Keywords

1 Introduction

The Asian region is large and diverse, with extremely variable levels of development, however we may describe that, existing between and within the countries of the region. At the same time, there is little doubt that as the global economy transforms, a significant proportion of economic growth will be taking place in this part of the world. One of the most significant challenges confronting the region is to transform their economies in a way that does not accelerate the Earth’s already precipitous journey towards carbon concentration above 450 ppm. Indeed, there are significant challenges ahead in transitioning towards low carbon growth in Asia. For example, there are existing and emerging technologies that are less carbon intensive ways of generating energy and the widespread introduction of such technologies might go a considerable way in creating a transition away from dependence upon fossil fuels. Indeed, there are economic drivers that are facilitating a shift away from fossil fuels, such as falling costs of PV, wind and other renewable technologies, and a concomitant growing reluctance to invest in carbon emitting industries by risk adverse banks. Nevertheless, as the analysis will demonstrate, there are significant issues that are at this time impeding investment in low carbon growth from outside the region into Asia’s economies, particularly outside core countries such as China.

Certainly, much can be achieved in decarbonizing the economy by shifting the balance of energy supplies towards renewable sources, particularly in those countries that are undergoing major transitions in their economic structures, as we see in may parts of Asia, such as China, India, and the so-called second generation tiger economies of South East Asia. However, ultimately, this will not be sufficient, and what is needed is a whole range of changes to the society and economy. Efficient technologies need to be introduced into homes and businesses, transport systems need to be decarbonized and energy needs to be distributed more effectively, including through the introduction of smart grids (Stephenson 2011). Whilst there are clear gains to be made in smaller and more remote areas through the deployment of these kinds of technologies and systems, arguably the most efficient way for these gains to be maximised is through their deployment in the parts of the region that are urbanizing. As such, the urban form will take on greater importance and there are significant opportunities in that regard to transition towards low carbon growth models, including in transport and distributed energy.

In light of all of these challenges, this chapter joins others in the current volume in arguing that regional cooperation represents a great opportunity to collectively move towards low carbon green growth in Asia. As scholars are beginning to recognize regional cooperation can be best achieved through a combination of market and non-market mechanisms. Such regional cooperation should be seen as able to complement and augment, rather than substitute for, domestic actions (Yao and Anbumozhi 2014; Anbumozhi 2015). Anbumozhi (2015) has recently published a comprehensive study of the conditions under which such regional cooperation for low carbon green growth might be achieved in Asia; he notes that there are significant institutional, regulatory and financial difficulties associated with creating the conditions for effective regional cooperation. Nevertheless, there is a range of policy mechanisms that are thought to be appropriate in the transition to a low carbon economy, for which countries such as New Zealand could contribute. These policy instruments include financing mechanisms and credit; enhanced trade in environmental services; taxation and, the integration of each country’s carbon markets with a broader global or regional consideration. In addition to these policy mechanisms, there is clearly also a significant need for capacity building so that the energy sector can be appropriately planned and strategies implemented at a range of different scales. Each country in Asia has different kinds of needs in this regard, and the geographic diversity within countries means that some measures may be best achieved nationally while others are more suited to local measures. There are, in other words, significant technical and social challenges associated with the widespread adoption of different kinds of technology that may facilitate low carbon growth.

In this chapter the specific example of New Zealand is utilised to discuss the challenges and opportunities associated with regional cooperation for low carbon growth in Asia. The chapter will begin by outlining the New Zealand domestic context, and here we will learn that New Zealand enjoys certain advantages in pursuing a pattern of low carbon growth, such as a widespread usage of renewable energy, but also has some serious issues to confront, partly stemming from the significance of (carbon intensive) agriculture in the economy as well as a high dependence upon fossil fuel for transport.

With this background in mind, Sect. 11.2 then moves on to discuss New Zealand’s current regional cooperation and to examine the potential to broaden and deepen this engagement. In doing so a range of different institutions and mechanisms are examined. There has been a fairly extensive literature documenting New Zealand’s domestic carbon economy and a growing body of literature that looks at its international efforts; however, there has been to date almost nothing that examines the possibilities for regional cooperation with Asian nations. There are a number of possibilities for such regional cooperation, which includes New Zealand’s role as part of the multilateral donor community; its bilateral aid programme; the potential of linking carbon markets; and the role of institutional investment originating from New Zealand.

