Comment: Why the voluntary carbon market is crucial to decarbonising Southeast Asia
Public health emergencies, due to record-breaking heatwaves, coastal flooding, worsening air pollution and unpredictable weather events caused by the burning of fossil fuels are pummeling cities around the world. For cities in Europe and the United States, a surge in clean energy in-vestments and decarbonisation efforts could prove to be a silver lining against this perfect storm, thanks to tax credits, incentives and rebates. The voluntary carbon market (VCM) is crucial to decarbonising Southeast Asia, as it provides incentives, incentives and rebates for homeowners to transition to solar energy through tax incentives and subsidies. The market works to reduce carbon emissions by investing in carbon-reduction projects and offsets to reduce emissions from car-bonbon emissions into the atmosphere. This may be the most-effective way to reduce marginal emissions since the carbon dioxide emissions of CO2 emissions since 1990s, and the most effective way to do so is by providing pre-payment credits for certain projects through carbon credits.
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Diterbitkan : 2 tahun lalu oleh Melissa Jun Rowley di dalam Weather Health Environment
October 17 - Public health emergencies , due to record-breaking heatwaves , coastal flooding, worsening air pollution and unpredictable weather events caused by the burning of fossil fuels are pummeling cities around the world. For cities in Europe and the United States, a surge in clean energy in-vestments and decarbonisation efforts could prove to be a silver lining against this perfect storm, thanks to tax credits, incentives and rebates.
In Oslo, the heating system is powered by 80% renewable energy and nearly all new car sales are EVs , due to Norway’s generous tax incentives and subsidies. As of 2021, there were 500,000 solar panels on rooftops in Amsterdam , where energy tax rebates are available for people who join forces to generate electricity through solar power. Trains and buses in Stockholm have been running on 100% renewable energy since 2017, and the city has set a target to become fossil-free by 2040 . While Stockholm has made a number of renewable investments, the government has made it more affordable for homeowners across Sweden to transition to solar energy through two tax incentives: the Green deduction and ROT deduction, which provide deductions on material and installation costs for solar panels.
Meanwhile, homeowners in U.S. cities are benefitting from the Residential Clean Energy Credit, which is worth 30% of the cost of installing solar and battery systems. This is part of the Inflation Reduction Act (IRA), which Congress passed last year. The landmark federal law provides $369 billion for renewable equipment and energy efficient home improvements.
Creating even more opportunities for cities in America, the U.S. Treasury Department and Internal Revenue Service released guidance on what tax-exempt entities, such as states, cities and nonprofits, can do to access the credits and provisions included in the IRA. This means cities can receive a payment equal to the value of a tax credit for building a clean energy project, such as energy-efficient retrofits for buildings or a fleet of electric buses.
However, for cities in south-east Asia, one of the world’s most at-risk regions for climate change, transitioning to renewables is more costly and challenging. These economies have been steadily growing every year, along with their demand for electricity, of which 75% is powered by the burning of fossil fuels – 50% of that from coal.
As a result, of the 40 most polluted cities in the world, 37 are in south-east Asia.
Additionally, rising sea levels driven by greenhouse has emissions are posing a major threat to south-east Asian cities. According to the Intergovernmental Panel on Climate Change, parts of Ho Chi Minh City in Vietnam and Bangkok in Thailand could be underwater by 2050.
Other than tax credits for industrial production, most cities in south-east Asia don’t have a fiscal state to provide incentives at the same level as the United States and Europe. Additionally, high transaction costs, interest rates and yields make taking a loan or raising a bond a challenge for many cities, particularly municipalities with lower credit ratings.
Addressing climate change in cities across south-east Asia isn’t only important for the region itself. It’s a significant challenge and calls for support from international governments, as the region is home to one of the top GHG emitters in the world – Indonesia. Additionally, the Association of Southeast Asian Nations (ASEAN), south-east Asia’s regional and political trading bloc, is the fourth largest energy consumer on the planet.
Even though pressure to support developing countries has been mounting, no funds are flowing from governments in the Global North to south-east Asia to support decarbonisation. This is where the voluntary carbon market can play a critical role.
The voluntary carbon market (VCM) can help south-east Asian cities go green by facilitating wealth transfer from rich countries to low- and middle-income nations that need help in the fight against climate change. Simply put, the VCM provides a way for individuals and organisations to take action on reducing overall global emissions by investing in emissions-reduction projects. The market works by governments, NGOs, or companies generating carbon offsets and selling them – most often to corporations aiming to reduce their emissions.
As consumer pressure increases for corporations to reach net zero – a balancing out of the car-bon emitted into the atmosphere and the carbon removed from it – the demand for carbon offsets is growing . Cities can meet this demand by identifying renewable energy projects that will reduce emissions and by having a buyer provide prepayment through carbon credits – permits that represent emission reductions from climate action projects and allow the owner to emit a certain amount of GHG into the atmosphere.
Carbon credits can compensate for the high transaction costs that come with clean energy interventions in south-east Asia and thereby unlock investment. This may be the most cost-effective way to reduce emissions, since the marginal cost of abatement in the region is less costly than in the Global North because the low-hanging fruit has already been done there with the help of tax incentives.
Through optimising the VCM, cities in south-east Asia that don’t have tax incentives like those in the U.S. and Europe, still have an opportunity to transition to clean energy, generate revenue and help their countries decarbonise. And time is of the essence.
For the world to meet global environmental targets, specifically net zero carbon emissions by 2050 , decarbonising south-east Asia’s cities is paramount. This requires cooperation between governments, the private sector and cities themselves. The VCM provides a bridge to bring these key bodies together, while bolstering an exchange that can facilitate environmental and economic solutions for cities and countries across the globe.