Tokyo is steering Southeast Asia’s emerging economies in the wrong direction
Clean energy experts and climate advocates have all but accused Japan of pursuing greenwashed energy imperialism in Southeast Asia. They argue that the government is promoting technologies that masquerade as low— or zero-carbon but in reality serve to prolong fossil fuels in the region so as to benefit Japanese business interests.
One key avenue for such an agenda, they claim, is the Asia Zero Emission Community (AZEC), a Japan-led “platform to promote decarbonization in Asia” in the government’s own telling, through which Prime Minister Fumio Kishida is trying to consolidate his legacy of energy diplomacy in Asia.
In Jakarta this month, Kishida aims to bolster the multilateral framework and give it permanence by launching an Asia Zero Emission Center in the Indonesian capital and appointing Japanese diplomat Takio Yamada as ambassador to AZEC.
While I have no qualms with the criticism leveled at AZEC, I fear it misses the forest for the trees. Japan's approach reflects a deeper global divide over the energy transition. Plus, there is a confluence of interests between Japan’s energy and industrial leaders and the Southeast Asian countries that have signed on to the initiative. It is against this backdrop that Japan is promoting and supplying technologies that prolong the use of fossil fuels.
Even as China’s global infrastructure investments grab headlines, Japan is by far a bigger presence in Southeast Asia, with projects valued at $330 billion in 2022 compared with China’s $100 billion.
Since the 1960s, Japan has been a huge source of investment in the region, with its government institutions and businesses working in lockstep — the former offering insurance and loans at below-market rates, the latter exporting goods, building infrastructure, investing in plants and developing local human resources.
In keeping with the global transition to cleaner sources of energy, Japan’s infrastructure spending in the region has shifted, with more emphasis on energy projects. AZEC is the clearest sign of this shift: It is a multilateral forum made up of 11 countries and acts as a channel through which Japan and member countries coordinate policies, spreading Japanese technology and know-how, brokering deals and, generally, patting themselves on the back.
Kishida floated the idea of AZEC in January 2022, Japan and Indonesia linked arms to make it happen and in December last year, they inaugurated the initiative with all of its members.
AZEC serves several strategic objectives for Japan. It is an ideal channel for its firms to expand export markets, given the limits of a shrinking domestic market. AZEC is also a key pillar of Japan’s Free and Open Indo-Pacific strategy, late former Prime Minister Shinzo Abe’s diplomatic doctrine, revamped under Kishida, which seeks to maintain a rules-based regional order in security, economic ties and, now, energy.
Coupled with this, Japan's energy diplomacy acts as a counterpoint to China’s influence in the region.
This month’s AZEC meeting in Jakarta will institutionalize the framework, making it easier for member countries to coordinate energy policies and for Japan to distribute the energy transition financing that it has promised. Kishida might also be personally motivated by the desire to solidify his legacy in Southeast Asia as he will not run in his party’s upcoming presidential election and a new American president could shake up geopolitics in Asia.
The assertion that Japan is peddling fossil fuel-prolonging technologies is right on the money. According to the government, more than 350 AZEC projects are now under way, including initiatives involving liquefied natural gas (LNG), co-firing ammonia in coal power plants, fossil-based hydrogen and carbon capture and storage (CCS), whose effectiveness at scale is far from certain.
These projects are coming at a time when renewable energy sources — especially solar — are becoming cheaper than fossil fuels in many markets, including in Asia-Pacific.
Japan’s strategy falls neatly under the government’s “one goal, various pathways” to zero emissions mantra. But this isn’t gunboat diplomacy. Japanese financing, exports and expertise find willing customers. Vietnam became AZEC’s first beneficiary when Japanese government agencies agreed to offer financial assistance of up to $8 billion for projects related to renewables, energy efficiency, hydrogen, ammonia and CCS. To put this in perspective, that is almost one-tenth of Vietnam’s projected public spending this year.
As one of AZEC’s founding countries, Indonesia has also greeted Japanese largesse with open arms. At AZEC’s first meeting last December, Jakarta secured Tokyo’s support for 24 energy-related projects. In the words of Indonesian Foreign Minister Retno Marsudi, these agreements “accommodated the country’s steadfast push for the recognition of varied applicable ways and technology toward energy transition.”
The minister’s and Japanese government’s references to “varied” or “various” paths reflect a deeper global schism over the direction of the energy transition. On one side are Europe’s industrialized economies and the (Biden-era) United States, which have sought to ramp up global climate and renewable energy ambitions.
On the other side are emerging economies — who view renewables as a great idea but with scarce financing and requiring a massive infrastructure overhaul — and hydrocarbon exporters seeking to protect their core business for as long as possible.
A more feasible option, these parties contend, is to cut emissions from fossil fuel plants by switching from coal to gas, capturing the carbon and mixing with hydrogen. “We should abandon the fantasy of phasing out oil and gas, and instead invest in them adequately,” the CEO of Saudi Aramco, Saudi Arabia’s national oil company, proclaimed earlier this year.
In Southeast Asia, undergirding this mentality is a combination of factors that make phasing out fossil fuels and financing large-scale renewable energy projects difficult. In 2021, the Association of Southeast Asian Nations estimated that the region needed at least $367 billion of energy investments over the following five years to meet decarbonization targets. A recent ASEAN brief cites just $1.6 billion in climate-oriented blended finance (a combination of public and private investments) having been invested so far in the region.
Therefore, Southeast Asian governments, state-owned utilities and energy firms gladly welcome Japanese investment and Tokyo’s narrative, which allow the region to keep its fossil fuel plants while claiming to be on track to cutting emissions.
The “various pathways” approach may seem reasonable at first. But Japanese firms and government agencies wield the concept to downplay the region’s enormous potential for renewable energy generation and storage.
For example, new investments in gas infrastructure are being encouraged by arguing that Asia’s geography severely limits its solar and wind potential and that the region is too dependent on coal, which emits about half the amount of carbon dioxide when burned compared with gas — though this does not account for emissions from other greenhouse gases, especially methane.
AZEC members seem to have accepted these claims, signaling an alignment of Japan’s aims as both merchant and patron.
For those of us agonizing about the climate crisis, this confluence is deeply concerning. For a region so vulnerable to the impacts of a warming planet, renewable energy accounted for only about one-quarter of Southeast Asia’s total electricity in 2021. And although large-scale renewable projects grew by 20% between last year and this year, increased demand from the region’s growing economies means that to achieve net zero, three-quarters of the region’s energy needs must be met by wind and solar energy and coal-fired electricity must be phased out as soon as possible, according to the Asian Development Bank.
However, AZEC delays this process: International financial flows spearheaded by multilateral development banks should make investing in large-scale renewable energy projects easier than funding fossil fuel infrastructure. And Southeast Asian countries themselves have much to do. Energy think tank Ember, based in the United Kingdom, urges the region’s five largest countries to raise their clean energy targets, reconfigure electricity grid capacity to accommodate growing renewables and promote cross-border power integration.
Closer to my heart is Japan. The merchant must offer products that will lead to decarbonization. For this to happen, Japan’s domestic policies and innovations matter greatly. Instead of promoting technologies like CCS, LNG and ammonia co-firing, Japan’s parallel ambitions — to become the global leader in next-generation renewables like perovskite solar cells and floating offshore wind — are far more conducive to fighting climate change.
An energy roadmap and updated climate targets set to be published by the end of this fiscal year will determine how proactively Japan will take part in the fight.
Jt