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Germany’s ambitious efforts to advance its clean energy transition

MD Staff

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The International Energy Agency released its latest in-depth review of German energy policies today, welcoming the country’s bold approach to its clean energy transition.

Since the last IEA review of German energy policies, the Energiewende, German for “energy transition,” has been the defining feature of the country’s energy landscape. It is an impressive plan for transforming the country’s energy system to a more efficient one supplied mainly by renewable energy. It aims to phase out electricity generation from nuclear power by the end of 2022. More recently, the government announced plans for a phase out of coal by the end of 2038.

Germany’s national climate change strategy is defined in the Climate Action Plan 2050, which sets out a longer-term pathway for sector-specific emissions reductions, as part of the Energiewende. Compared with the base year of 1990, the key goals are to achieve at least a 40% cut in greenhouse gas emissions by 2020 and 80-95% by 2050. Germany has made notable progress in cutting its emissions. In 2019, it had the largest decline in energy-related carbon dioxide emissions of any EU country, according to IEA data released last week.

“The Energiewende has been successful in electricity generation, where it has been effective at substantially increasing the share of renewable electricity supply. To further support the role of renewables, the government will need to ensure a transmission grid expansion and promote the development of hydrogen technology,” said the IEA’s Executive Director, Dr Fatih Birol, who launched the report in Berlin with Peter Altmaier, Germany’s Federal Minister for Economic Affairs and Energy.

However, given the requirement for additional renewable capacity, the IEA review highlights the need for Germany to ensure a continued strong investment environment for wind generation, including to address recent social acceptance and permitting issues impacting the onshore wind sector, as well as repowering ageing wind facilities. In addition, the review urges the government to facilitate the smooth system integration of renewables, in particular through a buildout of much-needed additional transmission capacity to carry wind resources from the north to the south.

Despite the extraordinary progress in renewable electricity, the report notes that the nuclear phase-out as well as higher electricity exports have offset some of the emissions benefits. Still, the government’s planned coal phase-out could help the country remain on track to achieving its longer-term emissions targets in the electricity sector.

To date, the electricity sector has been shouldering a sizeable share of the Energiewende’s costs and progress; other sectors need to follow suit. “Building on success in the electricity sector, now the government must focus its efforts on achieving stronger emissions reductions in the transport and heating sectors. The IEA welcomes the recently adopted Climate Action Programme 2030, which includes a carbon price in the transport and heating sectors, as an important step in the right direction,” Dr Birol noted.

Beyond that, the programme includes a focus on technology development to support the energy transition, such as the use of more electric vehicles and hydrogen-based energy systems. It is also mindful of the distributional impacts of climate policies and aims to ensure a level playing field across sectors and stakeholders.

Energy security remains a focus area for the IEA, and Germany has maintained a high degree of oil, natural gas, and electricity supply security. As the nuclear and coal phase-outs increase Germany’s reliance on natural gas, the review finds it will be increasingly important for the country to continue efforts to diversify its gas supply options, including through the import of liquefied natural gas.

“I would like to thank Minister Altmaier for his collaborative spirit and commitment to building a secure and sustainable energy future. It is my hope that this report will help Germany as it undertakes this very important energy transition,” said Dr Birol. 

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MSMEs Key to Southeast Asia’s Post-COVID-19 Recovery

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Strengthening the dynamics of micro, small, and medium-sized enterprises (MSMEs) with innovation and internationalization will be key to revitalizing Southeast Asian economies devastated by the coronavirus disease (COVID-19) pandemic, according to a new report from the Asian Development Bank (ADB).

MSMEs are a critical driving force in Southeast Asian economies, accounting for an average of 97% of all enterprises and 69% of the national labor force from 2010 to 2019. They contributed an average of 41% of each country’s gross domestic product over the same period.

“MSMEs in Southeast Asian economies mainly focus on domestic markets and their level of entrepreneurship remain suboptimal. Supporting the development of MSMEs, particularly in technology adoption and participation in global supply chains, will contribute to inclusive growth and aid in recovery efforts from COVID-19,” said ADB Chief Economist Yasuyuki Sawada. “We’re confident that this new report, Asia Small and Medium-Sized Enterprise Monitor (ASM) 2020, which provides a rich set of data and analyses on MSME development in Southeast Asia pre-COVID-19 pandemic, would become a benchmark in helping design feasible government assistance for MSMEs amid a new normal in the region.”

The first volume of ASM 2020, released today at a virtual launch attended by ADB Vice-President for Knowledge Management and Sustainable Development Bambang Susantono, presents a detailed assessment of financial and nonfinancial issues facing MSMEs in Southeast Asia at both the country and regional levels. It also analyses policies and regulations surrounding MSME development and access to finance in each country in Southeast Asia.

Key findings from the report’s second volume, to be released on 28 October, examines the impact of COVID-19 on MSMEs in Indonesia, the Lao People’s Democratic Republic, the Philippines, and Thailand based on rapid surveys conducted from March to May this year. The challenges faced by MSMEs in the region have been exacerbated by COVID-19, with demand for MSME products and services declining since the onset of the pandemic. This has resulted in layoffs, reduced business operations, and a depressed outlook for the sector. The report explores policy approaches that could support MSMEs during and after the pandemic.

ASM 2020’s remaining two volumes will be released by the end of 2020. They comprise a thematic chapter analyzing the impact of fintech-based loans to tricycle drivers in the Philippines; and a technical assessment that will present ADB’s new Small and Medium-Sized Enterprise Development Index.

