ASEAN

Why Southeast Asia will be critical to the energy transition

Southeast Asian nations' successful transition away from fossil fuels will be critical to the world meeting climate targets

Southeast Asian nations' successful transition away from fossil fuels will be critical to the world meeting climate targets Image: Florian Wehde for Unsplash

Roberto Bocca
Head of Centre for Energy and Materials; Member of the Executive Committee, World Economic Forum
Harsh Vijay Singh
Acting Head, Equitable Transition, World Economic Forum
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ASEAN

This article is part of: World Economic Forum Annual Meeting

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  • The actions of the Association of South East Asian Nations (ASEAN) will be critical to meeting global environmental targets.
  • The region is still heavily dependent on fossil fuels, but states are committed to achieving net zero.
  • The international community needs to support states in making that transition.

We are in the midst of an energy crisis the likes of which we haven’t seen since the 1970s. The decisions leaders make now about decarbonization will determine our collective future. Get it right, and we can transform short-term upheaval into long-term sustainability. Get it wrong, and we will struggle to meet our environmental targets, specifically the Paris Agreement target of global carbon emissions reaching net zero by 2050.

The Association of South East Asian Nations (ASEAN) is South-East Asia’s regional trading and political bloc. Its actions are vitally important to how we get through this crisis, and could be a deciding factor in humanity's future. ASEAN is the world’s fourth-largest energy consumer. Its current energy structure is skewed towards traditional forms of power generation, with fossil fuels making up 83% of its energy mix, and energy demand is expected to increase.

Davos 2023 - Power generation share with latest energy policy proposed for major Southeast Asia markets.
Power generation share with latest energy policy proposed for major Southeast Asia markets. Image: IHS Markit

This means that the energy crisis has disproportionately affected the bloc, exposing ASEAN member countries to increasing economic, energy security and geopolitical risks. The conundrum that the bloc’s leaders now face is how to secure energy supplies to develop the region’s economies, while also decarbonizing them.

The good news is that many of ASEAN's 10 member states show a strong commitment to achieving net zero by 2050. Only the Philippines has not yet committed to net zero by 2050, while Indonesia has set a target of 2060. All forecasts – and just the sheer practicalities of such a large transition – suggest achieving net zero won’t be easy. There is no one solution, and each country will have to pursue its own policies, depending on its priorities. A major shift away from the emissions generated by coal power generation sits at the center of change, the step change in efficiency and deployment of low carbon technologies can complement the transition.

The policy environment increasingly favours low-carbon energy, and ASEAN’s share of renewable energy increased to 14% of the energy mix in 2020, continuing to rise even during the pandemic. Green energy resources have been steadily climbing. For example, Viet Nam’s success in the global solar market shows what’s possible when political will, sectoral reform and market incentives come together. The Lao People's Democratic Republic, the self-declared ‘battery of Asia’, is among the region's richest countries in hydropower, while Indonesia and the Philippines sit on almost one-quarter of the world’s geothermal generation capacity.

ASEAN is also rich in the raw materials required for clean energy products. These include bauxite, nickel, tin and rare earth elements, which can variously be found throughout the region, particularly Indonesia, Myanmar, the Philippines and Thailand. In addition, Malaysia and Viet Nam are among the world’s largest solar modules’ makers.

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To capitalise on these – and other – advantages, ASEAN’s leaders will have to show an unwavering commitment to supporting and funding the green agenda. Investors will be looking for energy sector reform, including the dismantling of fossil fuel subsidies, and a hospitable investment and regulatory climate. This is important because international support and external investment will reduce some of the financial burden and risk that comes with developing and scaling up new technologies. This is emerging, as evidenced by the arrangements other countries are making with those ASEAN states that are piloting green hydrogen systems for power provision.

As the recent COP27 meeting underlined, those nations that have the means to invest in, and support, emerging economies in their policies to accelerate the energy transition should do so. Equity and justice are becoming interwoven into climate action, along with help to develop and implement clean energy policy and mobilize finance for clean energy schemes.

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What's the World Economic Forum doing about the transition to clean energy?

Reflecting the global need to collaborate in the effort to reach net zero, the World Economic Forum is supporting ASEAN’s energy transition through multiple initiatives. Among these are country-level work in Indonesia to mobilize finance for clean energy in partnership with the country’s Chamber of Commerce (KADIN); supporting the development and implementation of Malaysia’s National Energy Policy through a series of roundtables held with the government and private-sector energy companies; and supporting the forthcoming ASEAN Energy Leaders for Just Energy Transition community. The latter is aimed at strengthening intra-regional and international cooperation to help accelerate a just energy transition.

Out of the 1973 oil shock emerged an energy strategy that relied less on oil, improved energy efficiency and sought a more diversified energy mix. Out of the current energy crisis, a new energy strategy is required, one that decarbonizes economies worldwide. If ASEAN can achieve this, its countries will enjoy safe, equitable energy systems that support their long-term growth, and we will all be a lot closer to realising the Paris Agreement’s goals.

This article originally appeared in Mothership.

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Related topics:
ASEANClimate ChangeEnergy TransitionDavos Agenda
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