful in the fight against climate change.
In all these and other ways, COVID-19 should be understood both as a tragedy in its own right, as well as a dress rehearsal for an even greater challenge—the looming climate crisis. We all collectively share this planet. And COVID-19 tells us that if we don't solve our problems in one place, they will overwhelm us in others. But with that warning also comes with opportunity to collaborate and to build something that meets the challenge of the present time.
Climate change is the biggest risks we confront. Great power rivalries come and go. The world has certainly seen them before, that climate change is a challenge to human civilization. And we will either meet this challenge in some fashion or we will leave a legacy of failure for our children.
In ADB, we see that more and more, the subject of climate change is the single cross-cutting theme that affects everything we do. We cannot improve the lot of women if we don't address climate change. We cannot uplift the poorest of our societies who get hurt more than others if we do not address the consequences of climate change.
This is why I'm so pleased that in its first year, the East Asia Forum has decided to focus on decarbonizing Asia and the Pacific as its topic of discussion. As we look forward, let me make four points about the path ahead.
First, we will not succeed if we continue to talk about climate transition as something the developing world must do in order to atone for the sins of those who prospered before them. We currently have a paradigm that talks about climate transition as a burden sharing process. For example, this idea of $100 billion that will be transferred from polluters to those now seeking to grow. This is unfortunately a very inadequate framework. In fact, if we are able to scale decarbonization technologies and to continue to drive down their cost, the world we transition to can be better in every way than the one we are living—cleaner and cheaper. I think that such a paradigm shift really must happen in the developing world and we must pivot from a model where we view climate change as something that we are being asked in developing countries to do by others, and to pivot to recognizing that this may in fact be the greatest development opportunity we have ever seen, that the kind of capital that can flow to developing countries and the kind of skills and high quality jobs that can come with it are unparalleled in recent history. This is what I have come to call “decarbonization as development.” Developing countries have an opportunity to establish a beachhead in the technologies and industries of the future, and to win the fight for productivity enhancing FDI.
Second, we must explore new ways of thinking about the macroeconomics of climate transition, or more broadly, the macroeconomics of paradigm changes. For example, do existing climate mitigation models do a good job of incorporating best in class insights about the trajectory of price associated with core decarbonization technologies? This is an extraordinarily important point, because if you underestimate, price moves downwards, we may end up with poor investment choices. Besides that, system-wide structural transformations that are driven by fast evolving disruptive technologies must be better understood and integrated as key elements of the climate transition process. Unfortunately, the current macro-modeling approaches commonly deployed for climate change are based mostly on conventional single equilibrium frameworks focused on policy choices on the margin of optimally efficient systems. Such approaches do not pay sufficient attention to the role of diffusion of disruptive technologies that can accelerate the pace of decarbonization, nor to the feedback loops between public sector policy choices and the price curves of such technologies. Driving prices down will bring the goal of decarbonization nearer in the future and will allow for win-win climate outcomes.
Third, we're all in this together, but we will need to learn how to work together. This broad ecosystem of diverse actors must focus on its unique strengths and improve collaboration. Multilateral development banks like ADB will of course, have a key role to play in this process. I would include OneADB and knowledge work here and I'm very proud to see that this East Asia Forum will culminate in a very important session on “deepening partnerships,” and the launch of the OneADB Knowledge Working Group, which has been set up to facilitate knowledge transfers across ADB’s developing member countries. Besides knowledge, partnerships are critical because the investment needs are enormous. Such sums will not be achievable through the public sector alone, and we will need the private sector to step up in a big way. But the fact that the private sector needs to act doesn't mean that the private sector has all the tools it needs at its disposal. In particular, the interface with government is absolutely critical. The underlying investment needs for climate transition are often described as an enormous cost, but in fact, they are largely good investments that will earn a positive economic, financial and or social return. Despite this, we often do not see funds flow, in part because of failures in financial intermediation. Institutions like ADB will need to step up our work to facilitate the process by which market intermediaries are developed with the right profile— the right kind of investment return targets for example, or the right kind of duration capacity.
My fourth and last comment is that collaboration only thrives in a context of common purpose. Whatever in any organization’s intermediary success metrics are, when it comes to climate change, we must all be focused on adherence not only to process but on fidelity to ultimate purpose. The question is not, how much green finance did you mobilize or whether your bond fits within a certain taxonomy, it is whether you move the needle forward on eliminating GHG outcomes. That is a question that we can embed in process, but process alone will be insufficient to ensure a good outcome. Good outcomes will only come from individuals and institutions that share common purpose.
I would like to conclude with a reminder that the battle against climate change will be won—or lost—in the Asia Pacific region. What are we willing to do to win this battle? Let us collectively share our experience, thoughts, and ideas in this forum. But even more importantly, let us challenge ourselves to collectively act, design, and implement concrete initiatives to reach carbon neutrality. This will be a long journey, but it has begun, and the destination is already within sight.
Let me end with thanks to Ma Jun, to all of our speakers, to the participants and finally, to my own colleagues in East Asia Department of the ADB for coming up with a strong concept for this forum, for bringing together an exceptional cast of speakers, and for recognizing the importance of facilitating knowledge transfer across Asian Development Bank's developing member countries.
Thank you so much. It's a privilege to be with you.