ASEAN Position in Global Economy and Energy Landscape  

ASEAN’s economic growth is projected increase to be to be around 4.7% in 2025. , which is in the second place after 6.6% of the projected economic growth of South Asia in 2025. On average, this amount is higher than the projected economic growth of China for next decade. Among ASEAN Member States (AMS), Viet Nam and the Philippines are projected to have the highest economic growth around 6.2%, followed by Indonesia and Malaysia for 5% and 4.6% in 2025, respectively. Population growth of ASEAN also account for significant share of the global population for around 9% in 2023. As the effect, the future energy demand of ASEAN is projected to increase significantly.  The most recent 8th ASEAN Energy Outlook published by the ASEAN Centre for Energy (ACE), projected energy demand in the region in 2050 will increase by 2.6 times of the 2022 value under the baseline scenario.  The highest increase of energy demand in the region is projected to be from industry and transport sectors.  Moreover, ASEAN’s energy demand in 2035 is estimated to account for nearly 35% of global energy demand, which is around a 14% increase compared to ASEAN’s share in 2010. Natural gas, oil, and coal are projected to still account for the largest share of the total energy supply of ASEAN (76%) in 2050 under the baseline scenario. The region has also increased its oil import dependency up to 96% in 2022, indicating the need to strengthen regional energy policies towards reducing oil import dependencies. In other words, the region would also need to meet four regional energy priorities (security, accessibility, affordability, and sustainability) under its position in the global energy landscape.  

Decarbonisation Phases of ASEAN Energy Sector 

The AEO8 findings state that the current regional policies would lower total energy demand of the region for nearly half of the value under the baseline scenario in 2050. However, coal and oil remain to account for largest share of total energy supply in ASEAN. Import dependency of energy sector brings several spillover effects on energy and whole economy due to the uncertainty risk of currency exchange and supply shortage along global supply chain. Under the carbon neutrality scenario, the energy demand could be further lowered for nearly -17% lower than the value under the regional scenario. The consumption of fossil fuels (coal, natural gas, and oil) could be also lowered due to significant increase of bioenergy, electricity, and other emerging technologies. Thus, the clean energy, electricity stability, and emerging technologies would play more crucial role in both meeting the decarbonisation efforts and energy security in ASEAN. Some of AMS have a high potential for renewable energy sources and its critical minerals, However, there is a stability or reliability issue in electricity transmission and critical minerals required by clean energy technologies which need to be thought carefully by the region.  

Considering the energy security and accessibility goals of ASEAN, the intermittent issues of the electricity transmission grid and potential shortage of critical mineral supply are critical to be mitigated immediately through the close alignment of energy policy with its cross-sectoral sectors particularly during the near term (2025-2035). The region also acknowledges the need for strengthening regional interconnectivity through the ASEAN Power Grid (APG) in ensuring the reliability of electricity supply in the region. The second issue of reliability of the critical minerals supply chain required by clean energy technologies is not only related to security and accessibility but also to affordability and sustainability priorities of energy in ASEAN. Although some AMS have great potential for critical minerals production required by clean energy technologies, its utilisation still needs to be further enhanced to bring more value-added to ASEAN along global supply of critical minerals. Incentives can be one of the measures to add more value-added and strengthen the resilience of ASEAN along the global supply chain of critical minerals.  

The mid-term of 2050 (2035- 2050) can be prioritised to meet further affordability and sustainability priorities while continuing to maintain the security and accessibility priorities achieved during the first phase. The cost of technologies and energy would be the key parameter in affordability. As the region relies on emerging technologies from the global market, the price of emerging technologies would be a significant part of the total clean energy projects in the region. Moreover, the implementation of clean energy projects would also need the infrastructure (system and human capacity) readiness in ASEAN. Thus, the preparation of the framework and enabling policies for clean and emerging technologies including knowledge-sharing platforms could be done during the first phase with its enhancement will be prioritised during the second phase.  

Realignment of ASEAN Supply Side Energy Policies with Cross-Sectoral Policies 

The decarbonisation phases of the energy sector in ASEAN would require a vast amount of investment. The AEO8 estimated the annual power investment cost required by ASEAN including to finance additional transmission networks during the 2023-2030 is around USD 20 billion to USD 56 billion.  The total investment required to finance clean energy in ASEAN by 2035 under the existing scenario is estimated to be around USD 190 billion. The key issues in clean energy investment in ASEAN are not only the limited availability of private investment but also the speed of clean energy investment is slow. In 2023, the clean energy investment of ASEAN accounted for only 2% of global clean energy investment, which is too small considering the region’s speed on energy demand. In addition to improving the regulatory framework and innovative financial mechanisms, the realignment of energy policies with its cross-sectoral policies would be more crucial in boosting investment required by the region towards decarbonisation targets in 2050. Particularly, under the 42nd Joint Ministerial Statement of Ministerial Energy Meeting (AMEM) in Laos, in September 2024, the region aims the needs to integrate two recent policies on ASEAN sustainability, the ASEAN Carbon Neutrality Strategy and ASEAN Circular Economy Framework into the second phase of the ASEAN Plan of Action for Energy Cooperation, APAEC (2021-2025) and Post 2025 due to close interlinkages among these strategies. The latter acts as the primary document to provide direction of key priorities for energy cooperation of ASEAN for 2026-2030. Moreover, the realignment with some key existing strategies such as ASEAN Taxonomy on Sustainable Finance, Bond Market, Transition Finance, Minerals, and Industrial Policies would provide a full picture of not only the possible cross-sectoral collaboration but also of reducing the potential inefficiency budget allocation. The task is not easy with several energy priorities that need to be accomplished by the region. However, ASEAN has a great key regional target stated in APAEC and a commitment to advancing regional cooperation towards energy security and decarbonisation in the region.