ASEAN steps towards energy transition by prioritizing coal phase-out

The updated ASEAN Taxonomy calls for a significant regional shift to cleaner energy that benefits the future, but comes with daunting challenges.

In March 2021, the 10-member Association of Southeast Asian Nations established the ASEAN Taxonomy Board (ATB) to issue an overarching guide for their collective commitment to transition towards a sustainable region.

This came to be known as the ASEAN Taxonomy, which was updated early this year to prioritize the phasing out of coal in power generation, a move that could mark a significant shift in the region’s energy landscape.
This updated taxonomy aims to guide stakeholders in both public and private sectors toward adopting cleaner energy sources, according to Dr. Victor Nian, CEO of the Centre for Strategic Energy and Resources (CSER).
“Phasing out coal is a very important step towards meeting our climate goals, knowing the climate vulnerability that the region has. The taxonomy probably is the first step that can provide some guidance as to where [and] how we can look at moving away from coal,” said Nian, who co-founded the independent think tank headquartered in Singapore.
He cited the environmental pollution controls, greenhouse gas emissions, and the urgency to achieve climate neutrality as primary drivers behind this change in the ASEAN taxonomy.

Moreover, the ASEAN’s shift reflects the increasing global recognition of coal’s environmental impact as the most carbon-intensive and polluting source of energy.
Nian pointed out that China, one of the region’s major partners, has ceased financing coal-fired power plant projects overseas, which has also influenced the ASEAN’s stance on coal.
The coal phase-out can have substantial benefits for the general public in the region. “Reducing pollution by getting out of coal presents a reduced health impact. Chances are you will see fewer people visiting hospitals because of asthma, because of respiratory problems,” Nian said.
Also, decarbonizing the energy system would align with the objective of mitigating the effects of climate change, especially in Southeast Asia, which is highly vulnerable to climate change and sea-level rise.
For the private sector, the updated ASEAN Taxonomy can steer investments toward cleaner energy projects, such as renewables. Nian expressed optimism that it could indicate a sustainable and economically viable direction for the private sector to transition from the coal value chain.

Challenges to coal phase-out
However, the transition away from coal comes with challenges. The coal industry is a significant employer in the region, and a drastic phase-out could jeopardize hundreds of thousands of jobs.
Countries like Indonesia, Malaysia, and Vietnam, heavily dependent on coal, may face economic hurdles.
Nian emphasized the importance of governments and stakeholders considering the socioeconomic impacts and exploring ways to move jobs to renewable sectors through retraining and other measures.
Moreover, if a coal-fired power plant fails to qualify for sustainable financing, it could impact the energy security and economic competitiveness of a country.
Nian stressed the importance of alternative energy measures such as carbon capture, sequestration, and potentially nuclear energy as options that should be included in the ASEAN Taxonomy to address such challenges.
“I think these are critical questions that need some answers right now. The answers shouldn’t just come from myself, but everyone in the region or the experts in the region, and also internationally, so we can bring the best knowledge and best practices to the region to accelerate the development of the taxonomy and push forward with energy transition,” Nian said.

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