Rahul Ghosh, global head of sustainable finance and emerging markets at Moody's Ratings, told reporters that Asian countries are now following a "pragmatic transition" in energy policy. He said the region is moving from a decade of coordinated climate action to a more fragmented approach that balances sustainability with energy security and economic affordability.
Diverging climate policies
Ten years ago, many nations aligned around similar climate targets. Ghosh observes that today "the world was aligning around consistent climate policies, but now we're starting to see a bit of divergence." This shift reflects each country's focus on its own supply-chain resilience and energy needs rather than collective ambition.
Geopolitical pressures reshape the agenda
The war in Ukraine and the resulting spike in fuel prices exposed the vulnerability of developing economies to external shocks. In addition, U.S. strikes on Iran in February and the temporary closure of the Strait of Hormuz highlighted Asia's dependence on volatile Middle-Eastern oil and gas supplies.
National strategies in action
Governments across the region are diversifying their energy mix. Japan announced on 25 August a plan to build up to five new nuclear reactors in the 2040s and fourteen by the 2050s. Prime Minister Sanae Takaichi said the measures aim to ensure a stable supply of energy and critical goods, warning that fuel shortages could have "major negative societal and economic impacts."
In Singapore, the government pledged 800 million Singapore dollars for low-carbon research, targeting a reduction of national emissions to 45-50 million tonnes of CO₂ by 2035. Energy, science and technology minister Tan See Leng said the investment will help cut power-sector emissions while keeping the grid reliable.
Other countries are also expanding coal capacity. The Institute for Energy Economics and Financial Analysis notes that China, Japan, South Korea and Indonesia have all added coal-fired generation since 2020, despite earlier decarbonisation pledges. The Philippines, facing an energy crisis, plans to increase output from its coal plants to keep electricity costs low, according to Energy Secretary Sharon Garin.
Balancing resilience and climate risk
Extreme weather events are prompting a surge in climate-adaptation financing. Ghosh explains that "a lot of the next ten years of extreme weather conditions are already locked in because of prior emissions." He points to under-insurance in large parts of Asia, which is driving interest in flood-defence, early-warning systems and drought-resistant crops.
What lies ahead?
Ghosh cautions that the transition will be non-linear but remains optimistic. "We are still moving from a higher-carbon to a lower-carbon economic system over time," he said.
"The process was always going to be non-linear," Ghosh said. "Yet we are still moving from a higher-carbon to a lower-carbon economic system over time."
In Europe, the Carbon Border Adjustment Mechanism now places a cost on carbon-intensive imports, signalling a stricter regulatory environment. Asian markets, however, appear to be charting a path that blends renewable growth with continued use of traditional fuels, reflecting the region's unique demand for vehicles, air-conditioning and industrial output.
Analysts will watch whether the pragmatic approach can deliver the dual goals of energy security and emissions reduction, or whether reliance on coal will undermine long-term climate objectives.