On October 11, Southeast Asian countries and Australia will convene the “Asia Zero Emissions Community (AZEC)” summit, where they plan to introduce a common greenhouse gas (GHG) emissions calculation and reporting framework in the summit’s declaration. This new framework is based on Japan’s decarbonization law, the “Act on Promotion of Global Warming Countermeasures,” which aims to establish a unified standard for reducing CO2 emissions and enhance transparency. This move is expected to provide greater ease for Japanese companies looking to expand their operations in Asia.

The AZEC framework was initially proposed by Japan’s former Prime Minister, Fumio Kishida, and this upcoming summit marks the first international diplomatic stage for Japan’s current Prime Minister, Shigeru Ishiba. During the summit, AZEC member nations will discuss a ten-year action plan, with the introduction of the GHG calculation and reporting rules being a key agenda item.

Japan’s current “Act on Promotion of Global Warming Countermeasures” requires companies to calculate and report their GHG emissions. The law applies to businesses with energy consumption exceeding 1,500 kiloliters of crude oil equivalent annually, and as of 2021, around 12,000 companies are subject to its regulations. Under this law, companies must regularly report their emissions to the government and make these reports publicly accessible, ensuring transparency and accountability.

Currently, ASEAN countries have yet to establish internationally credible emission calculation systems. Therefore, AZEC nations are looking to adopt Japan’s experience by implementing similar calculation and reporting mechanisms. This would not only help businesses across these nations alleviate their emissions burden but also support their governments in building credible emissions tracking and monitoring systems in cooperation with the international community.

In recent years, Japan’s Ministry of the Environment has been promoting its GHG calculation systems in Southeast Asian countries such as Indonesia, Thailand, the Philippines, and Vietnam. Through training and other initiatives, Japan has actively shared its expertise with these nations and encouraged local businesses to adopt Japanese calculation methods.

According to the AZEC summit declaration, Japan will launch a support system in October 2023, led by ASEAN and the Economic Research Institute for ASEAN and East Asia (ERIA). The aim is to assist companies in these countries with the smooth adoption of the new emissions calculation rules. This initiative will lay the foundation for developing feasible emissions reporting mechanisms in Southeast Asia through company surveys and intergovernmental experience sharing.

At the same time, Japanese startups are actively promoting low-carbon technologies and tools in the Southeast Asian market. Tokyo-based Zeroboard has been promoting its emissions visualization software in Thailand, while another Japanese company, Asuene, has been conducting similar business in Singapore. These technologies are expected to gain further recognition and adoption during the AZEC summit.

The AZEC action plan will also outline a detailed timeline, with a mid-term progress report scheduled for the 2026 AZEC summit. The goal is to fully establish and refine the emissions calculation and reporting systems across member nations between 2029 and 2034.

For multinational companies operating in Southeast Asia, varying GHG reporting standards across countries have introduced additional compliance costs. The adoption of a unified emissions calculation and reporting mechanism would enable these companies to more easily track and manage carbon emissions across their supply chains. This standardization would not only reduce compliance burdens for businesses but also lay the groundwork for Japanese companies to lead the Asian decarbonization market.

The European Union (EU) is currently at the forefront of global GHG emissions regulation, particularly with the implementation of the Carbon Border Adjustment Mechanism (CBAM) in May 2023. CBAM imposes emission-based fees on imported goods, further enhancing the EU’s influence in decarbonization regulation. The rollout of the AZEC framework will help Southeast Asian nations and Japan maintain a degree of influence in the international community and secure their position in the global decarbonization market.

Japan’s promotion of these decarbonization rules also positions the country favorably for future competition with EU products in the global marketplace. CBAM is expected to expand to cover more products by 2026, which will further drive Japan and Southeast Asian countries to strengthen their internal decarbonization regulation and standardization processes.

Summary:

• The unified emissions calculation and reporting framework under the AZEC will provide Southeast Asian countries with internationally credible carbon emissions tracking standards.
• Japan’s GHG calculation and reporting rules serve as a model for ASEAN nations to advance their decarbonization efforts.
• A unified standard will help multinational corporations reduce compliance burdens and more effectively manage carbon emissions in their supply chains.
• Japanese companies are actively promoting decarbonization technologies in Southeast Asia, helping local businesses enhance their environmental awareness and technological capabilities.
• Through collaboration with Japan, ASEAN countries are strengthening their competitiveness in the global decarbonization market while consolidating their international voice.