Reality Is Setting In: Asian Countries To Lead Transitions in 2024 and 2025

This article is also featured in Energy Insights, which reflects a sample of ongoing research across the Center for Energy Studies’ diverse programmatic areas, all addressing the ever-evolving energy challenges across Texas, the U.S., and the globe. Read more from the inaugural edition.

How We Got Here

For most of the last 15 years, energy transition discussions were dominated by a small circle of American and Western European academics and policymakers hyperfocused on a rapid energy transition away from fossil fuels for the globe. These individuals’ aspirations were global, extending to developing countries that are desperate for more reliable and affordable energy to fuel economic development and raise living standards for their citizens. Key Asian partners, including China, India, Indonesia, Bangladesh, Pakistan, and others, were lectured on the evils of coal, the bleak future of oil as a transportation fuel, and the looming demise of natural gas at the hands of wind and solar. After several years of a slowly growing crescendo, the world apart from the Organization for Economic Co-operation and Development (OECD) now increasingly makes clear that it will speak with its own voice and pursue a different path than that advocated in Brussels or Washington.

Four things shattered postindustrial energy illusions and palpably transformed the climate and energy conversation: 

1. The COVID-19 pandemic shook every corner of the planet. Certain observers’ 2020 energy conclusions — for instance, accelerated peak oil demand — proved woefully inaccurate within months of the global vaccines’ rollout.[1] 
2. Russia-Ukraine War continues to perpetuate the biggest supply-side energy shock since the 1973 Oil Embargo and commensurately emphasizes energy security as a critical concern across the globe.[2] Despite its malign actions, Russia remains a systemically critical global energy player and among other things; the impacts of its evolving energy trade relationship with China will reverberate globally.[3] 
3. Some of the world’s biggest energy consumers — including China, India, and the United States — suffered summer heat waves and droughts that pushed electricity demand to record levels.[4] 
4. The developing world, including many countries in Asia, increasingly demand that developed nations’ policy advocacy stop treating the economic and environmental needs of the developing world as an afterthought.   

Seven billion people living outside the OECD who need jobs, water, food, and light today will not wait. And the principle of comparative advantage will, as it always has, play a critical role in the paths countries take. A passage from a report my colleague Michelle Foss and I co-authored in early 2022 rings stronger than ever today: 

“Ambitious leaders seek to not only address the ‘kilowatt-scale’ problem of alleviating individual citizens’ energy poverty, but also to power industrialization programs that require tens of gigawatts (or more) of power per country. In pursuit of their goals, they will use the resources most available to them. For Nigeria, Mozambique, and Tanzania, that will be gas, as Nigerian Vice President Yemi Osinbajo explained in an August 2021 Foreign Affairs essay. Ethiopia will rely on hydropower, even though the Grand Ethiopian Renaissance Dam stokes conflict with Egypt and Sudan. China, India, Indonesia, South Africa, Botswana, and others will likely lean most heavily on abundant and secure domestic coal.”[5]

As such, the idea that global energy trajectories can be dictated from Brussels or Washington is naively hubristic, at best — and destructive, at worst. 

At the individual level, energy poverty breeds water and food poverty, and the tragedy of elevated mortality from preventable disease — a burden that often falls most heavily on children.[6] At the national level, measures that make it harder to access some forms of energy — such as the U.S. Department of Treasury’s general opposition to multilateral development banks’ financing natural gas projects — will backfire.[7] Cheaper and dirtier coal will fill the void as leaders choose carbonaceous heat and light over clean energy poverty.[8] Non-OECD countries are ground zero for emissions restraint and then for reduction efforts because even if the OECD achieved net-zero today, non-OECD emissions would still equal what the entire world emitted in the late 1990s — when climate concerns were already on the ascent. 

