Asia at the energy crossroads
Global energy demand has grown by a significant 15% over the past decade. In what is a promising sign, as noted in the International Energy Agency’s (IEA) most recent World Energy Outlook report, around 40% of this growth in energy demand was met by clean energy. Indeed, the IEA predicts that renewables will outgrow its share of contribution, beating fossil fuel share in the near future.
For the world to achieve its net-zero goals by 2050, this growth in clean energy must occur in tandem with efforts to decarbonise the energy production sectors, stemming not just from the public sector but also everyday consumers. The report also highlights major challenges facing the sector’s decarbonisation efforts, in particular the ongoing conflicts in Europe and the Middle East that are disrupting global oil and gas supply chains.
Net-zero in Asia Pacific
Amidst this environment, Asia finds itself torn between its dual roles as a major consumer and producer of global energy.
China is a perfect example of this paradox.
On one hand, China is almost single-handedly responsible for surging global energy demand, accounting for the largest leaps in oil and gas demand over the past decade. Owing to increased incomes and industrial output, China’s electricity demand will reach around 420 TWh each year by 2030—overtaking the per capita electricity consumption of advanced economies. This demand has also made China the world’s largest carbon emitter, though the country’s emissions are expected to peak by 2030.
Exhibit: Per capita electricity consumption by sector and region in the STEPS, 2030
Source: World Energy Outlook 2024, International Energy Agency
On the other hand, however, China is also a leader in clean energy development and installation, accounting for more than 40% of the global installed capacity of wind and solar PV, as well as more than half of EVs in the world today.
India offers a much more complex picture. Home to 1.44 billion people, and now the world’s most populous nation, Indian energy demand is rising quickly—it is projected to increase by 35% by the year 2035. As a result, India remains highly dependent on coal. India isn’t alone in this respect, as much of the Asia Pacific region finds itself in the same predicament, and coal use is expected to increase in the region between now and 2035.
However, India has also set ambitious net-zero goals, aiming to achieve carbon neutrality by 2070 with the support of a range of policies. Under its Production Linked Incentives Scheme, the country has earmarked US$8.2 billion of subsidies to promote the development and use of low-carbon vehicles, solar PV and batteries. While substantial, these subsidies fall short of the more than trillion dollars India needs to transition away from coal mining and thermal power plants, as highlighted by the International Forum for Environment, Sustainability and Technology (iForest).
Though China and India’s actions tend to draw the most attention, energy developments in Southeast Asia are growing in importance, as it is home to the second-fastest growth in energy demand after India, with similar changes seen in installed renewables capacity. Though coal is still the region’s preferred power source, there are signs that regional economies are preparing to move towards renewables. Countries like Malaysia, Thailand and Indonesia have plans to phase out coal usage between 2045 to 2056, and by 2025, the regional bloc aims to increase its share of renewable energy to 23% in its total energy supply.
Perhaps some of the most exciting developments are occurring in Indonesia, the region’s largest economy. Along with support from USA and Japan, Indonesia, the world’s largest archipelago plans to mobilise US$20 billion to limit its power sector emissions and increase renewable energy share to 34%.
New energy system
The urgency to revolutionize our energy production and consumption systems is clear. As we envision the future of energy, it is imperative to prioritise a people-centric approach that ensures the benefits of the new energy economy are shared.
But developing economies face unique challenges in transitioning to clean energy systems. While access to green financing and government incentives can play a pivotal role in mitigating them and paving the way to a smooth and just transition, there is still not enough support for the transition. By investing in green energy initiatives, the region’s economies can be encouraged to harness the potential of renewable energy sources, reduce their reliance on fossil fuels and play their part in contributing to global efforts to combat climate change.