Commentary: Could Russia-Ukraine conflict derail Southeast Asia’s decarbonisation efforts?

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SINGAPORE: The Russia-Ukraine conflict has caused an exponential rise in the price of commodities, given that the two warring countries are key exporters of fossil fuels, food grains, fertilisers and metals. Disruptions in the supply of these commodities have drastically affected the global economy, including in Southeast Asia.

In 2020, the Association of Southeast Asian Nations (ASEAN) imported 9.7 per cent of its fertiliser from Russia and 9.2 per cent of its cereals from Ukraine. According to the World Bank, the conflict will cause global prices of energy and food to rise by 50 per cent and 20 per cent respectively in 2022. The inflation rate for ASEAN as a group increased from 3.1 per cent in 2021 to 4.7 per cent in 2022.

COMMODITY CRISIS UNDERMINES CLIMATE AMBITIONS

In addition to stunting economic growth, the commodity crisis is already undermining Southeast Asia’s climate ambitions.

To reduce inflationary pressures, the Philippines recently doubled its fuel subsidy programme for public transport and also plans to increase the use of coal in electricity generation. Malaysia’s oil subsidies can reach more than US$6 billion this year, while Indonesia has ramped up coal exports. Thailand and Vietnam also recently increased fossil fuel subsidies.

ASEAN’s renewable energy target of 23 per cent by 2025 is also impacted by supply shocks of critical minerals that can enable the transition to green energy.

As economic sanctions against Moscow have not taken their full effect, Russia is still the world’s largest exporter of nickel and palladium. Nickel is an important component of batteries that power electric vehicles, while palladium is used to produce catalytic converters — a part of a car’s exhaust system that controls emissions.

Following United States sanctions on Russia, the price of nickel and palladium increased by as much as 60 per cent and 25 per cent respectively, which led to concerns about the economic viability of renewable energy technologies.

Ukraine is the world’s leading supplier of neon gas, which is used for producing semiconductors — critical components of electric vehicles and communication technologies.

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