Fiscal Policy to Support the Green and Just Energy Transition

Fauziah Zen, Fukunari Kimura and Alloysius Joko Purwanto
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Alloysius Joko Purwanto: Economic Research Institute for ASEAN and East Asia (ERIA)

No 2024-RPR-28 in Books from Economic Research Institute for ASEAN and East Asia (ERIA)

Abstract: This study explores green fiscal policies in Indonesia, Malaysia, Thailand, Japan, and the European Union, highlighting their efforts to decarbonise key sectors. It underscores the gap between climate pledges and actual progress, emphasising the need for strategic planning, robust fiscal policies, and tailored solutions for each country's green transition. Case studies include Indonesia's coal phase-out, Malaysia's renewable energy policies, Thailand's electric vehicle (EV) policy, the EU's transport decarbonisation framework, and Japan's Green Transformation (GX) Program. These policies demonstrate the economic, social, and environmental impacts of the green transition and emphasise the importance of a just transition that benefits all sectors of society. The report stresses the need to mobilise private financing, including public–private partnerships, to overcome limited public capacity. Key fiscal tools include carbon taxes, subsidies for renewable energy projects, and innovative financing mechanisms such as green bonds, climate funds, and sustainability-linked loans. A just energy transition is advocated to ensure that disadvantaged communities are protected, with attention to reducing fuel subsidies, phasing out fossil fuels, and investing in renewable energy. The study also highlights the challenges faced by developing economies in accessing international climate funds. Key lessons include fostering innovation, strengthening policy frameworks, enhancing public–private partnerships, and aligning climate goals with sustainable development. ASEAN countries are urged to prioritise these strategies for a resilient, low-carbon future that ensures equitable growth and addresses the pressing challenges of climate change.

Date: 2024
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