Southeast Asian nations are growing increasingly frustrated with the state of climate finance, an essential component for tackling the severe impacts of climate change. Despite a recent pledge made at the United Nations Climate Change Conference (COP29) to raise financial support, experts argue that these commitments fall short of addressing the region’s urgent needs. As a result, Southeast Asia must explore alternative funding sources for both mitigation and adaptation strategies.
The COP29 meeting, held in Azerbaijan last year, concluded with a disappointing agreement for the Global South. Developed nations committed to increasing their climate finance contributions from US$100 billion to US$300 billion annually by 2035. However, this target, though a step forward, leaves much to be desired. The broader climate finance goal aims to mobilize US$1.1 to US$1.3 trillion annually by 2035, with developing countries expected to source up to US$1 trillion per year from private investments and other non-governmental channels. This raises concerns over the reliance on profit-driven investments rather than grants or low-interest loans, which would reduce the financial burden on governments in the Global South.
Representatives from the Global South have voiced strong dissatisfaction with this framework, particularly the emphasis on private capital rather than grant-based assistance. These nations argue that climate finance should prioritize grants, which would not add to the debt load of developing countries already struggling with economic challenges. Additionally, with inflation taken into account, the US$300 billion pledged by 2035 could lose as much as 20 percent of its real value, further undermining its impact.
The situation is particularly dire in Southeast Asia, where climate adaptation and resilience are becoming increasingly urgent. According to the Asian Development Bank (ADB), Southeast Asia requires an estimated US$210 billion annually—around 5 percent of the region’s GDP—until 2030 to invest in climate-resilient infrastructure. Public financing alone will not be sufficient to meet these needs. Countries in the region are already grappling with the costs of climate adaptation, including investments in agriculture, water management, mangrove restoration, and early warning systems for climate risks. The financial demands vary across the region, with costs as high as 2.2 percent of GDP for Cambodia, while more developed nations like Singapore face costs closer to 0.1 percent.
Despite this pressing need, investments in renewable energy have not kept pace with the growing demand for energy in the region. Southeast Asia is expected to account for a quarter of global energy demand growth over the next decade. However, according to the International Energy Agency, renewable energy investment in Southeast Asia constitutes only 2 percent of the global total. To meet the region’s energy transition goals, concessional finance of at least US$12 billion by the early 2030s is needed, yet this remains a distant target.
Given the inadequacy of current commitments from COP29, Southeast Asia must seek alternative sources of climate finance. Even if the climate finance goals had been more ambitious, history suggests that such targets are often not met. In 2009, developed nations pledged US$100 billion per year in climate finance by 2020, but contributions did not surpass this amount until 2022. This historical shortfall raises doubts about the reliability of future pledges.
Countries in Southeast Asia are already exploring other avenues for climate finance. Indonesia and Vietnam have joined the Just Energy Transition Partnerships (JETPs), a G7-backed initiative aimed at transitioning away from coal-fired power. Other regional efforts include the Asia Zero Emission Community (AZEC), a Japan-led project that seeks to mobilize US$8 billion by 2030 for decarbonization efforts. However, many of the AZEC initiatives still rely on natural gas and fossil fuels, underscoring the challenges of fully transitioning to clean energy.
In addition, initiatives such as the ASEAN Catalytic Green Finance Facility (ACGF) and Singapore’s Financing Asia’s Transition Partnership (FAST-P) are attempting to channel blended finance for green infrastructure and energy transition. Yet, despite these efforts, significant financing gaps remain, leaving Southeast Asia exposed to the risks posed by climate change.
The stakes for Southeast Asia are high. A study by Swiss Re suggests that if global temperatures rise by 3.2°C by 2048, Southeast Asia’s GDP could plummet by up to 37.4 percent. The urgency of the situation cannot be overstated: the region must secure substantial funding to mitigate and adapt to the devastating effects of climate change.
In light of these challenges, Southeast Asia must push forward with creative solutions to close the climate finance gap. Potential measures include debt-for-nature swaps, which offer to cancel national debt in exchange for commitments to environmental projects, and the issuance of green bonds. Additionally, support for new UN mechanisms such as the global tax convention could help mobilize resources to fund sustainable development in the Global South.
However, these efforts will likely only address a portion of the funding gap. The reality is that the region faces an uphill battle against time and financial constraints. The task of securing the resources necessary to protect Southeast Asia’s future remains a formidable challenge—but one that cannot be ignored.
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