Analysis: South Asian cross-border energy trade ignores climate risks - Dialogue Earth
Published December 29, 2025
Analysis: South Asian Cross-Border Energy Trade Overlooks Climate Risks
In recent years, the South Asian region has seen an increase in cross-border energy trade, with countries like India, Nepal, Bhutan, Bangladesh, and Pakistan engaging in various energy exchange initiatives. However, a critical analysis reveals that this burgeoning trade often neglects the pressing climate risks associated with energy production and consumption. As the region grapples with the impacts of climate change, it is essential to evaluate how cross-border energy trade can be aligned with sustainable practices to mitigate environmental impacts.
The South Asian Association for Regional Cooperation (SAARC) member states have recognized the potential of cross-border energy trade to enhance energy security, reduce costs, and promote economic growth. India, with its vast energy resources, has emerged as a key player in this trade. It has established power exchange agreements with its neighbors, facilitating electricity imports and exports. For instance, India has been exporting electricity to Nepal and Bangladesh, while also importing hydropower from Bhutan.
Despite the apparent benefits, the current framework of cross-border energy trade is often criticized for its lack of consideration for climate risks. The energy sector in South Asia is heavily reliant on fossil fuels, which contribute significantly to greenhouse gas emissions. According to a report by the International Renewable Energy Agency (IRENA), fossil fuels accounted for approximately 80% of the total energy consumption in South Asia in 2020. This dependence poses a significant threat to the region's climate resilience, as rising temperatures and erratic weather patterns become more prevalent.
The impacts of climate change are already being felt across South Asia. The region has experienced an increase in extreme weather events, including floods, droughts, and heatwaves. These events not only disrupt energy production but also exacerbate the vulnerability of populations reliant on stable energy supplies. For instance, the 2020 monsoon season brought severe flooding to several parts of India and Bangladesh, leading to power outages and damage to energy infrastructure. Such incidents highlight the urgent need for a more climate-resilient approach to energy trade.
One of the key challenges facing South Asian countries is the integration of renewable energy sources into the existing energy mix. While countries like India and Nepal have made significant strides in expanding their renewable energy capacities, the overall share of renewables in the region remains low. According to IRENA, renewable energy accounted for only 20% of the total energy consumption in South Asia in 2020. This limited adoption of renewables is a missed opportunity, as investments in clean energy can help mitigate climate risks while providing sustainable energy solutions.
To address these challenges, policymakers must prioritize the integration of renewable energy into cross-border energy trade agreements. This can be achieved through collaborative initiatives that promote the development of renewable energy projects, such as solar and wind farms, in the region. For instance, the South Asian region has significant potential for solar energy, with countries like India and Pakistan receiving high levels of solar radiation throughout the year. By harnessing this potential, South Asian countries can reduce their reliance on fossil fuels and enhance energy security.
Additionally, regional cooperation is essential for developing a robust energy infrastructure that supports the integration of renewables. This includes investments in grid connectivity and energy storage solutions that can help manage the intermittent nature of renewable energy sources. The Asian Development Bank (ADB) has been actively supporting initiatives aimed at improving cross-border electricity trade and enhancing grid infrastructure in South Asia. By fostering regional collaboration, countries can create a more resilient energy system that is better equipped to handle the impacts of climate change.
Furthermore, it is crucial to incorporate climate risk assessments into energy planning and decision-making processes. This involves evaluating the potential impacts of climate change on energy infrastructure and identifying strategies to enhance resilience. For example, the construction of energy facilities in flood-prone areas should be carefully considered, and measures should be taken to protect existing infrastructure from extreme weather events. By proactively addressing climate risks, South Asian countries can safeguard their energy systems and ensure reliable energy access for their populations.
In addition to infrastructure investments, the region must also focus on policy frameworks that incentivize the transition to renewable energy. This includes implementing feed-in tariffs, tax incentives, and other financial mechanisms that encourage private sector investment in clean energy projects. By creating a conducive environment for renewable energy development, South Asian countries can attract the necessary capital to drive the transition towards a low-carbon energy future.
Another important aspect of cross-border energy trade is the need for transparent and inclusive decision-making processes. Engaging various stakeholders, including local communities, civil society organizations, and the private sector, is essential for ensuring that energy projects are developed in a manner that respects environmental and social considerations. By fostering dialogue and collaboration among stakeholders, countries can build trust and support for renewable energy initiatives, ultimately leading to more sustainable outcomes.
In conclusion, while South Asia's cross-border energy trade presents significant opportunities for economic growth and energy security, it is imperative that climate risks are acknowledged and addressed. By prioritizing the integration of renewable energy sources, investing in resilient infrastructure, and fostering regional cooperation, South Asian countries can create a sustainable energy future that not only meets the needs of their populations but also protects the environment. As the region continues to navigate the challenges posed by climate change, a proactive approach to energy trade will be essential for building a resilient and sustainable energy landscape.
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