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Asia Pacific: Green growth or transition troubles?
The latest Net-Zero Navigator report covers the decarbonisation of the Asia-Pacific (APAC) region and the many contradictions it presents. It is responsible for more than half of annual global greenhouse gas (GHG) emissions and more than three-quarters of global coal consumption. It has also doubled the installed renewable energy capacity since 2015 and produces many of the essential components of low-carbon technology. A successful transition will mean addressing both the fossil-based status quo and the cleantech momentum of the future. We view two factors as key drivers in determining the pace of APAC’s energy transition: the decarbonisation of hard-to-abate sectors, and the changing nature of the region’s energy demand.
APAC: Green growth or transition troubles?
Hard-to-abate sectors like energy and industry make up around 30% of the GDP of APAC’s largest economies, which we will focus on in this report: mainland China, Japan, India, South Korea, Australia, Indonesia, Taiwan, Singapore, Thailand, and Vietnam. Cost-effective alternatives to fossil fuels for manufacturing, heavy industry, and other hard-to-abate sectors are still in the early stages of development and will require significant financing to reach commercial scale.
Debate over the causes and impacts of climate change is largely absent from APAC politics. This has resulted in a pragmatic approach to the energy transition, such as viewing low-carbon technologies as a market opportunity and renewables as an opportunity to reduce energy import dependence. Environmental policies that promote clean transportation and green buildings can also improve quality of life for citizens, given the region’s high level of urbanisation – nine of the ten largest cities by population are in Asia1. This is not to say that there is a universal lack of opposition to green initiatives, but rather that this tends to be towards specific activities based on local sentiment, rather than about the transition more broadly.
Although 2050 is the milestone year for achieving net-zero emissions under the Paris Agreements, APAC’s largest emerging economies have committed to longer transition time horizons. Emerging markets face particular challenges that can affect the pace of transition, such as population growth, urbanization, and rising energy demand, according to The Organisation for Economic Co-operation and Development (OECD)2 . The sustainable finance taxonomy has become one of the most common tools in APAC for governments to categorise the priority sectors and activities needed to meet net-zero targets; eight of the ten largest economies currently have or are developing a taxonomy. These taxonomies can provide important context for stakeholders in assessing the ambitiousness of company-level transition plans in markets with post-2050 net-zero timelines.
APAC is the world’s leader in renewable power, with 64% of global solar capacity and 54% of global wind capacity as of 2024.3 Despite this, coal continues to be its most important fuel source. More than half of APAC’s electricity is generated by coal, and it is the only region with positive growth in installed coal capacity - around 3% per annum from 2019-20244 . Coal is a significant portion of the electricity mix not only in emerging Asia, but also in developed markets. The relative youth of much of APAC’s coal fleet and the need to replace generating capacity with renewable power could slow advancement of the energy sector’s progress towards net-zero.
APAC has sizable climate financing needs; the IMF estimates the gap to be around USD800bn annually for emerging Asia alone. Bond markets are currently the region’s largest source of private climate capital, and although a range of issuer types are active in the labelled bond market, some of the most carbon-intensive industries are less well represented. Growing focus on the net-zero transition by the region’s financial regulators and finance ministries has led to broad adoption of sustainable finance taxonomies, which quantify and measure green and transition activities in the context of local economies.
Growth in sectors related to the net-zero transition may contribute towards sustainable development for APAC’s emerging economies, by increasing access to affordable energy and transportation. Southeast Asia is well-positioned to benefit from the EV sector, both from EV-related FDI supporting jobs and local economies, and by making vehicle ownership more affordable for low- and middle-income residents.
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- Jakarta, Dhaka, Tokyo, New Delhi, Shanghai, Guangzhou, Manila, Kolkata, Seoul “The World’s Cities in 2025 – Data Booklet,” United Nations, Department of Economic and Social Affairs (UNDESA)
- “Ensuring a just transition to net-zero emissions,” Policy Papers No.15, OECD, 27 May 2025
- Renewable Capacity Statistics 2025, The International Renewable Energy Agency
- Source: BloombergNEF
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