Opportunities in Asia’s low-carbon future
Asia is on its way to a low-carbon future. Could Australian and NZ businesses capitalise on this energy transition?
- Many Asian countries have set carbon emission reduction targets, although with varying timeframes and levels of ambition.
- Australian businesses can capitalise on opportunities in Asian markets, including in energy infrastructure and associated services, and embedding environmental, social and corporate governance (ESG) into investments.
- To capture these opportunities, governments have a role to play in setting the framework to nurture and position businesses for success in future-focused industries.
By Rou-Hui Wong
Climate change is expected to hit Asia hard and other countries no doubt will be watching how the world’s most populous region takes action. Asia’s transition to net zero is sure to be scrutinised.
Of the 13 Asian countries on the World Economic Forum’s Energy Transition Index, fewer than half were considered ready for energy transition, according to the World Economic Forum’s April 2021 Fostering Effective Energy Transition Edition Insight Report. The rest were classified as emerging countries or countries with potential challenges.
These difficulties are particularly acute in South-East Asia where the effects of climate change will bring rising sea levels, more intense rain, heatwaves and drought.
The region’s vulnerability to climate change and consequent destruction of lives and livelihoods is complicated by the lack of energy transition readiness, unequal access to energy and a lack of funding that constrains innovation.
Recognising the threat to the region, some nations have announced carbon emission reduction targets. It’s worth noting that these targets reflect varying levels of ambition and not all countries are on track to meet theirs. China, the world’s largest emitter of carbon dioxide, committed to becoming carbon neutral by 2060. India, the world’s third-largest carbon emitter, is targeting net zero carbon emissions by 2070.
Indonesia, the world’s largest thermal coal exporter, aims to reach net zero carbon emissions by 2060. Japan, Korea and Vietnam have pledged to reach net zero by 2050.
Picture: Energy company Sun Cable has plans for the world’s biggest solar farm that will send energy from northern Australia to South-East Asia.
Opportunities for businesses
Australia’s established trade and investment ties with key Asian countries positions it well to support this energy transition. Four out of five top export partners for Australia are in Asia: China, Japan, Republic of Korea, and India, according to the Department of Foreign Affairs and Trade (DFAT).
Export of goods remains the key component, but this reliance on traditional exports may no longer give Australia a competitive advantage in the future. The nation needs to start exploring untapped services opportunities, particularly adapting to climate change impacts and mitigating carbon emissions.
An increasing number of Australian and New Zealand businesses have well-developed offerings in climate technology, including rooftop solar installations, energy efficiency, technology solutions (smart grids and innovative grid solutions) and specialised intellectual property for renewables. There are also other opportunities in ESG cooperation, investment funds and energy consulting.
Both the public and private sectors are developing technology and expertise in new areas: growing the hydrogen industry; investing in large-scale energy storage; reducing steel and aluminium industries’ emissions reduction costs; reducing emissions through carbon capture, use and storage; investing in future fuels and vehicles to reduce transport emissions.
These immediate areas of opportunity mean that Australia can use its know-how in energy services and reputation in emissions transparency to help Asian countries meet their net zero targets.
Picture: Hillridge Technology co-founders Dai Kyu Kim and Dale Schilling have created a weatherbased technology platform to help farmers mitigate the financial impact of poor weather on their crops.
The role of finance professionals
Accountants and financial services professionals will play a key role in supporting this transition. Australian companies are well placed to leverage equipment, technology and skills developed in their current industries to transition to new industries.
These businesses will be in a strong position to seize opportunities across Asia, but making such a transition comes with financial risk. Effective financial management, including rigorous planning and expenditure against budget, will be crucial to the success of these businesses.
Opportunities in investment will also require advice from accountants and financial services professionals. According to the Association of Superannuation Funds of Australia, Australian superannuation funds manage about A$3.3 trillion and are seeking areas for diversification.
Some of these funds integrate ESG as a key consideration in investment opportunities, and could lead the way on engagements with other countries. Similarly, carbon accounting will be an increasingly important part of an investment portfolio.
As an accountant, it is important to stay across these trends and emerging opportunities, particularly as the region navigates through the COVID-19 pandemic.
Picture: The MacIntyre Wind Farm, being developed by ACCIONA and Ark Energy outside Warwick, Qld, is planned to generate enough clean energy to power 630,000 homes.
Green energy innovations
- Sun Cable, the energy company, has plans for the world’s biggest solar farm in northern Australia to provide intercontinental solar power to South-East Asia via high-voltage sub-sea transmission.
- Hillridge Technology, an Australian start-up, created a weather-based technology platform to help farmers mitigate the financial impact of poor weather on their crops or livestock.
- Ark Energy Corporation, a subsidiary of Korea Zinc, aims to become the safest and most competitive producer of green hydrogen in the world. It is establishing its first hydrogen hub, “SunHQ”, in North Queensland, with plans to supply green hydrogen to third-party customers.
- ClimateWorks established best practice principles for net zero targets based on climate science. Its 2021 report, Corporate Action for 1.5 degrees: Best practice for Australian company net zero commitments, shows what net zero best practice means for business and outlines leading Australian companies and those that fell below international norms.
- Halcyon Power, a joint venture between Māori-owned Tuaropaki Trust and Japan's Obayashi Corporation, plans to produce green hydrogen using renewable geothermal energy.
- Genesis Energy and Tilt Renewables have partnered to construct the Kaiwaikawe Wind Farm near Dargaville, Northland, which will help to reduce carbon emissions.
- Waiū Dairy, a geothermal-powered dairy processing plant, is a joint venture between 11 Māori entities and Japanese investor Imanaka. The plant will produce export grade products including organic whole milk powder, milk protein concentrates and butter.
- Northland solar farm projects such as Pukenui, Lodestone One and Naumai will capitalise on the bountiful sunshine and increase local power reliability, particularly in summer.
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