Deepening geopolitical tensions are compelling nations to prioritize energy security and affordability, diversify energy supplies, and build more resilient supply chains. At the same time, countries now have far greater scope to pursue clean energy pathways, driven by steep declines in the cost of renewables, battery storage, and other enabling technologies.

Global power competition in energy has bifurcated, with China, frequently referred to as the world’s first “electrostate,”¹ becoming the dominant force in the energy transition and the US federal government doubling down on fossil fuels. While China is still the world’s biggest fossil fuel user and coal still provides a large share of its electricity generation, nearly all new capacity and generation in China now comes from renewables. At the same time, Chinese firms dominate global supply chains for solar panels, wind turbines, and grid equipment. 

The Trump administration, in contrast, has reinforced its fossil-forward posture, emphasizing LNG exports, coal, as well as nuclear power, and scaling back federal support for renewables. US military action in Venezuela early in the new year could be seen as part of Washington’s broader fossil fuel ambitions. In January, the administration directed its agencies to withdraw from 66 international agreements, many of them climate-related and including the Intergovernmental Panel on Climate Change (IPCC) and the UN Framework Convention on Climate Change (UNFCCC).

Many governments are attempting to navigate long-term US–China decoupling without provoking retaliation from either side. Political risk firm Eurasia Group profiles this development in its 2026 Risk Report and predicts that “many will opt for the benefits of cheap Chinese imports anyway.…This choice is (geo)political but less binary than choosing a defense partner or telecom provider, making it easier to drift toward Beijing without a single dramatic breach with Washington.”³

The trend is already evident: Chinese exports of renewable energy technologies now surpass US fossil fuel exports (see Figure 1).⁴ Pakistan and India were among the largest Asian destinations for Chinese solar PV modules in 2024. Malaysia, Thailand, the Philippines, Indonesia and Vietnam have growing clean-energy trade links with China, with solar equipment (and in Vietnam’s case also batteries and wind turbines) forming significant import categories.

Figure 1: China’s Growth in Electricity Generation and Energy Exports

Source: Eurasia Group, citing Ember Energy Institute

In addition, China’s merger and acquisition (M&A) surge in Asia also reflects notable activity within the energy transition value chain.⁵ Chinese firms in the solar, battery, and electric vehicle (EV) sectors are increasingly using M&A to establish production bases across ASEAN, with Indonesia emerging as a key regional hub for EV manufacturing.⁶ This aligns with Beijing’s efforts to broaden market access, embed outbound manufacturing in emerging industrial hubs, and secure supply chains for critical minerals and green technologies amid heightened trade frictions and geopolitical fragmentation.⁷ China still funds fossil fuel activity in Asia, but is also enabling the region’s clean energy transition to advance.

And let’s not count out the US. States and cities across the country have organized to continue the US’s energy transition, as evidenced by the mission and achievements of the organization America is All In.⁸ US investors, foundations, and other non-governmental entities continue to support Asia’s energy transition, and a future administration could yet re-enter the Paris Agreement and re-engage with global climate institutions.

In an increasingly fragmented geopolitical landscape with competing visions of energy security and dominance, Asian economies, and others beyond the region, face strategic choices. As Dr. Spekter, a professor of politics and international relations at the Getúlio Vargas Foundation in São Paulo, Brazil, has eloquently stated: “The defining resource of many of these states today is not ideology, but the power to choose — and to make their choices consequential in this new geopolitical landscape.”⁹

Natural gas has long been viewed as a “bridge fuel” in the global effort to reduce carbon emissions. However, rapid technological progress in renewables, shifting market dynamics, and growing concerns over cost and lock-in raise the question of whether gas should really play this transition role. Recent analysis suggests that the economic and structural foundations underpinning the bridge fuel argument are becoming less secure. It may not be a popular view, but we dig into it to see it from both sides.

Asia sits at the center of this debate. The region holds only around 9% of the world’s proven natural gas reserves,¹⁰ yet it accounts for more than 70% of global LNG imports.¹¹ This reflects both the scale of Asia’s energy demand growth—electricity demand is rising by roughly 5% per year—and the region’s limited domestic gas resources. As decarbonization pressures intensify, gas (whether imported LNG or domestic gas) has been promoted as a key component of Asia’s energy transition, particularly in coal-heavy power systems.

Gas is cleaner than coal, emitting roughly 50–60% less carbon dioxide when used for power generation. Gas-fired power plants can also ramp up and down quickly, making them well suited to complement variable renewable energy sources such as wind and solar while supporting grid stability. These attributes have supported gas’s appeal as a transitional fuel across much of Asia.

