One goal, many pathways: Asia’s practical route to decarbonization

In the hills of West Sumatra, engineers are preparing to expand the Muara Laboh geothermal power project. The site taps into one of the most stable sources of renewable energy available—heat from deep inside the earth—and once complete, it will help Indonesia meet rising energy demand without adding to the country’s carbon dioxide emissions. 

Author: Meti

Image: Muara Laboh Geothermal power plant supporting electricity supply for approx. 420,000 households. Indonesia ranks second globally in geothermal potential. (Source) Supreme Energy Muara Laboh/ Sumitomo Corporation

The Muara Laboh expansion is just one of more than 350 projects taking shape under the umbrella of the Asia Zero Emission Community, or AZEC, a framework created by Japan and its Southeast Asian partners to pursue a “triple breakthrough”: addressing climate change, promoting inclusive economic growth, and achieving energy security. In a fast-growing region, AZEC recognizes that making a real impact on climate change requires practical solutions tailored to diverse national circumstances.

“Energy is needed for the region’s economic development, to improve people’s standard of living and to support industrialisation,” says Sue-Ern Tan, the Head of the International Energy Agency’s Regional Cooperation Centre in Singapore. “The challenge for the region is to meet this energy demand – for households, businesses, industry – in a secure, affordable and sustainable way.”

Asia’s unique challenge

Asia’s decarbonization challenge looks very different from Europe’s or North America’s. In Europe, many coal plants are nearing retirement: the average facility has been operating for 34 years. Southeast Asia’s plants are much younger — just 11 years old on average. That makes power companies and governments far more reluctant to scrap them. To do so would be to throw away years of potential output, often before construction costs have been recouped. It is little wonder that, across the Asia-Pacific, coal still supplies nearly half of all energy needs.

Asia’s coal-fired power plants will be working for years to come.

 

Demand, meanwhile, is surging. Electricity consumption in Asia has tripled over the past 20 years, as rising incomes drive demand for the comforts enjoyed by richer countries. By 2050, the region is expected to account for more than half of the world’s total energy demand.  In Southeast Asia, for example, only 15% of households own air conditioners, according to a 2019 report by the IEA, but penetration is expected to increase sharply.

This dual reality—new coal assets that are difficult to abandon, and soaring demand for reliable power—makes Asia’s transition distinct.

Tan Sri Tengku Muhammad Taufik, president and group CEO of Malaysia’s Petronas, said at the Energy Asia conference earlier this year that an increasingly complex macroeconomic environment made pragmatic approaches to energy transition more important than ever for Asian nations. "This means advancing along a pathway that does not compromise energy security, by building a more efficient and resilient ecosystem where energy flows safely, reliably, sustainably and responsibly,” he said. “The reality is that for this to be a just transition, we cannot switch overnight, especially when the new energy systems are not yet mature.”

A pragmatic framework

Japan’s Ministry of Economy, Trade and Industry (METI) has framed AZEC as a way to reconcile growth with sustainability. Rather than imposing a single model of transition, it recognizes the need to tailor solutions to each country’s unique circumstances and industrial needs—in areas as varied as renewable energy, energy conservation, low-carbon thermal power such as ammonia co-firing, and carbon capture, utilization and storage (CCUS).

“We’re closely linked through trade, so collaboration is more important than ever,” says Shinichi Kihara, Director-General for Energy and Environmental Policy at Japan’s Agency for Natural Resources and Energy. “In addition to its traditional strength in energy efficiency, Japan is a ‘department store’ of energy technologies—from hydrogen and ammonia to carbon capture and geothermal—that can support the region’s practical steps toward net zero.”

Under AZEC, countries pursue tailored solutions. For some, that means deploying renewables like geothermal or solar. For others, it involves adapting existing thermal plants to use cleaner fuels such as hydrogen, ammonia, or biomass.

A showcase example is emerging in Malaysia, where Japanese engineering group IHI is working with Petronas affiliate Gentari toward commercial deployment of a fully ammonia-fueled gas turbine — a potential world’s first. Because ammonia contains no carbon, the turbine can generate power without CO₂ emissions, while making use of existing natural gas infrastructure.

Technology is only part of the answer. According to the IEA, global data centers — including those powering artificial intelligence — already consume about 500 terawatt-hours of electricity each year, equivalent to the annual demand of France. That figure could triple by 2030. Meeting such surges in demand while cutting emissions will require both innovation and capital.

That’s why another pillar of AZEC is finance. At the Second AZEC Ministerial Meeting in August 2024, METI, the Asian Development Bank (ADB), and the Economic Research Institute for ASEAN and East Asia (ERIA) signed a memorandum of cooperation on technology and transition finance for practical energy transition in Asia.

“Transition financing is essential for Asia’s decarbonization because it enables high-emission and hard-to-abate sectors to access sustainable capital while they implement credible, forward-looking transition plans,” says Fatima Yasmin, ADB vice president. “The AZEC framework can play a vital role in advancing regional decarbonization by fostering collaboration and knowledge sharing among member countries.”

A two-way street of innovation

AZEC is not only about Asia catching up. Some see it as a potential source of reverse innovation: technologies and business models developed to suit Southeast Asia’s needs may later flow back into advanced economies.

“Through AZEC, products, services, and business models developed in Southeast Asia to meet local needs could be  ‘re-imported’ to Japan or other developed nations, benefiting both sides” says Professor Akie Iriyama of Waseda Business School.

Japan’s own experience lends weight to this approach. Since the oil shocks of the 1970s, the country has achieved world-leading efficiency while maintaining industrial growth. Today it is exporting not only equipment — like hydrogen-powered cars, fuel cells, and next-generation ships — but also lessons in how to balance security, growth, and sustainability.

The road ahead

Momentum for AZEC is set to build this October, when ministers and heads of state will gather in Malaysia for the initiative’s next round of meetings. The summit is expected to highlight both flagship projects and broader policy frameworks.

For Asia, the stakes are global. With more than half the world’s future energy demand centered here, the region’s success or failure in decarbonization will determine the trajectory of global climate efforts.

“Asia is an incredibly dynamic region,” says Kihara of the Agency for Natural Resources. “We need to nurture that dynamism while aiming for sustainability.”