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1、DECARBONIZING SOUTHE AST ASIA:THE GREEN FUEL S R ACETransforming a regional ecosystem to better utilize CO2 2024CONTENTFOREWORD 3EXECUTIVE SUMMARY 61.HOW CO2 CAN UNLOCK ECOSYSTEM OF GREEN FUELS&HOW COMPANIES CAN PREPARE 82.PREPARING FOR TRANSITION TO CO2-BASED PRODUCTS 103.STATE OF ECOSYSTEM FOR BIO

2、FUELS&OBSTACLES IN SEA 124.STATE OF H2-&CO2-DERIVED FUELS&MARKET CHALLENGES IN SEA 165.SEA OPPORTUNITIES FOR CO2-BASED FUELS 186.BUILDING AN ECOSYSTEM FOR REGIONAL DECARBONIZATION 22CONCLUSION 26TRUNG GHIPartner,Head of Energy&Utilities Southeast AsiaAIRI MORIMOTOConsultant,SingaporePRAKARSA MULYOCo

3、nsultant,IndonesiaWe would like to acknowledge all those who contributed in the review of this Report,especially:Yuma Ito,Abhishek Srivastava,Somnath Kansabanik,Zheng Gu,Wendy Cheng,and Julian Yeo.2UNLOCKING DECARBONIZATION POTENTIAL ACROSS SEAAcross the globe,there is currently an enormous,transfor

4、mative shift away from fossil fuels,driven by the fundamental need to decarbonize to hit net zero targets as well as growing pressure from customers looking to embrace green alternatives.Achieving effective decarbonization requires a profound shift in the entire ecosystem around fuel production,dist

5、ribution,and usage.As part of this shift,CO2 can anchor new ecosystems,enabling the creation of net zero fuels,whether bio-based or hydrogen(H2)-and CO2-derived products.This shift provides opportunities for companies,customers,and societies across Southeast Asia(SEA)and will help SEA countries hit

6、their wider decarbonization targets,particularly in crucial,hard-to-decarbonize,high-demand regional sectors,including aviation,shipping,and power generation.It will also help resolve pressing socioeconomic needs,such as reducing waste through reuse and investments in green fuel production and addre

7、ssing the concerns of younger generations pushing to create a more sustainable world,both as consumers and entrepreneurs building sustainability start-ups.A move to CO2 can unlock the broader universe of CO2-to-X and carbon capture and utilization(CCU)-to-X products,opening new possibilities for SEA

8、 and putting the region at the forefront of the global shift to decarbonization.Technology and processes like carbon capture,utilization,and storage(CCUS)and direct air capture(DAC)are central to this,lowering or eliminating greenhouse gases(GHGs),mitigating hard-to-abate emissions,and providing CO2

9、 as a feedstock for green fuel production,while delivering the monitoring and measurement required for compliance,including through emerging technology like artificial intelligence(AI).Successfully scaling such technologies across SEA is vital to providing the infrastructure for change.FORE WORDARTH

10、UR D.LITTLE3In the words of US Special Presidential Envoy for Climate John Kerry,“The energy transition is the new Industrial Revolution.”Just as earlier industrial revolutions dramatically reshaped industries and cities according to where value was located,so will the energy transition.This shift m

11、akes understanding how to manage CO2 an economic,social,and political imperative for countries within SEA.To realize its potential,governments,regulators,and players across the value chain must act now to address the challenges(especially around cost,certification,and regulation)that are holding bac

12、k the ecosystems growth compared to other regions.The transition requires concerted action on a regional,cross-industry basis that will enable companies to meet the changing needs of customers,preserve competitiveness,and transform regional economies through decarbonization.Trung Ghi Partner,Head of

13、 Energy&Utilities,Southeast Asia4REPORT:DECARBONIZING SOUTHEAST ASIA:THE GREEN FUELS RACEARTHUR D.LITTLE5E XECUTIVE SUMMARYAgainst the backdrop of achieving net zero,companies from all industries must transform their strategies to focus on reducing and,over time,eliminating GHG emissions.Collectivel

14、y,this decarbonization push will help countries achieve their net zero targets.Decarbonization can be delivered through multiple approaches,such as electrification,adopting advanced materials,replacing industrial equipment with more sustainable alternatives,and asset optimization.One alternative app

15、roach is to effectively capture and use CO2 to create new products,such as fuels and chemicals.With an emphasis on the approach of effectively reusing CO2,this Report focuses on decarbonization from the perspective of shifting the product mix to enable net zero.CO2 can serve as an anchor for a broad

16、er ecosystem of green products in the CO2-to-X and CCU-to-X domains.Examples include biofuels(derived from biomass,which absorbs CO2)as well as H2-and CO2-derived products(e.g.,e-fuels).While making greener products will not contribute directly to the producers own decarbonization,those products wil

17、l enable its customers,end users,and the region to eliminate carbon emissions.For example,sustainable aviation fuel(SAF)helps airlines decarbonize their operations and hence supports national-level targets but does not necessarily enable SAF producers to hit their own GHG-reduction objectives.6REPOR

18、T:DECARBONIZING SOUTHEAST ASIA:THE GREEN FUELS RACELooking in-depth at SEA,achieving net zero across the region hinges on effectively managing carbon emissions and using carbon itself as a raw material for the net zero journey,such as by converting it into usable products.These products comprise bot

19、h fuels and non-fuels (e.g.,chemical products and derivatives).However,since fuel is a more urgent and pressing need compared to chemicals,this Report focuses on this area.Specifically,the Report addresses these five questions:1.How can CO2 unlock a broader ecosystem of green fuels,and how are compa

20、nies preparing for the transition to these CO2-derived fuels?2.What is the state of the ecosystem for biofuels,and what obstacles does SEA face?3.What is the state of H2-and CO2-derived fuels in SEA,and what challenges does the market face?4.Where are the opportunities in SEA for CO2-based fuels(bot

21、h bio-based and H2-and CO2-derived)?5.How can businesses and governments build an ecosystem in SEA for regional decarbonization?ARTHUR D.LITTLE71.HOW CO2 CAN UNLOCK ECOSYSTEM OF GREEN FUEL S&HOW COMPANIES CAN PREPARECreating a decarbonized ecosystem across SEA relies on economies moving from fossil