On the other hand, LNG’s role is increasingly constrained by price volatility. High prices, combined with ongoing trade tensions, have contributed to Asia’s LNG demand being on track to decline by around 5% in 2025.¹² This volatility highlights the region’s exposure to global market shocks over which Asian policymakers have limited control. Moreover, overdependence on LNG creates the risk of locking in LNG as the “new coal.” See Figure 2 for an illustration of the price volatility of Asian LNG over the past 13 months¹³ and Figure 3 for declining LNG demand in the region.¹⁴ Similar patterns have been observed in other gas benchmarks, including TTF.¹⁵

Figure 2: LNG Japan/Korea Marker PLATTS Future Historical Data

Source: Investing.com

Figure 3: LNG Imports in Select Asian Markets, First 11 Months of 2024 and 2025

Source: IEEFA citing Kpler

As European demand continues to influence global LNG pricing, Asian importers are responding by seeking cheaper alternatives or by doubling down on domestic supply where possible. China illustrates this shift clearly. Having recently overtaken Japan as the world’s largest LNG importer, China has increasingly prioritized pipeline gas imports, particularly from Russia, while accelerating domestic gas production. 

LNG prices eased in December as Northeast Asian demand softened, supported by strong Chinese pipeline gas supplies and increased renewable power generation in Japan, among other factors, but then rallied in January.¹⁶ These swings reinforce a key point: rather than assuming LNG prices will remain consistently affordable, price volatility should be treated as a structural feature of global gas markets.

Domestic gas extraction in Asia has faced its own set of challenges, including slow permitting, inadequate infrastructure, and tightening access to finance. For example, in Vietnam and Thailand, gas features prominently in national energy plans, but progress on domestic extraction is limited, with gas plans outpacing delivery.¹⁷

At the same time, declining renewable energy costs are reshaping the region’s energy economics. Solar, wind, and energy storage technologies have become cheaper faster than anticipated, eroding gas’s cost advantage. In many Asian markets, renewables are already more competitive than fossil fuels: in 2023, 96% of new utility-scale solar and wind projects generated electricity at lower cost than new coal or gas plants.¹⁹ Battery energy storage systems (BESS) have also rapidly fallen and are predicted to “keep hitting record lows through 2029,” according to research from Wood Mackenzie.²⁰

The verdict is not so black and white as we enter 2026. But taken together, gas price volatility and rapidly improving renewable economics suggest that the case for continued investment in gas as a bridge fuel warrants closer scrutiny for policymakers and energy industry stakeholders. Against a backdrop of geopolitical uncertainty and trade tensions, and alongside increasingly cheaper and more scalable renewable options, these trends raise important questions about alternative pathways to energy security and affordability for Asian economies as they plan their energy transitions.

The rapid expansion of AI- and cloud-driven digital infrastructure, anchored by large-scale data centers, has significant implications for electricity demand and clean-energy deployment in Asia. The region already hosts some of the world’s largest data-center markets—China, India, and Japan all rank among the global top ten—and Southeast Asia is emerging as one of the fastest-growing regions for data-center and AI infrastructure. ²¹

As illustrated in Figure 4, data-center capacity loads are rising sharply across the region. Electricity demand from data centers in Asia is expected to more than double by 2030, driven in part by the concentration of regional hubs in Singapore and southern Malaysia.²²

Figure 4: Data Center Capacity Load (MW) in Southeast Asia

Source: Ember

Over the past five years, Singapore and Malaysia have become focal points for data-center growth. Singapore currently leads the region in live data-center capacity, while Malaysia leads in pipeline and upcoming capacity. Singapore’s attractiveness reflects its political stability, highly reliable power grid, and strong digital connectivity.²³ Malaysia’s growth has been supported by a favorable regulatory environment, strategic proximity to regional technology and financial hubs, and compelling cost and land-availability advantages.²⁴ In 2025, the two countries launched the Johor–Singapore Special Economic Zone (JS‑SEZ) to deepen cross‑border economic cooperation across multiple sectors, including manufacturing, technology, and digital infrastructure such as data centers.

Major technology companies are scaling digital infrastructure not only in Singapore and Malaysia, but across Southeast Asia:

• Google has invested and committed billions in data center and cloud facilities in Malaysia and is backing a new USD 1 billion data center project in Thailand.
• Alibaba is investing at a multi-billion-dollar scale in global cloud, AI, and data-center infrastructure, with Singapore and Malaysia among its key Southeast Asian hubs.
• AWS has launched its  Asia Pacific (Thailand) cloud region with plans for over USD 5 billion in investments.
• Microsoft, Oracle, Nvidia and others are also pouring significant capital into large projects across the region, contributing to a booming market.

These tech firms are also increasingly linking data-center expansion with clean-energy and energy-efficiency strategies. This includes long-term renewable power procurement, such as Google’s multi-year solar power purchase agreement (PPA) in Malaysia,²⁵ and broader corporate commitments to renewable energy sourcing. Alibaba, ByteDance, Tencent, and other Chinese IT giants are building renewable generation and storage systems for their national data centers; this green technology could well be applied in other markets.²⁶ These efforts are reinforcing the role of hyperscalers as catalysts for renewable deployment and more energy-efficient operations across Asia’s power systems.

Governments are also shaping how data-center growth is powered sustainably. Singapore has introduced a Green Data Centre Roadmap to integrate sustainability into the sector, while Malaysia has launched Guidelines for the Sustainable Development of Data Centers, alongside schemes for large electricity users such as the Corporate Green Power Programme (CGPP) and the Corporate Renewable Energy Supply Scheme (CRESS). In November, ByteDance signed an agreement with Tenaga Nasional Berhad, becoming the first subscriber and offtaker for the Green Electricity Tariff (GET) Greenpath Program and securing Malaysia Renewable Energy Certificates (mREC).²⁷ By subscribing to TNB’s Green Energy Tariff, ByteDance has committed to accelerate its transition to cleaner energy sources for its data center operations in the country.

