The science is clear: to prevent the most severe impacts of climate change, the world needs to transition to net zero carbon emissions by the middle of the century. Tremendous progress to this end has been made in the past several years, and despite the COVID-19 pandemic—or perhaps because of it—global net zero commitments by corporations and governments have more than doubled in 2020 from the end of 2019. Even within the most carbon-intensive segments and countries, the latest surge in public commitments to carbon neutrality highlights the fact that net zero by 2050 is the new standard for climate action.
Recently, a number of Asian countries and companies have joined the swell of bold sustainability ambition. What are these commitments and what do they mean for the global business community?
Asia Pacific - going big on carbon neutrality
Until recently, the most noteworthy carbon neutrality commitments were coming from the European Union. But with several Asian countries joining the movement, the global push toward net zero has reached a critical mass, bringing many benefits and economies of scale.
The latest commitments include:
China’s net zero by 2060 target
With China joining the movement during Climate Week, more than half of the world's gross domestic product (GDP) will now be generated in regions with binding net zero targets. China is responsible for around 28% of global emissions, and as the world’s biggest energy financier, its transition away from fossil fuels will shape the rest of the world’s low-carbon journey.
Japan’s net zero by 2050 target
Japan boasts the world’s 3rd-largest economy, which until now has been powered largely by coal generation. With its commitment to carbon neutrality, the country has indicated that it will shift this reliance on coal as a domestic energy security measure. The country is also a leader in technological advancements, such as carbon capture and storage (CCS).
South Korea’s net zero by 2050 target
Increasing pressure from the commitments of its neighbors China and Japan pushed the South Korean government to also announce a target year for achieving carbon neutrality. The country’s Green New Deal pledges to replace coal-fired power generation with renewable energy and put 1.13 million electric vehicles and 200,000 hydrogen vehicles on the road by 2025, among other carbon-cutting measures.
The Philippines’ moratorium on coal
In 2019, about half of the electricity production in the Philippines relied on coal. The newly approved moratorium could halt 8GW of new coal projects in the country, signaling a move towards cleaner, more flexible energy investments.
Science-based target-setting has become a business imperative in reaching the Paris Agreement’s ambition to keep global warming below 1.5 degrees Celsius. More than 1,000 companies have committed to take action under the Science-Based Target (SBT) initiative; 266 of these are companies based in the APAC region. Furthermore, over 90% of these companies have strong commitments to decarbonize their Scope 3 emissions and amplify their ambition across their value chains. More than 50 SBT-committed companies have explicitly asked their suppliers to also set SBTs.
China, Japan and South Korea all announced their commitments to becoming net zero in the span of a single month. Together, these countries buy approximately 60% of Australia’s coal exports. A dramatic reduction in the demand for exported coal could in turn accelerate Australia’s own journey toward low-carbon energy sources. (A presumed Biden administration in the U.S. may also increase pressure on Australia to develop more aggressive climate action). Meanwhile, Australia and New Zealand Banking Group (ANZ) joined CommBank, Westpac, NAB, and many others before it in announcing it will no longer finance thermal coal projects after 2030. ANZ will now screen new customers’ revenue and will not lend if more than 10% of revenue comes from thermal coal mining or generation.
China’s move toward carbon neutrality sent a shockwave through the global sustainability community and was a geopolitical move as well. With the U.S. government deciding to retreat from the Paris Agreement and announcing no commitments to carbon neutrality as of now, China’s entrance into the net zero game shows that it aims to lead the global climate action movement. With such a large global economy taking a bold stand for the climate, could other countries be inspired to follow suit?
Country commitments trickle down to corporate opportunities
More than two-thirds of APAC companies have identified climate risks as essential components to their long-term resilience strategies, and natural catastrophes have been mentioned as the greatest concerns for many companies there. Climate scenarios show that the region is among the most vulnerable to the adverse impacts of climate change. As a result, companies are increasingly aware of the actions needed to address climate-related risks, but the initiatives currently in place are not comprehensive enough to achieve a low-carbon pathway.
Corporate access to renewables in China, Japan and South Korea is also still limited, although accessibility and interest are on the rise in India, Australia, Vietnam and elsewhere in APAC. Demand for cleaner energy sources is high, not only from foreign companies with operations in Asia but also from large local companies and conglomerates. These organizations have now been directed by their governments to decarbonize to help meet goals, but have few local options to do so. These buyers may need to source energy attribute certificates (EACs) and/or carbon offsets to achieve their decarbonization objectives in the meantime.
These governmental commitments reinforce the trend towards sustainable finance and will ramp up economic opportunities that are already emerging to fill the gap. Economies in the APAC region show great innovation power and speed in leveraging trends – and net zero is one of the most powerful economic trends at present.
Regulatory change and market mechanisms need to catch up with ambition very quickly, within the next 3 – 5 years, to facilitate widespread corporate renewable energy buying, which is one of the most effective ways to drive towards collective decarbonization goals.
At Schneider Electric, we know from experience with our own sustainability journey, and by helping clients on their sustainability journeys, that the road can be complex and fraught with barriers. Contact us for help navigating your company’s goals and opportunities in the growing Asian market.