22、fuels to using CO2 as an anchor for new processes that create alternative fuels,using either biomass or H2 as production feedstock(see Figure 1).Successfully collecting and harnessing CO2 enables producers to unlock a broader universe of products,including:-CO2-to-X fuels,namely biofuels(e.g.,fatty

23、acid methyl esters FAME,hydrotreated vegetable oil HVO,bio-SAF,and 1-3G biofuels)-CCU-to-X fuels,such as H2-and CO2-derived fuelsSUCCESSFULLY COLLECTING AND HARNESSING CO2 ENABLES PRODUCERS TO UNLOCK A BROADER UNIVERSE OF PRODUCTSFigure 2 illustrates the differences between CO2-to-X and CCU-to-X pro

24、ducts.(Since fourth-generation biofuels remain at an incredibly early stage in development,we do not cover them in this Report.)Figure 1.Building blocks and key pillars of decarbonizationSource:Arthur D.LittleSource:Arthur D.LittleFigure 1.Building blocks and key pillars of decarbonizationCO2 as anc

25、hor for H2-&CO2-derived fuelsBiomassCO2H2H2-&CO2-derived fuelsBiofuelsCO2 as anchor for biofuels8REPORT:DECARBONIZING SOUTHEAST ASIA:THE GREEN FUELS RACEARTHUR D.LITTLEFigure 2.Differences between CO2-to-X and CCU-to-X fuelsSource:Arthur D.LittleSource:Arthur D.LittleFigure 2.Differences between CO2

26、-to-X and CCU-to-X fuelsAtmospheric CO2Captured CO2Biogenic CO2Industrial CO2DACPhotosynthesisConversionCO2-to-XH2-based fuelOther feedstockH2-based non-fuelCO2 SOURCEFEEDSTOCKPRODUCTIndustrial sourceBiomassBiofuelBio-based product(non-fuel)CCU-to-XH2N2Others(e.g.,carbon nanotube)NON-EXHAUSTIVE9Glob

27、ally,many companies have begun their transition to providing greener alternatives to fossil-based products.In most cases,they have initially created bio-based products but are now moving toward H2-and CO2-derived fuels.The essential difference between bio-based products and their H2-and CO2-derived

28、equivalents is the feedstock used in their manufacture.That means the same applications can use them,and they do not require a large-scale change to the distribution infrastructure or supply networks.Consequently,many producers are treating bio-based products as a first step on the path to H2-and CO

29、2-derived products,shifting their focus as costs fall and regulatory policies change.Among the universe of alternative fuels,products with both bio-and H2-derived counterparts will enable this transition(see Table 1).The shift toward H2-and CO2-derived pathways is further enabled by feedstock availa

30、bility and regulatory mechanisms in the region.ACCESS TO AFFORDABLE FEEDSTOCKAcross the region,biomass is readily available,providing a relatively affordable feedstock for bio-based products.This makes these products an ideal first step for producers looking to move away from fossil fuelbased produc

31、ts.In contrast,the cost of renewable energy is currently higher in SEA compared to other regions and supplies of low-cost H2 are also limited.This makes H2-and CO2-derived products more expensive than bio-based equivalents,although using hydropower or geothermal energy can aid cost-competitiveness,i

32、n select countries.2.PREPARING FOR TR ANSITION TO CO2-BASED PRODUC T STable 1.Common types of alternative fuels with bio-and H2-derived counterpartsAtJ=alcohol-to-jet;BtL=biomass to liquidSource:Arthur D.LittleAtJ=alcohol-to-jet;BtL=biomass to liquidSource:Arthur D.LittleTable 1.Common types of alte

33、rnative fuels with bio-and H2-derived counterpartsPRODUCTFEEDSTOCKBIO-BASEDH2-DERIVED CO2 FUELMethaneBiomethaneBio-basedSynthetic methaneH2/CO2MethanolBio-methanolE-methanolH2/CO2SAFAtJ/BtLAlcohol/biomassE-SAFH2/CO2NON-EXHAUSTIVE1 0REPORT:DECARBONIZING SOUTHEAST ASIA:THE GREEN FUELS RACEARTHUR D.LIT

34、TLEREGULATORY MECHANISMSLegislation(through mandatory uses and subsidies)is key to driving the transition to decarbonized fuels,particularly given their higher cost compared to fossil-based products.While the EU is the driving force behind much of current regulatory activity,it has a major impact on

35、 SEA,for two main reasons:1.EU regulations impact global sectors such as the maritime industry,where SEA is strong(especially given Singapores position as a global maritime hub).Ships from the region that sail to EU ports are affected by EU maritime legislation.2.Other nations/regions often adapt an

36、d adopt versions of EU legislation,meaning they can become de facto standards for many parts of the world.Initially,markets like the EU focused on biofuels,such as through the Renewable Energy Directive(RED I)of 2009.However,regulators are increasingly recognizing the additional sustainability benef

37、its and attributes of H2-and CO2-derived fuels,leading to new legislation that provides the market with confidence when investing in this area.For example:-In February 2023,the European Commission adopted the Additionality Delegated Act,which outlines how H2,H2-based fuels,or other synthetic fuels(i

38、ncluding those produced with industrial CO2)can be considered as renewable fuels of non-biological origin(RFNBOs).-In July 2023,the EU launched the FuelEU Maritime initiative,which includes incentives to support the use of RFNBOs,including H2-and CO2-derived fuels.Case studies Moving from bio-to H2-

39、and CO2-derived productsNational oil company:Petronas Malaysian state oil company Petronas has been active across a range of alternative fuels,beginning with bio-based(CO2-to-X)projects scheduled to go live in 2025.These biofuels include the production of SAF created from hydroprocessed esters and f

40、atty acids(HEFA),renewable diesel made from HVO,and bionaphtha.Moving forward,the company has embraced H2/ammonia with plans to supply green ammonia to the maritime sector from 2026.As part of its strategy,Petronas has partnered with a range of companies,including Eneos and Samsung C&T to develop H2

