Fiscal Policy to Support the Green and Just Energy Transition

Editedby Fauziah ZenFukunari KimuraAlloysius Joko Purwanto Fiscal Policy to Support the Green and Just Energy Transition Economic Research Institute for ASEAN and East Asia (ERIA)Sentral Senayan II 6thFloorJalan Asia Afrika No. 8, Gelora Bung KarnoSenayan, Jakarta Pusat 10270Indonesia © Economic Research Institute for ASEAN and East Asia, 2025ERIA Research Project FY2024 No. 28Published in January 2025 All rights reserved. No part of this publication may be reproduced, stored in a retrievalsystem, or transmitted in any form by any means electronic or mechanical without priorwritten notice to and permission from ERIA. The findings, interpretations, conclusions, and views expressed in their respectivechapters are entirely those of the author/s and do not reflect the views and policies of theEconomic Research Institute for ASEAN and East Asia, its Governing Board, AcademicAdvisory Council or the institutions and governments they represent. Any error in contentor citation in the respective chapters is the sole responsibility of the authors. Materialin this publication may be freely quoted or reprinted with properacknowledgement. Foreword As the President of the Economic Research Institute for ASEAN and East Asia (ERIA), it ismy distinct honour to present this comprehensive study on the economic impact of thegreen and just transition in selected East Asian economies and the European Union.Climate change remains one of the most pressing challenges of our time, and addressingit requires a concerted effort from all sectors of society. At ERIA, we are committed toadvancing economic research that not only highlights the challenges but also identifiesviable solutions for a sustainable future. This study provides an in-depth analysis of green transition efforts in select economies.The country authors examine various relevant aspects, such as governance systems,development agendas, economic structures, and fiscal policies. The impacts of greenpolicies on economies and people have been estimated and projected. It also underscoresthe critical role of both public and private sectors in mobilising the necessary financialresources to support climate action. In addition to sectoral case studies, the reportpresents a detailed examination of strategies employed by Indonesia, Malaysia, Thailand,Japan, and the European Union in their transition towards a low-carbon economy. Our findings highlight the importance of strategic planning, robust fiscal policies, andinnovative financial mechanisms in implementing a successful green transition. It is vitalto incorporate the principles of a just transition, ensuring that the shift to renewableenergy and sustainable practices is both inclusive and equitable, particularly for thosemost vulnerable to the impacts of climate change. I extend my deepest gratitude to the dedicated team of researchers and contributors whohaveworked tirelessly to produce this report.Their expertise and unwaveringcommitment have been instrumental in completing this study. I also wish to thank ourpartners and stakeholders for their invaluable support and collaboration. As we move forward, it is imperative that we continue to foster both international andregional cooperation, particularly in the East Asia context. We must also strengthen ourcollective efforts to leverage innovative financial instruments and complement them witheffective fiscal policies to finance the transition and mitigate the adverse effects of climatechange. I believe the insights and recommendations in this study will serve as a valuableresourcefor policymakers, researchers, and practitioners as we work towards asustainable and resilient future for East Asia and beyond. Tetsuya Watanabe President of ERIA (Economic Research Institute for ASEAN and East Asia) List of Project Members Chapter 1 - Achieving Climate Goals: The Intersection of Policy, Finance, andInnovation Fukunari Kimura, ERIA (Economic Research Institute of ASEAN and East Asia)Fauziah Zen, ERIAAlloysius Joko Purwanto, ERIADenisa Athallia, ERIA Chapter 2 - Financingthe Green and Just Energy Transition: Green Fiscal Policy forJust and Fair Transition to a Green Economy Khoirunurrofik, University of Indonesia (UI)Fauziah Zen, ERIAYusuf Sofiyandi, UIYusuf Reza Kurniawan, UICalista Endrina Dewi, UIFachry Abdul, UI Chapter 3 - The Green Economy Transition: The Effect of Environmental Factors onRenewable Energy Development in Malaysia Norasikin Ahmad Ludin, Universiti Kebangsaan Malaysia (UKM)Fairuz Suzana Mohd Chachuli,UKMNurfarhana Alyssa Ahmad Affandi,UKM Chapter 4 - The Economic and Greenhouse Gas Emission Impacts of ElectricVehicles Nattapong Puttanapong, Thammasat UniversityThongchartBowonthumrongchai, Srinakharinwirot University Chapter 5 - European Union Transition to Green Energy in the Transport Sector Inge Mayeres, Transport & Mobility Leuven Chapter 6 - Energy Transition in Japan from the Perspective of Economics andTechnology Joni Jupesta, United Na