Southeast Asia’s Green Shift Could Yield $12.5 Trillion in Gains

(Bloomberg) -- Southeast Asia stands to reap $12.5 trillion in economic gains by 2070 if it takes urgent moves to slow climate change, while inaction could yield losses more than double that size, according to the Deloitte Economics Institute.

The region’s gross domestic product could grow by an average of 3.5% per year over the next five decades if it nurtures industries and technologies to keep global average warming to around 1.5 degrees Celsius, compared to a baseline scenario of climate inaction, Deloitte said in a report Monday.

If Southeast Asia doesn’t significantly reduce its emissions and warming reaches more than 3 degrees Celsius by 2070, economic losses are estimated at $28 trillion in present-value terms, reducing GDP growth by an average of 7.5% per year over that period, according to Deloitte.

The projections underline the trade-offs for Southeast Asia, a $3-trillion economy that has historically enjoyed rapid growth and development powered by heavy use of fossil fuels. That’s pushed nations in the region to make only modest pledges to cut emissions under the Paris Agreement, wary of the toll a green shift could take on their economies, even as they’re also among the most vulnerable to climate-change risks.

Narrow Window

According to Deloitte, decarbonization can serve as a new growth engine for Southeast Asia. Faced with a “narrow” window of opportunity to be a “frontier” player, decisive policy action is needed to send price signals, transform supply chains and enforce broad changes to its energy mix and industrial bases.

Reducing emissions will require significant structural adjustment costs, but the cost of inaction will be far greater, the report said. Unchecked global warming would lead to losses in agriculture and tourism, while worsening people’s health. Rising sea levels take away productive land in low-lying nations, and extreme weather events hasten degradation of capital assets.

The most impacted industries are seen to be services -- with potential losses of $9 trillion through 2070 -- followed by manufacturing, retail and tourism, construction, and mining and gas. Together, these sectors account for over 80% of Southeast Asia’s economic output.

“Unmitigated climate change threatens to wipe out decades of hard-won economic growth in Southeast Asia,” Deloitte said.

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