As data-center growth continues to accelerate, aligning power-system planning, clean-energy supply, and regulatory frameworks will be critical. Policymakers and industry leaders across Asia will play a decisive role in ensuring that AI adoption and digital infrastructure can scale sustainably while meeting rapidly rising electricity demand, making this a key trend to monitor closely through 2026 and beyond.

In December 2025, the government of Indonesia formally withdrew Cirebon-1, a 660MW coal-fired power plant (CFPP), from the Asian Development Bank (ADB) Energy Transition Mechanism (ETM) pipeline. While the cancellation is a setback for near-term progress on coal retirement, it also marks a critical inflection point. It invites closer examination of the underlying constraints, the lessons emerging from the transaction, and the alternative approaches that might shape future coal transitions.

There were several interrelated factors that contributed to the cancellation of the Cirebon-1 early retirement transaction. Among the most significant were challenges related to the shifting policy environment, alongside contractual and power system conditions that shaped the project’s overall financial viability. 

CSV will publish a separate article in the coming weeks examining lessons learned from the Cirebon-1 cancellation to help inform the next generation of coal transition deals in Asia. That analysis will cover the policy and financial challenges encountered, as well as broader considerations such as the need to factor energy security and grid readiness early in ETM planning, the value of linking coal retirement transactions to clearly articulated renewable energy pathways, and the role of stronger domestic financing participation.

Here, we focus on alternative coal transition models and approaches to weigh more heavily in 2026, strategies that can help decarbonize coal without relying solely on early retirement. These include coal phase-down options (rather than full phase-out), such as operational flexibility, repurposing assets, and maintaining plants as cold reserves. We also consider looking at plants with a different ownership structure – namely captive CFPPs.

1. Flexible coal operation
   Coal flexibility is defined as “the ability of CFPPs to operate reliably at varying load levels and to respond dynamically to system requirements.”²⁸ In contrast to baseload operation, in which plants run continuously at or near full capacity, flexible operation allows coal plants to ramp generation up or down more quickly in response to changing grid demand and variable renewable energy (VRE) across daily and seasonal cycles.
   
   Under certain conditions, reduced and more flexible operation of some coal plants could support a faster transition to cleaner sources of energy. While flexible coal operation remains less reliable and more emissions-intensive than long-term solutions such as energy storage and cross-border transmission, it may play a limited, transitional role in coal-dependent emerging economies.²⁹
   
   
2. Asset repurposing
   Repurposing a CFPP site can leverage existing grid connectivity and the site’s strategic position within the power system, making these locations well suited for the provision of system services.³⁰ Following plant retirement and appropriate environmental remediation, repurposing also creates opportunities to attract private investment and extend the productive use of existing infrastructure.
   
   Assets can be repurposed to host solar or wind generation, green hydrogen production, or other emerging technologies. Where it is technically feasible to decommission the boiler–turbine–generator units, the site and associated transmission infrastructure can also be redeployed for battery energy storage systems or synchronous condensers. Compared with full retirement or mothballing, CFPP repurposing may face lower levels of social and political resistance, making it a potentially more pragmatic option in certain transition contexts.³¹
   
   
3. Cold reserve capacity
   Given the continued importance of energy access and system reliability as policy priorities in many Asian countries, maintaining CFPPS as non-operating cold reserve assets can serve as a pragmatic option. Under this approach, CFPPs are placed in an idle state and designated as backup capacity, available to be brought online during periods of system stress or energy crises, while governments simultaneously scale up cleaner energy sources as part of the broader energy transition. Chile is an example of a country that has introduced a formal mechanism for placing CFPPs into cold reserve.
   
   
4. Captive coal transition
   Within the broader discussion of CFPPs targeted for transition, “captive” CFPPs represent an important category that warrants attention for Asia. A captive CFPP is a coal plant owned and operated by a private company or facility to generate electricity primarily for its own use, rather than relying solely on the main grid. These plants are most commonly found in the commercial and industrial (C&I) sector. Notably, JETPs and no-coal pledges from Asian nations and major lenders typically exclude captive CFPPs, which has contributed to their continued growth in countries such as Indonesia.³²
   
   In some cases, captive CFPPs may be easier to address than utility-scale plants due to their private ownership and relatively limited impact on overall grid operations. Analysis of renewable technologies being adopted in the C&I sector suggests that the most effective solutions often involve integrating renewable energy with existing thermal generation and heating-based industrial processes. These hybrid approaches are already deployed globally and across Southeast Asia, and companies implementing them have found them to be commercially viable and profitable.³³ Similar to coal flexibility, hybrid solutions for captive CFPPs can offer a practical and near-term pathway for transition.
   
   

These are some of the approaches worth exploring further in 2026, and we’ll also be watching—and potentially innovating—more creative solutions.