41、 infrastructure and has launched its own clean energy solutions provider,Gentari,to offer a wide range of renewable energy,H2,and green mobility solutions for commercial,industrial,and retail customers.Global oil&gas major:ShellShells alternative fuel strategy targets the land and aviation transport

42、 industry,with plans to supply HEFA SAF,and renewable diesel to hard-to-decarbonize sectors from 2024.It focuses on products to decarbonize longer-distance journeys(e.g.,heavy-duty transport,aviation,and shipping),complementing electric and H2 mobility.Shell has not yet provided indications of movin

43、g into H2-and CO2-derived fuels but completed front-end engineering design(FEED)on its ammonia project in 2023 and will make a final investment decision on H2 production in 2026.Alongside oil and gas companies,other organizations are looking to produce CO2-based products,including chemicals players

44、such as Proman(producing bioethanol and developing H2-and CO2-derived ethanol),as well as Methanex and OCI Global(both also focusing on ethanol alternatives).1 13.STATE OF ECOSYSTEM FOR BIOFUEL S&OB STACLES IN SE AFIRST-GENERATION BIOFUEL ECOSYSTEMGiven that SEA consists largely of countries with si

45、gnificant agricultural sectors,there is an abundance of bio-based feedstock for use in creating biofuels.For example,when it comes to first-generation(1G)biofuels(produced directly from crops),Indonesia and Malaysia are the two largest providers of palm oil in the world,responsible for 84%of global

46、production,while Thailand is a major cassava producer.The availability of this biomass has driven the establishment of a conventional biofuel sector across the region,with products including bioethanol(from sugar/starch crops)and biodiesel(from transesterification of oils).Currently,the development

47、of more advanced biofuels is at an earlier stage(see Figure 3).Given its natural advantages around biomass availability and established conventional biofuel industries,the region is poised to become a prominent producer and exporter;for example,it was responsible for 17%of global biodiesel productio

48、n in 2022.Key strengths include:-Indonesia 15%of global biodiesel production,supported by available,varied feedstock sources-Malaysia 2%of global biodiesel production,driven by cost advantages-Thailand 2%of global bioethanol production,driven by proximity to large Asian marketsFigure 3.Main biofuel-

49、producing technologies and methodsGas-FT=gasification+Fischer-Tropsch Source:Arthur D.Little,ACEGas-FT=gasification+Fischer-Tropsch Source:Arthur D.Little,ACEFigure 3.Main biofuel-producing technologies and methodsADVANCED BIOFUELCONVENTIONAL BIOFUELBioethanolCellulosic ethanolEthanol from sugar&sta

50、rch corpsDiesel-type biofuelsBiodiesel from microalgae;sugar-based hydrocarbonsBtL diesel(from Gas-FT)Hydrotreated vegetable oilBiodiesel(by transesterification)Other fuels&additivesNovel fuelsBiobutanol;dimethyl ether;pyrolysis-based fuelsMethanolBiomethaneBio-SNG(bio-synthetic gas)Biogas(anaerobic

51、 digestion)HydrogenGasification with reformingBiogas reformingAll other novel routesBasic&applied R&DDemonstrationEarly commercialCommercial1 2REPORT:DECARBONIZING SOUTHEAST ASIA:THE GREEN FUELS RACEARTHUR D.LITTLEMANY PRODUCERS OF BIO-BASED FEEDSTOCK REMAIN UNCERTIFIEDGovernments across SEA are dri

52、ving local consumption and guaranteeing their own energy security by implementing a range of biofuel blending mandates(see Figure 4).Indonesia has set the most ambitious targets,mandating 35%bio-based biodiesel(B35)for road transport since August 2023.However,there are challenges to 1G biofuels part

53、icularly around certification and concerns over indirect land-use change when using agricultural land for biofuel crops rather than for growing food.Many producers of bio-based feedstock(e.g.,palm oil plantations in Indonesia and Thailand)remain uncertified.This makes it difficult to export products

54、 created from this,particularly to the EU,where restrictions exist to protect and promote the growth of the EUs local industries.As Table 2 overleaf shows,certification is more advanced in Malaysia,where the Malaysia Sustainable Palm Oil(MSPO)mandate covers 88%of total plantation area.While the EU i

55、s moving away from 1G biofuels,other countries are embracing them,meaning there is a pressing need to ensure that production meets sustainability criteria,delivers GHG savings,and has a lower adverse impact on the environment and society.Those efforts will open markets such as:-UK which has committe

56、d to recognizing MSPO certification in due diligence guidelines for ensuring commodity sustainability-Singapore where transport ministry is advocating for including palm oil as feedstock for SAF productionAdditionally,producers of biodiesel must move beyond existing production,which is based on FAME

57、 processes and subject to recommended B5 blending limits(5%FAME and 95%fossil diesel,by volume),which narrows the percentage for use within existing fuels and hence their sustainability impacts.Shifting production to drop-in replacements such as HVO,which is not subject to blending limits,will thus

58、increase biodiesel consumption and reduce GHG emissions.Production of HVO therefore must be developed and scaled up in the region,while producers should look to meet growing needs for 1G biofuels in areas outside road transport,particularly in the aviation sector.Figure 4.State of biofuel mandates a

59、cross SEANote:E5,E10,E20,E85 refer to ethanol blends(e.g.,E10 refers to 10%ethanol,90%gasoline);B2,B5,B7,B10,B20,B35 refer to biodiesel blends(e.g.,B35 refers to 35%biodiesel)Source:Arthur D.Little,International Renewable Energy Agency(IRENA)Note:E5,E10,E20,E85 refer to ethanol blends(e.g.,E10 refer

60、s to 10%ethanol,90%gasoline);B2,B5,B7,B10,B20,B35 refer to biodiesel blends(e.g.,B35 refers to 35%biodiesel)Source:Arthur D.Little,International Renewable Energy Agency(IRENA)Figure 4.State of biofuel mandates across SEAVietnamE5 launched in 2018 but no further mandate sinceThailandB5,E10,E20&E85Red

61、uced mandatory blend rate from 10%to 7%,then to 5%in 2022IndonesiaB35 just launched in 2023,E20 by 2025&E30 by 2030MyanmarPlans to mandate E10 blendingMalaysiaImplementation of B5,B7&B20 mandates for transport sector has been delayed:B20 was slated to roll out in 2020 but has yet to be fully impleme