Section 11.3 of the chapter then moves on to examine New Zealand’s contribution to the international environment for emissions reductions and low carbon green growth. Section 11.3.1 examines emissions trading scheme (ETS), which is one of the earliest such schemes set up anywhere in the world. Significant changes to the scheme in the last few years has meant that it is no longer as well-regarded as it once was, and some critics believe that considerable changes need to be made if it is to play an effective part in reducing New Zealand’s emissions. The New Zealand ETS is far more linked into global markets than many of its counterparts and so it is perhaps not surprising that country has played an important role in trying to examine and facilitate how domestic carbon markets throughout the Asia-Pacific might be linked in the future.

The next part of the chapter, Sect. 11.4, examines the role of institutional investors in financing and sometimes building energy infrastructure in Asia. The focus here is on companies that are explicitly committed to exploring opportunities around low carbon growth and for that purpose Sect. 11.4.1 of the chapter examines the Investor Group on Climate Change (IGCC) and some of its members, most notably the New Zealand government backed sovereign wealth fund and New Zealand Superfund. An examination of the role of trade liberalization follows in Sect. 11.4.2, focusing specifically on environmental goods and detailing the contribution that this can make. Again, New Zealand has played an active role in the development of a number of bilateral and multilateral agreements.

As Sect. 11.5 makes clear, development cooperation is an area where countries such as New Zealand could clearly have an impact on Asia’s low carbon growth trajectory. In recent years New Zealand’s aid programme has become increasingly narrowly focused around the Pacific Region and in areas targeted at sustainable economic development. It can be argued that this focus means that there is less engagement with Asia than one might expect given the expertise in New Zealand in areas that might help Asia chart a path towards low carbon economies. Nevertheless, as this section shows, there are areas that demonstrate New Zealand’s commitment to engendering a low carbon growth pattern for Asia through its aid programme. Section 11.6 concludes the discussion and summarises the lessons for regional cooperation that can be taken from the experience of New Zealand.

2 The New Zealand Context

New Zealand is classified as a developed country and as Table 11.1 demonstrates, its basic indicators are similar to many other Organisation for Economic Co-operation and Development (OECD) countries.

Table 11.1 Basic sustainable development indicators of New Zealand
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While in many respects the country is similar to many of its contemporaries in terms of the above indicators, it varies considerably when it comes to energy. Indeed, New Zealand has rightfully been regarded as an important case study in terms of the significance of renewable energy its overall energy mix and there are some suggestions that it could be an example for other countries in this regard. It is certainly the case that, given the preponderance of hydroelectricity as the mainstay of its grid, supplemented by wind power, geothermal, tidal and other sources New Zealand is in an unusual situation. Indeed, more than 70 % of its electricity is derived from renewable sources, as Fig. 11.1 demonstrates.

Fig. 11.1
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Electricity generation in New Zealand by fuel source. Source Ministry of Economic Development (2011)

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New Zealand clearly has significant potential to generate future energy from renewable sources. Indeed, some commentators argue that it would be possible to increase the proportion from these current levels and move towards 100 % generation from renewable sources, although it is acknowledged that this would require considerable political will and that there are of course costs and benefits, including environmental trade-offs, to such a strategy.

Despite the country’s commitment to move towards carbon neutrality, its greenhouse gas emissions profile, which in 2013 amounted to 80,962 kt carbon dioxide equivalent, is far less impressive than its energy generation profile. Although New Zealand emits only 0.15 % of global Greenhouse gas (GHG), the country’s significant agricultural base, including methane intensive dairy as well as a huge reliance on fossil fuels for transport, means that it has one of the highest GHG per capita profiles of any country in the OECD. Indeed, agriculture and the energy sector respectively contributed 48 and 39 % of total GHG emissions, with road transport being the fastest growing source of emissions in that sector. Figure 11.2 shows New Zealand’s emissions, while Fig. 11.3 total and net emissions (under the Climate Change Convention) from 1990 to 2013.

