2022 was a year of record-breaking weather extremes. From scorching droughts throughout Europe and China to devastating floods in Australia and Pakistan, climate disasters wreaked havoc on countries worldwide. The economic cost of such climate events has increased dramatically, and countries are now prioritizing strengthening their infrastructure and systems to become more anticipatory and adaptable.
Southeast Asia (SEA), in particular, is especially vulnerable to the effects of climate change. Rising sea levels jeopardize the region’s low-lying and densely populated coastal cities, while extreme weather events such as tropical cyclones and droughts threaten livelihoods and economies. Despite this, many Southeast Asian countries have yet to implement sustainability strategies, such as carbon reduction plans and net-zero emission targets, that would help to mitigate the severity of these risks.
All these challenges underscore the urgent need for effective climate solutions. Recent advances in climate technology and solutions offer hope. From building and scaling carbon markets to investing in alternative fuels and waste circularization, companies in the region are helping to combat climate change and build more resilient communities for the future.
Leave no carbon footprints behind
Carbon markets are marketplaces or systems where carbon credits and carbon offsets can be traded, sold, and bought. One tradable carbon credit or carbon offset is equivalent to one ton of greenhouse gas reduced, sequestered, or avoided.
Carbon credits and carbon offsets are essential in the fight against climate change—they offer individuals, corporations, and governments tangible ways to neutralize their carbon footprint while improving environmental and biodiversity conservation through the proliferation of carbon mitigation projects.
There are two types of carbon markets: compliance markets which are formed due to policy or regulatory requirements— where carbon credits are created or distributed by a regulatory body; and voluntary carbon markets, where carbon offsets are issued, purchased, and sold voluntarily.
In SEA, the regional carbon market is relatively nascent and countries only have voluntary markets. Singapore is the only SEA country that has implemented a carbon tax. However, the region hosts 15% of the world’s tropical forests, making it a prime location for high-quality carbon offset projects.
There has also been a significant increase in the demand for carbon offsets, due to the intensified commitment that governments and corporations around the world have made toward addressing climate change. Overall, the potential carbon offsets generated in SEA could create USD 10 billion in annual economic opportunities by 2030.
To fully realize this economic potential, climate tech startups in the region are trying to bridge the gap between the supply of carbon projects and companies that want to decarbonize.
Indonesia-based Fairatmos has built the country’s first carbon technology platform to connect individuals and companies looking to purchase carbon offsets with carbon project developers.
Singaporean startups like Zuno and Unravel Carbon offer decarbonization solutions for enterprises. Zuno provides AI-based solutions to help companies automate their organizational carbon accounting. Unravel Carbon’s services include a software-as-a-service decarbonization platform, access to sustainability experts, and customized pathways to achieving net-zero targets.
While SEA’s carbon market needs to address its challenges with efficiency and scalability, the most pertinent issue is the varying quality and reliability of the carbon credits and offsets available. Due to the lack of a robust governance framework, it is possible that some of the privately certified carbon offsets available in the global voluntary carbon market could be ‘phantom credits’ that do not result in genuine carbon reductions.
Fortunately, efforts to strengthen the governance of voluntary carbon markets are in progress. Multiple private international initiatives have been set up, such as the Integrity Council for the Voluntary Carbon Market, and the Taskforce on Nature Markets.
Researchers from Singapore’s Centre for Nature-based Climate Solutions have created an interactive mapping software called the Carbon Prospecting Dashboard. This software is the first of its kind, and aims to support the search for high-quality carbon projects. It can identify carbon-rich forests threatened by deforestation and can quantify the environmental and societal benefits of conserving tropical rainforests.
Tropical rainforests are not only rich in carbon; they are also rich in natural capital—the economic value of the natural resources, biodiversity, and environment of a given area. A ton of emitted carbon is the same all across the globe, but when it comes to nature and biodiversity, location is crucial to determining their value.
SEA is currently rich in natural capital, but that wealth is rapidly dwindling. If the region continues its business as usual, SEA might lose up to 90% of its habitats and up to 42% of its species by 2100. However, this growing ecological deficit can be alleviated through the mobilization of investments into natural capital assets. As such, SEA is in an advantageous position of not only being able to capitalize on global carbon markets but also lead the growth of the global natural capital market.
Alternative fuels for a cleaner world
Another integral decarbonization strategy that SEA needs to adopt is the transition to clean energy and low-carbon fuels. This transition is especially necessary as SEA is the world’s fourth-largest energy consumer, with fossil fuels making up 83% of its energy supply.
On a positive note, nine of the ten member states in the Association of Southeast Asian Nations (ASEAN) have shown a strong commitment to achieving net-zero carbon emissions by 2050. 14% of ASEAN’s energy mix was renewable energy in 2020, and ASEAN as a whole has committed to increasing that number to 23% by 2025.
Green hydrogen, made through the electrolysis of water, is one of the most prominent renewable energy sources that can help ASEAN achieve its climate objectives. The annual global production of hydrogen accounts for 830 million tons of carbon dioxide a year, around 3% of greenhouse gas emissions, because 95% of hydrogen is produced using coal and gas. The remaining 5% is produced using renewables.
