Decarbonization and Finance in ASEAN: An Analysis with a Social Accounting Matrix

The importance of financial support for accelerating decarbonization is widely recognized. Against the backdrop of the stream, this chapter analyzes the inducement effect of financial support on power generation sectors and estimates the emission reduction rate due to an increase in the share of renewable energy among ASEAN member states. We first adopt a social accounting matrix (SAM) multiplier decomposition method to assess the inducement effect via the financial sphere. Next, we examined the emission reduction rate of substituting renewable energy for thermal power by applying the scenario Leontief model to SAMs for ASEAN member states. The SAMs in this chapter are based on the GTAP-Power Database that is included in the GTAP 11 Database. This chapter reaches two findings. First, proper financial support can increase the share of renewable energy in the energy mix. Second, increasing the share of renewable energy can decrease carbon emissions at a reasonable rate, even using current technology. These results suggest that well-designed financial supports can contribute to the carbon neutrality in ASEAN by increasing the share of renewable energy in the energy mix.