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Welcome to the second edition of our Asia newsletter for 2024.
This month, a significant topic of discussion has been the U.S. decision to pause permits for new LNG export facilities. We've explored the implications of this decision on Asia's energy security and decarbonization efforts and concluded that it will not adversely affect them.
Additionally, our analysis has covered recent developments in Indonesia, including changes to its sustainable finance taxonomy. While there are some positive updates, there are also additions that raise concerns.
Here are some key highlights of recent developments in Asia’s energy transition:
The U.S. decision to pause permits for new LNG export facilities does not affect U.S. projects already under construction, which will nearly double U.S. LNG export capacity. The world is on pace for record increases in global LNG supply this decade, indicating there will be plenty of LNG to go around.
Shell’s 2024 LNG Outlook proves that the long-term investment case for LNG beyond 2040 is fading. Instead, the company is pinning its hopes on rapid demand growth in emerging markets and China’s industrial sector, which may never materialize.
The Indonesian Financial Services Authority (OKJ) updated its taxonomy for sustainable finance. The revised taxonomy includes classifying new captive coal-generated power as “green”, which could undermine the credibility of its taxonomy and cast doubt on the government’s climate commitment.
Indonesia plans to reduce its renewable energy target from 23% to 17%-19% in 2025 and 26% to 19%-21% in 2030. Such a move signals the government's low commitment to the energy transition and prolongs Indonesia’s high dependence on fossil fuels.
The U.S. pause on LNG export permits is unlikely to impact South Korea, Asia's largest U.S. LNG importer until 2022, primarily because LNG's importance in South Korea's energy transition is decreasing.
For more detailed insights, please view the analyses in full.
Paige Nguyen
Regional Director, Asia Institute for Energy Economics and Financial Analysis
Latest Releases
Will the new Indonesian Taxonomy for Sustainable Finance really serve its national interest?
Ramnath Iyer
February 27
On 20 February 2024, the Indonesian Financial Services Authority (OJK) updated its “Indonesian Taxonomy for Sustainable Finance” (TKBI for short in Bahasa). The revised TKBI muddies the waters, potentially leading to confusion among investors and financiers. Additionally, it creates difficulties in harmonizing with sustainability standards set by other countries and regions.
"The lenient approach to defining what constitutes sustainable activities introduces additional risks to these projects, to the financiers backing them, and eventually, to the Indonesian public, should the state have to absorb some of the financial impact."
Three reasons the U.S. LNG pause does not threaten South Korea’s energy security and transition
Michelle Kim
February 21
Since the U.S. Biden Administration announced the temporary pause on new LNG export approvals early this year, many Asian countries expressed concern about the potential disruption in energy security and decarbonization goals. South Korea, the largest U.S. LNG importer in Asia until 2022, is one of them.
“The real energy security and transition for South Korea is reducing heavy reliance on imported fossil fuel and rapidly shifting to domestically produced renewable energy, as the country promised at the recent COP28.”
Shell’s latest LNG outlook underestimates barriers to demand growth in Asia
Sam Reynolds and Christopher Doleman
February 20
Shell’s 2024 LNG Outlook proves that the long-term investment case for LNG beyond 2040 is fading. Instead, the company is pinning its hopes on rapid demand growth in emerging markets and China’s industrial sector, which may never materialize.
“Ultimately, Shell’s outlook is an admission that the investment case for LNG beyond 2040 is dwindling. Instead, the company is banking on rapid near-term demand growth in emerging markets to fill a gap left by traditional LNG customers. However, high hopes will confront economic realities, meaning Shell’s lower demand forecast this year could be the first of many.”
The dark cloud over Indonesia's pledge to net-zero emissions by 2060
Mutya Yustika
February 13
Indonesia plans to reduce its renewable energy target from 23% to 17%-19% in 2025 and 26% to 19%-21% in 2030. Such a move signals the government's low commitment to the energy transition and prolongs Indonesia’s high dependence on fossil fuels.
“The incoming government needs to make new and extra efforts to ensure that even the reduced target is met. They must identify the root of the problem and make necessary adjustments to its policies, regulations, and processes to support the energy transition.”
The U.S. pause on LNG export permits does not threaten energy security in Europe and Asia
Sam Reynolds and Ana Maria Jaller-Makarewicz
February 8
The Biden administration’s decision to temporarily pause permitting for new LNG export terminals has caused an uproar among industry groups and fossil fuel companies. In January, during the congressional hearings on the issue, opponents of the move repeatedly declared it would hurt U.S. allies in Europe and Asia that “desperately” need American LNG. However, these claims ignore basic trends in global gas markets.
“As key markets in Europe and Asia cut their dependence on LNG, traders are soaking up an increasing share of U.S. volumes, betting on the long-term growth of the global market. The pause on new U.S. export permits is about reining in how much fossil fuel companies are allowed to gamble.”
Concerns about the U.S. LNG pause in Asia are overblown
Sam Reynolds
February 1
In January, the U.S. announced a pause on permits for new U.S. LNG export facilities. The move sparked outcry among industry groups in Asia, which quickly declared the move would hurt the region’s energy security and climate goals. However, their concerns are unfounded.
“It’s not Asia’s energy security and climate goals at risk from the U.S. decision, it’s the global oil and gas industry’s unquenchable thirst for profit.”
"While we've seen an industry outcry, the largest customers of U.S. LNG have been backing away, signaling that they may no longer need such a significant quantity."
South Korea’s LNG imports have already decreased by 4.9% in 2023 amid increased nuclear and renewable energy generation. This trend is likely to continue with the country’s strengthened decarbonization targets.
The predicted annual reduction rate of LNG demand in South Korea, at 3.6%, could offset the portion of U.S. LNG in total LNG imports, currently at 11%, by the end of this decade.
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