62、nted to datePhilippinesRemained at E10&B2 since 2012 Ambitious biofuel targetModerate biofuel targetLow or no biofuel target1 3UNLOCKING POTENTIAL OF 2G BIOFUELSSecond-generation(2G)biofuels provide significant advantages over 1G biofuels.They are more sustainable(with higher GHG emission savings)an

63、d,as they use waste products rather than crops as feedstock,they do not impact agricultural food production or lead to deforestation(see Figure 5).The EU is currently the most advanced region when it comes to driving the shift to 2G biofuels.It has initiated policies to:-Enhance biofuel sustainabili

64、ty criteria by increasing GHG emissions savings requirement for fossil fuels to 50%-65%-Limit/reduce use of crop-based biofuel to 7%of energy consumption(or 2020 EU country consumption level plus 1%)-Encourage use of non-crop-based biofuels with mandates around advanced biofuels-Phase out use of(som

65、e)crop-based biofuels with an EU-wide ban on palm oil and a proposed blanket ban in GermanyAs a major export market for SEA biofuel,EU legislation also will have an impact on producers in the region.THE EU IS CURRENTLY THE MOST ADVANCED REGION WHEN IT COMES TO DRIVING THE SHIFT TO 2G BIOFUELSFrom a

66、feedstock perspective,SEA is well positioned to make the transition to 2G biofuels produced through,for example,pyrolysis or gasification from waste-based feedstock,such as cooking oil or agricultural waste(see Figure 6).However,supply chain bottlenecks,particularly around the aggregation and collec

67、tion of feedstocks from numerous,widely spread producers,is a key challenge.One way to address the issue is by securing feedstock from B2B partnerships,which provide a more centralized supply compared to distributed municipal solid waste sites.Some players in the region have already formed such part

68、nerships.As an example,METPower is building biogas facilities using pineapple waste from Dole Philippines.Source:Arthur D.LittleTable 2.Certification for palm biomass in Indonesia,Malaysia,and ThailandSource:Arthur D.LittleTable 2.Certification for palm biomass in Indonesia,Malaysia,and ThailandCERT

69、IFICATION STATUS&TRENDSIndonesia Mandates for all oil palm growers&smallholders by November 2025 Covers 800 plantation organizations(smallholders,cooperatives&companies)Covers 40%of global palm oil production Globally recognized certification program&multi-stakeholder initiative that promotes the pr

70、oduction&use of sustainable palm oil Hurdle for adopting:overlap with ISPO&MSPO in two biggest palm plantations&miller countriesMalaysia Mandate since January 2020 Only 31%of the 250,000 independent oil palm smallholders have obtained MSPO certification More than 150,000 independent oil palm smallho

71、lders nationwide have yet to register for the certification Thailand doesnt have any specific certification for palm like Indonesia&Malaysia(ISPO,MSPO)RSPO is the certification for palm in ThailandCERTIFICATION TYPECERTIFIED AREASCERTIFIED COMPANIESFEEDSTOCK TYPE ISPO:Indonesia Sustainable Palm Oil

72、5.5 million hectares(ha)(33%of total plantation areas)800 organizations Palm biomass products RSPO:Roundtable Sustainable Palm Oil 2.2 million ha(13%of total plantation areas in 2019)106 members Palm biomass products MSPO:Malaysia Sustainable Palm Oil 5.2 million ha(88%of total plantation areas)426

73、POM(94%of total POM in MY)Palm biomass products RSPO:Roundtable Sustainable Palm Oil 27,000 ha(3.8%of total plantation areas up to 2020)63 large&small companies Palm biomass productsThailand1 4REPORT:DECARBONIZING SOUTHEAST ASIA:THE GREEN FUELS RACEARTHUR D.LITTLEUCO=used cooking oilNote:(1)GHG emis

74、sion savings is biofuel reference to a baseline level of 94 gCO2e/MJ,measured on a lifecycle basisSource:Arthur D.Little,MMSA,European CommissionFigure 5.Comparative GHG emissions savings of biofuel feedstockUCO=used cooking oilNote:(1)GHG emission savings is biofuel reference to a baseline level of

75、 94 gCO2e/MJ,measured on a lifecycle basisSource:Arthur D.Little,MMSA,European CommissionFigure 5.Comparative GHG emissions savings of biofuel feedstockWheat strawSugar caneSugar beetCornBlack liquorWaste woodFarmed woodUCOSunflower oilRape seed oilPalm oil83%70%68%40%89%86%83%84%52%47%19%Bioethanol

76、Bio-methanolBiodiesel(FAME)BiofuelFeedstockGHG emission savings1EXAMPLES1st generation2nd generation3rd/4th generationOil cropsSugar cropsEnergy cropsMunicipal solid or industrial wasteAgricultural arisingsForestry arisingsOff-gases&landfill gasLiquid waste&effluentsAgricultural&food productsAlgae g

77、rown for fuel useHigher costLower costBiofuel feedstock technology categorization GHG emission savings NON-EXHAUSTIVE Sources:Arthur D.Little,Fitch SolutionsFigure 6.Opportunities for 2G biofuelsSources:Arthur D.Little,Fitch SolutionsFigure 6.Opportunities for 2G biofuelsDevelopments of SEA biofuels

78、CURRENT STATEFUTURE TRENDSProjected key feedstock sources for 2G biofuels2030,%share1st generation Widely availableProving sustainability3rd/4th generationR&DCommercialization2nd generationCommercialized technologyScaling up supply chain10%10%10%10%20%10%10%10%20%10%55%30%85%5%5%Palm oil empty fruit

79、 bunchSugarcane bagasse&leavesMaize cobsCassava peelsRice straw&huskOthersIndonesiaThailandMalaysia1 54.STATE OF H2-&CO2-DERIVED FUEL S&MARKE T CHALLENGES IN SE ACURRENT H2-&CO2-DERIVED FUELS ECOSYSTEMAcross SEA,there is enormous potential for the use of H2 in fuel production,both in terms of feedst

80、ock availability and renewable energy production.Based on the carbon emissions involved in its production,H2 is classified into different colors(other colors,including white,pink,and turquoise,are also used to classify H2,although these are not yet as developed or widely used):-Green H2 uses renewab

