ENERGY TRANSITION IN ASEAN: Gaps, challenges and policy pathways to carbon neutrality

By CARI ASEAN Research and Advocacy | 10 November 2021

Writer: Eta Ahmad | Webmaster: Nuratiqha Abd Razak | Research Director, Editor and Supplementary Writer: Hong Jukhee

As world leaders convened in Glasgow at the 26th session of the Conference of the Parties to the UNFCCC (COP 26), the largest climate conference since the pandemic has hit, the meeting has brought the focus on phasing out coal and energy transition to the forefront.  ASEAN reaffirmed its commitment to the Paris Agreement in a joint statement released during the 38th ASEAN Summit held on 26 October.

The world is currently going through different stages of recovery from the impact of the COVID-19 pandemic, but the effects of climate change continue to be felt, seemingly stronger than before. A landmark report released by the Intergovernmental Panel on Climate Change (IPCC) in August 2021 raises the alarm bell on the urgent need for the world to curb its greenhouse gas (GHG) emissions to avert irreversible climate disaster.

The energy sector contributes three quarters of the global carbon emissions and therefore, plays a prominent role in the climate solution. Although ASEAN’s current energy demand is only around 5% globally, it is steadily rising as a result of urbanisation and industrialisation. The region’s share of electricity in final energy consumption is below the global average of 18%, but this is expected to grow rapidly to 26% in 2040, which would be equivalent to the global average then. As such, ASEAN’s energy sector, along with the rest of the world, needs to move towards a net zero pathway.


1) ASEAN’s energy sector primarily relies on coal and oil and even though electricity generation from renewables have been increasing

With a population of 670 million people and a combined GDP of more than US$ 3.2 trillion, ASEAN’s shift from the agriculture sector to industrialisation is leading the region towards becoming one of the global growth drivers and important economic forces in the world. Around seven million people are added to the region’s urban population each year, further driving up energy demand.

Observation of ASEAN’s energy landscape reveals the following insights: 

1. ASEAN’s current energy mix is dominated by fossil fuels (oil, coal, and natural) (Figure 1) and under a baseline scenario, will continue to be the same by 2040 (Figure 2).

2. The electricity and transport sectors are the largest emitters of GHGs in ASEAN and are projected to emit over 60% of the region’s GHG emissions (38% and 25%, respectively) in 2025. Under a baseline scenario, this share is estimated to rise to 42% and 25%, respectively, in 2040. 

3. Renewable energy in the region remains an underused potential with current usage only meeting 15% of Southeast Asia’s energy demand (Figure 3). This is despite hydropower output having quadrupled since 2000 and the rapid increase in the modern use of biomass in heating and transport. The contribution of solar photovoltaics (PV) and wind remains small even though costs have fallen.

4. For ASEAN to reduce its GHG emissions in line with the Paris Agreement, the region must make efforts in all sectors, particularly in the energy sector, which is the largest emitter. Globally, achieving the Paris Agreement’s goal of keeping the global temperature increase below 1.5°C with little or no “overshoot” would require CO2 emissions to decline by about 45% from 2010 levels by 2030 and reach net zero around 2050.

2) Gaps and challenges for ASEAN’s energy sector towards a low carbon pathway

As parties to the Paris Agreement, all ASEAN member states have ratified the agreement and submitted their Nationally Determined Contributions (NDCs) which are pledges to reduce GHG emissions in line with limiting global temperature increase to 1.5 ºC.

In addition, each member state has its own renewable energy policies, and regionally, the ASEAN Plan of Action for Energy Cooperation (APAEC) Phase II: 2021-2025 has set an aspirational target to increase the component of renewable energy to 23% in the ASEAN energy mix, including by increasing the share of renewable energy in installed power capacity to 35% by 2025 and increase the energy intensity reduction target to 32% for the region by 2025.

In order to achieve its energy targets, ASEAN needs to overcome the different gaps and challenges, which includes:

  1. Continued heavy reliance on fossil fuels
    • The region’s reliance on fossil fuels is growing as member states optimise the use of natural resources and others continue building infrastructure to support fossil fuel imports to meet domestic needs.
    • Fossil fuel subsidies distort decision-making and the relative competitiveness of various energy sources by shielding purchasers from the changes in international energy prices. In 2018, governments in Southeast Asian countries provided around US$35 billion in fossil fuel consumption subsidies.
  2. Impediments to renewable energy
    • The absence of long-term, robust investment schemes across ASEAN has limited the potential of wind and solar power, while geothermal sources are only available in a few countries.
    • Cambodia and Myanmar plan to implement renewable energy strategies to boost rural electrification but lack of financing and technical competence remain obstacles.

3) The path towards a low carbon energy sector

A net zero scenario is pictured as a world where all parties to the Paris Agreement succeed in realising and achieving their most ambitious NDCs, and the effects of climate change, though still felt, are kept at a manageable level. A roadmap for the global energy sector is explored in a report by the International Energy Agency, Net Zero by 2050.

The following pre-requisites must be fulfilled to achieve a net zero scenario:

  • Fall in CO2 emissions – Global energy-related and industrial process CO2 emissions fall by nearly 40% between 2020 and 2030 and to net zero in 2050. Universal access to sustainable energy is achieved by 2030 and there is a 75% reduction in methane emissions from fossil fuel use by 2030. 
  • Reduction in total energy supply – Total energy supply falls by 7% between 2020 and 2030 and remains at around this level to 2050. Solar photovoltaic and wind become the leading sources of electricity globally before 2030 and together provide nearly 70% of global generation in 2050. The traditional use of biomass is phased out by 2030.
  • The decline in demand of fossil fuels – Coal demand declines by 90% to less than 600 million tonnes of coal equivalent (Mtce) in 2050, oil declines by 75% to 24 million barrels per day (mb/d), and natural gas declines by 55% to 1,750 billion cubic metres (bcm). 
  • Increase in energy efficiency – Energy efficiency, wind, and solar provide around half of emissions savings to 2030. They continue to deliver emissions reductions beyond 2030, but the period to 2050 sees increasing electrification, hydrogen use and CCUS deployment, for which not all technologies are available on the market today, and these provide more than half of emissions savings between 2030 and 2050. 
  • Rise in investment in the energy market – Annual energy sector investment, which averaged US$ 2.3 trillion globally in recent years, sees a rapid rise to US$ 5 trillion by 2030. As a share of global GDP, average annual energy investment to 2050 is around 1% higher than in recent years.

ASEAN as a region can take advantage of its natural sources of renewable energy and learn from others that have embarked on successful deployment models of renewable energy to achieve a net zero scenario.

4) Recommendations for ASEAN to move towards a low carbon energy sector

Policymakers need to take action now if the world is to have a chance at avoiding the catastrophic effect of runaway carbon emissions. There is a clear need to protect lives and livelihoods from an increasingly unstable climate that would affect crop production, disrupt supply chain lines, and the basic needs and rights of society at large.

To ensure clear action towards the energy sector’s shift to a net zero pathway, ASEAN member states should consider these recommendations.