Fig. 11.2
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New Zealand’s 2012 emissions profile. Source Harrison (2015)

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Fig. 11.3
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New Zealand total greenhouse gas emissions (1990–2013)

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Figure 11.3 above shows that total emissions have increased by 21 % in the period 1990–2013. Indeed, the Ministry of Environment’s own modelling suggests that GHG emissions will grow at an average rate of 0.8 % to 2040, by which time emissions will be 51 % higher than the 1990 baseline (Royal Society of New Zealand, 2014). Figure 11.4, details these projections.

Fig. 11.4
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New Zealand energy sector greenhouse gas emissions. Source Stephenson (2011)

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An important aspect of New Zealand’s GHG emisisons profile is the significant divergence between New Zealand’s net GHG emissions per capita and its gross emissions per capita. However, a significant reason for this divergence is due to the fact that allowances are made for plantation forest area in current GHG acounting rules. Many of these plantations are due to be harvested in the next decade, with the result that the country’s net emissions are expected to rise significantly.

The New Zealand government has a target of an unconditional reduction of 5 % compared with 1990 gross emissions by 2020 and a 50 % reduction by 2050. Unfortunately this is unlikely to occur if the current trajectory continues. In a recently released consultation document the Ministry of the Environment details estimates for the reduced average household consumption in 2027 compared to that which would occur in a Busines as Usual scenario. Its assumes that stronger cuts will lead to slower growth, which will have impacts upon household consumption and translate into a reduction in consumption growth for different reduction targets. Of course, how these costs are distributed across society depends to an extent on domestic policies and political decisions about whether some households will bare a greater proportion of the reduction in household consumption. The main impacts are projected to be as a consequence of reduced wage growth and increased price of some goods and services, particularly those related to energy (e.g. electricity and vehicle fuel) (Ministry of Environment 2015a) (Table 11.2).

Table 11.2 Impact of different targets on annual household consumption in 2027 (based on a $50 per tonne carbon price)
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3 New Zealand’s Role in Global Climate Change Agreements

If the story of New Zealand’s carbon economy is a mixed one, it is nevertheless the case that the country has consistently been an important global player when it comes to climate change; certainly to an extent that is disproportionate to its modest population base. In the section below, this contribution is examined, focusing specifically on New Zealand’s role in multilateral financial institutions and in carbon markets.

3.1 New Zealand Emissions Trading Scheme (ETS)

An important step to creating economic incentives for internalising the costs of emitting carbon is by creating a carbon market and then by linking regional and national carbon markets together. At the present time there are a number of carbon markets developing in different parts of the world, with 17 ETS in operation and another 15 in preparation or under consideration (ICAP 2015). Many of the most significant developments in terms of the growth of carbon markets are taking place in the Asia-Pacific region, including China, Korea, Indonesia, Chile, Japan, New Zealand, Singapore, Thailand, California, and the North American Regional Greenhouse Gas Initiative.

New Zealand was one of the first countries to develop an ETS in 2008 and is an important initiative for the government as the country’s primary response to charting a future towards decarbonising its economy. The ETS includes all six gases listed in the Kyoto protocol as well as all sectors except agriculture, which has been controversially delayed (Wright 2015; Macey 2012). The domestic emission unit used for the ETS, called the NZU, is not compliant with the Kyoto units and thus can only be used within the country. However several other international Kyoto units can be used in the NZ ETS, including emission reduction units (ERUs), certified emission units (CEUs) and removal units (RMUs). Compared to most other carbon markets to New Zealand ETS has a high degree of international linkages, but this also means that it is a price taker when it comes to these units (Macey 2012).

The New Zealand ETS has undergone significant changes in the past few years and this has led some to question its effectiveness. Although New Zealand is a signatory to the Kyoto protocol its relationship to the international community with regards to climate change arguably altered at the UNFCC conference in 2012 when the country decided not to sign on the second commitment period 2013–2020. According to Macey (2012), this meant that New Zealand was effectively, in his words, ‘locked out of UN carbon markets from 2013’. However, the wash-up period of the Kyoto Protocol meant that there was some trading activity until June 2015.