81、le energy,meaning production does not create any carbon emissions-Blue H2 creates carbon emissions(e.g.,by burning fossil fuels)but these are captured and utilized/stored through CCUS to mitigate emissions -Grey H2 produced by using fossil fuels without any capture of emissionsNatural gas is a key f

82、eedstock for blue H2 production and is widely available across the region,with Indonesia,Malaysia,and Thailand large-scale natural gas producers.This has led many countries to focus on H2 as a key enabler for decarbonization across mobility,industry,and power generation,particularly when combined wi

83、th renewable energy from wind,solar,and hydroelectric sources.COST CHALLENGESRenewable energy remains expensive in the region compared to the US,the Middle East,and Australia,impeding green H2 production.While countries across SEA possess distinct,economically viable renewable energy sources(e.g.,hy

84、dropower in Laos and Malaysia and geothermal energy in Indonesia),these are currently underdeveloped,while hydropower is well established and cost competitive.For example,Rystad predicts that by 2030 the levelized cost of green H2(LCOH)in key SEA countries will be between US$3.5-$4.3 per kilogram co

85、mpared to less than$2.5 in the US,the Middle East,and Australia.Reducing costs through new,cheaper renewable energy sources,such as hydropower in Malaysia,would reduce LCOH to around$2.6 per kilogram,according to a report by DNV.However,building a new hydropower plant is a time-consuming project,tak

86、ing at least a decade to achieve functionality.Alongside renewable energy,the region also lacks other infrastructure,including R&D and production facilities(including electrolyzers and CCUS facilities),although multiple SEA countries have announced electrolyzer projects.1 6REPORT:DECARBONIZING SOUTH

87、EAST ASIA:THE GREEN FUELS RACEARTHUR D.LITTLESECURING CO2 FEEDSTOCK H2-and CO2-derived fuels involve a CO2 capture element.Multiple carbon capture and storage(CCS)projects,a key enabler of blue H2,are under construction in SEA,with facilities at Kasawari(Malaysia)and Panca Amara Utama Central Sulawe

88、si(Indonesia)scheduled to become operational in 2025,and Arthit(Thailand)going live in 2026.CO2 is available in large volumes across the region,generally from industrial processes.The availability of biogenic CO2(created by living organisms)is more limited,with development of DAC technologies focuse

89、d outside the region,in Europe and the US.However,local companies have invested in DAC players,such as Singapore sovereign wealth fund GIC in Swiss-based Climeworks AG.OVERCOMING TECHNOLOGY,REGULATORY&DEMAND CHALLENGESGlobally,the adoption of alternative fuels faces significant obstacles due to the

90、need for innovative technologies and infrastructure to accelerate scaling.SEA lags other regions in developing production infrastructure for decarbonization,with insufficient CCUS technology penetration,for example,or a connected renewable power grid needed for large-scale production of blue and gre

91、en H2 fuel.Developing an alternative fuel ecosystem requires significant up-front investment.To justify it,producers must secure offtake contracts or guarantees from customers to mitigate their risks.However,the SEA region lacks relevant incentives and scale to encourage demand and the uptake of H2-

92、and CO2-derived fuels,which are vital given the current higher cost of alternative fuels compared to fossil equivalents.For example,in the SEA region,only select countries have established H2 strategies;examples include Singapore,which has a national H2 strategy in place,and Malaysia,which recently

93、announced the launch of the Hydrogen Economy&Technology Roadmap(HETR).Other countries have not yet published national H2 strategies or established clear frameworks or mechanisms,which reduces regulatory certainty for businesses and investors and thus discourages investment in H2 products.This lack o

94、f regulatory support is particularly noticeable in three areas:1.Targets,mandates,and incentives.Local countries lag behind the likes of the EU in terms of regulatory and financial incentives to drive demand.For example,in the EU and the US,subsidies such as the EU Innovation Fund and the US Inflati

95、on Reduction Act(IRA)incentivize development,making these regions global hubs for alternative fuel production.2.Certification.Producers must be able to prove the decarbonization credentials of their alternative fuels if they are to be adopted en masse.However,SEA currently lacks sustainability stand

96、ards for H2-and CO2-derived fuels,hindering local sales and exports to regions with existing standards like the EUs RED II and Californias Low Carbon Fuel Standard(LCFS).3.Knowledge.Many producers of sustainable/alternative fuels in SEA are not price-aware,which hinders the development of transparen

97、t price indexes that drive customer confidence.1 75.SE A OPP ORTUNITIES FOR CO2-BASED FUEL SAs the energy transition continues,producers and their customers must understand where the biggest opportunities lie for bio-and H2-derived green fuels in order to properly focus their efforts and investments

98、.In SEA,opportunities exist in alternative fuels due to three primary factors:1.The presence of large-scale demand hubs in the region2.The impact of the global regulatory/industry push around alternative fuels3.Growing demand-side infrastructure readiness,especially in hubs like SingaporeFor alterna

99、tive fuels,transport offers the largest immediate target market due to its pressing need to decarbonize,responsibility for an estimated 20%of SEA emissions,and emissions growth of an estimated 2.2%per year.According to the IEA,to deliver net zero emissions by 2050,transport CO2 emissions must fall b

100、y more than 3%per year to 2030.Within the sector,road transport is the largest CO2 emitter(see Figure 7).Here,alternative fuels(e.g.,biofuels such as bioethanol and biodiesel)are expected to act as a complementary component to electrification in road transportation,particularly in heavy-duty applica

101、tions,until the achievement of total electrification.By contrast,electrification is not a viable option for the maritime and air transport sectors due to journey distances and weight constraints.This means that adopting biofuels and H2-and CO2-derived fuels is crucial for successfully decarbonizing

102、these industries,leading to strong demand.Apart from transport,power generation also offers a potential opportunity for alternative fuels technologies within SEA.Source:Arthur D.Little,International Energy Association(IEA),MMSAFigure 7.Breakdown of CO2 emissions within transport sectorSource:Arthur

