Project LINK meeting

Beyond growth: Towards a green future

Sweta C. Saxena

New York | June 19, 2019

MAIN MESSAGES• Broadly stable growth outlook and low inflation

MAIN MESSAGES• Broadly stable growth outlook and low inflation

• …has come at a cost of social inclusiveness and environmental degradation

Economy

SocietyEnvironment

MAIN MESSAGES• Broadly stable growth outlook and low inflation

• …has come at a cost of social inclusiveness and environmental degradation

• Time to raise our ambitions beyond economic growth

MAIN MESSAGES• Broadly stable growth outlook and low inflation

• …has come at a cost of social inclusiveness and environmental degradation

• Time to raise our ambitions beyond economic growth

• Need an annual additional investment of $434 billion ≈ 27₵/person/day ≈ 1 per cent of GDP to achieve a greener future.

MAIN MESSAGES• Broadly stable growth outlook and low inflation

• …has come at a cost of social inclusiveness and environmental degradation

• Time to raise our ambitions beyond economic growth

• Need an annual additional investment of $434 billion ≈ 27₵/person/day ≈ 1 per cent of GDP to achieve a greener future.

• These ambitions are largely affordable with strong development partnership.

Economic outlook for East and South Asia

6.15.8

5.6 5.5

6.15.9

5.6

6.1

2017 2018 2019 2020

Perc

enta

ge

East Asia South Asia

Economic conditions in East and South Asia are largely stable

GDP growth, year on year

Inflation remains at a relatively low level

Inflation

1.9 2.1 2.2 2.3

4.7

7.2

9.8

7.5

3.9 3.5

4.7 4.8

2017 2018 2019 2020

Perc

enta

ge

East Asia South Asia South Asia (without Iran)

Bottom 10%

Middle 40%

Top 10%

Top 1%

100

150

200

250

300

350

400

450

50019

80

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

Inde

xFocusing on growth alone has come at a cost to social inclusiveness…

Average income in Asia1980 = 100

Source: World Inequality database (accessed on 31 January 2019)

… without further action, hundreds of millions will still live in extreme poverty

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

1000000

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Num

ber o

f peo

ple,

thou

sand

South Asia

East AsiaRest of the world

Data source: DESA estimation

Over 130 million people will still be living in extreme poverty in the East and South Asia by 2030!

…and has come at a heavy cost to the environment…

Annual CO2 emissions in billion tonnes (GT)

Source: Carbon Dioxide Information Analysis Centre (CDIAC).

5 out of the top 10 countries in the world that are most severely affected by climate change are located in the region

For a future that we want: Investment in Sustainable Development Goals

People Planet

Prosperity

From 17 Goals to 3 dimensions… spanning people, prosperity and the planet … supported by good governance and strong partnerships

Survey 2019 estimates an investment gap of $1.5 trillion per year or 5% of GDP for developing Asia-Pacific …

Survey 2019 estimates an investment gap of $1.5 trillion per year or 5% of GDP for developing Asia-Pacific …

Annu

al a

vera

ge, 2

016-

2030

$

billi

ons

in 2

016

cons

tant

pric

es

669

People Prosperity Planet

Survey 2019 estimates an investment gap of $1.5 trillion per year or 5% of GDP for developing Asia-Pacific …

Annu

al a

vera

ge, 2

016-

2030

$

billi

ons

in 2

016

cons

tant

pric

es

669

People Prosperity Planet

Survey 2019 estimates an investment gap of $1.5 trillion per year or 5% of GDP for developing Asia-Pacific …

Annu

al a

vera

ge, 2

016-

2030

$

billi

ons

in 2

016

cons

tant

pric

es

669

People Prosperity Planet

Affordable and clean

energy

… or ≈ $1 per person per day

≈$1 43₵

NO POVERTY & ZERO

HUNGER

HEALTH AND EDUCATION

12₵

SUSTAINABLE INFRASTRUCTURE FOR ALL

37₵

CLEAN ENERGY FOR ALL

PROTECTION FOR NATURE

It’s within reach!