The confluence of empirical realities like economics, physics, and thermodynamics, with moral and fairness imperatives has driven an awakening among leaderships across our Eurasian and non-OECD partners. Recent U.N. Conference of the Parties (COP) summits and the Cambridge Energy Research Associates’ 2024 CERAWeek event demonstrate that political and economic decision-makers from the non-OECD world have become far less apologetic about their needs for energy abundance and the ways they will fulfill it, starting with the most affordable, energy-dense, and secure resources.[9] 

For some, this may be hydro, but for many, it is coal, gas, oil, or some combination of the three. Indonesia, a vital U.S. partner, illustrates the case: It aims to massively build out solar and geothermal energy production but simultaneously plans to utilize abundant domestic coal resources as a multidecadal transition fuel. The clarity that our non-OECD interlocutors bring to the conversation deserves a more prominent place in American and European energy transition deliberations. 

An Emergent New Reality

So, what do these converging trends suggest we should expect in 2024 and 2025? As Aramco CEO Amin H. Nasser put it in a March speech at CERAWeek, “The energy transition narrative will increasingly be written by the Global South.”[10] Key places to watch include:

• India, where baseload coal anchors a system that now has roughly 110 gigawatts of renewables and growing. 
• Indonesia, which is a coal powerhouse with a nickel mining center for EV batteries and is gearing up to become a global carbon storage hub. 
• China, which now has installed a terawatt combined of wind and solar capacity while still ramping up coal output and moving to dominate EV and renewables supply chains and manufacturing. 

Compounding matters, several energy issues have become securitized amid an intensifying global great power competition between the U.S. and China.[11] The stakes could not be higher.[12]

Global gas market dynamics on both ends of Eurasia will also profoundly affect energy decision-making, as Europe continues compensating for lost Russian imports by importing liquified natural gas (LNG) on the spot market while Chinese and other higher-income Asian buyers sign long-term contracts. Heat waves or cold snaps that spike gas demand, driving up global LNG spot prices, could push more consumers in developing Asia back toward coal. Chinese energy policy recognizes that a successful energy transition will require the country to leverage abundant coal resources, given that power grid stability is a key dimension of energy security and climate adaptation resilience.[13] Indian Prime Minister Narendra Modi, recently elected for a third term, has in recent years emphasized the continuing importance both of coal and gas even as India continues large-scale pursuit of nonfossil energy sources.[14] Furthermore, Vietnam reached record levels of coal use in early 2024, again reflecting the collision between long-term energy transition aspirations and the need for energy to fuel growth and human well-being in the present.[15]

What To Expect

Necessity forces a reconciliation between aspiration and reality. Asia in 2024 and 2025 will continue moving past the luxury beliefs held by some opinion shapers in parts of the OECD who have forgotten that the comfort and prosperity they now enjoy was built — and remains maintained — by energy abundance, mostly from carbon. To be clear, American and European policies will have shaping influence on the future of energy, especially with regard to trade patterns, international capital flows, innovation, and market designs that affect technology uptake. But, in and of itself, that is nothing new. When it comes to who is in the driver’s seat, the Global South — led by Asia — is at the wheel for at least the next 18 months and likely far beyond.

< Previous article | Next article >

Notes

[1] Noah Browning, “Pandemic Brings Forward Predictions for Peak Oil Demand,” Reuters, last modified April 21, 2021, https://www.reuters.com/business/energy/pandemic-brings-forward-predictions-peak-oil-demand-2021-04-21/. 

[2] Gabriel Collins, Anna B. Mikulska, and Steven R. Miles, “Winning the Long War in Ukraine Requires Gas Geoeconomics” (working paper, Rice University’s Baker Institute for Public Policy, August 4, 2022), https://www.bakerinstitute.org/research/winning-long-war-ukraine-requires-gas-geoeconomics.

[3] Andrew S. Erickson and Collins, “Putin’s Ukraine Invasion: Turbocharging Sino-Russian Collaboration in Energy, Maritime Security, and Beyond?,” Naval War College Review 75, no. 4 (Autumn 2022): 1–36, https://digital-commons.usnwc.edu/nwc-review/vol75/iss4/8. 

[4] Collins and Gopal Reddy, “How China’s Water Challenges Could Lead to a Global Food and Supply Chain Crisis” (Houston: Rice University’s Baker Institute for Public Policy, November 14, 2022), https://doi.org/10.25613/526F-MR68. 

[5] Collins and Michelle Michot Foss, “The Global Energy Transition’s Looming Valley of Death” (Houston: Rice University’s Baker Institute for Public Policy, January 27, 2022), https://doi.org/10.25613/Y18Q-PM32.