103、D.Little,International Energy Association(IEA),MMSAFigure 7.Breakdown of CO2 emissions within transport sector5.90.80.70.20.14.10.70.90.10.1RoadMaritimeAirPipelineRail-31%-18%+24%-40%-44%20212030 net zeroStunted by the pandemic;likely to be higher in the immediate termin Gt1 8REPORT:DECARBONIZING SO

104、UTHEAST ASIA:THE GREEN FUELS RACEARTHUR D.LITTLEOPPORTUNITIES IN THE MARITIME SECTORResponsible for 2.2%of global CO2 emissions,the maritime industry currently provides the largest and most urgent opportunity for alternative fuels(notably bio-and e-methanol),driven by significant potential demand,gr

105、owing regulation,and infrastructure availability.Within the region,Singapore is taking a leading role in marine decarbonization,providing clear opportunities for the supply and take-up of alternative fuels.DemandMajor maritime trade routes run across the region.In particular,Singapore is a key port

106、for global shipping and is the largest bunkering(refueling)port in the world,with a volume of nearly 50 million tons in 2022,according to the Maritime and Port Authority(MPA)of Singapore.Demand is increasing as shippers respond to pressure from customers and set their own decarbonization targets.For

107、 example,Maersk has pledged to reach net zero emissions by 2040,and MSC has committed to the same by 2050.Demonstrating this,Ship&Bunker reports that 62%of new vessels ordered in H1 2023 are powered by methanol,compared to just 8%that will use traditional fuel oil.Regulation/government actionMaritim

108、e operators must meet increasingly stringent rules developed at a global,industry,and local level.The International Maritime Organization(IMO)has set targets for the maritime industry to reach net zero by or around 2050 and reduce GHG emissions intensity by 20-30%by 2030 and 70-80%by 2040.These targ

109、ets will rely on a smooth transition to alternative low/zero-carbon fuels.At a local level,Singapores MPA is promoting and supporting the use of renewable fuels as part of the countrys national strategy to reduce emissions,including through pilot programs and cross-ecosystem work on safety standards

110、.Infrastructure readinessAlongside the growth in methanol-powered shipping,port infrastructure is already in place to enable the use of alternative fuels.For example,Singapore has already completed more than 70 methanol loading and discharging operations for industrial use since 2022,and local firms

111、 have ordered methanol-bunkering tankers.OPPORTUNITIES IN THE AVIATION SECTORAviation generates a similar level of emissions to the maritime sector,according to the IEA,with the entire industry focusing on achieving net zero,notably by the rollout of SAFs produced through bio-and H2-and CO2-derived

112、pathways.SAFs are renewable liquid or gaseous fuels of non-biological origin produced by mixing green H2 with CO2,which can be captured directly from the air,from biogenic origin,or from industrial processes.They cover a wide range of feedstocks and processes,as shown in Table 3.HEFA=hydroprocessed

113、esters&fatty acids;DSHC=direct sugars to hydrocarbons;CHJ=catalytic hydrothermolysis jet;FOG=fats,oils&greasesNote:(1)Listed feedstocks are technologically feasible for specific production pathway but not necessarily applicable under certain regulations;(2)TRL 7-8 for conventional sugar feedstock;TR

114、L 5 for lignocellulosic sugar feedstockSource:Arthur D.Little,European Union Aviation Safety Agency(EASA)Table 3.SAF production pathwaysHEFA=hydroprocessed esters&fatty acids;DSHC=direct sugars to hydrocarbons;CHJ=catalytic hydrothermolysis jet;FOG=fats,oils&greasesNote:(1)Listed feedstocks are tech

115、nologically feasible for specific production pathway but not necessarily applicable under certain regulations;(2)TRL 7-8 for conventional sugar feedstock;TRL 5 for lignocellulosic sugar feedstockSource:Arthur D.Little,European Union Aviation Safety Agency(EASA)Table 3.SAF production pathwaysPRODUCTI

116、ON PATHWAYFEEDSTOCKS1CERTIFICATION NAME(blending limit)TECHNOLOGY READINESS LEVEL(TRL)Biomass Gas-FTEnergy crops,lignocellulosic biomass,solid waste FT-SPK(up to 50%)7-9HEFAVegetable&animal fat HEFA-SPK(up to 50%)8-9DSHCConventional sugars,lignocellulosic sugars HFS-SIP(up to 10%)7-8 or 52Biomass Ga

117、s-FT with aromatics Energy crops,lignocellulosic biomass,solid waste FT-SPK/A(up to 50%)6-7AtJ Sugar,starch crops,lignocellulosic biomassATJ-SPK(up to 50%)7-8CHJ Vegetable&animal fat CHJ or CH-SK(up to 50%)6HEFA from algae Microalgae oils HC-HEFA-SPK(up to 10%)5FOG co-processing FOGFOG(up to 5%)-FT

118、co-processing FT biocrude FT(up to 5%)-1 9DemandAccording to TheGlobalE,Singapore,Thailand,Malaysia,and the Philippines are all in the top 30 of global aviation fuel users,signifying significant potential demand for green alternatives within the region.Singapore is the largest SEA user of jet fuel,r

119、anking among the top 10 in the world by volume.Regulation/government actionAs with the maritime sector,aviation industry bodies are setting targets for decarbonization.The International Air Transport Association(IATA)aims to reduce emissions to net zero by 2050,with 65%of this reduction a result of

120、using SAFs.On the government side,the region currently lags others,notably the EU,which has set mandated targets for usage through the RefuelEU regulation.However,there is growing interest from SEA governments in this area,again led by Singapore,which in May 2023 said it was studying rules to oblige

121、 airlines to use SAF on flights departing from the state.Infrastructure readinessFor use within aircraft as drop-in replacements for fossil-based fuels,different SAF production pathways must fulfill strict certification requirements that prove that they match the physical and chemical characteristic

122、s of the fuels they are replacing and can therefore use the same infrastructure.As of January 2022,seven SAF production processes have been approved.In addition,two pathways for the coprocessing of renewable feedstocks in petroleum refineries are approved with a blending limit of 5%(refer back to Ta

123、ble 3).Notably,as estimated by IATA,overall SAF production reached more than 600 million liters in 2023.Given regulatory imperatives and growing demand,production is expected to grow rapidly,both globally and in SEA.OPPORTUNITIES IN THE POWER SECTOROutside transport,power generation also offers oppo

124、rtunities for the use of bio-and H2-and CO2-derived fuels within the region.Given the size of its current emissions volume(over 40%of the global total,according to the IEA),and the fact that emissions are increasing,there is a pressing need to decarbonize the sector across the value chain.This can b

125、e achieved upstream by using renewables(including landfill gas and biomethane),gas-to-power,co-firing(e.g.,ammonia co-firing in coal power plants),CCUS,bioenergy CCS,and DAC and midstream through H2/biomethane injection.Longer-term decarbonization can be through H2 and carbon capture,while renewable

126、s,including bio-and e-methane,provide interim solutions.Demonstrating their versatility,these can be used on their own as an alternative to natural gas(methane)for power generation or processed into further derivatives that provide both fuels and chemical applications via the gas-to-liquids pathway.

