Decades-long contracts chain Asia to coal-fired power - Reuters
Published November 22, 2025
Decades-long Contracts Bind Asia to Coal-Fired Power
As countries across Asia strive to meet their energy demands and economic growth targets, many are finding themselves increasingly tied to coal-fired power generation through long-term contracts. This reliance on coal, a significant contributor to carbon emissions, poses challenges to the region's climate commitments and energy transition efforts.
In recent years, several Asian nations have signed extensive agreements with coal suppliers, locking in prices and supply for decades. These contracts often stem from a desire for energy security and affordability, but they also create a dependency on a fossil fuel that is increasingly viewed as unsustainable in the face of climate change.
According to data from various industry sources, countries such as India, Indonesia, and Vietnam have made substantial investments in coal infrastructure, including power plants and mining operations. For instance, India has plans to add approximately 25 gigawatts (GW) of coal-fired capacity by 2025, despite international pressure to shift towards cleaner energy sources.
Indonesia, one of the world's largest coal exporters, has also been expanding its coal production to cater to both domestic and international markets. The country's coal production reached 610 million tons in 2022, with a significant portion destined for China and India. This expansion is supported by long-term contracts that ensure a steady revenue stream for coal producers.
Vietnam's energy strategy has similarly emphasized coal, with plans to increase its coal-fired capacity to 75 GW by 2030. The government has signed multiple agreements with foreign investors to develop new coal power projects, further entrenching the country's reliance on this fossil fuel.
These long-term contracts often extend for 20 years or more, creating a financial and operational inertia that can be difficult to overcome. As prices for renewable energy technologies continue to decline, the opportunity cost of remaining dependent on coal becomes more pronounced. However, the existing contracts can limit the ability of these countries to pivot towards cleaner alternatives such as solar or wind energy.
Experts warn that this dependency on coal could have significant implications for regional climate goals. The Paris Agreement, which aims to limit global warming to well below 2 degrees Celsius, requires a substantial reduction in carbon emissions. However, as countries continue to invest in coal, achieving these targets becomes increasingly challenging.
In addition to the environmental concerns, the economic viability of coal-fired power is also coming into question. As more countries commit to reducing their carbon footprint, the demand for coal is expected to decline, potentially leading to stranded assets for investors and operators of coal power plants. The International Energy Agency (IEA) has indicated that investments in new coal-fired power plants may not be financially viable in the long term.
Despite these risks, the allure of coal remains strong for many Asian nations. The fuel is often viewed as a reliable and cost-effective energy source, particularly in regions where access to natural gas or renewable energy resources is limited. Additionally, coal-fired power plants can provide a steady supply of electricity, which is critical for supporting economic growth and development.
Governments in the region are faced with the complex challenge of balancing energy security, economic growth, and environmental sustainability. While many nations have set ambitious renewable energy targets, the reality of transitioning away from coal is complicated by existing contracts and infrastructure investments.
In response to these challenges, some countries are exploring options to integrate renewable energy into their energy mix while still relying on coal in the short term. For example, India is investing in solar and wind energy projects, aiming to significantly increase its renewable capacity by 2030. However, the transition is gradual, and coal remains a significant part of the energy landscape.
Moreover, international financial institutions and development banks are beginning to reassess their funding strategies for coal projects. The World Bank and the Asian Development Bank have announced initiatives to limit financing for new coal-fired power plants, pushing for investments in cleaner energy alternatives instead.
As the global community continues to grapple with the realities of climate change, the future of coal in Asia hangs in the balance. The long-term contracts that currently bind many countries to coal-fired power generation could hinder progress towards a more sustainable energy future. Nevertheless, the region's energy landscape is evolving, with increasing recognition of the need to transition towards cleaner energy sources.
In conclusion, the reliance on coal-fired power in Asia is a complex issue shaped by decades-long contracts and economic considerations. While the region faces significant challenges in transitioning to renewable energy, the ongoing investments in coal infrastructure may ultimately prove to be a double-edged sword. As the world moves towards a greener future, the decisions made today will have lasting impacts on the energy landscape of Asia for years to come.
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