The changes that have occurred to the ETS scheme after 2012 have been contentious within New Zealand. Many critics, including the Parliamentary Commissioner on the Environment, suggest that the ETS scheme has been significantly compromised in the period after 2012 and there are questions about whether the carbon credits that are being purchased after that time represent actual greenhouse gas emissions (Wright 2015). This controversy stems from the fact that the New Zealand ETS system has no limits on the amount of international units that can be purchased. In the last few years many of the carbon credits purchased under the ETS were those that had originally been allocated to Russia and the Ukraine under the Kyoto protocol (Macey 2014), but which those countries did not use subsequently because of the contraction in their economies. These so-called hot air units sell for well below the New Zealand price of $25 and in fact many of them have been traded for just a few cents. The Parliamentary Commissioner on the Environment argued in June 2015 that:

These hot air units do not represent real reductions in emissions. The price of these hot air units have been running at a few cents. Taking advantage of the difference in price between these hot air units and the units allocated by the government to admit as has damage the integrity of the ETS (Wright 2015).

It is unclear what the future will hold for the New Zealand ETS scheme. However, as the next section demonstrates, the country continues to be at the forefront of actions to try and link international carbon markets. This is understandable, since there are many within the country that believe that because New Zealand has such a strong reliance on renewable energy, there is little capacity to make serious reductions in its emissions and so it needs to be engaged internationally with other carbon markets (Ministry of Environment 2015b).

3.2 New Zealand and Asia–Pacific Carbon Markets Roundtable (APCMR)

Many commentators suggest that there is a need to linkup the various domestic carbon markets throughout the region. An important initiative in this sense is the Asia–Pacific Carbon Markets Roundtable (APCMR) that was initiated by New Zealand in 2011 and had its fifth iteration in 2014. The roundtable is an informal gathering of representatives from jurisdictions that have already considering domestic market based carbon instruments. It was set up as a way to encourage the growth of domestic carbon markets and do so in a manner that makes future bilateral regional level linking of those markets possible. Some of the domestic carbon markets included in this roundtable are China, Korea, Indonesia, Chile, Japan, New Zealand, Singapore, Thailand, California, and the North American Regional Greenhouse Gas Initiative.

The APCMR is an opportunity for representatives of these jurisdictions to discuss ways in which future market linkages may be arranged and potential obstacles overcome. Some of the issues covered in these discussions include environmental integrity, emissions MRV, governance, and registry arrangements. At the present time, materials stemming from deliberations at the various APCMR fora are not publically available. Again, whilst it is unclear how and in what form carbon markets will be linked in the future, the example of the APCMR shows that leadership from countries such as New Zealand can assist in moving dialogue along and in doing so help create the conditions for the emergence of such linked markets, that will ultimately assist Asian countries in transitioning towards a low carbon economy.

4 Financing Low Carbon Technologies

The financing of low carbon technologies is an area where regional cooperation can foreseeably be of assistance. In theory, many low carbon technologies should be attractive investment opportunities because they are relatively low risk, since they are operationally simple and have no fuel costs. Indeed, there are now substantial cost reductions and efficiency improvements in renewable energy systems such as solar PV and onshore wind. Thus, even though global investment in those areas dropped between 2013 and 2014, a great deal more power capacity was added, much of it without the need for subsidy support (FSFM 2014). In 2014, investment in renewable energy to developing countries rose 36 % from the previous year, with several countries in Asia, such as China, India, Indonesia, Philippines and Myanmar all seeing large gains (FSFM 2015). This is particularly impressive because falling capital costs means that a great deal more power is generated than an equivalent investment would have yielded even three years previously.

However, for many investors looking to invest in renewable energy in Asia, there are often uncertainties around the broader issues around the regulatory environment, feed-in tariffs and difficulty in accessing finance. Moreover, while capital costs are falling, for many companies in Asia the upfront capital costs associated with some forms of low carbon growth still remain prohibitively high, with a recent estimate suggesting that up 90 % of the total lifetime cost of a renewable energy project are from capital costs (New Climate Economy 2015). Obtaining long-term financing is often one of the most difficult obstacles faced by companies wanting to introduce low carbon technologies. Again, it has been estimated that access to low-cost, long-term finance might reduce the cost of low-carbon electricity by up to 30 % in emerging economies (New Climate Economy 2015). However, attracting such finance from outside the Asian region is problematic given that the regulatory environment that confronts the investors in different jurisdictions is extremely uneven throughout Asia, meaning that significant local understanding is indispensable. Even if such expertise is available the regulatory environment that will emerge in the coming decades is uncertain and difficult to predict.