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Recession Deepens as COVID-19 Pandemic Threatens Jobs and Poverty Reduction in Western Balkans

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The COVID-19 pandemic has plunged the Western Balkans region into a deep recession, with drops in both domestic and foreign demand, coupled with disruptions in supply chains, forcing all six countries in the region into negative growth territory for 2020. According to the World Bank’s latest Regular Economic Report (RER), economic growth is forecast to contract by 4.8 percent in 2020, 1.7 percentage points lower than forecast in April. A second, stronger wave of the pandemic since mid-June is delaying economic recovery in the region. Travel restrictions and social distancing measures have also depressed growth in those countries more reliant on tourism.

The pandemic is further challenging labor markets in the region and threatening to undermine the progress that countries have made on improving the population’s welfare. By June, unemployment in the region had risen by a half of a percentage point, erasing 139,000 jobs. An additional 300,000 people are estimated to have fallen into poverty in Albania, Kosovo, Montenegro, and Serbia – a significant number, but less than half of the total that would have fallen into poverty had response measures not been put in place, notes the report.

“Like in much of the rest of the world, the COVID-19 pandemic is continuing to hit people hard in the Western Balkans, threatening threatening the health and economic well-being of people in all six countries,” says Linda Van Gelder, World Bank Country Director for the Western Balkans.

“As bad as this situation is, it would have been much worse had governments not taken swift measures from the outset of the crisis. The first priority remains getting the health crisis under control and limiting the economic damage. Policymakers in the region will then need to focus on strengthening their economic fundamentals for a resilient recovery.”  

According to the report, all six countries in the region were quick to introduce policies to protect lives and livelihoods. The introduction of large job-retention schemes, including employee subsidies, helped arrest some of the worst impacts of the pandemic on employment, while social assistance programs, such as cash transfers, helped protect the most vulnerable populations in the region in the face of lockdowns and other restrictions.

Despite these measures, however, the gains in labor force participation made in the region over the last few years have now been erased and progress on poverty reduction is being imperiled by the crisis. Compounding these challenges are soaring fiscal deficits in the region, as governments continue to spend more to counter the economic contractions in the face of plummeting revenues. With the end of the economic crisis uncertain, pressure on labor markets and incomes is likely to continue for some months.

“Apart from improved health systems and robust social protection mechanisms, policymakers in the region will need to take measures to enhance human capital, build stronger institutions and strengthen the rule of law. The unfortunate situation of needing to spend more in a time of declining revenues puts additional pressure on governments in the region to prioritize fiscal sustainability, including through improving public spending and strengthening tax compliance,” says Linda Van Gelder.

The report acknowledges that the speed of recovery, in the short term, will depend on how the pandemic evolves, the availability of a vaccine that allows for the normalization of economic activity, and a sustained recovery for the region’s main trading partner – the European Union (EU).

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Collapsing consumer demand amid lockdowns cripple Asia-Pacific garment industry

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Women at work in a garment factory in Hai Phong, Viet Nam. © ILO

The COVID-19 pandemic has triggered government lockdowns, collapsed consumer demand, and disrupted imports of raw materials, battering the Asia Pacific garment industry especially hard, according to a new report released on Wednesday by the International Labour Organization (ILO).

The UN labour agency highlighted that in the first half of 2020, Asian imports had dropped by up to 70 per cent.

Moreover, as of September, almost half of all garment supply chain jobs, were dependent on consumers living in countries where lockdown conditions were being most tightly imposed, leading to plummeting retail sales.

ILO Regional Director for Asia and the Pacific, Chihoko Asada Miyakawa, pointed out that the research highlights “the massive impact COVID-19 has had on the garment industry at every level”. 

Ripple effect

In 2019, the Asia-Pacific region had employed an estimated 65 million in the sector, accounting for 75 per cent of all garment workers worldwide, the report reveals.

Although governments in the region have responded proactively to the crisis, thousands of factories have been shuttered – either temporarily or indefinitely – prompting a sharp increase in worker layoffs and dismissals.

And the factories that have reopened, are often operating at reduced workforce capacity.

“The typical garment worker in the region lost out on at least two to four weeks of work and saw only three in five of her co-workers called back to the factory when it reopened”, said Christian Viegelahn, Labour Economist at the ILO Regional Office for Asia and the Pacific.

“Declines in earnings and delays in wage payments were also common among garment workers still employed in the second quarter of 2020”.

Women worst impacted

As women comprise the vast majority of the region’s garment workers, they are being disproportionately affected by the crisis, the report tracked.

Additionally, their situation is exacerbated by existing inequalities, including increased workloads and gender over-representation, as well as a rise in unpaid care work and subsequent loss of earnings

Moving forward

To mitigate the situation, the brief calls for inclusive social dialogue at national and workplace levels, in countries across the region.

It also recommends continued support for enterprises, along with extending social protection for workers, especially women. 

The ILO’s recent global Call to Action to support manufacturers and help them survive the pandemic’s economic disruption – and protect garment workers’ income, health and employment – was cited as “a promising example of industry-wide solidarity in addressing the crisis”.

“It is vital that governments, workers, employers and other industry stakeholders work together to navigate these unprecedented conditions and help forge a more human-centred future for the industry”, upheld Ms. Miyakawa.

Nuts and bolts

The study assessed the pandemic’s impact on supply chains, factories and workers in Bangladesh, Cambodia, China, India, Indonesia, Myanmar, Pakistan, Philippines, Sri Lanka and Viet Nam.

It is based on research and analysis of publicly available data together with interviews from across the sector in Asia.

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