Investing in PEOPLE to realize basic human rights and human capacities

• Targeted cash transfer32

317

421

158

138

0

100

200

300

400

500

600

700

Additional investment inPEOPLE per year

billi

on, U

nite

d St

ates

dol

lar

• Social protection floor

• Nutrition-specific interventions

• Agricultural productivity

• Universal health coverage

• Universal access to quality education

Investing in PLANET to secure our future through clean energy and climate action and living in harmony with nature

102

242

180

156

0

100

200

300

400

500

600

Additional investment inthe PLANET per year

billi

on, U

nite

d St

ates

dol

lar

• Universal access to electricity

• Universal access to clean cooking

• Renewable energy

• Energy efficiency

• Biodiversity

Investing in PROSPERITY to improve access to infrastructure

126

56

14

0

20

40

60

80

100

120

140

160

180

200

Additional investment in thePROSPERITY per year

billi

on, U

nite

d St

ates

dol

lar

• Transport

• Information and communications technology

• Water and sanitation

Investment gap varies significantly across the region, rising to 16% of GDP in LDCs and 10% in South Asia

Inve

stm

ent g

ap b

y su

b-re

gion

s an

dan

d co

untry

gro

up, %

of G

DP

Similarly, Pacific SIDS face steep challenges due to high vulnerability to climate change, but results are not shown given limited data availability.

02468

1012141618

Leastdevelopedcountries

South andSouth-West

Asia

South-EastAsia

East andNorth-East

Asia

North andCentral Asia

People Prosperity Planet

Investing in SDG 7: Affordable and clean energy

Methodology • Model: International Energy Agency’s World

Energy Model• Scenarios:

Current Policies Scenario (CPS)

New Policies Scenario (NPS)

Sustainable Development Scenario

(SDS)

Baseline scenario NDC scenario SDG integrated scenario

Policies and measures enacted or adopted by mid-2018.

Baseline scenario + policies announced but not implemented as of 2018.

Achieve SDG 7 + Paris Agreement.

Methodology - continued• Group targets under Goal 7 to estimate

investment needs

o Goal 7.1: By 2030, ensure universal access to affordable, reliable and modern energy services

o Goal 7.2: By 2030, increase substantially the share of renewable energy in the global energy mix

o Goal 7.3: By 2030, double the global rate of improvement in energy efficiency

Methodology: Goal 7.1 & 7.2

Additional investmen

t needs

Incremental capacity

needs

Unit capital

cost

Methodology: Goal 7.1 & 7.2

Additional investmen

t needs

Incremental capacity

needs

Unit capital

cost

0

10

20

30

40

50

60

2016 2018 2020 2022 2024 2026 2028 2030

Pow

er g

ener

atio

n ca

paci

ty

• Future energy demand projectiono GDP growtho Inflationo Populationo Urbanizationo Historical energy demand

by different energy type (e.g. coal, solar, hydro, wind, nuclear etc.)

• Future energy demand by energy type, based on different scenarios

Existing capacity after power generation infrastructure retirement and depreciation

Required future capacity to meet future power demand Others

Nuclear

Wind

SolarHydro

Methodology: Goal 7.1 & 7.2

Additional investmen

t needs

Incremental capacity

needs

Unit capital

cost

Country-level unit capital cost to build energy infrastructure by different energy type

Methodology: Goal 7.3

Additional investmen

t needs

Demand for energy

efficient equipment

Additional amount to

procure such equipment

compared with a baseline

• Future demand for energy efficient equipment

o GDP growtho Inflationo Populationo Urbanization

• Future demand for energy-efficient equipment by sectors (transport, buildings and industry) in different scenarios

Demand for energy

efficient equipment

Methodology: Goal 7.3

Additional investmen

t needs

Demand for energy

efficient equipment

Additional amount to

procure such equipment

compared with a baseline

• Additional procurement costs

o Taxo Freight costso Labor costs

related to installation

Investing in SDG 7:The results

Developing Asia-Pacific countries need an annual additional investment of $434 billion during 2018 – 2030 to achieve SDG 7 (Unit: billion USD, 2016 prices)

CPS NPS SDS

SDG7.1 Universal access to electricity - 8.6 10

SDG7.1 Universal access to clean cooking - 0.4 2.0

SDG7.2 Substantially increase renewable energy’s share in the energy mix 131 152 242

SDG7.3 Double energy efficiency 101 134 180

Total 232 295 434

Most investment is needed to increase renewable energy’s share in the energy mix and improve energy efficiency

