Southeast Asia’s critical role as a green industrial leader - Lowy Institute
Published February 03, 2026
Southeast Asia’s Critical Role as a Green Industrial Leader
Southeast Asia stands at a pivotal juncture in its journey towards becoming a leader in green industrial practices. The region is increasingly recognized for its potential to drive sustainable economic growth while simultaneously addressing the urgent challenges posed by climate change. As the world shifts towards renewable energy and sustainable practices, Southeast Asia’s strategic advantages, including its abundant natural resources, growing technological capabilities, and youthful population, position it as a key player in the green industrial revolution.
The global demand for renewable energy sources is on the rise, driven by heightened awareness of climate issues and the need for sustainable development. Southeast Asia, with its diverse energy landscape, is well-positioned to meet this demand. The region has made significant strides in harnessing renewable energy sources such as solar, wind, and hydropower. Countries like Vietnam, Thailand, and Indonesia are leading the charge, implementing ambitious renewable energy targets and investing in clean energy infrastructure.
Vietnam, in particular, has emerged as a frontrunner in solar energy adoption. The country has witnessed a dramatic increase in solar power capacity, with installations reaching approximately 16 gigawatts (GW) by the end of 2020. This rapid growth can be attributed to favorable government policies, including feed-in tariffs and tax incentives aimed at attracting investment in the renewable energy sector. As a result, Vietnam is not only enhancing its energy security but also positioning itself as a key player in the regional green energy market.
Thailand has also made notable progress in its renewable energy initiatives. The country’s Power Development Plan aims for renewable energy to account for 30% of its total energy generation by 2037. This ambitious target is supported by a robust regulatory framework and a commitment to attracting foreign investment in renewable energy projects. Thailand’s success in solar and biomass energy has made it a model for other countries in the region looking to transition to cleaner energy sources.
Indonesia, with its vast archipelago and rich natural resources, has significant potential for renewable energy development. The government has set a target of achieving 23% of its energy mix from renewable sources by 2025. To achieve this goal, Indonesia is focusing on developing geothermal, hydropower, and solar energy projects. The country’s unique geographical features provide ample opportunities for harnessing renewable energy, particularly in remote areas where access to traditional energy sources is limited.
In addition to its renewable energy resources, Southeast Asia boasts a young and dynamic workforce, which is crucial for driving innovation and technological advancements in the green industrial sector. The region’s population is predominantly under the age of 30, providing a fertile ground for the development of new skills and expertise in renewable energy technologies. Educational institutions and training programs are increasingly focusing on equipping the workforce with the necessary skills to thrive in the green economy.
Moreover, Southeast Asian countries are recognizing the importance of regional cooperation in addressing climate change and promoting sustainable development. Initiatives such as the ASEAN Plan of Action for Energy Cooperation (APAEC) aim to enhance collaboration among member states in the energy sector. By sharing best practices, resources, and technologies, countries in the region can collectively accelerate their transition to renewable energy and green industrial practices.
Investment in green technologies is another critical factor driving Southeast Asia’s emergence as a green industrial leader. The region has seen a surge in foreign direct investment (FDI) aimed at renewable energy projects. According to a report by the International Renewable Energy Agency (IRENA), investment in renewable energy in Southeast Asia reached approximately $10 billion in 2020, a figure that is expected to grow as more countries commit to sustainable development goals.
However, despite the progress made, several challenges remain that could hinder the region’s transition to a green industrial future. One of the primary obstacles is the reliance on fossil fuels, which still dominate the energy mix in many Southeast Asian countries. To overcome this challenge, governments must implement policies that incentivize the transition to renewable energy and phase out subsidies for fossil fuels.
Another significant challenge is the need for improved energy infrastructure to support the growth of renewable energy. Many countries in the region lack the necessary grid infrastructure to accommodate the influx of renewable energy sources. Upgrading and expanding the energy grid will be essential to ensure that renewable energy can be efficiently integrated into national energy systems.
Furthermore, access to financing remains a critical issue for many renewable energy projects in Southeast Asia. While there has been an increase in investment, many smaller projects struggle to secure the necessary funding to get off the ground. Innovative financing models, such as green bonds and public-private partnerships, could provide the necessary capital to support the growth of the renewable energy sector.
As Southeast Asia continues to navigate these challenges, the importance of international collaboration cannot be overstated. The region can benefit from sharing knowledge and experiences with countries that have successfully transitioned to renewable energy. Collaborative efforts, such as technology transfer and capacity-building initiatives, can help accelerate the development of green industries across Southeast Asia.
In conclusion, Southeast Asia is poised to play a critical role in the global transition to a green industrial economy. With its abundant renewable energy resources, youthful workforce, and increasing investment in sustainable technologies, the region has the potential to lead the way in sustainable development. However, addressing the challenges of fossil fuel dependency, infrastructure limitations, and financing will be essential to fully realize this potential. By fostering regional cooperation and international partnerships, Southeast Asia can emerge as a leader in the green industrial revolution, contributing to a more sustainable and resilient future for all.