127、Presently,most activity is concentrated in biomethane because it is cheaper to produce than e-methane,although there is some variation among markets.In SEA,countries such as Singapore(distribution)and Malaysia(production)are looking at becoming green methane hubs,supplying internal needs and externa

128、l markets through existing infrastructure.2 0REPORT:DECARBONIZING SOUTHEAST ASIA:THE GREEN FUELS RACEARTHUR D.LITTLE2 16.BUILDING AN ECOSYSTEM FOR REGIONAL DECARBONIZ ATIONAlthough it has made some advances toward creating a regional decarbonization ecosystem,SEA remains behind other markets such as

129、 Europe and the US.By learning from their successes and best practices,the region can accelerate its progress,focusing on four key areas.1.STRENGTHEN REGULATORY&POLICY SUPPORTGovernments in other regions have actively provided direct regulatory support for decarbonization through a combination of su

130、bsidies,tax breaks/investments,and penalties.For example:-The EUs Innovation Fund and the USs IRA provide subsidies to relevant building blocks and pillars,incentivizing economic,supply chain,and technological development to deliver indirect and direct impacts on the energy transition.-Governments i

131、n countries such as Australia and Germany have launched programs to fund the commercial gap between the current cost of H2 production and market price.Australia has assigned around$1.3 billion in funding from its Hydrogen Headstart program,while the German government has committed approximately$986

132、million over 10 years to compensate providers that take part in auctions of green H2 and its derivatives organized by the H2Global Foundation.-In the EU as well as countries such as Singapore and Japan,the implementation of carbon taxes and emissions trading systems serve as a driving force for orga

133、nizations to reduce their emissions through various strategies,including the adoption of cleaner fuels,in order to avoid penalties.SEA countries are beginning to introduce regulatory support in areas such as H2 and biofuels.For example:-Singapore has released a national H2 strategy and is looking to

134、 develop biofuels,especially for the maritime and aviation sectors.The Civil Aviation Authority of Singapore(CAAS)is developing a Sustainable Air Hub blueprint.Scheduled to be published by the end of 2023,it will provide a decarbonization roadmap for aviation in Singapore,with both 2030 and 2050 tar

135、gets.-Malaysia includes a focus on H2 within its National Energy Policy.It provides a long-term roadmap to optimize production pathways for green,blue,and grey H2 and aims to create a local H2 ecosystem supported by R&D and commercialization capabilities across the value chain through regulations,co

136、llaborations,and pilot/market entry programs.The country has also recently announced a National Energy Council to facilitate the implementation of its National Energy Transition Roadmap,along with a renewable energy exchange to trade renewable energy.Next stepsCountries across SEA must accelerate th

137、eir regulatory support,incorporating lessons from other nations and regions and introducing direct and tangible incentives,targets,and penalties.Producers and customers should push for this greater support by highlighting growing demand and signal their commitment to decarbonization,sharing knowledg

138、e with regulators and governments.2 2REPORT:DECARBONIZING SOUTHEAST ASIA:THE GREEN FUELS RACEARTHUR D.LITTLE2.COLLABORATE REGIONALLY ACROSS ECOSYSTEM&VALUE CHAIN Across SEA,several national/industry-level partnerships dedicated to decarbonization have already been created,including:-The Global Cente

139、r for Maritime Decarbonization(GCMD)in Singapore,created to support the sector in meeting or exceeding the IMO decarbonization goals.-The Asian Clean Fuels Association(ACFA),dedicated to the promotion and advancement of cleaner transport fuels.-Vietnam and Indonesias participation in Just Energy Tra

140、nsition Partnerships(JETPs),which fund pathways away from dependence on coal-based power generation.-The ASEAN Centre for Energy(ACE),an intergovernmental organization within the Association of Southeast Asian Nations(ASEAN)structure,has recently completed a research and development roadmap for biof

141、uels.-Showing collaboration across the broader Asian region,280 Japanese companies(including Toyota and Sumitomo Mitsui Financial Group)that make up the Hydrogen Value Chain Promotion Council have launched a multi-billion-yen investment fund to boost the development of the H2 industry.However,opport

142、unities remain for increased cross-geography partnerships that span the region,modeled on existing examples such as:-The German/Dutch collaboration involving the HyNetherlands and NortH2 projects,which aims to create a large-scale,integrated H2 ecosystem for alternative fuels(green methanol/green am

143、monia).This includes pipelines,an electrolyzer,green power generation,and transport hubs.-The Zero-Emission Shipping Mission,a cross-country collaboration that is co-led by the US,Norway,and Denmark.It aims to demonstrate commercially viable zero-emission ships by 2030.SEVERAL NATIONAL/INDUSTRY-LEVE

144、L PARTNERSHIPS DEDICATED TO DECARBONIZATION HAVE ALREADY BEEN CREATED-The European Clean Hydrogen Alliance,which aims to facilitate customer demand(e.g.,by publishing a list of 840 H2 projects),technology transfer(through an electrolyzer partnership),and knowledge sharing through roundtables to prom

145、ote H2 development and address adoption issues and barriers.Next stepsGovernments and industry together need to build wider ecosystems and partnerships,focused on bringing together producers and customers across SEA.This could be reinforced through technology-transfer agreements or through offtake a

