CARI Policy Brief: Greening ASEAN – Paper 1: Review and Recommendations for COVID-19 Stimulus Measures

By CARI | 6 January 2021

Author: Aznita Ahmad Pharmy | Research Editor: Eleen Ooi Yi Ling | Webmasters: Nor Amirah Mohd Aminuddin; Nuratiqha Abd Razak | Supervisor: Hong Jukhee
With special thanks to Nithi Nesadurai, Regional Coordinator, Climate Action Network Southeast Asia; and Chris Humphreys, Executive Director, EU-ASEAN Business Council, for providing input.

CARI is pleased to release a new series of policy papers focusing on the sustainability agenda impacting ASEAN. Particularly, by examining the COVID-19 related measures that were released since the pandemic has started. Following the onset of the COVID-19 pandemic, ASEAN countries have come up with stimulus packages focusing on several priority areas covering healthcare, workforce, tax, business, households, education, food security, and priority sectors such as tourism, hospitality, aviation and small/informal businesses.

CARI looked at the various initiatives under ASEAN countries’ stimulus packages and have narrowed down a list of recommendations, based on the stimulus packages and knowledge of the region’s current and projected climate impacts, that would allow the ASEAN countries to steer themselves on a post-pandemic recovery pathway that takes into account the coming climate crisis.

KEY FINDINGS

1) ASEAN’s economic response to COVID-19 focused on containing the pandemic, ensuring business continuity, job creation and minimising job cuts and loss of income

To counter the severe economic effects of the COVID-19 outbreak on the economy, several ASEAN countries have come up with fiscal measures focusing on:

  • priority areas covering healthcare, workforce, tax, business, households, education, food security, and
  • priority sectors such as tourism, hospitality, aviation and small/informal businesses.

There were five key insights derived from the observation of ASEAN countries stimulus packages, including the following:

  1. In the initial stages of the COVID-19 pandemic, ASEAN countries’ stimulus packages focused on tax breaks, loan moratoriums, financial support for vulnerable sectors of the economy, and healthcare.
  2. As the pandemic progressed, governments’ relief packages started to include wage subsidy schemes, cash handouts and larger financial support for businesses including SMEs, state-owned enterprises and micro-businesses.

2) Other observations of ASEAN countries’ COVID-19 stimulus packages

Other literature confirms our observations of the lack of green measures in ASEAN countries COVID-19 stimulus packages, among others

  1. ASEAN countries, as well as other Asian countries’ response to COVID-191 were found to have almost no green policies.2
  2. Around one tenth of Singapore’s stimulus package was attributed to green policies.
 Figure 1: Environmental performance indicator and green spending as a percentage of total COVID-19 stimulus.
 
  1. Low price of fossil fuel a stumbling block: ASEAN’s greenhouse gas emission grew nearly 5% in annual increase over the last two decades and in 2015, its CO2 emissions totalled 1,294.24 million tonnes3 but the current low price environment of fossil fuels make it even harder to implement a move away from fossil fuels.
  2. Developed countries in Asia Pacific offer no meaningful green policies either: Even though developed countries in the Asia Pacific region have passed their peak industrialisation phase, many do not have tangible green policies included in their recovery packages.

3) Sidelined but not forgotten: Sustainability beyond stimulus measures

It is important to note that although our observation of ASEAN countries’ COVID-19 stimulus packages appear to not place significant emphasis on climate initiatives, in recent months, there have been a series of announcements by ASEAN countries that points towards renewed enthusiasm in addressing the climate crisis. The initiatives announced include:

  • Thailand’s zero carbon strategy4
  • Cambodia’s goal to achieve carbon neutrality,5 and
  • Singapore’s national research and development budget which includes climate change research.6

4) Beyond COVID-19, climate change poses significant risks to ASEAN

The COVID-19 pandemic has shown the need for countries to build resilience against future shocks to prevent devastating economic and social impacts. The pandemic is forecasted to cause a contraction of 3.8% to Southeast Asia’s economy in 2020.7

While it is important for countries to focus on the pandemic, it should not lose sight of the risks posed by climate change.

  • Unless climate change mitigation measures are put in place, by 2050, between 8% to 13% of the GDP of countries grouped as emerging Asia (which includes ASEAN countries such as Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Thailand and Vietnam) could be at risk annually.8
  • A projection made by the Stern Review estimates the mean cost of economic impact by the year 2100 for India and Southeast Asia to be 6% of regional GDP, which is higher than the global average of 2.6%.9

To identify the priority areas for climate change mitigation and adaptation that can be included in the stimulus packages, it is crucial to understand the observed and projected impact of climate change on the ASEAN region.

Read more about the impact of climate change on ASEAN in the PDF below.

 

5) Recommendations for ASEAN to ensure a green post-pandemic recovery

This paper provides a selection of recommendations that are related to climate action and sustainability for ASEAN countries’ policies under their respective stimulus packages.

  • a. The inclusion of financial incentives for businesses, particularly micro, small and medium enterprises (MSMEs) that contribute towards a low-carbon economy
    Most of the stimulus packages announced by ASEAN countries contain loans and grants for businesses, including MSMEs. It is essential that a portion of these financial assistance are channelled towards renewable energy firms, sustainable developers and so on.
     
  • b. The inclusion of tangible initiatives to incentivise carbon emissions reduction in the transport industry, especially aviation companies
    Financial assistance provided from the government to airlines should come with a condition that the companies implement a carbon offset programme once businesses have stabilised. Countries like Singapore, Indonesia, Thailand, the Philippines and Vietnam have included some form of financial assistance for aviation companies.
     
  • c. The implementation of adaptation measures to address the decline in crop production in the Lower Mekong River Basin (LMB) due to climate change
    Countries dependent on the LMB for crop production (Cambodia, Laos, Myanmar, Thailand, Vietnam) need to allocate a portion of their stimulus packages towards fast-tracking the mainstreaming of adaptation measures by the Mekong River Commission into future development policies to protect the lives and income of those dependent on crop production in the LMB.
     
  • d. Climate action should be included in ASEAN’s regional recovery plan
    The ASEAN Comprehensive Recovery Framework adopted at the 37th ASEAN Summit in November 2020 outlined several measures that are focused on sustainability, but it should include measures that are more targeted towards climate change mitigation and adaptation as well.