Future Projection of ASEAN Energy   

In 2024, ASEAN countries experienced substantial economic growth, with nations like Malaysia, Indonesia, the Philippines and Vietnam ranking among the world’s fastest-growing economies. The region’s population is also projected to increase by over 19% by 2050 compared to 2020. This population growth, alongside economic expansion, is expected to drive a tripling of energy demand by 2050, reaching approximately 1,282 Mtoe.  As a result, greenhouse gas (GHG) emissions from ASEAN’s energy sector in 2050 are projected to increase up to 2.7 times compared to the 2020 levels.  

This trajectory poses significant challenges to ASEAN’s climate goals, as the region will need to reduce carbon emissions by 2.6 gigatons by 2050 to achieve carbon neutrality – a target that many ASEAN countries have already pledged to meet. One crucial pathway to mitigate this growing GHG emissions is through the deployment of Carbon Capture and Storage (CCS) technologies, which involve capturing carbon dioxide emissions from high point sources, such as industrial processes or power generation and storing them underground to prevent them from entering the atmosphere. CCS will be one of the key technologies in balancing ASEAN’s growing energy demand while reducing emissions, supporting the region’s pathway toward climate goals. While the potential for CCS is clear, unlocking its full impact will require innovative financing strategies, regional collaboration, and investment frameworks tailored to Southeast Asia’s unique need. This article will explore the preparatory actions by ASEAN to attract additional CCS finance in ASEAN.  

CCS Technologies Status in ASEAN 

With the high potential of carbon storage capacity which ASEAN has, the CCS technologies can provide a great contribution to the region in securing energy supply and gradually reducing emissions from the energy sector. CCS provides a number of benefits, such as decarbonizing hard to abate industries such as on cement and steel, and contributing to oil production by reinjection of captured CO2 into the reservoir by enhanced oil recovery (EoR) technique and production of low-carbon ethanol and hydrogen. Some CCS-matured technologies already in commercial use are CCS in post-combustion amines (power plants) and natural gas processing, transport onshore pipelines, offshore pipelines, transport ship, and carbon capture for enhanced oil recovery. Notably for the ASEAN region, the CCS technologies are still in an early stage with only three in early development, five in advanced development, and one in construction of CCS by 2023, showing that the region is still under development. To accelerate CCS technologies’ deployment in the region, a package of supporting policies consisting of the specific legal and regulatory, policy, and storage pillars including a financial support scheme is crucial. Among ASEAN Member States (AMS), Indonesia has the more complete legal and regulation specific to the CCS project but still lacks some details on cross-border carbon movement among regions. As the first country in ASEAN to implement nationwide CCS regulations, Indonesia has naturally attracted significant CCS investment and financing compared to other ASEAN Member States (AMS).  

CCS Financing Needs and its Existing Schemes 

The importance of CCS development is also realized by the banks and financiers, where they begin to shift their focus to sustainable financing, for example shifting from conventional coal-powered plants to CCS-enabled power plants. Then, it is predicted that more than USD 1.2 billion funding will be needed for CCS (or CCUS) technology’s investment in ASEAN in 2030, with an average of almost USD 1 billion per year from 2025 to 2030. Specifically, approximately USD 400-500 million per 500-megawatt (MW) coal power plant will be needed for capturing technology and USD 200-300 million per saline aquifer with a 2000-metre depth for storage technology. One of the most notable investments in the region is the Just Energy Transition Partnership (JETP), an international collaboration that channels global funds to support a “just” transition to sustainable energy. Indonesia and Vietnam are among the beneficiaries of this partnership, with Indonesia receiving USD 20 billion to limit carbon dioxide emissions from the power sector to 290 million tons by 2030 and to achieve zero emissions by 2050. Vietnam, with USD 15.5 billion in funding, aims to phase out coal-powered electricity production by 2050, converting facilities to ammonia or biomass energy or dismantling them entirely. While the JETP scheme doesn’t explicitly mention the CCS/ CCUS project, it offers an opportunity to link this scheme with the CCS/CCUS project considering the scope of early retirement and transition towards phase-out of coal. In practical implementation, the potential utilization of this JETP scheme on CCS and CCUS project would need further assessment from all relevant stakeholders. Another potential financial source is the Japan Join Crediting Mechanism (JCM). It facilitates the bilateral cooperation between Japan and the partner countries for the diffusion of leading low-carbon technologies, products, and infrastructure including CCS technologies. Among AMS, Indonesia, Laos, Vietnam, Myanmar, Thailand, Cambodia, and the Philippines are included as the JCM bilateral partner countries.  

However, even with the additional financing through the JETP or JCM, the CCS financing in ASEAN is still facing challenges. Particularly for developing regions, the challenges are its high capital cost, expensive business model due to CCS facilities that are interconnected and rely on a single source, and risk of long-term storage. In addition, the lack of carbon pricing or carbon taxing system, and less energy efficient from power plants with CCS are also issues that hinder CCS investment.  Furthermore, unclear laws and regulations pertaining to CCS projects might make it more difficult to finance projects coming to the AMS; as of now, only Indonesia has the CCS rule in place, while other AMS such as Malaysia and the Philippines are still working on proposals and plans. 

Preparatory Actions for Seizing Additional CCS Finance in ASEAN 

Many banks and other financial institutions have requested the gradual phasing down of coal usage or set its limitations and the inclusion of CCS technologies indicate additional potential financial sources can be explored by developing countries including ASEAN. The biggest challenge faced by phasing down or limitation of coal usage is “transition risk” perceived by the stakeholders involved in the CCS project. Additional financial sources from banks and other financial institutions can be used to manage this transition risk of CCS project. This needs to be aligned with the region’s effort towards the harmonization standard of sustainable finance such as with the ASEAN Taxonomy on Sustainable Finance Version 3.   

As the region shows a strong commitment towards the Carbon Neutrality (CN) target, the market-based financial mechanism can be a great source of additional CCS finance in ASEAN. The key characteristic of market-based financial sources is the evidence for emission reduction potential under the CCS project. Although the region’s carbon market is still at an early stage, the carbon pricing discussion is gaining momentum among the stakeholders in ASEAN. The potential inclusion of carbon pricing into one of the climate finance sources needs to be designed into a package of enabling policies for CCS finance in ASEAN. Moreover, the clear position of CCS technology is used as a complementary (not as a competitor to renewable energy) is also essential to be included in a package of enabling policies of CCS finance in ASEAN. Through regional cooperation among its Member States, ASEAN has unique and great opportunity to lead in CCS area, the regional strategy or target for the CCS deployment framework and roadmap of ASEAN and ASEAN CCUS Working Group would send a clear signal to attract investors for CCS finance in ASEAN.