Asia’s green transition is being reshaped by energy security, supply-chain risks and the cost of living, with governments increasingly choosing a more pragmatic path rather than following a single, co-ordinated climate agenda, Moody’s Ratings has said.
Rahul Ghosh, the agency’s global head of sustainable finance and emerging markets, said an “erosion of multilateralism” had prompted countries to put national resilience ahead of what he described as “virtue signalling”.
“Ten years ago, the world was aligning around consistent climate policies, but now we’re starting to see a bit of divergence,” he said.
Ghosh said the emerging approach was a “pragmatic transition” that sought to balance decarbonisation with reliable energy supplies and affordability. That has left a continuing role for fossil fuels in several Asian economies, despite their public commitments to cut emissions.
The reassessment has been accelerated by geopolitical shocks. Russia’s invasion of Ukraine in February 2022 sent fuel prices soaring and triggered an energy crisis across much of the developing world.
More recently, the conflict involving the US and Iran and the effective closure of the Strait of Hormuz disrupted oil and gas flows into Asia. The International Energy Agency has said the waterway is particularly important to the region, with most of the oil passing through it destined for Asian markets.
Governments have responded by seeking to diversify their energy systems. Options include increased investment in renewables and nuclear power, new oil and gas suppliers such as the United States, and, in some cases, a renewed dependence on coal.
Japan has placed energy security at the centre of its latest green transformation plans. Official estimates published by the country’s economy ministry indicate that between two and five nuclear reactors may need to be replaced during the 2040s, rising to between 11 and 14 during the 2050s, subject to the assumptions underpinning the forecast.
The Japanese government has said nuclear power will be used alongside renewables to strengthen both energy security and decarbonisation, with any replacement projects dependent on safety approval and the understanding of local communities.
In April, Prime Minister Sanae Takaichi also hosted an Asian summit on energy resilience and announced a partnership intended to strengthen regional supplies of oil, critical minerals and other essential goods. The Japanese government said the initiative could involve about $10 billion in financial co-operation.
Singapore is pursuing a different balance, combining major investment in low-carbon technology with a focus on the resilience of its power system. The city-state has committed S$800 million over five years to research, innovation and the development of low-carbon energy and industrial technologies.
Singapore’s Ministry of Trade and Industry said the programme would focus on the power and industrial sectors, which together account for more than 85 per cent of the country’s emissions. The government has retained a target of reducing annual emissions to between 45 million and 50 million tonnes of carbon dioxide equivalent by 2035, before reaching net zero by 2050.
But the shift towards security has also encouraged greater use of coal. The Institute for Energy Economics and Financial Analysis has reported that China, Japan, South Korea and Indonesia all increased their coal-fired capacity after 2020, even as they maintained pledges to decarbonise.
When the Philippines declared a national energy crisis in March, its energy secretary, Sharon Garin, said coal-fired power stations would be operated more intensively to help contain electricity costs.
“Be it in Australia, Singapore or Hong Kong, we’ve seen more focus on safeguarding transition assets and activities than we’ve seen in Europe,” Ghosh said.
He said Asia faced a particularly difficult challenge because strong economic and population growth was driving demand for vehicles, air conditioning and electricity. The region must meet that demand while maintaining energy-efficiency standards and reducing the emissions intensity of its economies.
Climate damage itself is adding to the pressure. Investors are directing more money towards adaptation and resilience projects, including flood barriers, dams, early-warning systems, smart monitoring and drought-resistant crops.
The United Nations said on Wednesday 2 September that the world was on course to breach the 1.5C temperature limit set under the Paris Agreement, despite rapid progress in wind and solar power since the accord was adopted.
Ghosh said many of the extreme weather events expected over the next decade were already “locked in” by historic emissions. Large parts of Asia, including areas of India, China and south-east Asia, were also under-insured against natural disasters, increasing the need for public and private investment in resilience.
Despite the renewed use of coal and the retreat from a common global approach, Ghosh said Asia was not abandoning the transition altogether.
“The process was always going to be non-linear,” he said. “Yet we are still moving from a higher-carbon to a lower-carbon economic system over time.”
