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Small business has big role in fighting for climate goals

Asian governments can spur change with smart policies on emissions and waste

| China
Recycling rare metals from old mobile phones is an environmentally friendly opportunity for small businesses.

It has been dubbed the "Uber for trucks." The e-logistics company Huochebang in China has developed an online platform that coordinates truckers, shippers and service centers. By the end of last year, the company was working with 2.3 million truckers and 350,000 shippers in more than 360 Chinese cities.

The business startup stands as a great example of innovation that is helping alleviate global carbon emissions. Its service reduces empty miles and waiting times between loads, making shipping more environmentally friendly.

In India, Attero Recycling is pioneering India's nascent e-waste recycling market, using proprietary technology to extract metals from discarded electronics.

In the Philippines, Imperial Homes, through its Via Verde Homes unit, is erecting "green" buildings and helping low-income Filipinos save on electricity bills. It is demonstrating that low-cost, low-carbon housing can simultaneously help solve the country's housing backlog and contribute to reducing emissions. Compared with conventional homes, Via Verde houses consume 32 to 42% less energy, 20 to 28% less water and 26 to 38% less building material.

These cases highlight the huge business opportunities that exist in tackling climate change and the benefits delivered to people. And the lessons are being widely shared across sectors and borders, for example, at a forum on climate-friendly investment convened in New Delhi last week by the International Finance Corp. (IFC), a member of the World Bank Group.

A growing "green" market

Today, private global climate-related markets are worth over $1 trillion. This includes renewable energy ($297 billion), energy storage ($2.5 billion), green buildings ($388 billion), climate-smart urban transport ($365 billion), water recycling ($23 billion), and municipal waste management ($160 billion). This rapid growth is expected to continue: By 2040, renewable energy investments world-wide could climb to $11 trillion annually with half that in the Asia-Pacific region according to the International Energy Agency.

The region's biggest investment potential is in China, where the government has designated renewable energy as a strategic industry. The country now has more than one-third of the world's wind power capacity and a quarter of its solar power, and is leading a revolution in battery technologies. China added 35 gigawatts of solar power and 23GW of wind power in 2016 -- equivalent to energy use of over 40 million households.

Meanwhile, at the other end of the scale, in Papua New Guinea, global solar manufacturers are entering the local market for the first time. A $3.3 million investment -- funded primarily by the Australian and New Zealand governments under an IFC program -- has, since 2014, led to about 20% of the population now having access for the first time to off-grid renewable energy -- including solar lighting and phone charging.

The potential is enormous, as noted in IFC's latest report, Creating Markets for Climate Business, which illustrates the role business can play in helping developing countries meet their climate targets.

Smart policy reforms that support innovative companies -- such as Huochebang, Attero and Imperial Homes -- could trigger trillions more in investments and deliver on the promise of the historic Paris climate change agreement. At the same time they could generate jobs.

Smart policies include putting prices on carbon, water and waste, removing fossil fuel subsidies, entering into public private partnerships to design, build and operate sustainable urban infrastructure, and instituting efficiency standards such as building codes and vehicle emissions limits.

Market-creating policies needed

Take for example, market-creating policies like renewable energy auctions. More than 15 countries held auctions in 2016, including China and India. This has led to increased competition, with record-breaking bids cutting the installed cost for renewables to their lowest levels to date.

While the market outlook is good for grid-tied renewable energy, policies are still needed to address risks, including uncertainty about grid access, unclear land titles, and a high cost of financing. Governments can foster attractive markets for grid-tied renewables through setting targets, adopting supportive renewable energy policies, ensuring non-renewable polices align with renewable energy goals, and adapting policies to manage dynamic market needs as the share of renewables in the energy system grows. The policies can help deliver renewable energy at lowest cost to the consumer.

Meanwhile, a blend of regulatory, financial and voluntary moves can tackle barriers that prevent greater private investment in green buildings. Voluntary rating systems, building codes, tailored financial incentives and greater action by utilities can all help.

For example, in Indonesia, the government with assistance from the IFC is seeking ways to cut greenhouse gas emissions in the capital, Jakarta. Indonesian officials have acknowledged that reducing the building sector's carbon footprint would be crucial for their goals to significantly reduce emissions over the coming years. Jakarta's building sector accounts for more than a quarter of the country's total energy use and buildings are expected to consume 40% of total national energy consumption in the next two decades.

Jakarta has introduced a mandatory code for energy- and water-efficiency requirements for large buildings, including both old and new constructions, albeit with different standards. The rules are integrated into the building permit application process. The private sector has risen to the challenge. In the last three years, companies have built about 18 million square meters of new green floor area in the capital. Already, we estimate that over 700,000 metric tons of carbon emissions have been avoided and energy savings of almost $70 million have been made in the last three years.

The bottom line is climate friendly businesses are already helping -- and can help even more -- to set Asia-Pacific countries on track to meet their Paris commitments. Businesses are already innovating. But they need the smart policy reforms to help deliver more for the climate.

Vivek Pathak is IFC director for East Asia and the Pacific. IFC is a member of the World BankGroup, and the largest global development institution focused exclusively on the private sectorin developing countries.

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