The Paradox in Southeast Asia’s Decarbonization Agenda - Carnegie Endowment for International Peace
Published November 22, 2025
The Paradox in Southeast Asia’s Decarbonization Agenda
Southeast Asia is at a critical juncture in its efforts to transition to a low-carbon economy. The region is experiencing rapid economic growth, which is accompanied by increased energy demand and greenhouse gas emissions. This paradox presents a significant challenge for policymakers who are striving to achieve decarbonization while simultaneously supporting economic development.
As Southeast Asia continues to industrialize, the demand for energy is projected to rise sharply. According to the International Energy Agency (IEA), the region's energy demand could increase by 60% by 2040. This surge in demand is primarily driven by population growth, urbanization, and economic expansion. Consequently, the region's reliance on fossil fuels, particularly coal, remains high. In fact, Southeast Asia is expected to account for nearly 30% of the global increase in coal consumption by 2040, according to the IEA.
Despite the pressing need for decarbonization, many Southeast Asian nations are struggling to balance their energy needs with environmental concerns. Countries such as Indonesia, Vietnam, and the Philippines are heavily investing in coal-fired power plants to meet their energy requirements. For instance, Indonesia is planning to add over 30 gigawatts (GW) of coal capacity by 2030, while Vietnam is set to increase its coal generation capacity from 18 GW in 2020 to 37 GW by 2030.
This reliance on coal raises significant challenges for the region's climate goals. The Paris Agreement, which aims to limit global warming to well below 2 degrees Celsius, requires substantial reductions in carbon emissions. Southeast Asia's current trajectory, however, suggests that emissions will continue to rise unless significant policy changes are implemented.
In response to these challenges, several Southeast Asian countries have begun to adopt renewable energy targets and policies. For example, Thailand aims to generate 30% of its energy from renewable sources by 2036, while Malaysia has set a target of 20% by 2025. Additionally, the Philippines has committed to increasing its renewable energy capacity to 15.3 GW by 2030.
However, the transition to renewable energy is not without its obstacles. One major challenge is the lack of infrastructure and investment needed to support renewable energy development. Southeast Asia requires an estimated $1.7 trillion in investment to meet its energy needs and achieve its climate goals by 2030. This investment is crucial for developing the necessary grid infrastructure, storage solutions, and technology to support a shift to renewable energy sources.
Moreover, the region's energy policies often favor fossil fuels over renewables, creating a difficult environment for investment in clean energy technologies. Many countries continue to subsidize fossil fuels, which not only undermines the competitiveness of renewable energy but also perpetuates reliance on carbon-intensive energy sources. For example, Indonesia spent approximately $20 billion on fossil fuel subsidies in 2020, which significantly detracts from potential investments in renewable energy.
Another significant barrier to decarbonization in Southeast Asia is the political landscape. Energy policies are often influenced by vested interests, including powerful fossil fuel lobbies that resist change. This can lead to a lack of political will to implement necessary reforms that would facilitate the transition to a low-carbon economy. Furthermore, the economic benefits of fossil fuel investments can create a reluctance to shift towards renewable alternatives, as governments may fear losing jobs and revenue associated with traditional energy sectors.
Despite these challenges, there are signs of progress. Countries like Singapore are leading the way in renewable energy adoption, with ambitious plans to increase solar energy capacity. The nation aims to generate at least 2 GW of solar energy by 2030, which would represent a significant portion of its overall energy mix. Additionally, Singapore is investing in research and development to promote innovative clean energy technologies, such as energy storage and smart grid solutions.
Regional cooperation is also emerging as a vital component of Southeast Asia's decarbonization agenda. Initiatives such as the ASEAN Plan of Action for Energy Cooperation aim to enhance energy security and promote renewable energy development across member states. By fostering collaboration, countries can share best practices, pool resources, and accelerate the transition to sustainable energy systems.
Furthermore, international partnerships and funding mechanisms are critical in supporting Southeast Asia's decarbonization efforts. The Green Climate Fund and other international financial institutions are providing financial assistance to help countries transition to renewable energy. These partnerships can facilitate technology transfer, capacity building, and investment in clean energy projects, enabling nations to overcome some of the barriers they face in achieving their climate goals.
In conclusion, Southeast Asia's decarbonization agenda is marked by a complex interplay of economic growth, energy demand, and environmental responsibility. While the region faces significant challenges in transitioning away from fossil fuels, there are also opportunities for progress through renewable energy investments, regional cooperation, and international partnerships. As Southeast Asia navigates this paradox, the decisions made today will have lasting implications for the region's energy future and its contribution to global climate goals.