TOKYO -- The prospects for keeping global temperatures in check seemed to be brightening as more than 70 heads of state gathered virtually over the weekend to mark the fifth anniversary of the Paris climate accord.
A report by Greenpeace released on Tuesday, however, argues that major economies trumpeting lofty goals are still not doing enough -- and that their banks need to step up.
Leaders participating in the Climate Ambition Summit reported progress on reducing warming gas output, with 24 announcing fresh strategies and accelerated targets. Since the U.S. is missing in climate action for at least a few more weeks, the summit's headliner was Xi Jinping, who declared that China would reduce its carbon intensity by over 65% by 2030, while raising its solar and wind power capacity to over 1.2 billion kilowatts.
Absent from the summit, however, were the leaders of Indonesia, the Philippines and Vietnam -- where China still has 43 coal-fired power plants under construction, by Greenpeace Beijing's count.
The Greenpeace report warns China and Japan, as well as South Korea, to avoid the double standard of setting net zero emissions goals for themselves while exporting coal financing and infrastructure to smaller neighbors.
This fall, leaders of three of Asia's four largest economies all pledged to become carbon neutral by mid-century. Japan's government and three megabanks -- Sumitomo Mitsui Financial Group, Mizuho and Mitsubishi UFJ Financial Group -- have also said they will end lending for new coal projects. But existing projects like the Vung Ang 2 power plant in Vietnam will still be bankrolled.
Over the past decade, coal financing from the three countries' public and private banks has far outpaced support for renewable energy. In that time, the Japan Bank for International Cooperation and China Development Bank invested $14.6 billion and $17.3 billion, respectively, into coal and gas projects, but each underwrote only over $2 billion for solar and wind power loans.
"East Asian finance will be as important for renewable energy in Southeast Asia as it was for coal," said Insung Lee, head of climate and energy for Greenpeace Japan.
Put another way, Chinese, Japanese and South Korean banks could have an early chance to capture slices of Southeast Asia's renewable energy market, potentially worth $205 billion -- nearly three times that of coal in the previous decade. Energy demand in Southeast Asia is expected to grow 60% between 2018 and 2040, according to the International Energy Agency.
"Public and private finance in China, Japan and South Korea risks missing out on market opportunities in [renewable energy] because they are unwilling to abandon fossil fuels," the report says.
Governments will need to help private banks break out of their comfort zone, where financial instruments exist for traditional energy projects but not for renewables.
Public and private banks in South Korea, which are not active in overseas renewable energy finance, will require government prodding. "State-backed public development banks once again need to play the trailblazer role to engage new markets," said Lee.
Although they are active lenders for renewable energy, Japan's risk-averse private banks have preferred projects in developed countries, where sovereign guarantees are not necessary. Two of Japan's three big banks, MUFG and Mizuho, have set 2030 environmental finance outflow targets at $76.9 billion and $115 billion, respectively.
To help the banks reach their targets, "A guarantee from JBIC seems to be a must for commercial banks in developing countries to finance [renewables] projects through credit mechanisms," the report suggests.
The Greenpeace report has a bone to pick with the Japan International Cooperation Agency, which provides grants to developing countries, for preferring geothermal projects over solar and wind. While geothermal fields, like hydropower, are considered a clean source of energy, the report says solar and wind power should be prioritized to create jobs more quickly in a post-COVID world.
All three East Asian giants recently signed the Regional Comprehensive Economic Partnership, which has been criticized by environmental groups for opening countries to litigation if their green regulations pose a "trade barrier."
But Greenpeace recommends taking advantage of the financial integration promised by RCEP to make inroads for renewable energy finance in emerging nations. This could even lead to cooperation across the three major economies.
"Designing a project finance deal with a combination of Japanese and South Korean [banks] co-financing a project and solar panels from China is not unthinkable," the report says.