Sustainability circles worldwide groaned as the United States picked Donald Trump as its next president last week, following a previous term marked by climate pullbacks and an election campaign suggesting he would do likewise this time round.
In Southeast Asia, Trump portends, if not an upset, then greater uncertainty for the clean energy sector. Beyond fears of shrinking green funding, policymakers need to divine the implications of a potentially reinvigorated US-China trade war in climate technology, and any adjustment to the American strategic interest in this part of the world.
There could be silver linings where American interests align, though Southeast Asia could also be tempted to pivot closer to China, observers say. Some are counting on existing momentum in private clean energy markets to carry the region through the next five years.
One less partner
Major clean energy schemes in Southeast Asia could lose billions of pledged funds if Trump lives up to his promise of saving climate money and focusing on domestic industries.
The US is today the biggest state partner in Just Energy Transition Partnership (JETP) programmes with Indonesia and Vietnam, to help the recipients ditch pollutive coal power and switch to clean energy. Trump could disengage the US from these schemes, as part of “a repeat of rollbacks and repeals” expected in his new term, said Sharon Seah, senior fellow and coordinator of the climate change in Southeast Asia programme at Singapore’s ISEAS-Yusof Ishak Institute.
A full US withdrawal from the JETPs would mean US$2 billion less of the US$20 billion pledged to Indonesia by wealthy nations and financiers, and US$1 billion less of the US$15.5 billion allocated for Vietnam – at a time when the funds are already slow to materialise. More American dollars feed into these packages via multilateral lenders.
Trump could also derail Southeast Asia’s green energy push by weakening international institutions and refusing to pay up US dues, Seah said, pointing to his halting of funding and withdrawal from the World Health Organization as Covid-19 worsened in 2020, moves only reversed later by his successor Joe Biden.
More broadly, anxieties lie too in the US’ broader contributions to global climate finance. Trump in his first term in 2017 had sought one-third cuts in US aid overseas, though the Senate ultimately blocked the move. There are fears the US will now disengage from a new, larger round of global funding under negotiation.
Eco-Business graphics. Data: OECD.
But at least, an immediate shock from funding cutoff is unlikely. The US government is not today a major funder of Southeast Asia’s energy transition, noted Joshua Crabb, Asia-Pacific equities head at Dutch asset manager Robeco.
On clean energy specifically, bilateral American funds for the region totalled just over US$41 million between 2018 and 2022, per Organisation for Economic Co-operation and Development data. That is 2 per cent of all such financing from wealthy nations, and 3 per cent of the US$1.4 billion by super-funder Germany in the same period.
Trade wars rebooted
Asia is no stranger to Trump’s trade salvos. Having watched China face the wrath of US semiconductor restrictions since 2018, Southeast Asia then accommodated an influx of Chinese solar panel manufacturers escaping sky-high US import tariffs from the mainland.
Some restrictions have been eased, though key ones including on solar panels remain, and even extended under Biden to target firms offshoring to Southeast Asia. This time round, Trump has campaigned on an up to 20 per cent levy on global imports (up to 100 per cent for China).
America-first policies could restrict US investments in Southeast Asia’s energy sector, the Asia Society Policy Institute wrote ahead of Trump’s win. Such a trade strategy appears to be taking shape, with the man running Trump’s earlier trade war with China asked to return to his portfolio, as reported by UK newspaper Financial Times.
There could be a “revival” of the trade war, except now “there are more emerging and critical sectors that would make for easy targets, for example clean technology”, Seah said.
She added that Trump “can and almost certainly will withdraw from the ongoing Indo-Pacific Economic Framework negotiations”, a Biden initiative. The framework aimed to beef up environmental standards, cover critical mineral supply chains, and introduce new commitments on clean energy. Initial members include seven Southeast Asian nations.
But Seah sees possible upsides too, such as US clean-tech firms being interested in Southeast Asian markets and supply chains should Trump dampen domestic demand.
Another area that could survive Trump is nuclear energy cooperation – where some Southeast Asian nations have ongoing work with the US state, on top of business engagements with American small reactor companies.