By shifting towards green hydrogen, which has a climate-neutral production process, the production of hydrogen can be decarbonized. Furthermore, green hydrogen can be a crucial element for decarbonizing heavy industries, shipping, and aviation.
It is clear that green hydrogen is the next big innovation in renewable energy — various stakeholders in ASEAN are beginning to lay the groundwork for green hydrogen production in their countries.
In Singapore, state-affiliated conglomerates such as Keppel Corporation and Sembcorp have inked agreements with Japanese conglomerates to build Singapore’s first hydrogen-compatible power plant, and what could possibly be Asia’s largest hydrogen transport project.
Singaporean startup SunGreenH2 raised USD 2 million of seed funding last year to continue developing their nanostructured electrodes, which can increase the water contact area during electrolysis, lowering the cost of green hydrogen production.
Indonesian oil company, Pertamina, is exploring potential collaborations with American multinational corporation Chevron and Keppel Corporation to develop green hydrogen projects in Indonesia. TGS Green Hydrogen is currently building Vietnam’s first green hydrogen plant in Ben Tre.
Despite the tough funding landscape that startups are currently facing, climate-tech startups in SEA raised a record USD 1.11 billion in the first 11 months of 2022. The renewable energy sector received the largest share of financing – a signal that investors are hungry for innovative solutions in the renewables space.
One person’s trash is another’s treasure
SEA is home to some of the largest agriculture producers globally, who are responsible for large amounts of biomass waste, including agricultural and industrial waste.
For instance, Indonesia and Malaysia produce over 80% of palm oil worldwide, which translates into millions of tons of waste annually. Coupled with often outdated and environmentally damaging practices and systems, the environmental costs are immense.
Plastic pollution is another major challenge in the region. The large volume of plastic waste produced, coupled with inadequate recycling and management systems, means that the majority ends up in landfills, waterways, and even the air.
However, waste circularization, or creating value from waste, is an approach that is steadily gaining traction. Based on the concept of a circular economy, which typically involves creating a system where materials and products are kept in circulation for as long as possible instead of being disposed of, such an approach to waste management aims to (re)capture value from waste.
In SEA, several startups are leading the way in leveraging technology to turn “waste” into valuable materials, while promoting sustainable production and consumption in the region and beyond.
Singapore-based WasteX is one startup that is looking to circularize agriculture and industry waste, by transforming biomass into higher-value products. Through providing tailored end-to-end solutions to producers, WasteX aims to help them capture greater value from their operations. For example, one of their products is a small-scale carbonizer that can be used to convert crop residue into biochar fertilizer. This not only allows farmers to reap cost benefits but also helps to lower their carbon footprint.
A biotechnology startup based in Indonesia, MYCL Mycotech Lab, has turned to mushrooms grown with agricultural by-products and waste to tackle the issue. The startup harvests mycelium, the root-like structure of mushrooms, to create materials such as mushroom ‘leather’ (Mylea) and building materials (Biobo). To date, Mylea has been featured in product collaborations with renowned fashion designers, some of which have been showcased at Paris Fashion Week.
To address plastic waste, Rebricks, an Indonesian startup, transforms multi-layered plastic—which is used to package items ranging from snacks to shampoo bottles—into paving bricks. Multi-layered plastic is often incinerated or sent to landfills since it is difficult to recycle, but Rebricks has found a way to incorporate it into paving bricks, with each containing around 20%of waste.
Similarly, Singaporean startup Magorium’s technology is able to convert unrecyclable plastics into a material that is similar to bitumen, a commonly used construction material derived from the distillation of crude oil. This material—NEWBitumen—has been used to pave several private roads in Singapore, and is set to be trialed on public roads.
Every day should be Earth Day
Climate change knows no geographical boundaries. Likewise, the solutions that emerge to address the current climate crisis should be cross-border in nature. However, obstacles remain in implementing climate tech regionally.
For instance, the lack of funding and fragmented governance in many Southeast Asian countries means that they are still underinvesting in climate solutions, despite the pressing need to do otherwise. Sector-specific barriers, such as the nascency of the regional carbon market and the lack of familiarity with climate technology among businesses, also make it difficult for the region to reach its climate and carbon neutrality goals.
Notwithstanding these challenges, investing in and developing climate solutions remains crucial. While there has been a surge in the number of climate tech startups and investments in countries like Singapore and Indonesia, more can be done to support the growth of sustainable climate solutions in SEA.
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Beyond financing, greater collaboration and coordination among stakeholders within the ecosystem would help to ensure a more unified approach to tackling climate change. It is therefore encouraging to see SEA’s startup community focusing on this space.
About the authors: This article is co-authored by Richard Mackender, Tan Shuo Yan, Teo Zhixin, and Michelle Ng.
Richard Mackender leads the Deloitte Southeast Asia Innovation team, a cross-function, cross-country unit dedicated to driving innovation as a long-term value creator across Deloitte’s Southeast Asia operations. This article was co-written with Tan Shuo Yan, Teo Zhixin and Michelle Ng, members of the team.