As the saying goes, there is no one-size-fits-all approach to coal transitions. The right pathway will depend on a country’s energy security needs, social and economic priorities, and decarbonization goals. To help guide these decisions, the World Bank recommends using a multicriteria vulnerability matrix to assess plant-specific factors that determine whether a facility is best suited for operational flexibility, repurposing, cold reserve status, or early retirement.³⁴ Taking a structured, context-sensitive approach gives energy leaders, policymakers, and investors a better shot at identifying the strategies that are both feasible and effective for decarbonizing coal, while keeping the energy system secure and sustainable.

In this section, we highlight one of the most stunning success stories in renewable power over the past 5 years–Pakistan’s people-led solar boom, as an achievement offering important lessons for other emerging markets navigating their energy transitions. In just half a decade, Pakistan has imported over 50 GW of solar modules, exceeding the country’s total installed power plant capacity by around 2 GW. See Figure 5 for solar module prices and import trends over time. Remarkably, only 0.8 GW of this is utility-scale. The vast majority is rooftop solar, driven by distributed renewable energy adoption.

Figure 5: Solar Module Price vs Import Trends in Pakistan

Source: Renewables First

What makes Pakistan’s case even more compelling is that this was not a state-led energy transition or a coordinated, climate-driven decarbonization effort. Instead, it was an unexpected, people-led solar rush, sparked by a convergence of market forces:

• A 155% spike in electricity tariffs over just three years (2022-2024), making grid power unaffordable for many households and businesses
• A nearly 50% decline in global solar prices, driven in large part by Chinese manufacturing overcapacity
• Duty and sales tax exemptions on solar PV imports

Rooftop solar is a key example of what has been referred to as Customer-Owned Renewable Electrification (CORE) assets. CORE assets refer to renewable energy systems and infrastructure that are directly owned or controlled by end-users, such as individuals, households, businesses, or communities, rather than by centralized utilities or third-party providers. These assets enable customers to generate, store, and manage their own clean energy, increasing energy autonomy and resilience. 

In addition to rooftop solar, CORE assets can include battery storage systems, small scale wind turbines, EVs, and microgrid renewable setups.

CORE assets shift the role of customers from passive consumers to active energy participants and owners, which Pakistan’s rooftop solar movement exemplifies. The success of Pakistan’s solar rooftops highlights the potential of CORE in other emerging markets, from cost savings and emissions reductions to job creation.³⁵

• Cost competitiveness strengthens. ​​The economics clearly favor rooftop solar. Between 2023 and 2025, average electricity tariffs in Pakistan surged. In 2025 prices often ranged from PKR 40 – 50 per kWh for many consumers,³⁶ while the effective lifetime cost of rooftop solar, after installation and typical net‑metering credits, ranged from just PKR 3–6 per kWh. This made self-generation dramatically more affordable than relying on the grid for both households and businesses.
• Emissions reductions accelerate: ​​Solar PV has potentially avoided 35 million MtCO₂-eq emissions in FY25. Sustaining an annual deployment rate of 3 GW could enable the avoidance of 50 million MtCO₂-eq emissions per year by FY30.
• Fossil fuel dependence declines: Solar-driven demand erosion has undercut fossil-based generation. Imported coal plants have become largely idle, with utilization dropping by nearly 86% over FY22-FY24, alongside declines of 14% for local coal. Over the past two years, coal imports have fallen by 70%, with consumption showing a similar decline. The shift is most visible in the industrial sector, where factories are steadily turning to solar to cut costs and secure reliable energy.³⁷
• Employment opportunities grow: The distributed solar industry has created an estimated 300,000 direct and 200,000 indirect jobs between FY17 and FY25, with the majority concentrated in engineering, procurement, and construction (EPC) services and construction activities.

​​
There have also been challenges, most notably the impact of reduced on-grid demand, often described as a potential “utility death spiral.” As consumers shift away from grid electricity, fixed capacity payments embedded in the system are spread across a shrinking base of customers, pushing electricity rates higher for those who remain connected. This dynamic persists because capacity payments tied to US dollar–denominated debt, much of it owed to Chinese lenders, must still be serviced even when thermal power plants are idle.³⁸

Another challenge has been inequitable access to finance to pay for solar rooftop. The majority of Pakistan’s recent solar deployment has been funded through personal savings rather than the formal financial system. As a result, millions of households and small and medium-sized businesses have been unable to participate in the transition, despite strong underlying economics. As Renewables First notes, “This isn’t a capital shortage. It’s a systems problem, driven by rigid collateral norms, conservative risk frameworks, and missing market infrastructure, that keeps viable borrowers locked out and capital parked in government paper.”³⁹

Pakistan is emerging as an early test case on how rapidly solar can reshape power systems in developing economies. A central takeaway is the critical role of national grid planning in preventing financial instability and inequitable access to affordable energy. One key recommendation is to shift from government-controlled energy models toward more deregulated, competitive and flexible market structures as an essential step to avoid grid obsolescence.⁴⁰ Done well, such a shift could help lower tariffs in the near term, create new revenue streams for grid operators, and reinvigorate demand for grid services even as customer-owned energy grows.⁴¹

Damola Omole, Director of Utility Innovation at the Global Energy Alliance for People and Planet (GEAPP), notes that while an unplanned solar rollout is preferable to no rollout at all, a more coordinated approach can unlock greater system-wide benefits. “You don’t need a plan for it to work,” he argues, “but it’s better to have a plan in place, because that means it’s more equitable and you’re able to do more with less.”⁴²

For other emerging markets, the opportunity to make a similar leap is compelling. As Pakistan shows, this transition may emerge organically, but it nonetheless warrants serious, proactive attention from national governments to ensure reliability, equity, and long-term system sustainability.

