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Growing Champions: Malaysia’s climate agenda advantage in adversity

WRITER : Dave Sivaparasad
PUBLISHER : The Edge Markets

Covid-19 has triggered widespread disruption around the globe, presenting the nations of Southeast Asia with an unprecedented opportunity to pursue policies, investments and behavioural changes that mitigate impacts and build a sustainable future.

Malaysia faces a key moment in its climate journey, with a unique opportunity to drive a green recovery agenda. Budget 2021 offers an encouraging start, with RM2 billion allocated under the Green Technology Finance Scheme, introduction of the Sustainability Bond, and the RM30 million Save 2.0 programme encouraging adoption of energy-efficient domestic appliances.

Malaysia has significant potential to unlock new sources of growth and economic advantage for the country with a comprehensive climate and sustainability agenda.

A path to informed change

Southeast Asia is at a crossroads. Combining targeted national measures with a comprehensive regional approach could unlock long-term competitive advantage for the region. These are the conclusions of Boston Consulting Group’s (BCG) report — Climate Action & Sustainability: Advantage in Adversity — released at the recent Singapore Summit.

More than 75 million citizens live in low-lying land that is five metres above sea level or lower in Southeast Asia. Over 1.5 million people in Malaysia live below this measure, which is set to be topped if global warming exceeds 2°C above preindustrial levels. The regional population that could be displaced by climate-driven sea level rises stands at 11.9%, more than double the global average.

The ongoing Covid-19 pandemic offers an unprecedented opportunity for change. But there cannot be a one-size-fits-all approach across the region. Southeast Asia requires both the commitment and the investment to succeed. Just 0.5% of more than US$290 billion (RM1.18 trillion) committed to a post-Covid-19 recovery is thus far focused on sustainable investment. Charting the path ahead will require targeted policies that address the unique challenges and opportunities of the individual nations of this diverse region.

Malaysia is at an important nexus of Southeast Asia. Its diverse yet integrated cultures reflect the spirit of cooperation at the heart of any successful regional climate action. Malaysia’s position on the cusp of developed nation status means it can provide a framework for growth that could be emulated by the developing nations of Southeast Asia and beyond. In addition, Malaysia should be celebrated for its environmental abundance. Protecting the nation’s diverse flora and fauna from the impact of climate change is a responsibility that Malaysia should also be proud to embrace.

Malaysia is in a unique position to realise advantage in adversity through climate action. Government, business leaders, investors and civil society all have a role to play in the transformation that is needed. The global priority in spurring a green recovery as we emerge from this pandemic is to focus on green job opportunities, adapt to changing workforce needs and manage job transitions over the long term.

Capitalise on Malaysia’s natural assets: Half of Malaysia’s land is still under forest cover. This is a national asset that is a deep source of strength for the country in its climate transition. Changes over the last decade have resulted in more sustainable stewardship of this vital resource, reducing overall national emissions and offering a positive framework for the future.

Today, the carbon sink of LULUCF (land use, land-use change and forestry) offsets Malaysia’s emissions by more than 60%. BCG’s research has shown there is significant job creation potential in nature-based solutions — estimates indicate that twice the number of jobs are created for every dollar of investment in afforestation, reforestation and forest preservation compared with the same level of investment in other sectors. This is an advantage that Malaysia can leverage.

Energy and resource efficiency to strengthen competitiveness: Energy and resource efficiency, coupled with enhanced demand-side management, is a valuable pathway to reduced emissions in Malaysia, while enabling deeper competitive advantage for industry and businesses in the country. Most estimates point to a potential 10% to 15% reduction in primary energy demand through energy-efficiency and demand-side management initiatives. For businesses, in particular, the opportunity is a two-fold benefit.

First is to drive operational efficiency and resource productivity that achieve a dual objective of both emissions reduction and waste reduction to realise cost savings. Second is to scrutinise the full length of supply chains, with BCG’s report highlighting how emissions from supply chains are up to 5.5 times greater than direct business emissions.

Scaling up these measures through digital technologies and connected devices could manage and better match electricity demand and supply, creating a more efficient power ecosystem. A commitment by utility Tenaga Nasional Bhd (TNB) to expand smart meter and smart grid initiatives by installing nine million units nationwide by 2021 is creating an important foundation to ongoing demand management.

Transform transport to create jobs: Transport is another key area that offers Malaysia important potential for transformation. Transport currently accounts for 21% of national emissions, with cars contributing more than half of the sector’s total. Improving public transport infrastructure will help reduce transport emissions, particularly if first-mile and last-mile connection issues are addressed to create a more integrated public transport network.

Creating a more conducive environment for electric-vehicle (EV) adoption is another key opportunity. Encouraging uptake will not only improve low-carbon transport but also unlock the potential for the local automotive industry to scale EV manufacturing and expand the associated EV manufacturing supply chains — contributing to jobs and the economy.

Future-proof the energy system: Transitioning the energy system towards low-carbon operations remains an important priority. Malaysia is endowed with rich renewable resources and has the opportunity and potential to further accelerate and scale renewables in the long term.

Global corporates and investors are increasingly making choices on where to invest and locate their operations based on access to clean and renewable energy. Shifting the energy supply mix towards a greater share of renewables in Malaysia reflects positive steps towards this agenda. The recent fourth round of large-scale solar procurement to add 1GW of new solar energy capacity offers positive signs on how energy systems can contribute to Covid-19 recovery and long-term economic resilience.

These changes will take time. This crisis offers the opportunity to take action and lay the foundations for the future. The commitment by US President-elect Joe Biden to rejoin the Paris Climate Agreement, alongside China’s plan to become a net-zero country by 2060, offers global glimmers of hope for this journey.

Malaysia has been buffeted by the headwinds of a global pandemic in 2020. Climate change represents another growing storm on the horizon. With the right commitments, Malaysia can leverage this period of growing adversity to generate significant sustainable value for the nation.