4.1 Institutional Investment

Previous chapters in this volume have touched on the significant private sector investment needed to finance low carbon growth in Asia. One significant source of investment in low carbon technologies is institutional investment. There are several regional associations around the world that attempt to harness institutional investment, including superannuation funds, in ways that can contribute to lessening climate change and facilitating a transition to low carbon intensity growth. These groupings, such as the Institutional Investors Group on Climate Change (UK), Investor Network on Climate Risk (USA) and Asia Investor Group on Climate Change (AIGCC) encourage government policies and investment practices that address the risks and opportunities of climate change. In Australia and New Zealand, the equivalent body is the Investor Group on Climate Change (IGCC), which has approximately A$1 trillion under management (IGCC n.d). The IGCC is interested in raising awareness about the impacts of climate change among investors, government, corporate and community sectors. It seeks to institutionalise inclusion of climate change impacts in investment analysis. It does this by assisting the investment industry to understand the potential costs and benefits of climate change through the provision of relevant and timely information.

4.2 NZ Superfund and Its Difficulties in Investing in Renewable Technologies in Asia

An important example of a managed fund that is active in the IGCC is the NZ Superfund. This is a Sovereign wealth fund (approximately NZ$25.82 billion under management) that invests Government capital contributions, and the returns from those investments, to contribute to the cost of paying superannuation entitlements in the future. It is a long-term, growth-oriented, global investment fund. It is a member of the Responsible Investment Association of Australasia (RIAA) and abides by the guiding principles set out by that organisation.

NZ Superfund has been pro-active in investing in renewable energy, including an equity and debt investment in Massachusetts-based wind turbine manufacturer Ogin Inc (NZ Superfund 2014). Ogin develops smaller, high-performance wind turbine, and aims to help wind-energy developers bring clean energy production closer to customers. It should begin generation this year. NZ Superfund has also invested in California-based Bloom Energy, a maker of on-site power generation systems using fuel cell technology (NZ Superfund 2014).

The NZ Superfund is clearly an example of a institutional investor that is interested in investing in renewable energy technologies and thus could be expected to be interested in investing in Asia’s fast growing and energy hungry economies. However, qualitative interviews with figures associated with the IGCC suggested that the story is repeated across many of the member organisations of the IGCC. They have encountered significant issues with entry into ASEAN markets. For example, because there are different regulatory environment in each jurisdiction, there is a need for very specialist knowledge of each of those markets. However, NZ Superfund has had difficulty in establishing good relationships with local partners. They have also struggled to find expertise that stretches across the region rather than in particular countries. Further, there was perceived to be an adversarial attitude towards foreign investment in some countries, which translated into reluctance on the part of some members of IGCC to invest in projects in Asia.

The experience of NZ Superfund has many comparable examples around the world. A recent submission by a coalition of all responsible investment organisations mentioned previously, as well as intergovernmental partnerships PRI and UNEPFI, urged governments to work with investor groups to ensure a regulatory environment where it was mandatory for risks to be adequately disclosed and an emphasis was put on a stable and transparent investment climate that supported the deployment of low carbon technologies (Global Investor Statement on Climate Change 2014). This group argued that investment would continue to be stymied unless there were significant regulatory changes taking place. The group argued that:

Ultimately, in order to deliver real changes in investment flows, international policy commitments need to be implemented into national laws and regulations. These policies must provide appropriate incentives to invest, be of adequate duration to improve certainty to investors in long-term infrastructure investments and avoid retroactive impact on existing investments (Global Investor Statement on Climate Change 2014).

