Japan is prepared to take advantage of a dramatic decrease in China’s lending abroad by assisting Asia-Pacific nations in covering the $40tn cost of battling climate change. Asia is where the world’s newest generation of coal power plants are located and contributes about half of the world’s carbon emissions. Rich nations have come under fire for allegedly not offering enough financial assistance to support underdeveloped nations in making the switch to green energy.
Tokyo’s initiatives to lead Asia’s rule-making for green financing come amid a global discussion over how swiftly nations should transition to cleaner energy in the wake of the energy crisis and the conflict in Ukraine.
Government representatives in Japan and other Asian nations have complained that global norms, such as the EU’s green taxonomy, a classification scheme designed to aid investors in evaluating sectors on environmental sustainability, are excessively strict and deprive developing nations of funds. For years, Beijing has dominated Asian development financing. However, China has recently drastically decreased its outbound financing for infrastructure projects.
“China needs to focus more on their internal market. So, when I think about the next 10 years, China today may be the largest creditor to the developing world, but there are just going to be gaps,” said Ian Bremmer, president of Eurasia Group and Gzero Media. “So it’s clear that there is going to be space for the Japanese.”
Some of the biggest financial institutions in the world, led by Japan’s Mitsubishi UFJ Bank, published guidelines for investors this week to help Asian nations hasten the transition away from fossil fuels.
Some think that Japan’s efforts to lead “transition finance” initiatives in Asia are partially self-serving. Following the Fukushima Daiichi nuclear accident in 2011, the nation expanded its reliance on coal, natural gas, and oil. The nation lacks a realistic plan to attain net zero carbon emissions by 2050 and trails some of its regional rivals in the adoption of solar and wind power.
Analysts said it makes sense for Japan to lead standard-setting in the area for transition finance and carbon-reducing technology, such as carbon capture, as Prime Minister Fumio Kishida explores government and private funding to decrease the country’s carbon footprint.
“To attract transition financing from around the world, we envision working on large-scale projects in Asia such as power generation, hydrogen and grids, as well as creating common standards within the region,” Kishida told the New York Stock Exchange last month.
Japan promised to contribute $10 billion to the transition to renewables and other clean sources of energy when it introduced the idea for an Asian version of transition finance last year. Tokyo predicts that for Asia to attain net zero emissions by 2050, it will take $40 trillion.
Some Asian officials believe that when it comes to climate aid, western donor nations have been overly rigorous and do not take into consideration variations in economic growth and the region’s geographical characteristics.
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