Net Zero in the Public Sector in Southeast Asia

What is driving the adoption of net zero by governments?

In 2015, the Paris Agreement was adopted by 196 governments to pursue limiting global warming to 1.5°C, with the ambition of reaching net zero no later than 2050. Many national governments have announced national targets to achieve net zero greenhouse gas (GHG) emissions or to become carbon neutral by 2050, including many countries in Southeast Asia.

Net zero

How can government and public sectors in Southeast Asia drive the net zero agenda?

Over 130 countries (including eight Southeast Asian countries) now have an ambition to be carbon-neutral by 2050.
ASEAN’s Comprehensive Recovery Framework, has identified “transitioning to sustainable energy, building green infrastructure and promoting sustainable investment” as a key priority.¹

66% of Southeast Asian investors are placing importance on environmental issues - higher than the global average of 55%.²
This pressures businesses and ultimately the government to issue clearer net zero policy directives and guidelines that can be tied to investment and capital decisions in the country.

More than 50% of Southeast Asian citizens expect the government to encourage businesses to adopt green practices, enact climate laws, and allocate more public financial support to low carbon solutions.³
Governments must increasingly take more active steps towards achieving net zero to retain public support.

As one of the world's most vulnerable regions to climate change, Southeast Asia is affected by extreme weather patterns and climate disasters.⁴
The regional economy in Southeast Asia could lose 37.4% of current Gross Domestic Product (GDP) by 2048 if no action on climate change is taken.⁵

How can the public sector in Southeast Asia influence the scale of national emissions?

Southeast Asia’s net zero target requires an economy-wide overhaul and decarbonisation of all sectors. The public sector in Southeast Asia can influence national emissions through policy making, infrastructure development, procurement and its own operations. Governments play a pivotal role not only in setting standards, but also in acting as a role model.

Implementing nation-wide policies and infrastructure
Procurement and Internal Operations

Implementing nation-wide policies and infrastructure

Policy and governance

Indirectly promote low carbon remedies through sector-specific regulations
Incentivise and accelerate innovation (e.g. renewable energy, electric mobility, green buildings)

Infrastructure

Adopt low carbon and climate resilient technology in the nation’s built environment
Invest in enabling and climate resilient infrastructure (e.g. renewables for energy generation, to achieve the greatest impact on net zero)

Procurement and Internal Operations

Procurement

Support innovation, sustainability, climate resilience and responsible practices through their procurement and sourcing policies
Increase the use of challenge-based procurement practices (e.g. setting responsible sourcing protocols and environmental standards)

Operations

Manage their direct and indirect carbon emissions within the government’s own operations
Implement green standards in public buildings and use zero-carbon fleets for public sector-owned vehicles

What are key challenges for the public sector in Southeast Asia in achieving net zero?

Keeping pace with advancement of technology

Acting on net zero requires new technology and innovation to be supported and prioritised. Regulations need to catch up with the pace and scale of these emerging technologies. For example, policies and regulations around electric charging points and carbon capture technology are still a work in progress in Southeast Asia.

Changing infrastructure needs

Resilient physical and digital infrastructure is increasingly a bottleneck for development and deployment of net zero solutions. In Southeast Asia, net zero may be seen as a separate and additional demand to the existing requirements of basic need infrastructure development e.g. electricity access.

Shortage of domain and technical expertise

While climate change knowledge and education is emerging in Southeast Asia, there is limited technical expertise in net zero within government departments. Further, there is limited collaboration between government and external stakeholders, which could have otherwise facilitated knowledge exchange in net zero.

Insufficient climate financing

While green and sustainability bonds have grown rapidly in Southeast Asia, current investment levels are less than required to close the emissions gap. Further, in the public sector, often the budget has been set and allocated in the preceding year with less flexibility to mobilise towards net zero activities.

Short term political cycles and bureaucracy

Governments often work within short-term political cycles and changing agenda; the bureaucracy around changes makes acting on a 2050 net zero agenda more challenging. Further, governments of lower-middle-income countries may see meeting basic needs (e.g. health care and education) as a higher priority in the immediate term, compared to achieving net zero.