There are examples, however, of niche firms that have been able to profitably capitalize on the merging opportunities for investing in low carbon growth in Asian markets. H.L.R. Morrison & Co. is a New Zealand infrastructure investment company that specializes in the brokering of expertise and capital. In 1994 it launched Infratil, one of the world’s first listed infrastructure funds, which now controls NZ based energy company Trustpower. Morrison & Co. have formed a successful partnership with the China General Nuclear Power Group (CGN) on renewable energy projects throughout China. As of 2014, CGN operates power generation plant of the capacity: nuclear 8.3 GW, wind 4.7 GW, hydro 4.0 GW and solar 600 MW. Elsewhere in the world, Morrison & Co. has also built a stake in Drax Group, which is transforming itself into biomass-fuelled generator business through the burning of sustainable biomass in place of coal at the UK’s largest power station. This transformation will see what is the UK’s single largest source of carbon dioxide emissions become one of the largest renewable generators in Europe.

There are several lessons to be learnt from the experience of H.L.R Morrison & Co. Firstly, the form had experience in developing renewable energy in New Zealand but then successfully partnered with local firms. They combined this experience with combined with specialist abilities to manage assets and raise funds. Morrison & Co. have undoubtedly benefited from the fact that their forays into Asia have been in China, where there is an evolving policy framework to induce investment to transition to renewables, including in terms of pay-in tariffs needed to create revenue stream in case subsidies or support withdrawn and the concurrent development of generation transmission infrastructure such as regional grids. One of the lessons that emerges from the case of Morrison & Co. is that success in China has come from niche expertise as well as because of the kind of conditions which exist in that country to engender the take-up of renewable energy projects. It is certainly not the case that similar conditions exist everywhere in the region and thus it is far from an easy task to replicate this success elsewhere.

4.3 Free Trade Agreements, Environmental Goods and Technology Transfer

Another area that can increase the uptake of low carbon technologies is in the trade of environmental goods. The global market for environmental goods is estimated to grow to approximately $3 trillion by 2020 from a 2013 base of $1 trillion. Many commentators believe that if such a market potential is to be reached then there will have to be a liberalisation of the tariff and non-tariff barriers in low-income countries. Indeed, it has been observed elsewhere that many developing countries continue to impose high tariff and non-tariff measures on low carbon goods and services. If such countries were to be tariff free and quota free, Kalirajan (2012) has estimated that this could lead to substantial increase in trade in renewable energy generation and efficient technologies.

New Zealand has been a significant player in efforts to reduce tariffs in environmental goods, a variety of fora including the WTO context, APEC and the free trade agreements. In 2012, APEC countries committed to reducing applied tariff rates on 54 environmental goods to 5 % or less by 2015. In 2014 New Zealand was one of 14 members of the WTO that were involved in plurilateral negotiations on environmental goods. Collectively these members account for 86 % of all global trade in environmental goods. New Zealand is also one of only 7 countries that are involved in both RCEP and TPP. Although there is significant opposition in New Zealand, particularly to the TPP, the Ministry of Foreign Affairs and Trade (MFAT) has consistently stated that these two treaties will both bring considerable benefits to the country (Kim 2015).

One of the reasons usually cited for the country’s enthusiasm for these trade pacts has been the potential for New Zealand industry to export environmental goods, including those related to energy. In 2012, the export of environmental goods including wastewater management and potable water treatment; management of solid and hazardous waste and recycling systems and renewable energy plants, was valued at NZ$750 million. The liberalisation of environmental goods could undoubtedly benefit technology transfer from countries such as New Zealand to region’s that are transitioning to low carbon growth economies such as in those in Asia.

An important example of low carbon energy where New Zealand has a expertise is geothermal energy. This energy source has the advantage of being clean, with relatively low environmental impacts. It is also reliable since generation is independent of weather and climate. New Zealand has legitimate claims to be regarded as a world leader in the uptake of this technology. Indeed, in the period between 2008 and 2014 half of all the geothermal energy installed around the world (1,100 MW) took place in New Zealand, leading to a doubling of the country’s geothermal electricity genertion capacity. This is potentially an important aspect of the RCEP given the importance geothermal technology could have for countries such as Indonesia, Vietnam and Philippines.