Grid readiness and system integration are now widely recognized as one of the biggest bottlenecks to the global energy transition, with particular relevance in the ASEAN region. A central challenge is the urgent need for new transmission capacity. ASEAN transmission lines need to approximately double from the current 45,076 km planned to align with the IEA Announced Pledges Scenario pathway to deliver national clean energy and climate targets.⁴³ See Figure 6 for ASEAN grid development targets in comparison to the IEA’s scenario target.

Figure 6: ASEAN Grid Development Targets Only Meet IEA’s Pathway Halfway

Source: Ember

The challenge also extends beyond building more transmission lines. 

Timely grid modernization is critical as power systems face growing risks, from grid congestion and long connection queues for new projects to increasingly costly redispatch of generation.⁴⁴ Acting early delivers clear system-wide benefits: smoother integration of renewables, improved power quality, and stronger resilience in an increasingly electrified and climate-exposed energy system. Incorporating “clean flexibility” options, such as battery storage, demand-side management, pumped hydro, and grid interconnections helps balance supply and demand and maintain grid stability.⁴⁵

In 2025, the IEA published a landmark assessment of power system readiness for integrating variable renewable energy across ASEAN, setting out a clear roadmap for action.⁴⁶ Central to its recommendations is the need for coordinated progress across technical, regulatory, and market dimensions, underpinned by clearly defined and complementary stakeholder roles: energy ministries provide system-wide direction through targets and policy signals; regulators modernize market and grid frameworks to unlock flexibility and investment; utilities upgrade operations, planning, and network management; and regional bodies enable cross-border power trade and system balancing.

The IEA’s assessment also highlights that ASEAN countries are at different stages of integrating variable renewable energy, meaning their power system development needs should be tailored accordingly. For example, an early-stage readiness country such as Cambodia should focus on enhancing energy efficiency regulations, establishing grid codes and coordinating government-utility planning, while a mid-stage readiness country such as Indonesia should prioritize developing flexible procurement mechanisms, enhance grid infrastructure, reform system planning and invest in a broader range of flexibility resources.

Power system readiness has surged on the global climate agenda over the past two years. A turning point came at COP29 with the Global Energy Storage and Grids Pledge, through which endorsing governments and organizations commit to collectively deploy 1,500 GW of energy storage and add or refurbish 25 million kilometers of electricity grids globally by 2030. Momentum continued at COP30, with a growing coalition making public commitments. Notably, the ADB, World Bank Group, and ASEAN launched the USD 12 billion ASEAN Power Grid Financing Initiative to strengthen regional connectivity. Additionally, the Future Energy Storage and System Integration Alliance (FESSIA) was established last year to focus explicitly on system flexibility and integration in Asia, recognizing these as critical enablers of the next phase of the energy transition.⁴⁸

These developments reflect encouraging momentum for Asia’s grid build-out and modernization. With meaningful frameworks and commitments now in place, attention can increasingly shift toward practical delivery and moving projects forward. And with sustained follow-through, grid infrastructure can move from being a limiting factor to a key enabler of Asia’s energy transition.

How Asia finances its energy transition—through carbon markets, transition finance, and other investment channels—is entering a phase of refinement rather than disruption. The pace of progress is likely to be incremental, not transformational, reflecting a relatively solid foundation, a focus on securing early and credible wins, and a continued caution around transaction and policy risk.

We take a look at a few key areas. 

Carbon markets 

Carbon markets in Asia remain underutilized and face a host of challenges. Policies are often weak or inconsistent, providing limited incentives for decarbonization and resulting in low demand for carbon credits.⁴⁹ Additional constraints include low carbon prices, narrow sectoral coverage, targets based on emissions intensity rather than absolute reductions, and the continued presence of fossil fuel subsidies.⁵⁰

At the same time, developments during COP30 signal growing efforts to strengthen carbon markets across the region. This includes both compliance markets (carbon taxes and emissions trading systems) and voluntary carbon markets, where offset transactions are not used for regulatory compliance. One such example is the creation of the Open Coalition on Compliance Carbon Markets, which aims to foster best-practice sharing and greater consistency among countries.

In 2026 policymakers and environmental leaders will likely continue to expand collaboration and work out the kinks in this area.

