The analysis, titled Accelerating Net-Zero: Critical Opportunities in Asia Pacific’s Climate Policy, flagged the widening gap between climate commitments and rising greenhouse gas emissions in a region that produces more than 60 per cent of the world’s climate pollution.
Asia Pacific’s current climate pledges under Nationally Determined Contributions (NDCs) to the Paris Agreement would cut nearly half a billion megatonnes of CO2-equivalent emissions by 2030 — just 3 per cent of total emissions. But reaching net zero will requires cuts of 2.6 per cent every year until 2050, the report warned.
Asia Pacific’s 2030 emissions trajectory factoring in NDCs [click to enlarge]. Source: Deloitte/IEA
Achieving the region’s net zero ambitions has the potential to grow the Asia Pacific economy by US$47 trillion by 2070, but requires a massive scale-up of emerging technologies and build-out of new industries, which could unlock US$80-US$90 trillion in investment by 2050, the study projected.
In 2023, Asia Pacific invested a record US$840 billion in low-carbon technologies. But investment must nearly triple to US$2.3 trillion annually by 2030, and expand further after the decade’s end to ramp up renewables generation, modernise grids, and transform industrial processes, the study said.
It proposed four key elements that are pivotal to Asia’s transition – cleaner fuels, critical minerals for transition technologies, battery production, and industrial transformation to decarbonise heavy industry.
‘Future fuels’ and transition speed
The hardest sectors to transition – heavy industry, aviation, and shipping – cannot easily be electrified, and while solar, wind, and electric vehicles (EVs) are scaling rapidly, hard-to-abate sectors will require fuels with higher energy density, which Deloitte refers to as “future fuels.”
These fuels include clean hydrogen, synthetic fuels like methanol and ammonia, and biofuels produced from crops or agricultural waste.
Fuels required to decarbonise carbon-intensive industries [click to enlarge] Source: Deloitte
But across the region, production of these fuels is currently minimal. Biofuels account for less than 4 per cent of transport energy, and less than 1 per cent of hydrogen consumed in the region is green. Uptake of sustainable aviation fuels (SAF) and low-carbon maritime fuels is also low.
To scale these technologies, the region must agree on standards, definitions, and carbon pricing to enable certification, transparency, and ease of trade, the report noted.
Despite obstacles to growth, Deloitte forecast that hydrogen demand will grow to 66 million tonnes by 2030, and to 236 million tonnes by 2050, almost entirely from clean sources. By mid-century, emerging fuels could meet 77 per cent of aviation fuel needs and 83 per cent of maritime fuel demand, it predicted.
Critical minerals, batteries and industrial decarbonisation
The report identified three other areas that must scale quickly to deliver necessary emissions cuts by 2030.
The first is critical minerals. Demand for lithium, nickel, cobalt and rare earths is surging – the EV fleet in Asia Pacific is projected to reach 671 million vehicles by 2050 – each requiring, on average, 53 kilogrammes (kg) of copper, 40kg of nickel, 13kg of cobalt and 9kg of lithium.
But supply is geographically concentrated, in countries such as Indonesia (nickel) and Congo (cobalt), and environmentally problematic. In the same week that Deloitte launched its study, news emerged that a nickel mine had re-opened in the biodiversity hotspot of Raja Ampat in Indonesia, despite protests from environmental groups.
Battery production must also scale up to bring greater stability to electricty grids importing renewable energy and aid electric vehicle growth. Most Asia Pacific economies have emissions targets for power generation, but few have specific strategies for battery storage and transport, the report noted.
In addition, falling prices and uncertain trade conditions complicate battery investment and supply chain decisions. Meanwhile, the regulatory, market, and grid infrastructure is not yet in place to support large-scale EV charging, grid storage or more distributed power-systems, the report read.
The final piece of the decarbonisation puzzle is carbon-intensive industries. Asia Pacific dominates global industrial production – accounting for 74 per cent of steel, 77 per cent of cement, 65 per cent of chemicals and 50 per cent of fertiliser output.
Hard-to-abate sectors such as steel and cement must shift away from fossil-intensive processes, yet commercially viable alternatives are limited, the report said. It noted that carbon capture, use and storage (CCUS) will be necessary as well as emerging negative emissions technologies that can convert carbon emissions into a resource.
What’s at stake
Decarbonisation could lift Asia Pacific’s gross domestic product (GDP) by 7.5 per cent by 2070, equivalent to US$47 trillion in net present value – more than the combined economies of Australia, India and Japan today.
Failure, however, could cost the region US$96 trillion in climate damages, with agriculture, infrastructure, and labour markets most exposed, the report said.
K Ganesan Kolandevelu, Deloitte Southeast Asia’s sustainability and emerging assurance leader, said that the region’s path to net zero will be “defined by how effectively we tackle the next wave of decarbonisation.”
“Clear and coordinated policy direction is essential to unlock large-scale investment, provide certainty for emerging technologies, and foster cross-border collaboration. At the same time, businesses must reimagine operations and supply chains to capture opportunities in new low-carbon industries,” he said.