146、rrangements.3.DEVELOP ROBUST CERTIFICATION MEASURESOne area where Europe and the US are far ahead of SEA is around certification,with specific standards already in place.These include:-The EUs RED II,Emissions Trading System (EU ETS),and FuelEU Maritime initiative-The CertifHy consortium,which has d

147、eveloped high-quality H2 certification schemes addressing consumer disclosure(from well to gate)to advance the European H2 economy-Californias LCFSRobust regulation and certification would provide the required guarantees for both producers and customers to unlock investment and to commit to alternat

148、ive fuels,justifying the price premiums required.In SEA,these would enable the development of cross-border supply chains and trade,stimulate demand for alternative fuels in the region,enable local producers to target export markets,and contribute to local and global decarbonization.2 3Next stepsSEA

149、countries could consider developing standards such as a guarantee of origin(GO)scheme,which would show customers that a unit of energy aligns with a schemes criteria.However,since certification schemes take time to develop and implement,producers and customers can navigate around current challenges

150、in the interim by taking one of two options:1.Identify available certification schemes based on customer requirements and supplement shortfalls with self-declared documentation(e.g.,internal lifecycle assessments to obtain fuel carbon footprints),audited by an independent third party.2.Where adoptin

151、g a certification scheme is not possible,develop an in-house tracking system and leverage data analytics and smart lifecycle assessment processes to generate a delivery documentation system that facilitates end-to-end communication across the supply chain,as shown in Figure 8.ROBUST REGULATION AND C

152、ERTIFICATION WOULD PROVIDE THE REQUIRED GUARANTEES FOR PRODUCERS AND CUSTOMERS TO UNLOCK INVESTMENT AND COMMIT TO ALTERNATIVE FUELSSD=sustainability declaration Source:Arthur D.LittleFigure 8.In-house tracking for alternative fuel certificationSD=sustainability declaration Source:Arthur D.LittleFigu

153、re 8.In-house tracking for alternative fuel certificationPhysical transferCertificate transferFuel producerMaritime customerFuel producer creates SD documentation with use of in-house tracking system adopted by whole supply chainIndependent third party annually audits&verifies SD documentation befor

154、e transferring to maritime fuel userSD documentation transferred from fuel producer to fuel consumer at same time as physical transfer of methanol fuelMaritime fuel user receives SD documentation alongside utilization of methanol fuel1243123424REPORT:DECARBONIZING SOUTHEAST ASIA:THE GREEN FUELS RACE

155、ARTHUR D.LITTLE4.EMBRACE DISRUPTIVE TECHNOLOGIES:AIDecarbonization relies on new,emerging technologies and processes such as CCUS and DAC.At the same time,AI can assist in the transformation toward decarbonization(see Figure 9).AI has the potential to boost decarbonization substantially in terms of

156、both reducing emissions and boosting carbon absorption by radically reducing the carbon intensity of energy production,enhancing energy efficiency,better predicting/mitigating carbon emissions from natural sources,enabling new policies for forest and ocean management,and enabling advanced CCU-to-X t

157、echnologies.Next stepsMultiple examples exist of global and SEA start-ups and larger organizations using AI to enable decarbonization across the value chain.SEA companies must first understand which of the dimensions impact them,then partner with relevant technology players and begin to pilot soluti

158、ons.With the right mix of investments,policies,incentives,and prioritization,the SEA region can play a significant role globally in the new and exciting space of AI for decarbonization.Source:Arthur D.LittleFigure 9.Potential AI focus areas for decarbonizationSource:Arthur D.LittleFigure 9.Potential

159、 AI focus areas for decarbonizationReduce carbon intensity of energy production Enhance energy efficiency of economic activityGenerate/design new materials&processesBetter prediction&mitigation Forest,urban&rural management Advanced CCS technologies&use cases AI algorithms can analyze data from ener

160、gy systems to optimize energy generation,distribution&consumptionAI can control energy usage,identify&signal problems&detect equipment failures before they occurAI can learn multiple process areas to improve efficiency,cost savings&environmental sustainabilityAI technologies allow for fast smoke det

161、ection&easy monitoring of patrol vehicles,facilitating management of wildfires AI algorithms can analyze large amounts of data in real time to optimize CO2 capture systems,resulting in greater efficiencyAI can help observe data around climate changes impacts using technology such as satellite remote

162、 sensing1234562 5DELIVERING DECARBONIZATION IN SEAThe pressing need to decarbonize is an opportunity for transformation,providing countries and companies across SEA with the chance to innovate,leverage existing resources(e.g.,bio-feedstock),and develop the infrastructure to meet changing demand need

163、s.SEA can play a pivotal role in the development and adoption of green fuels,but policymakers must seize the opportunities across the region.Returning to the questions asked at the beginning of this Report,we draw the following conclusions:1.How can CO2 unlock a broader ecosystem of green fuels,and

164、how are companies preparing for the transition to CO2-derived fuels?Access to feedstock is driving the growth of bio-based products,providing a pathway to CO2-derived fuels.Legislation and subsidies are key to encouraging uptake.2.What is the state of the ecosystem for biofuels,and what obstacles do

165、es SEA face?The region is already a substantial producer of 1G biofuels and is well positioned to transition to 2G biofuels.Achieving this shift requires overcoming supply chain bottlenecks around feedstock.SEA CAN PLAY A PIVOTAL ROLE IN THE DEVELOPMENT AND ADOPTION OF GREEN FUELS3.What is the state

166、 of H2-and CO2-derived fuels in SEA,and what challenges does the market face?While there is enormous potential for the use of H2 in fuel production,to enable success the market must address current high renewable energy costs and a lack of regulatory support.4.Where are the opportunities in SEA for

167、CO2-based fuels?The combination of pressing needs and substantial regional demand hubs in shipping and aviation provides significant opportunities for CO2-based fuels,helped by growing government action.5.How can businesses and governments build an ecosystem in SEA for regional decarbonization?Unloc

168、king the regions potential relies on increasing and accelerating regulatory support,deepening regional collaboration,introducing stronger certification,and harnessing new technologies like AI across both carbon emissions and absorption.CONCLUSION2 6REPORT:DECARBONIZING SOUTHEAST ASIA:THE GREEN FUELS

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