Asia Pacific’s Energy Transition To Play Key Role In Meeting Global Climate Goals, Says Wood Mackenzie

The Asia Pacific region is entering a critical phase in its energy transition, one that will play a major role in determining global climate outcomes. The region is home to more than half of the world’s population and generates over one-third of global GDP. At the same time, countries across Asia Pacific must support rapid economic growth while also reducing carbon emissions. Balancing these two priorities—economic expansion and climate responsibility—will determine whether global climate goals can be achieved in the coming decades.

A recent analysis from Wood Mackenzie examines how this transition could unfold. The study is part of the company’s Energy Transition Outlook (ETO), which explores several possible pathways for the global shift toward cleaner energy. The outlook presents four different scenarios with varying levels of ambition, ranging from current policy trends to more aggressive strategies aimed at reaching net-zero emissions. In addition to the global analysis, the report also provides regional insights that examine how individual countries may contribute to the transition.

The Asia Pacific update focuses on nine key energy markets that play an important role in the region’s energy system. These include Australia, China, India, Indonesia, Japan, South Korea, Malaysia, Thailand, and Vietnam. Together, these countries represent a large share of the region’s population, economic activity, and energy demand. Understanding how their policies and investments evolve will be essential in determining the direction of the global energy transition.

Currently, Asia Pacific is the world’s largest carbon-emitting region. By 2025, it is expected to account for more than half of global emissions. This is largely due to the region’s rapid industrialisation, population growth, and rising energy demand. According to the outlook, emissions across the region are likely to peak in the late 2020s. This peak is expected to occur later than in many other parts of the world, after which emissions will gradually decline. Over time, the rate of reduction could eventually surpass the global average as clean energy technologies expand.

China plays a central role in shaping the region’s energy transition. As the world’s largest energy consumer and carbon emitter, its policies and investments significantly influence global energy trends. At the same time, many governments in the region are increasingly focusing on domestic priorities such as energy security, resource availability, and supply chain stability. Trade policies, tariffs, and geopolitical shifts are also reshaping the global clean-energy supply chain. These changes are gradually reducing China’s dominance in certain sectors as other countries develop their own manufacturing capabilities.

By the late 2030s, emissions across Asia Pacific are expected to fall below those of other major regions. The difference may continue to grow over the following decades. Although China will still account for a significant portion of emissions, its share of the regional total is projected to decline from about 60 percent today to roughly 40 percent by 2060. Meanwhile, developed economies such as Japan, South Korea, and Australia are expected to cut their emissions by more than half. In contrast, emerging economies including India, Indonesia, and Vietnam may still see emissions growth in the near term because of rising energy demand linked to economic development.

The power generation and industrial sectors together produce around 78 percent of Asia Pacific’s emissions, but their transition pathways are expected to differ significantly. The electricity sector is likely to see the largest reductions, with emissions from power generation projected to fall by more than two-thirds by 2060. This change will be driven by the rapid expansion of renewable energy sources and stronger cooperation between countries to develop regional power systems. However, heavy industries such as steel and cement face a much more difficult path to decarbonisation. These industries require extremely high temperatures and large amounts of energy for production, making it challenging to replace fossil fuels with cleaner alternatives. As a result, emissions reductions in these sectors are expected to be slower and more limited compared with the electricity sector.

Despite these challenges, the region also presents enormous opportunities for investment and technological development. Total spending related to the energy transition in Asia Pacific could reach between 54 trillion and 72 trillion US dollars by 2060. Much of this investment will be directed toward new technologies, expanded infrastructure, and the development of manufacturing hubs for industries such as batteries, hydrogen production, solar equipment, and critical minerals used in clean energy systems. To achieve deeper reductions in emissions, stronger government policies will likely be required. Carbon pricing mechanisms may need to increase significantly, possibly reaching levels up to 1.7 times higher than current baseline estimates. Higher carbon prices could encourage companies to adopt cleaner technologies and accelerate the shift away from fossil fuels.

Electricity demand in Asia Pacific continues to grow faster than in any other region. The combination of population growth, rapid urbanisation, industrial expansion, and rising household incomes has pushed energy demand to new levels. Today, the region already accounts for more than half of global electricity demand. As economies continue to expand, governments must ensure that enough power generation capacity is available to meet this demand while also reducing emissions. To maintain reliable electricity supplies, many countries are using a mix of different energy sources. These include traditional fuels such as coal and natural gas, as well as nuclear power and renewable energy technologies like solar and wind. In recent years, renewable energy installations have grown quickly across the region. China currently leads the world in renewable energy capacity, while India is rapidly expanding its solar and wind energy projects.

Even with this progress, fossil fuels remain an important part of the energy system. Coal and natural gas are still widely used to provide reliable power, especially during periods when renewable energy generation is lower. As new renewable projects are developed, fossil fuels continue to help maintain stability in electricity networks across several major economies. This situation has created a complex energy mix across Asia Pacific. Renewable energy is expanding rapidly, but traditional energy sources are still needed to meet rising demand and maintain system reliability. The decisions made today about infrastructure, energy policy, and investment will have long-lasting effects on the region’s energy system.

Looking ahead to 2060, the future of Asia Pacific’s energy transition could follow several different paths. These possibilities range from continuing with current policies to implementing stronger climate commitments aimed at achieving net-zero emissions. Some scenarios also consider the possibility of slower progress if technological, financial, or political barriers delay the transition. Several major themes will influence how the region’s energy transition unfolds. Energy security and independence are becoming increasingly important priorities for many governments, especially as global supply chains face disruptions and geopolitical tensions. Countries are also working to diversify clean-technology manufacturing to reduce reliance on a single market and strengthen domestic industries.

Another critical factor will be the availability of investment capital. The speed of the energy transition will depend heavily on whether governments, financial institutions, and private investors are willing to fund large-scale energy infrastructure and technology development. Without sufficient financing, the shift toward cleaner energy systems could progress more slowly than required. Finally, the gap between rapidly growing electricity demand and the pace of decarbonisation remains one of the region’s biggest challenges. As Asia Pacific continues to expand its power supply to support economic growth, ensuring that this expansion is increasingly powered by low-carbon energy sources will be essential for meeting global climate targets.