South China Morning Post
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Filipino climate activists run with a banner saying “Clean Energy, Green Future” during a rally outside the Chinese consulate in Makati, Philippines, in October 2021. The group welcomed the announcement by Chinese President Xi Jinping that his country will no longer fund coal-fired plants abroad. Photo: AP
Opinion
Eye on Asia
by Mathieu Nègre
Eye on Asia
by Mathieu Nègre

US and China must return to climate cooperation soon – without Asia, the energy transition will fail

  • Asia is a major contributor to both climate-hurting emissions and climate-helping solutions, from renewable energy to electric vehicles
  • For key decision-makers in the region, this is a chance to continue to show leadership and move forward – the West cannot lead the energy transition alone
Mathieu Nègre
Mathieu Nègre
Why you can trust SCMP
China’s recent decision to suspend cooperation with the United States on climate change comes at a very inopportune moment, given the increased importance of Asia in the fight against climate change.

Awareness of the need for an energy transition has come later in Asia than in Europe. This was partly justified by Asia’s lower share of historic carbon emissions. Back at the Earth Summit in Rio de Janeiro in 1992, the Asian continent was responsible for only 16.5 per cent of historic emissions.

But 30 years of industrial success and urbanisation have modified the landscape. According to the latest data, Asia’s share of emissions is now up to 31 per cent while that of the old industrial nations (Europe and the US) is down to 46 per cent – and Asia’s share will most probably continue to increase.

But Asia is both the problem and a big part of the solution. For instance, solar energy is a stronger proposition than 10 years ago. Solar panel makers in many countries are now competitive in the market without subsidies. This progress is largely due to cost savings as Chinese solar energy companies increased their market share, which has grown to above 80 per cent in most areas of the supply chain.

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Huge solar farm at Mexico City market being built with 32,000 panels from China

Huge solar farm at Mexico City market being built with 32,000 panels from China
Similarly, the top 10 producers of batteries for electric vehicles are all in Asia, and they have played a pivotal role in the surge in electric vehicle sales. Asian companies also play a leading, if not critical, role in promoting wind energy, high-speed rail, bicycles and many of the semiconductors that improve energy efficiency around the world. And this list could go on.

Asian start-ups are also rising through the ranks. BloombergNEF recently released a study about “climate unicorns”. It estimates that 13 companies from Asia have reached that status, making the region the most represented after North America, and ahead of Europe.

Solving the climate crisis hinges on action taken in Asia

No wonder diplomats have tried to carve out an exception for the fight against climate change, even in times of political disagreements. We saw this at the COP26 climate meeting in Glasgow, where, despite geopolitical tensions, the US and China issued a joint declaration to remind the world that they intended to deal with climate change “through cooperation in multilateral processes”. We saw it again last June when the White House announced a two-year pause on any new solar import tariffs.
As an example of the level of interdependence, Chinese producer BYD announced in June that it would soon be supplying Tesla. Other battery suppliers to Tesla are from Asia as well. Meanwhile, the American company is continuing to bet on China with a potential new plant next to its Shanghai Gigafactory.
It is logical that more regional actors are committing to a meaningful energy transition. It started at the country level, with China making the unexpected but welcome pledge in September 2020 to strive for carbon neutrality by 2060. Soon after, Japan and South Korea separately pledged to reach net zero carbon emissions by 2050. Last November, India surprised the world by also pledging to reach net zero, by 2070.

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India’s renewable energy ambitions turn desert into solar energy powerhouse

India’s renewable energy ambitions turn desert into solar energy powerhouse

The movement is also being confirmed on the ground by individual companies joining climate initiatives in ever-increasing numbers. The latest progress report from the Science-Based Targets initiative shows that 449 Asian companies had an approved science-based target or a commitment towards it at the end of last year, 20 per cent of the global total and ahead of North America.

Importantly, the level of acceleration among “high-impact companies” is similar to what we have seen in Europe. This is a welcome development, as there is still a lot of ground to cover, with most of such companies not having a commitment in place yet.

It is no longer possible to see the energy transition as something that the US and Europe can lead alone, which is why China’s decision to pull back from working with the US on climate issues is a significant setback. The length of this cooperation suspension is not known yet, but the shorter the better, given the urgency of climate action.

For the key decision-makers in the region, this is an opportunity to continue to show leadership and move forward. A successful global energy transition cannot take place without Asia.

Mathieu Nègre is head of Union Bancaire Privée’s (UBP) emerging equities impact team and co-manages UBP’s impact emerging market strategy

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