Southeast Asia is Ready for the Energy Transition

The people in Southeast Asia, like much of the rest of the world, have had a rough two years. Tariff uncertainties have clouded the economic outlook, hurt consumer sentiment and added to inflation since April 2025. The woes were further compounded this year by the broad cost impact of the US-led war against Iran. It would seem, however, that these woes have not pushed aside concerns about climate change nor overly dented support for measures needed to mitigate it.

This can be seen in the responses to the 2026 Southeast Asia Climate Outlook Survey done by the ISEAS – Yusof Ishak Institute (ISEAS), which show that economic uncertainties pipped climate concerns by less than two percentage points (55.3 per cent versus 53.6 per cent). More interestingly, responses to questions about key energy transition policy levers still underscore broad, if not majority, support.

One indication is that a slight majority of respondents (50.3 per cent) believe that existing coal plants should be closed or phased out quickly in favour of alternative energy sources (Figure 1). On the other side, only 9.2 per cent support building more coal plants, with the remaining group opting for continued use with (25.0 per cent) or without (15.5 per cent) technologies to reduce their emissions. Among the major users of coal in the region, 47.5 per cent from Indonesia, 45.2 per cent in the Philippines, 47.9 per cent in Vietnam and 41.5 per cent in Malaysia want to close or phase out existing coal plants. This is even though 43–67 per cent of their electricity generation comes from coal. This is a significant proportion and is pertinent, given that less than 10 per cent of the respondents from these countries want to continue business as usual by building new coal plants.

Indonesia’s case is particularly significant, given its current heavy dependence on coal and its abundant indigenous coal resources. Indonesia has pledged to end its coal power usage by 2040 while working to fund early retirement of existing plants under its Just Energy Transition Partnership (JETP). The US’ withdrawal from the programme has affected the JETP somewhat, but Germany and Japan have since stepped in to fill the gap.

Figure 1. Sentiment Turns Dark Against Coal

In terms of the timeframe for phasing out coal plants, 56.5 per cent of all respondents are in favour of doing it by 2030 or earlier (Figure 2). This shows that a sense of urgency is present on the ground. All the major coal-user states except Vietnam have majorities of their respondents supporting a tight 2030 target: 60.7 per cent for the Philippines, 60.2 per cent for Indonesia and 53.1 per cent for Malaysia. Such ambition is encouraging and should give confidence to their national governments to move ahead, even if implementation will need to be tempered by funding and construction challenges going forward.

For Vietnam, the corresponding group supporting phase out by 2030 is a little lower, making up 45.8 per cent. However, this is still ahead of current state plans, which only call for a moratorium on new coal plants after 2030. From the indications in this survey, Vietnam’s road map for Net-Zero by 2050 will receive firm domestic backing.

Figure 2. Earlier, Not Later

Another important and effective national policy lever for the energy transition is the use of a carbon tax. The survey indicates that a clear majority of 62 per cent of respondents support the imposition of a carbon tax while 19.6 per cent oppose it. The other 18.4 per cent were unclear as to what such a tax is (Figure 3). The top five carbon emitters in ASEAN by absolute emissions (in descending order: Indonesia, Vietnam, Malaysia, Thailand and the Philippines) all indicate clear majorities of respondents supporting the use of a carbon tax lever. The figures range from 65 to 83 per cent. Moreover, more than nine in ten of those who supported the tax indicated that they are at least moderately, if not greatly, willing to stump up for the tax as consumers, underscoring aspirations which they are willing to incur some costs for.

Another important and effective national policy lever for the energy transition is the use of a carbon tax. The survey indicates that a clear majority of 62 per cent of respondents support the imposition of a carbon tax while 19.6 per cent oppose it.

Figure 3. Levying a Tax on Carbon

Another important issue for some regional governments to facilitate the energy transition is fossil fuel subsidies. The Survey shows that, where they exist, there is more overall support at 41 per cent for such fuel subsidies to be cut than there is at 17.9 per cent for them to remain. Another 27 per cent are unsure of what to choose. This same conclusion holds at the national level for all countries except Brunei, where the proportion opposing cuts (32.2 per cent) is higher than those for them (12.7 per cent). Being an oil-producing country used to cheap oil with limited public transport options, Brunei’s unique situation will need a more comprehensive solution beyond just the removal of subsidies.

Apart from Brunei, Malaysia is also less favourably poised than the other countries, with 40.1 per cent for cutting subsidies against 30.6 per cent who oppose it. Here, the development of public transport in Kuala Lumpur and other urban areas is still a work in progress, leaving residents with few viable alternatives to private vehicles. The government’s ongoing reform of fuel subsidies, while both climate-friendly and fiscally progressive, is running into political headwinds. The complexity of fuel subsidy policies and their reform is also a significant factor contributing to the high number of people who are unsure.

One other worry that many governments have when planning their energy transition is the public acceptance of alternative clean energy options. The survey results demonstrate that most respondents are knowledgeable and open to alternatives that are more feasible in their own countries. Respondents from nine out of the 11 ASEAN states chose solar energy as the technology that offers the most potential. In Myanmar and Laos, those who chose hydropower rightly believed that there is a significant potential for such an option. Biofuels and bioenergy also featured significantly for respondents from agricultural countries like Cambodia, Indonesia, Myanmar and Thailand. In the Philippines, Thailand, Timor Leste and Vietnam, wind power is seen as promising because such resources are present. Interestingly, Singapore respondents see nuclear energy as their second most promising source of clean energy, probably because of limited other alternatives. Nevertheless, such openness does auger well as the nascent technology for small modular reactors (SMR) develops to become feasible for deployment in smaller geographical footprints.

Overall, the message is clear: despite some difficulties, the ground is set for the transition to move apace.

2026/286