How can the public sector in Southeast Asia achieve net zero?

As a provider of services and consumer of resources, the public sector has a significant role to play in achieving net zero through its own operations and procurement, setting themselves as role models.

Ways for public sector in Southeast Asia to achieve net zero in its own operations

Below are two examples of how governments can decarbonise their own operations through sectors with significant emissions (transport and buildings).

Transport sector

In Southeast Asia, the transport sector accounted for about one-quarter of total energy-related CO2 emissions in 2015 and it is expected to increase by 3.3% per annum to 870 million tonnes in 2050.⁶ Transition to clean transportation fleets will reduce emissions and contribute to energy independence.

Building and construction sector

In Southeast Asia, buildings accounted for 23% of the total final energy consumption and 23% of total process and energy-related CO2 emission.⁷ In order to mitigate carbon lock-in risks in built environment, energy efficiency measures and technologies are important to be integrated since design and construction phase.

As an automotive hub in Southeast Asia, Thailand has an ambitious plan to transform half of its total auto production to EVs by 2030 and become a production base for cleaner vehicles in Southeast Asia.⁸ There is more investment in this area following tax incentives and soft loans to support the ecosystem in developing the supporting infrastructure.

As part of the transformation towards Zero-Emission Mobility, the country has set a target for EV production to account for 30% of the automotive production in the country by 2030.⁹ The public sector will also participate in this transformation with all vehicles procured for government agencies and public fleets to be zero-emission vehicles (ZEVs) by 2025 and all vehicles used by government agencies and public fleets to be ZEVs by 2030.⁹

In Singapore, the public sector is leading the way to pursue sustainable development with the GreenGov.SG initiative with target of 10% energy and water reduction by 2030 from the average of 2018-2020 levels. The Ministry of Sustainability and the Environment announced in 2022 that all new and existing public sector buildings undergoing major retrofitting will be required to be Green Mark Platinum Super Low Energy buildings.¹⁰ Since 2006, new public sector buildings have been required to attain Green Mark certification, including Platinum level for new buildings with air-conditioned area exceeding 5,000 sqm.¹¹

The Building and Construction Authority (BCA) introduced the Green Mark certification scheme as a green building rating system to evaluate a building’s environmental impact and performance. It aims to promote sustainable design,and best practices in construction and operations in buildings.

Significant impact of public procurement in Southeast Asia to Net Zero

In Southeast Asia, public sector spending accounts for 5 to 25% of the nation’s GDP,¹² positioning them as one of the largest purchase of goods and services in each of the countries. The WEF White Paper on Green Public Procurement published in 2022 estimated that globally public procurement accounted for 3% of direct GHG emissions (scope 1) and 12% indirect emissions released by the suppliers and service providers, along their supply chain (scopes 2 and 3).¹³ The government’s procurement and sourcing practices have the scale to exert cascading influence to the market. If set right, it can support innovation, sustainability, and responsible practices.

Government’s target on its own operations, as set out in the above example, affects the public procurement criteria for greener products/services. Further, below are some examples on how governments can embed sustainability criteria in their procurement and sourcing practices.

Green Procurement in Malaysia

Malaysia is implementing nationwide green procurement, which will be compulsory for all public entities by 2030

Sustainable Procurement in Singapore

All Singapore government agencies will be required to procure products that are highly efficient and sustainable

How can we support our public sector clients in their net zero transformation?

Our net zero framework can support public sector clients across all aspects of net zero transformation.

Climate risk and impact baselining

Identifying and prioritising climate risks and opportunities, understanding current state of performance against other nations, organisations, and economic benchmarks, and assessing the value implications and change initiatives needed to mitigate climate risks.

Net zero strategy development

Understanding and evaluating the holistic sustainability strategy, assessing the pillars for change and sustainable investments, and developing and implementing public-private sector plans which have sustainable development issues at the core.