“Civilian nuclear energy cooperation and eventually nuclear power project deployment will take time in Asean, and this is more of an export prospect for the US,” said Dr Victor Nian, founding co-chairman of Singapore thinktank Centre for Strategic Energy and Resources. The Asean bloc consists of 10 Southeast Asian countries.
Slowdowns in US partnerships with Southeast Asia are “unlikely dealbreakers” for nuclear energy cooperation and export, though exact impacts remain unclear now, Nian added. Four Southeast Asian nations – Indonesia, Philippines, Singapore, Vietnam – have signed “Section 123” agreements with the US, a precursor deal to the transfer of nuclear energy logistics.
US disengagement could yet tempt Southeast Asia closer to China, with its growing renewable energy supply chain in the region – and globally.
“If indeed the US is pulling away from clean energy investment in Asean, it might lead to a situation where the region has to lean towards China for future investments,” Nian said, as Southeast Asia concurrently prioritises economic development, urbanisation and industrialisation. But he said Asean should not rely heavily on any particular country, and use diversification to ensure equitable access to clean energy.
Market momentum
In the days after Trump’s win, many have sought to calm nerves by downplaying one man’s influence on climate action. US local governments and nonprofits have pledged to continue supporting decarbonisation initiatives, while foreign leaders are said to have made plans on global negotiations without American leadership.
Some in the private sector, likewise, believe there is enough momentum in the sustainability sector to carry Asia through Trump’s new term.
“Many of the banks we speak to, and more critically the asset owners, are very focused on transition,” said Crabb.
“We often say that Asia, having the population, economic growth and pollution problems, means it is the key focus area for the world,” he said, adding that regulations are changing to enable investments to address the issues.
Investor confidence and the positive impact of the green transition in Asia will remain key investment themes, Crabb said.
In a briefing note, the global sustainable equity fund team at French asset manager Mirova noted a “strong rebound of sustainable themes” in 2017, right after Trump won his first election.
“Climate change still affects our economy. And although policies may be less supportive, technological advancements still continue and we still need to protect our society and economy from [its] devastating effects,” it said, adding that the “fundamental outlook” for sectors such as renewable energy, nuclear and water treatment “has not changed for most”, amid significant underperformance today.
Moral decay
But developing countries still look to the United States to lead climate action – not just because of its money and capabilities, but responsibility as the world’s biggest producer of planet-heating greenhouse gases.
If the US does not pull its weight, emerging economies may also be reluctant to, and they have at times voiced this frustration publicly. Last year, as officials from Indonesia – the world’s top coal exporter – sought to get more funding for decarbonisation projects, one of its senior ministers pulled up a chart showing per-capita emissions by country at a conference in Singapore.
Luhut Pandjaitan, now chair of Indonesia’s national economic council, pointed to Indonesia’s 2.3 tonnes of carbon emissions per person. “We also have a right to go up, to reach [the world average] of 4.5 tonnes, before we go down. But the US for instance, [as a] developed country, they have to reduce from 14.7 to 4.5 tonnes,” he told his audience of policymakers and financiers.
Globally, the immediate fear is that Trump would once again pull the United States out of global climate treaties, jeopardising efforts like the COP29 talks that started Monday in Azerbaijan, where countries are to decide on a whole host of issues from climate funding to slashing fossil fuel use.
Seah, from the ISEAS-Yusof Ishak Institute, said Southeast Asian climate efforts may face more roadblocks if the US continues to subsidise the oil and gas sectors. She added that inertia could increase too should the US refuse to cooperate with China on reducing methane, another potent greenhouse gas from extracting and using fossil fuels.
But Seah noted that Trump cannot directly stop Southeast Asia’s decarbonisation plans, and many countries have already started implementing key steps such as ramping up renewables.
“Remember, Trump 2.0 too shall pass,” she added.
Correction note: An earlier version of the story misstated that Robeco is based in the UK. The firm is based in the Netherlands instead. We apologise for the mistake.
