Asia’s role in the transition to net zero

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The region must transform its growth patterns, write Declan Magee, principal economist for climate change and sustainable development, and Abdul Abiad, director of macroeconomic research at the Asian Development Bank.

With each passing year, the effects of climate change are increasingly visible in developing Asia and the Pacific – from unprecedented floods to extreme droughts and devastating storms. The region is one of the world’s most vulnerable to climate change. About 70% of the global population susceptible to sea level rise is in developing Asia.

Natural resource–based sectors, such as agriculture and fisheries, which are directly affected by climate, account for around a third of total employment in the region. If left unchecked, things will only get worse. A report released by the Asian Development Bank last year found that, under a high emissions scenario, climate change could impose losses of 24% of gross domestic product for developing Asia as a whole by 2100 (Figure 1).


Figure 1. Climate change will hit Asia’s GDP
Change in GDP (%) in developing Asia under a high emissions scenario by 2100

Note: Change in GDP is relative to the scenario without climate change. Scenario results are for Intergovernmental Panel on Climate Change Representative Concentration Pathway 8.5/Category 8 Pathway. Mean losses over the period are generated by harmonising to RCP 8.5 via reported damage functions, averaging across results of reported individual model runs and extrapolating aggregate losses from 2070-2100 via damage functions. The sector composition of losses is held constant over 2070–2100 as damage functions are only reported at the aggregate level. For this reason, the sector composition of losses after 2070 should be interpreted with caution.

Source: ADB, Asia in the Global Transition to Net Zero


But the region also accounts for an increasing share of global greenhouse gas emissions. Although historical emissions from developing Asia were low, they have been growing faster than the global average. The region’s share of global GHG emissions doubled from 23% in 1990 to 46% in 2020. Asia is expected to continue contributing about half of global emissions until mid-century, under current policies (Figure 2).

For these reasons, it is often said that the battle against climate change will be won or lost in Asia. Growth in the region has relied heavily on polluting activities, with the emission intensity of GDP currently 41% higher than the rest of the world. Achieving development goals while avoiding catastrophic climate risks cannot be done without transforming Asia’s growth patterns.

Meeting the Paris agreement 2015 goals requires drastic transformations of energy and land use in developing Asia. The transformation of Asia’s energy sector is already underway but requires a further increase in investment and a reallocation towards cleaner sources.


Figure 2. Asia expected to contribute half of all global emissions
Global annual greenhouse gas emissions, 1990-2020, GtCO2e = billion tons of carbon dioxide equivalent.

Notes: Emissions from land use change and forestry, which can be positive or negative, are included.

Source: World Resources Institute, Climate Watch


In 2021, $468bn was invested in power supply in developing Asia, of which $397bn was in renewable energy, electricity networks and storage infrastructure. To achieve Paris agreement goals, the 2023 ADB report found that average annual investment in energy until 2050 would need to increase to $707bn, corresponding to between 1.5% to 2.7% of GDP for the economies analysed.

While the transformation has cost implications for economic activity, more international coordination could substantially lower the costs of achieving the Paris agreement goals. Many lower-income countries in developing Asia would benefit the most from international carbon trading, with revenues from carbon-offset exports being potentially greater than the cost of decarbonisation.

More importantly, the transformation will deliver non-climate ‘co-benefits’ in the short run (better health and fewer deaths due to lower air pollution, for example), and economic benefits from reduced climate damage over the medium to longer term. Under an accelerated global net zero scenario, the net present value of benefits is five times the cost for developing Asia (Figure 3).

If, as described in ADB’s Asian Economic Integration Report 2024, trade becomes a key promulgator of regulatory standards for climate change and for the transfer of green technology, countries that can start transforming their economic structure to be part of green supply chains and green trade stand to benefit enormously.


Figure 3. Benefits of net zero far outweigh costs
Annual net policy costs, climate benefits and air quality co-benefits in developing Asia of the accelerated global net zero scenario relative to the current policies scenario, 2020-2100, $bn

Notes: Benefits from reduced climate change are generated using damage functions from van der Wijst, K. et al. 2023. New Damage Curves and Multimodel Analysis Suggest Lower Optimal Temperature. Nature Climate Change 1777.

Source: ADB, Asia in the Global Transition to Net Zero


Last year, ADB published its Climate Change Action Plan, which sets out how it will shift the way it operates to help its developing member countries meet their climate objectives. ADB’s ambition is to provide cumulative financing of $100bn from 2019-30 to tackle climate change. In 2023, ADB revised its Capital Adequacy Framework to make $100bn in additional finance available to its clients over the next decade. Also announced last year, the Innovative Finance Facility for Climate in Asia and the Pacific seeks to use $3bn in guarantees to create up to $15bn in new loans for climate projects.

While these innovations provide much-needed funding, they are a fraction of the region’s climate finance needs, which ADB estimates at $1tn-$1.5tn annually. Institutions like ADB need to find ways to catalyse private sector finance at scale to reduce this climate finance gap further – ADB is already doing this and looking to do more.

For example, under the Energy Transition Mechanism, ADB is using market-based approaches and public and private finance to help countries retire coal power assets early. Platforms such as the Nature Solutions Finance Hub and the Association of Southeast Asian Nations’ Catalytic Green Finance Facility use blended finance to derisk investments into nature and green infrastructure.

As well as mobilising climate finance, countries must embed climate change in their budget, planning and risk management frameworks. Well-formulated policies are needed in critical areas such as adaptation, carbon pricing, facilitating the adoption of low-carbon technologies and ensuring that vulnerable groups are shielded from the costs of climate change and climate policy. These changes are needed to ensure that Asia can enjoy rapid development progress in a low-carbon and climate-resilient world.

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