The transition to green energy in Southeast Asia is indeed a multifaceted and financially demanding process. The phenomenon of ‘greenflation’ is becoming increasingly relevant, as the move from fossil fuels to low carbon technologies leads to higher costs, attributed to the pricier nature of these innovative technologies.
Malaysia’s National Energy Transition Roadmap is a testament to the region’s commitment to decarbonization, with a goal to secure over 25 billion ringgit in investments by 2030 and the establishment of renewable energy zones. Yet, concerns arise, as highlighted by Deputy Prime Minister Fadillah Yusof, regarding the sustainability of funding for these technologies amidst the risks associated with new technologies and the effects of greenflation.
Industry experts, including Prakash Sharma of Wood Mackenzie, recognize the legitimate worries surrounding greenflation in Southeast Asia. Factors such as escalating capital expenses and supply chain complications are having a significant impact on the affordability of renewable technologies.
The economic repercussions of decarbonization are anticipated to be widespread in Southeast Asia. Energy-exporting nations like Indonesia and Malaysia could incur considerable initial expenses due to carbon levies on fossil fuels and the heightened costs of metals and minerals essential for electric vehicles and other green technologies. However, Oxford Economics projects that, despite the initial surge in energy costs and economic challenges, the long-term benefits from these investments will be favorable.
Singapore presents a unique case; Oxford Economics forecasts that the initial financial burden of decarbonization will be relatively minor. Nonetheless, the National Climate Change Secretariat of Singapore has raised issues concerning the limited alternatives for green energy procurement, considering the nation’s limited land area. The full scope of these challenges and the strategies to overcome them are complex and require careful consideration and planning. The path forward involves balancing the immediate financial impacts with the long-term environmental and economic benefits of a sustainable energy transition.