Article 6

Article 6 of the Paris Agreement continues to be actively leveraged in Asia. The region is the leading issuer of Article 6.2 deals, with Japan, Singapore and South Korea among the most actively involved buyers.⁵¹ Under Article 6.4, which establishes a centralized, UN-administered international carbon market, Asia accounts for 849 registered notifications, indicating that the mechanism’s benefits were considered by project proponents prior to implementation.⁵² This compares with 1,112 notifications globally, with India alone representing 649. Most of these projects are concentrated in the energy sector. 

As capacity building progresses and the operational details of Article 6 mechanisms are worked through, this remains a promising, though still maturing, area of transition finance for the region.

Transition credits

Transition credits are particularly relevant in Asia, where coal remains a significant part of the power mix, and momentum continues to build.⁵³ The Transition Credits Coalition (TRACTION) released its final report at COP30, highlighting the potential role of transition credits in accelerating coal retirement and replacement with clean energy. It estimated that around one-third of CFPPs in Asia could generate such credits.

Also at COP30, the governments of Singapore and the Philippines, together with 19 other entities, signed a statement of support for transition credit projects. Such support could include potential offtake, financing, and underwriting arrangements, helping to build market confidence in this emerging tool for the transition away from coal.

CSV is supporting a pilot project with ACEN and other partners to develop transition credits for ACEN’s SLTEC plant, while exploring their use in other decarbonization initiatives across Asia. In May 2025, Mitsubishi and its subsidiary DGA joined ACEN, GenZero, and Keppel to explore a pioneering collaboration to apply this mechanism to the early retirement of SLTEC.⁵⁵

Transition bonds

Transition bond issuance is expected to accelerate, even as the market remains relatively narrow in scope. Moody’s Investors Service projects that issuance of use-of-proceeds–linked transition bonds will reach a new record of nearly USD 40 billion globally in 2026, up from USD 21 billion in 2024—an almost doubling in two years.⁵⁶ It predicts that Europe will continue leading sustainable bond issuance, followed by the Asia Pacific.

Other forms of transition finance

Innovative funds have emerged to address hard-to-abate sectors and accelerate the coal-to-clean transition. A few illustrative examples are highlighted below.

• Brookfield Asset Management was an early mover in transition finance, launching the Catalytic Transition Fund (CTF) with ALTÉRRA in 2023 to deploy capital towards clean energy and transition assets in emerging markets. Brookfield’s more recent Global Transition Fund II has also proved successful, closing the fund in October 2025 at $20 billion and exceeding its initial target by $3 billion. 
• The Energy Transition Acceleration Finance (ETAF) partnership, one of three partnerships under Singapore’s Financing Asia’s Transition Partnership (FAST-P) initiative, is in the early stages of development. ETAF aims to mobilize concessional and private capital to finance energy transition projects in Asia, including the early retirement of coal assets, renewable energy deployment, and grid modernization.
• Reviva Transition Partners is a first-of-its-kind equity fund driving commercially viable transitions from legacy coal to clean energy in emerging markets, with CSV as a joint venture partner. The fund will partner with coal asset owners through strategic investment and active ownership to unlock practical, commercially sound pathways for decarbonization. Its mission is to transform 10 GW of coal assets into sustainable infrastructure by 2040, delivering measurable climate impact and strong commercial returns.

Across the range of mechanisms financing Asia’s energy transition, progress is evident, even as substantial work remains. CSV and other stakeholders in the energy transition ecosystem are taking measured steps to build on what has been achieved so far and to create a more solid foundation for impactful energy transition transactions in the year ahead.

¹ From Cleantechnica: “Electrostate” connotes a subtle shift from a nation that burns fossil fuels to generate electricity to one that relies primarily on renewables — solar, wind, and hydro. It also implies using emissions-free electricity as the primary source of energy for industry and transportation within the country. https://cleantechnica.com/2025/05/26/china-is-the-worlds-first-electrostate/