Implementation Alignment

Alignment of national environmental strategy with business and economic goals to ensure feasibility; focusing on the priority areas such as investment decision-making, societal welfare through education and health, supply chain management, R&D investment, and infrastructure design without sacrificing net zero targets.

Transparency and reporting

Transparency in internal and external measurement and standardised reporting are increasingly important facets to being able to fairly assess and adapt plans accordingly, while attracting responsible investment and building public trust.

References:

^{[1]. ASEAN. “ASEAN Comprehensive Recovery Framework” 2020.

[2]. Cacioli, L. “Covid-19 compels Southeast Asia's investors to focus on sustainability.” Asian Investor, 2021.

[3]. Seah, S., Martinus, M., Qiu, J., “Southeast Asia Climate Outlook: 2021 Survey Report.” ISEAS - Yusof Ishak, 2021.

[4]. Tan, C., “South-east Asia among regions hardest hit by climate change, must prioritise adaptation: IPCC.” The Straits Times, 2022.

[5]. Gray, C. and Haller, T. “The Economics of Climate Change: Impacts for Asia.” Swiss RE Group, 2021.

[6]. ASEAN. “ASEAN Regional Strategy on Sustainable Land Transport.” 2019.

[7]. International Energy Agency. “Roadmap for Energy-Efficient Buildings and Construction in ASEAN.” 2022.

[8]. Hanh, N.M. “Thailand Issues New Incentive Package for Electric Vehicle Industry.” 2022.

[9]. Ploymee, S. “Regulatory Framework and Investment Privilege Package in The Thai EV Sector Available to The European Automobile Companies”.Thailand Board of Investment, 2021.

[10]. Fu, G. “Singapore Green Building Council and Building and Construction Authority Leadership in Sustainability Awards 2022 - Ms Grace Fu.” 2022.

[11]. Singapore Green Building Council. “Singapore Green Building Master Plan 4th Edition.” 2022.

[12]. The Global Economy. “Government spending, percent of GDP - Country rankings.” 2021

[13]. World Economic Forum. “Green Public Procurement: Catalysing the Net Zero Economy.” 2022.

[14]. Green Tech Malaysia. “Energising Sustainability.” 2020.

[15]. SG Green Plan. “Green Government.” 2022}

Contact us

Tristan Hockley

Asia Pacific Government and Public Sector (G&PS) Leader and Salesforce Practice Leader, South East Asia Consulting, PwC Singapore

Tel: +65 9753 6736

Parul Munshi

Partner, Workforce Transformation, PwC South East Asia Consulting, PwC Singapore

Tel: +65 9660 5011

Andrew Chan

Asia Pacific ESG Strategy & Transformation Leader, PwC Malaysia

Tel: +60 3-2173 0348

Lit Ping Low

Asia Pacific Sustainability, Climate Change, Partner, PwC Hong Kong

Tel: +852 2289 3680

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Net Zero in the Public Sector in Southeast Asia

What is driving the adoption of net zero by governments?

Net zero

How can the public sector in Southeast Asia influence the scale of national emissions?

Implementing nation-wide policies and infrastructure

Policy and governance

Infrastructure

Procurement and Internal Operations

Procurement

Operations

What are key challenges for the public sector in Southeast Asia in achieving net zero?

Keeping pace with advancement of technology

Changing infrastructure needs

Shortage of domain and technical expertise

Insufficient climate financing

Short term political cycles and bureaucracy

How can the public sector in Southeast Asia achieve net zero?

Ways for public sector in Southeast Asia to achieve net zero in its own operations

Transport sector

Building and construction sector

Initiative: EV for the Thai public sector

Green buildings for the Singapore sector

Transport sector

Building and construction sector

Significant impact of public procurement in Southeast Asia to Net Zero

Green Procurement in Malaysia

Sustainable Procurement in Singapore

How can we support our public sector clients in their net zero transformation?

Climate risk and impact baselining

Net zero strategy development

Implementation Alignment

Transparency and reporting

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Contact us