Incremental annual investment needs to achieve SDG 7 for Asia Pacific region in 2018 – 2030, by sector

0

50

100

150

200

250

300

350

400

450

CPS NPS SDS

billi

on, U

nite

d St

ates

dol

lar Double energy efficiency

Substantially increaserenewable energy's share inthe energy mixUniversal access to cleancooking

Universal access toelectricity

China, India and South-East Asian economies need the most investment

Incremental annual investment needs to achieve SDG 7 for Asia Pacific region in 2018 – 2030, by country

0

50

100

150

200

250

300

350

400

450

CPS NPS SDS

billi

on, U

nite

d St

ates

dol

lar

Other developing Asia andthe Pacific

North and Cantral Asia(excluding Russia)

Russia

South-East Asia

India

Korea

Investment in affordable and clean energy can largely contribute to reduction of CO2 emissions…

CPS

NPS

SDS14000

15000

16000

17000

18000

19000

20000

21000

22000

2017 2025 2030

Mill

ion

tonn

es o

f car

bon

diox

ide

Energy related CO2 emissions in Asia Pacific region

… and improve air quality

CPSNPS

SDS6

8

10

12

14

16

18

2017 2025 2030

Mill

ion

tonn

esof

par

ticul

ate

mat

ter (

PM2.

5)

Energy-related particulate matter (PM 2.5) emissions in Asia Pacific region

… contributing to reduction of premature deaths

0.00.51.01.52.02.53.03.54.04.5

2017 2025 2030 2017 2025 2030

NPS SDS

Mill

ions

of p

eopl

e

Premature deaths due to air pollution in Asia-Pacific region

Can we work on a goal plan?

Prioritizing Goals: considering both progress and investment gaps

Strong partnership between public and private sectors

Strong partnerships are critical to finance investment in clean and affordable energy

Governments need to provide an enabling investment environment

Share of global investment in renewable energy projects in 2016

Private sector, 92%

Public sector

Demand-side interventions: improve risk-return profile of investment opportunities

• Prioritize non-fossil fuel power generation as part of integrated energy planning and investment processes

• Provide policy framework to incentivize and reduce risks in private sector’s low-carbon investment

Provide policy framework to incentivize and reduce risks in private sector’s low-carbon investment

Policy de-risking instruments: address the root causes of risks

• Support for renewable energy policy design• Implementation and enforcement of minimum energy efficient

standards

Financial de-risking instruments: financial products that transfer risks from private to public

• Loan guarantees• Public equity co-investments

Direct financial incentives: direct financial transfers or subsidies to low-carbon energy investments

• Removal of fossil fuel subsidies• Carbon pricing

Removing fossil fuel subsidies

Fossil fuel subsidies (2014)

Removing fossil fuel subsidies and introducing a carbon tax

Fossil fuel subsidies (2014)

Carbon tax revenue (2018)

Removing fossil fuel subsidies and introducing a carbon tax can largely reduce the additional investment requirements for developing Asia Pacific

Fossil fuel subsidies (2014)

Carbon tax revenue (2018)

Additional annual investment needs to achieve SDG7

44%

Supply-side interventions: shape the availability of private financing for low-carbon investments

Financial system reforms: align financial systems with sustainable development

• Bangladesh: Environmental Risks Management Guidelines for Banks and Financial Institutions

• Indonesia: Sustainable Finance Roadmap

New low-cost asset classes: emerging asset classes and sources for capital

• Green bondIn 2017, green bond issuance reached $43 billion in Asia and the Pacific, accounting for more than a third of the global volume.

• Impact investment• Digital finance

Partnerships with MDBs

• In 2014, China announced a $3.1 billion South-South Climate Change Fund.

• In 2017, India contributed $100 million to South-South cooperation trust funds and an additional $50 million to member States of the Commonwealth.

Takeaway messages

TAKEAWAY MESSAGES• Growth in Asia is not delivering a future that is

sustainable• Urgent actions are needed to transform to a low-

carbon economy• The ticket is affordable

at an additional $434 billion per year ≈ 27₵/person/day.

• …which brings co-benefits to PEOPLE and the PLANET

• We need strong development partnership to ensure NO ONE IS LEFT BEHIND!

For a green future that we want!