Making the most of the ‘C’ in APEC – for cooperation to tackle climate change

Thanks to modern computers which can model more complex relationships and make more precise predictions, there is now better and more accurate data about climate change. But the better data comes with the realization that predictions once thought of as dire are now reality. Gone are the future-tense forecasts of apocalyptic typhoons and firestorms that I learned of as a child. We have entered the present tense. Climate change is here and now.

The scientific world has crystallized consensus on anthropomorphic climate change. Yet the pumping of greenhouse gases (GHGs) continued. Between 1990 and 2018, annual emissions from the 21 economies composing the Asia-Pacific Economic Cooperation (APEC) grew 68.5%, an average rise of 1.9% per year. APEC economies play an outsized role in global emissions. In 2018, the APEC region accounted for 38% of the global population and 55% of economic output but contributed 60% of the world’s GHGs and 65% of carbon dioxide emissions.

No surprise then that the region has been suffering from the impacts of climate change, which is already affecting APEC economies’ financial systems, supply chains, trade, and even consumer behavior. The latest APEC Regional Trends Analysis (ARTA)[1], issued ahead of the APEC Leaders’ Meeting later this week, reports that the regional economy is expected to grow by 6% in 2021 and will settle at 4.9% in 2022. However, the report also notes that even in the best-case scenario where climate change is kept at or below 2.0°C, the longer-term scenario is discouraging. APEC can expect GDP losses of up to 11.3% by 2050.

According to the World Bank, physical and transition costs from climate change have already impacted equity and debt instrument payoffs and valuations. If policy action remains weak, losses from more frequent and severe extreme weather are expected to reach approximately 7.3% of GDP by the end of this century. These are losses from the risks that we already know. Based on assessments from insurance firm Swiss Re, potential losses from non-action on climate change – which results in global temperatures rising by 3.2 degrees Celsius – could reach 18% of GDP by mid-century if we account for unknown unknowns.

Moreover, 19 of APEC’s 21 members are seriously considering net-zero targets by 2060 or earlier. Significantly, four APEC economies – Canada, Japan, Korea, and New Zealand – have enacted net-zero commitments into law.

Despite these achievements, there is still a mountain of effort needed to tackle climate change. If the region is serious in contributing towards the goal of keeping temperature rise below 2.0 degrees, then the APEC region will need to reduce GHG emissions by about 900 megatons of CO2 equivalent annually between now and 2030, then reduce another 470 megatons annually from 2031 to 2070. That is a lot of emissions – the equivalent of emissions from 117 million cars per year for the next 70 years.

APEC economies also spend only 0.68% of their GDP on environmental protection while member economies of the Organisation for Economic Co-operation and Development (OECD) spend over 0.76% of their GDP on the same. Given APEC’s contribution to climate change, public expenditure on environmental protection is considerably low. According to the International Renewable Energy Agency (IRENA), about US$1.7 trillion would be needed for the world to implement the renewable energy targets set out in the nationally determined contributions (NDCs) and a majority of the finance gap is in Asia.

Clearly there is a need for more ambitious commitments from all economies. And while commitments are good, action is what will get GHG emissions down. Implementing these actions require a holistic approach, as the environment and the economy are an integrated system. The green economy is not just a narrow sector or industry, focusing on recycling for example, and entails extensive structural reforms in the way economies are run. Public policies can promote investments and jobs that reduce GHG emissions, develop capacity-building programmes on sustainability for businesses, particularly micro, small, and medium enterprises, and undertake campaigns that can influence behaviour change towards protecting the environment.

Finally, there needs to be cooperation at the global and regional levels. No economy can solve climate change alone. Creative approaches to tackling climate change require economies to work with one another. For example, in economies where the ability to recycle products such as batteries are limited, operationalizing the circular economy may involve sending such products to another economy for processing. There is also opportunity to increase global trade in renewable energy where economies with excess capacity can export and transmit them via cross-border energy grids.

Incidentally, “cooperation” is in APEC’s name. The forum has shown that it can work in parallel with global processes to make concrete contributions to global public goods, like globalization and international trade. In a similar manner, APEC is well placed to be the forum where climate change is openly discussed, consensus is achieved, and commitments are acted upon. If we pull this off, then maybe – hopefully – children of the future will learn about climate change in the past tense.

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[1] - APEC Regional Trends Analysis (ARTA): https://www.apec.org/publications/2021/11/apec-regional-trends-analysis-november-2021-apec-s-climate-change-challenge-toward-a-resilient-recovery-policies-matter

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