5 New Zealand Development Cooperation and Role in Multi-lateral Financial Institutions

There is a growing global recognition that Development Financial Institutions are an important player in the transition to low carbon growth, particularly in the Global South. Certainly, Multilateral Development Banks (MDB) (such as the World Bank and its regional affiliates) have already made significant investments in this direction, having provided US$24 billion in 2013, and US$75 billion in total in the three years from 2011 (New Climate Economy 2015). The description above of institutional investors, however, also suggests that the role of these MDBs could also extend to assisting in technical assistance in infrastructure investment for private sector investment and public-private partnerships. Indeed, infrastructure finance is an important area that MDBs have clear specialist expertise in; whilst direct loans are the most obvious area of importance, they also can also provide technical assistance and help to mitigate risk. In doing so, they create the conditions that will attract greater private sector investment (New Climate Economy 2015). Countries such as New Zealand can also use their influence in these institutions to argue for a redirection of investment priorities towards areas that will support low carbon growth to a greater extent than is currently occurring.

New Zealand has considerable investment in multilateral institutions and is an active player, relative to its size, in a number of institutions that are important in the regional and global development architecture. As well as contributing to overall subscription, New Zealand has also co-financed a number of initiatives with the Asian Development Bank that are directly aimed at a transition to a low carbon economy. However, New Zealand has stronger relationships in the Pacific, and has in the past most of its co-financing with the ADB has been in that region, such as the access to renewable energy for Papua New Guinea.

As well as being a long-standing contributor to well established multilateral institutions, New Zealand has also been an early signatory to the new Asian Infrastructure Investment Bank (AIIB) and has pledged approximately USD$87 million to this purpose (Rutherford 2015). Of course, the AIIB is in its formative stages and so it is premature to speculate about the role that this may take in future years in the provision of low carbon economy infrastructure in different parts of the region. What can certainly be asserted with some confidence is that early indications suggest that institutions such as these can do a great deal in a range of different areas that will help to encourage low carbon transition.

5.1 New Zealand Aid as a Source of Capacity Building and Technical Assistance

Another potential source of regional cooperation is New Zealand’s aid programme, which takes place through an entity called NZAID, which is itself a part of the country’s Ministry of Foreign Affairs and Trade. For example, NZAID has significant expertise in the provision of renewable energy and this is a focus of its programme in many countries, drawing on the country’s expertise in this sector as well as the established relationships in the Pacific, Asia and beyond.

5.2 Geothermal and Wind as Key Areas for Development Assistance

An important milestone in the New Zealand aid programs engagement is the Gadjah Mada University’s (UGM) Community Resilience and Economic Development (CaRED) program. This is the first integrated collaboration between New Zealand and Indonesia and involves all of the relevant stakeholders in eastern Indonesia. These include government, academia, and communities. The program aims to catalogue and mitigate risks from corrosive fluids, build capacity by developing guidelines for exploration, development and monitoring of geothermal fields in this part of the country. It also has a community development focus and aims to enhance public understanding of geothermal resource development, including enhancing livelihood opportunities associated with this development.

Arguably New Zealand’s priorities in its development cooperation are not focused on Asia to the extent that it might be. In 2008, the New Zealand aid programme underwent significant changes with regards to its focus and geographic orientation (Zweifel and Hill 2015). The newly elected National government decided that they needed to narrow the focus of the aid programme so that it concentrated on the Pacific region and specifically those countries, such as in Polynesia, where it was able to exercise the greatest influence. The government defended this move on the grounds that it was simply being pragmatic and attempting to use the aid budget in the most effective and efficient manner; however, critics of this approach thought that this shift was overly driven by geopolitical considerations and retreated from New Zealand’s historic role as a good international citizen. There was also controversy accompanying the shift away from poverty alleviation as the central driving feature of the aid programme, towards a focus on sustainable economic development. In an institutional sense, the linking of the aid program to broader foreign policy considerations was explicit in that NZAID was incorporated back into the MFAT and as such lost its semi-autonomous status.

In light of these changes is unsurprising that NZAID does not have a significant suite of programs focused on low carbon development in Asia. Nevertheless, if the government did decide to re-engage with the region more vigorously there is no doubt that there are many learnings built up through engagement with small island states that could be beneficial, particularly in the archipelago nations that have relatively isolated populations such as in Indonesia or the Philippines. NZAID is supporting a variety of solar and wind projects in the Pacific, including wind and photo vault take systems connected to the main grid, (such as in Rarotonga in the Cook Islands), as well as smaller scale PV based mini-grids on some outer islands that nation (MFAT n.d). New Zealand is also working with PIC governments to build capacity, so that these nations can develop and implement their own energy sector plans. A refocusing of the NZAID geographic scope in the future could mean remote and rural parts of Asia also gain access to this technology as part of development cooperation.