² Carbon Brief, IEA: Declining Coal Demand in China Set to Outweigh Trump’s Pro-Coal Policies, December 17, 2025, https://www.carbonbrief.org/iea-declining-coal-demand-in-china-set-to-outweigh-trumps-pro-coal-policies/?utm_content=buffercdf7f&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer
³ Eurasia Group, Top Risks 2026, https://www.gzeromedia.com/video/gzero-live/the-biggest-geopolitical-risks-of-2026-revealed and https://www.eurasiagroup.net/issues/top-risks-2026.
⁴ Ibid.
⁵ ARC Group, China Private Sector’s Supply Chain Breakthrough in Southeast Asia through M&A, September 9, 2025, https://arc-group.com/china-southeast-asia-private-sector-supply-chain-ma/ 
⁶ Ibid.
⁷ East Asia Forum, A China-ASEAN Mechanism to Power the Clean Energy Transition, September 24, 2025, transition, https://eastasiaforum.org/2025/09/24/a-china-asean-mechanism-to-power-the-clean-energy-transition/
⁸ See: America is All In, https://www.americaisallin.com/whos-in, accessed January 15, 2026.
⁹ The New York Times, The World is in Chaos. What Comes Next? January 11, 2026, https://www.nytimes.com/interactive/2026/01/11/opinion/trump-new-world-order.html.
¹⁰ Asia Natural Gas & Energy Association, Natural Gas Explained, https://angeassociation.com/resource/natural-gas-explained/, accessed January 14, 2026.
¹¹ BNE Intellinews, LNG in Asia: A transitional step on the way to a greener future, July 5, 2025, https://www.intellinews.com/lng-in-asia-a-transitional-step-on-the-way-to-a-greener-future-389545/.
¹² Institute for Energy Economics and Financial Analysis (IEEFA), Asia’s falling LNG demand in 2025 defies investor optimism for rapid growth, December 4, 2025, https://ieefa.org/resources/asias-falling-lng-demand-2025-defies-investor-optimism-rapid-growth.
¹³ Investing.com, LNG Japan/Korea Marker PLATTS Future Historical Data, accessed January 19, 2026. https://www.investing.com/commodities/lng-japan-korea-marker-platts-futures-historical-data  
¹⁴ Institute for Energy Economics and Financial Analysis (IEEFA), Asia’s falling LNG demand in 2025 defies investor optimism for rapid growth.
¹⁵ Trading Economics, Commodities, https://tradingeconomics.com/commodities. accessed January 19, 2026. The data shows TTF gas down 26.67 YOY, up 24.27% YTD, and up 15.70% weekly.
¹⁶ Baird Maritime, LNG prices in Asia slide to lowest since April 2024 as regional demand softens, December 19, 2025, https://www.bairdmaritime.com/shipping/tankers/gas/lng-prices-in-asia-slide-to-lowest-since-april-2024-as-regional-demand-softens?utm_source=chatgpt.com.
¹⁷ Energy Tracker, The Gas Gamble: Southeast Asia’s Risky Bet on Fossil Fuel Expansion, June 27, 2025, https://www.youtube.com/watch?v=yDI3kjWgRU4.
¹⁸ Energy Tracker, https://www.youtube.com/watch?v=yDI3kjWgRU4
¹⁹ Energy Tracker Asia, High Costs and Renewables Surge Weaken Asian Gas Demand Forecasts, June 19, 2024, https://energytracker.asia/asian-gas-demand-forecasts/.
²⁰ Wood Mackenzie, Asia-Pacific battery costs keep hitting record lows through 2029, according to Wood Mackenzie, October 14, 2025, https://www.woodmac.com/press-releases/apac-utility-scale-energy-storage-pricing-report-2025/. Also see decline in BESS prices here: https://www.energy-storage.news/battery-storage-system-prices-continue-to-fall-sharply-bnef-and-ember-reports-find/.
²¹ Data Center Map, https://www.datacentermap.com/datacenters/, accessed January 6, 2026.
²² International Energy Agency, Energy demand from AI, https://www.iea.org/reports/energy-and-ai/energy-demand-from-ai, accessed January 10, 2026.
²³ Softvil Technologies, Singapore’s Role in the Future of AI and Data Centers, https://www.softvil.com/blog/singapores-role-in-the-future-of-ai-and-data-centers, accessed January 10, 2026.
²⁴ White and Case, What is Propelling Malaysia’s Data Centre Boom? October 27, 2025, https://www.whitecase.com/insight-our-thinking/what-propelling-malaysias-data-centre-boom.
²⁵ ESG Today, Google Signs 21-Year Clean Energy Deal with TotalEnergies to Power Malaysia Data Centers, December 16, 2025, https://www.esgtoday.com/google-signs-21-year-clean-energy-deal-with-totalenergies-to-power-malaysia-data-centers/.
²⁶ PV Magazine, Alibaba, Tencent and ByteDance bet on batteries as AI fuels power demand surge, https://www.ess-news.com/2025/09/30/alibaba-tencent-and-bytedance-bet-on-batteries-as-ai-fuels-power-demand-surge/, September 30, 2025.
²⁷ w.media, ByteDance first in Malaysia to ink Green Electricity Tariff (GET) deal with TNB, https://w.media/bytedance-first-in-malaysia-to-ink-green-electricity-tariff-get-deal-with-tnb/, November 17, 2025.
²⁸ Coal Transition Commission, Powering Past Coal Alliance, Transition Zero, From Flex to Phase-Out: Technical Report of the Coal Transition Commission Assessing the Role of Coal Flexibility in Accelerating Coal-to-Clean Transitions in Emerging Markets and Developing Economies (2025), https://poweringpastcoal.org/wp-content/uploads/CTC-Report_From-Flex-to-Phase-out.pdf.
²⁹ Ibid.
