Energy transitions are not new. In the past 200 years, each successive transition — from wood to coal, then from coal to oil and gas — happened with the discovery of a more efficient, abundant new source of fossil fuel coupled with technological innovation. But the promise of the next transition to sustainable energy may be very different. This transition will be unprecedented, in that it will be necessary to phase out almost all fossil fuels. In the past, one fossil fuel did not completely replace another, as evidenced by the continued use of coal in electricity generation long after gas and oil production took off.
A shift to renewables after more than a hundred years of dependence on fossil fuels may hold the promise of opportunities for economic growth and environmental sustainability, but also raises concerns about workforce and technological redundancies, increase in costs of living, and disproportionate impacts on vulnerable communities.
The latest Southeast Asia Climate Outlook: 2023 Survey Report demonstrates that while the region’s citizens are hopeful of the positive impacts of energy transition, they are also wary of some of the associated externalities or external costs. More than 66 per cent of regional respondents believe that phasing out fossil fuels has long-term economic benefits, while only 8 per cent disagree (Fig 1). Positive perceptions about transition are the highest in countries that are leading in renewable energy generation, such as Vietnam. They are also high in countries developing lucrative supply chains of critical minerals, such as Indonesia. These optimistic perceptions are backed by data — a study by the International Renewable Energy Agency shows that a more ambitious approach to energy transition may increase the region’s GDP by 3.4 per cent while increasing employment by 1.0 per cent and social welfare by 10.9 per cent in the 2021-2050 period, compared to scenarios based on existing renewable energy goals.
Figure 1. Reduction of dependence on fossil fuels will be painful in the short term but beneficial to ASEAN economies in the long term. Do you agree?
High levels of confidence in the economic benefits of transition are also apparent in regional perceptions of fossil fuel subsidies. Figure 2 shows that over 51 per cent of regional respondents want to end fossil fuel subsidies, while 31.8 per cent are unsure and 17.1 per cent disagree. The strongest support for ending fossil fuel subsidies are from Vietnam, Singapore, and Thailand respondents. These are encouraging signs within a discourse that is dominated by fears of social unrest instigated by higher energy prices. Subsidies for fossil fuels continue to undermine the competitiveness of renewable energy and perpetuate the use of obsolete and inefficient technologies. These resources should instead be used to address the huge gap in renewable energy investment. One 2018 study found that for every dollar invested in renewable energy, five dollars went to fossil fuel subsidies. Indeed, there is a strong case for targeted subsidies to help the approximately 36 million people in the region who live below the poverty line as opposed to giving blanket fuel subsidies which, according to the IMF has surged to a record US$7 trillion since 2015. The Bantuan Langsung Sementara Masyarakat programme was designed by the Indonesian government to shield vulnerable communities from cuts in fossil fuel subsidies and has achieved some level of success, despite many challenges.
Figure 2. Fossil fuel subsidies can hinder clean energy transition. Should fossil fuel subsidies be cut in your country?
While the respondents expressed positive views regarding energy transition and ending fossil fuel subsidies, the survey also highlights some key concerns. As shown in Figure 3, more than half the region’s respondents are worried about rising energy prices and cost of living — issues that take prominence in Singapore and Thailand. While the energy transition may influence the cost of energy in the short-term, research points towards savings of US$160 billion in energy supply costs cumulatively to 2050. In addition, energy transition can lower externalities to human health and the environment. This can range from US$508 to US$1,580 billion. Policies that prioritise the long-term economic benefits of renewables, while providing targeted subsidies can address concerns regarding the impact of energy transition on energy prices and costs of living. Studies generally agree on the distributional impacts of energy transition on vulnerable groups. One study has demonstrated that it can be relatively inexpensive to compensate the most vulnerable households with a cash transfer to lessen the distributional impact of a carbon tax.
Around 20 per cent of the region’s respondents are worried that a transition will lead to energy shortages. This perception is the highest among Vietnam respondents who experienced severe blackouts in June 2023 when El Nino caused hydropower reservoirs to dry up. However, existing data highlights that a transition can enhance energy security, provided that renewable energy generation is complemented with sound battery storage systems and increased cross-border connectivity. Job losses and increased social inequality caused by transition were not seen as major issues by regional respondents, which belies the critical importance of addressing these impacts to ensure a just transition.
Figure 3. What is your top concern about the impact of transitioning to renewable energy/ cutting fossil fuels?
With an equal mix of fear and hope surrounding the impending energy transition in Southeast Asia, the region’s policymakers have their work cut out for them in planning and implementing an orderly, just and equitable transition that ensures that no one is left behind.
Mirza Sadaqat Huda is Lead Researcher in the Climate Change in Southeast Asia Programme, ISEAS - Yusof Ishak Institute.
Sharon Seah is Senior Fellow and concurrent Coordinator at the ASEAN Studies Centre and Climate Change in Southeast Asia Programme, ISEAS – Yusof Ishak Institute. She is also editor of Building a New Legal Order for the Oceans.
This article originally appeared on the ISEAS–Yusof Ishak Institute's Fulcrum on 3 October 2023.