Although the government has been rhetorically very assertive about the need to narrow the geographic and sectoral focus of its activities, the reality is that it hasn’t completely stopped engaging with other regions, particularly those places where the lessons of its core programme are arguably easily transferred, at least in a technical sense. Thus NZAID is supporting Small Island Developing States in Africa (Comoros) and the Caribbean (Dominica, St Vincent and the Grenadines, and St Kitts and Nevis) by helping them develop their own geothermal energy sectors (MFAT n.d). NZAID has also assisted with geothermal surface exploration and has extended technical assistance. This technical and financial assistance is particularly useful for a sector such as geothermal because of the high upfront costs associated with this form of energy. This expertise is potentially invaluable for countries in Asia that have significant geothermal capacity, such as Indonesia and the Philippines.

5.3 Capacity Building and Development Cooperation

There is no doubt that one of the strongest contributions that New Zealand can make to the development of the low carbon economy in Asia is in terms of capacity building, and an important part of this is scholarships to allow students from the region to study in New Zealand tertiary institutions. Of particular note here are the NZ ASEAN scholarships, which are open to students from those member countries. Preference is given to students interested in undertaking studies in renewable energy, such as geothermal, solar, hydro engineering and wind energy, as well as renewable energy distribution systems. There is also a focus on areas, which can improve governance such as public sector management and private sector development courses, as well as help in resilience and adaptation to climate change, such as disaster risk management degrees.

An interesting and important example of the technical capacity that New Zealand possesses in these sectors is the University of Auckland’s geothermal Institute, which has more than 60 years experience and expertise in harnessing this energy. The institute offers postgraduate certificate in geothermal energy technology; master of energy; and MD or Ph.D. in geothermal engineering. It has been particularly active in recent years in training postgraduates from Indonesia.

6 Conclusions

This chapter has argued that there are substantial opportunities to foster regional co-operation towards low carbon growth in Asia. Technical assistance, capacity building, institutional investment and carbon markets are all areas where countries such as New Zealand can contribute. Certainly, the promotion of regional carbon markets, of which New Zealand is a strong proponent, has significant potential, both for that country and emerging economies in Asia. However, recent policy changes in New Zealand have raised significant concerns about whether its ETS will be effective in the future.

Another important facet examined in this chapter has been the potential for funds from outside the region to be mobilised to invest in technologies associated with the development of low carbon economies. It was argued that because of the regulatory diversity of the region, and the need for specialized knowledge of each market, there are significant barriers to entry for outside investors and governments and multilateral banks with experience in infrastructure provision also have a role to play in facilitating the appropriate investment conditions. The chapter has outlined examples of where institutional investors from New Zealand have struggled to capitalise on emerging opportunities (such as New Zealand Superfund), as well as cases (such as H.L.R. Morrison & Co.), which demonstrates that there is potential for dedicated infrastructure investment companies to play a part in promoting low carbon growth in Asia.

The latter part of the chapter also discussed the contributions that the New Zealand Aid programme could make in facilitating the transition to low carbon growth in Asia. As the UNEP has noted, a green economy must be built upon the three pillars of low carbon, resource efficient and socially inclusive and so development cooperation has an important role here. Whilst there is clearly expertise and experience in New Zealand’s development assistance sector that could be of greatly useful to low income countries in Asia, at the present time the priorities of the New Zealand aid programme are focused on different geographic areas, although the extension of some programmes to Africa and the Caribbean in recent years suggests there may be possibilities in the future. Whether this is an opportunity lost for the aid programme—in terms of making a contribution to a highly populous and fast growing region in Asia, or is instead a pragmatic distribution of its resources through the targeting of the Pacific, where it has unusually strong connections, is a debate that will continue in New Zealand. Further, New Zealand’s expertise in mature technologies such as geothermal provides the possibility of technology transfer to countries such as Indonesia, Vietnam and the Philippines under the RCEP. Overall, then, it is clear that regional co-operation has a significant role to play in promoting low carbon growth in emerging Asian energy systems.