The Centre for Strategic Energy Resources has published a report examining why ASEAN should learn from the EU and support nuclear power.
Asia’s energy demand is growing fast and significant energy investment is still going into coal and gas. So, as the ASEAN group of nations develop the second phase of their joint taxonomy for sustainable finance, Victor Nian, founder of the Singapore-based think tank CSER, has made the case for classifying nuclear energy as green investment.
ASEAN’s climate imperative
The ASEAN region is in a uniquely troubling position in regards to climate change. With huge populations living in climate-threatened regions, the consequences of climate change in its member states will be profound. At the same time, however, rapid economic development is driving up energy demand and that demand is largely being met with coal and gas.
As of 2020, ASEAN member states had installed 285GW of power capacity. Coal and gas made up 31.4% and 30.9% of that respectively. Worse still, ASEAN total energy demand will roughly treble between now and 2050, meaning that without strong alternative sectors, efforts to decarbonise the region’s economy will fail.
The picture for the region’s decarbonisation is not entirely bleak, however. Rapid growth of renewables is starting to meet a larger share of the region’s total and increasing energy needs. But while renewables are playing their part, there is a strong move by some countries to use nuclear energy to meet long-term demand at much lower carbon levels than oil and gas. Those moves now need wider financial support to get going.
Asia’s stifled demand for nuclear energy
Countries like Indonesia, Thailand, the Philippines and Vietnam are attempting to pave the way for new nuclear technologies like small modular reactors to boost energy security and decarbonisation.
Unfortunately, efforts to finance these projects are proving difficult. Energy from modern reactors can be inexpensive to produce but the upfront cost of development can deter private institutional investors. The technical capacity to deliver new nuclear plants can also take time to develop and often involves attracting expertise from abroad, which means attracting people and companies from more established nuclear nations seen as safer markets.
Nian’s report sees the ASEAN taxonomy as a potential solution to this. Multilateral development banks play a big role in development in the region but also tie most of their decisions to green finance outcomes and increasingly use green bonds to raise finance. So, opening up access to green finance for nuclear energy could get a number of projects off the ground and support several ASEAN member states to achieve their national policy aims.
EU Taxonomy as a model
The report examines the example of the EU’s inclusion of nuclear projects in its own sustainable finance taxonomy. Though controversial with some parts of the public there, the view was taken that nuclear power should constitute green investment where projects displaced the use of fossil fuels.
The report suggests this approach has enabled nuclear projects to seek finance from a wider pool. It is also deemed analogous because of the scale of investment involved – with the EU seeking to use the taxonomy to guide around $1tn of private and public investment decisions in decarbonisation projects.
Like the EU, ASEAN members have also ratified conventions and agreements on nuclear safety the report stresses that many have put in place regulatory bodies and standards that meet international standards. As a result, the report suggests that the revision of the ASEAN taxonomy should include nuclear energy as a suitable transition sector for inclusion, with similar requirements that projects be used to displace fossil fuel energy, not renewables.
The report was produced by Victor Nian, co-founder and chief executive officer of the Centre for Strategic Energy and Resources. Victor will be presenting on world-leading best practice relating to investment, decarbonisation and other issues at the Global Infrastructure Conference on September 12.
If you’d like to read the full report, click here.