³⁰ World Bank, To Phase Down: A Renewed Approach to Coal Power in Developing Countries (2024), https://openknowledge.worldbank.org/server/api/core/bitstreams/1f9c458d-af10-40e3-94fd-42224d6d0cab/content.
³¹ Ibid.
³² Semafor, One big loophole threatens the global energy transition, October 23, 2024, https://www.semafor.com/article/10/23/2024/one-big-coal-loophole-in-asia-threatens-the-global-energy-transition.
³³ Climate Smart Ventures, Accelerating Decarbonization in Southeast Asia: Commercial and Industrial Sector Captive Coal Fired Power Plants are the Low-Hanging Fruit Too Many are Ignoring (2024), https://climatesmartventures.com/wp-content/uploads/2024/03/Commercial-and-industrial-energy-transition.pdf.
³⁴ World Bank, To Phase Down: A Renewed Approach to Coal Power in Developing Countries.
³⁵ The following list is mostly sourced from: Renewables First, The Many Dividends of Solar Rush in Pakistan, November 2025, https://uploads.renewablesfirst.org/The%20Many%20Dividends%20of%20Solar%20Rush%20in%20Pakistan.pdf.
³⁶ Renewables First, Pakistan’s Power Market Insights, June 2025, p14, https://uploads.renewablesfirst.org/Power_Market_Insights_Issue_8_3f80db9ded.pdf.
³⁷ Renewables First, Pakistan Energy Market Review 2025 (2025), https://uploads.renewablesfirst.org/Pakistan%20Energy%20Market%20Review%202025.pdf.
³⁸ World Resources Institute, The Perfect Storm Fueling Pakistan’s Solar Boom, October 1, 2025, https://www.wri.org/insights/pakistan-solar-energy-boom.
³⁹ Renewables First, LinkedIn post December 2025, https://bit.ly/4q25jxV.
⁴⁰ World Economic Forum, Pakistan is experiencing a solar power boom. Here’s what we can learn from it, November 25, 2024, https://www.weforum.org/stories/2024/11/pakistan-solar-power-energy-transition/.
⁴¹ Ibid.
⁴² African Business, Africa aims to replicate Pakistan’s extraordinary solar success, August 28, 2025, https://african.business/2025/08/energy-resources/africa-aims-to-replicate-pakistans-extraodinary-solar-success.
⁴³ Ember, Wired for Profit: Grid is the Key to Unlock ASEAN Energy Investment (2025), https://ember-energy.org/app/uploads/2025/05/Report-Wired-for-profit-ASEAN-PDF.pdf.
⁴⁴ International Energy Agency, Integrating Solar and Wind in Southeast Asia: Status and Outlook for Secure and Efficient Strategies (2025), https://iea.blob.core.windows.net/assets/b0b39b60-8686-4043-b060-1f7655e7536c/IntegratingsolarandwindinSoutheastAsia.pdf
⁴⁵ Ember, Wired for Profit: Grid is the Key to Unlock ASEAN Energy Investment.
⁴⁶ International Energy Agency, Integrating Solar and Wind in Southeast Asia: Status and Outlook for Secure and Efficient Strategies.
⁴⁷ Liming Qiao, CEO and Founder, Future Energy Storage and System Integration Alliance (FESSIA), social media post, November 2025, https://www.linkedin.com/posts/qiao-liming_grids-storage-cop30-activity-7396756904930234368-xvP1?utm_source=share&utm_medium=member_desktop&rcm=ACoAAAEBYPMBWwHRhsO8YYe2pteeFi1gA3Q0ptI.
⁴⁸ See https://fessia.org/?utm_source=climatesmartventures&utm_medium=referral&utm_campaign=energy_trends_to_watch&utm_content=online to learn more.
⁴⁹ Carbon Trust, Carbon Markets Face the Implementation Test in Southeast Asia, https://www.carbontrust.com/news-and-insights/insights/carbon-markets-face-the-implementation-test-in-southeast-asia, November 27, 2025.
⁵⁰ IEEFA, Asia’s Carbon Markets are Expanding but Undermined by Low Prices, https://ieefa.org/articles/asias-carbon-markets-are-expanding-undermined-low-prices, September 27, 2026.
⁵¹ World Economic Forum, Asia’s Carbon Markets: Strategic Imperatives for Corporations (2025) https://www.weforum.org/publications/asias-carbon-markets-strategic-imperatives-for-corporations/.
⁵² United Nations Environment Programme, Article 6 Pipeline, https://unepccc.org/article-6-pipeline/, accessed January 23, 2026.
⁵³ Transition credits are “high-integrity carbon credits generated from the emissions reduced by retiring CFPPs earlier than planned and substituting them with cleaner energy alternatives.” Source: Monetary Authority of Singapore, TRACTION Outlines Integrity, Scalability and Demand Considerations in Utilising Transition Credits to Accelerate the Early Retirement of CFPPs, https://www.mas.gov.sg/news/media-releases/2024/traction-interim-report, November 14, 2024.
⁵⁴ Monetary Authority of Singapore, MAS Releases Key Insights from TRACTION’s Final Report and Launches Statement of Support for the Development of High-Integrity Energy Transition Credits, https://www.mas.gov.sg/news/media-releases/2025/traction-final-report-and-sos, November 10, 2025.
⁵⁵ GenZero, Mitsubishi and DGA join ACEN, GenZero and Keppel to Drive Energy Transition with Transition Credits, https://genzero.co/mitsubishi-and-dga-join-acen-genzero-and-keppel-to-drive-energy-transition-with-transition-credits, May 7, 2025.⁵⁶ Maaal, (Moody’s): Transition Bonds to Jump 100% to $40 Billion in 2026, Surpassing Sustainability Bonds, https://maaal.com/en/news/details/moodys-transition-bon/, January 21, 2026.