[6] Collins, “Energy Poverty and Water-Driven Mortality,” Texas Water Intelligence, November 23, 2020, https://texaswaterintelligence.com/2020/11/23/energy-poverty-and-water-driven-mortality/.

[7] U.S. Department of the Treasury, “Guidance on Fossil Energy at the Multilateral Development Banks,” August 16, 2021, https://home.treasury.gov/system/files/136/Fossil-Fuel-Energy-Guidance-for-the-Multilateral-Development-Banks.pdf.

[8] Collins and Miles, “Why Is Europe Not Replacing Russian Pipeline Gas with Long-Term LNG Contracts?” (Houston: Rice University’s Baker Institute for Public Policy, September 13, 2023), https://doi.org/10.25613/3FRC-FA56.

[9] U.S. Congress, Senate, U.S.-China Economic and Security Review Commission, China’s Energy Plans and Practices: Hearing Before the U.S.-China Economic and Security Review Commission, 117th Cong., 2nd sess. (March 17, 2022) (statement of Gabriel Collins, “China’s Energy Import Dependency: Potential Impacts on Sourcing Practices, Infrastructure Decisions, and Military Posture”), https://www.uscc.gov/sites/default/files/2022-03/Gabriel_Collins_Testimony.pdf. 

[10] “SPEECH: Remarks by Amin H. Nasser, Aramco President and CEO, at CERAWeek, Houston,” Aramco Life, March 19, 2024, https://www.aramcolife.com/en/publications/the-arabian-sun/articles/2024/week-12/speech-amin-nasser-at-ceraweek-2024.

[11] Collins and Erickson, “U.S.-China Competition Enters the Decade of Maximum Danger: Policy Ideas to Avoid Losing the 2020s” (Houston: Rice University’s Baker Institute for Public Policy, December 20, 2021), https://doi.org/10.25613/T3FG-YV16. 

[12] Erickson, Collins, and Matt Pottinger, “The Taiwan Catastrophe: What America — and the World — Would Lose If China Took the Island,” Foreign Affairs, February 16, 2024, https://www.foreignaffairs.com/united-states/taiwan-catastrophe. 

[13] “Qiushi Magazine: Accelerating the Construction of a New Energy System and Enhancing Energy Resource Security Assurance Capacity” (加快建设新型能源体系 提高能源资源安全保障能力), Communist Party of China National Energy Administration Leading Group (中共国家能源局党组), June 1 2024, https://www.nea.gov.cn/2024-06/01/c_1310776840.htm; National Climate Change Adaptation Strategy 2035 国家适应气候变化战略2035, translated by Georgetown University’s Center for Security and Emerging Technology, https://cset.georgetown.edu/publication/national-climate-change-adaptation-strategy-2035/. For the original Chinese version of the document, see https://www.gov.cn/zhengce/zhengceku/2022-06/14/5695555/files/9ce4e0a942ff4000a8a68b84b2fd791b.pdf.

[14] Press Trust of India, “‘Historic milestone’: PM Praises India’s Record Coal, Lignite Production,” India Today, last modified April 2, 2024, https://www.indiatoday.in/business/story/pm-modi-praises-indias-record-coal-lignite-production-calls-it-historic-milestone-2522007-2024-04-02; “India Is Emphasizing the Development of Environmentally Conscious Energy Sources to Enhance Our Energy Mix: PM Modi,” Narendra Modi, February 6, 2024, https://www.narendramodi.in/text-of-prime-minister-narendra-modis-address-at-inauguration-of-india-energy-week-2024-goa-579039. 

[15] Gavin Maguire, “Vietnam’s Coal Use and Emissions Set New Records,” Reuters, last modified June 5, 2024, https://www.reuters.com/markets/asia/vietnams-coal-use-emissions-set-new-records-2024-06-05/. 

This material may be quoted or reproduced without prior permission, provided appropriate credit is given to the author and Rice University’s Baker Institute for Public Policy. The views expressed herein are those of the individual author(s), and do not necessarily represent the views of Rice University’s Baker Institute for Public Policy.