Coal returns to Asia

Southeast Asia’s renewable energy potential is among the world’s largest. In a bold push for renewables, Vietnam is pursuing an unorthodox but promising green hydrogen strategy, Thailand’s prime minister has pledged to explore cutting-edge nuclear power, and the Philippines has received widespread praise for its commitment to renewables and regional trendsetting.

So why is coal regaining popularity in Southeast Asia?

Indonesia and the Philippines, for example, are increasing their reliance on coal. The share of coal-fired power in both the Philippines and Indonesia recently surpassed China to become among the most coal-dependent countries in the world. According to London-based think tank Ember, coal generation in the Philippines grew much faster than electricity demand growth in 2023—coal generation rose by about 9.7%, while electricity demand rose by 4.6%. Both Indonesia and the Philippines accounted for more than 61% of coal generation.

Coal is widely known as an environmentally unfriendly fuel, but there are many reasons why breaking away from coal dependence is difficult.

Russia’s invasion of Ukraine has brought uncertainty to the oil and gas industry, shifting Europe’s natural gas supply away from Russia. Demand for liquefied natural gas (LNG) has surged worldwide. Coal, on the other hand, is a reliable, cheap, and widely available option. Even Germany has kept some coal-fired power plants in operation after Moscow’s invasion due to concerns about energy security and market prices, although it recently decided to close more than a dozen of those coal-fired plants. In Germany’s case, prejudices surrounding nuclear power have prevented it from being used as a clean alternative to coal.

In the Philippines, the high cost of electricity, an unreliable transmission system, and frequent power outages make coal an attractive source of reliable power generation. In addition, the depletion of Malampaya’s natural gas reserves is a growing crisis for the country, which currently supplies about 30% of Luzon’s energy. Much of the world is also seeing rising energy demand, driven by modern advances such as the rise of artificial intelligence and massive, energy-hungry data centers, as well as an increase in the number of electric vehicles from 2 million in 2018 to 40 million by 2023. Indonesia has seen an increase in total energy demand, which has been helped by a similar increase in domestic coal consumption.

Not only is Indonesia’s domestic consumption growing, but thermal coal exports are also seeing growth. Indonesia’s coal production hit a record 775.2 million metric tons (MT) in 2023, with exports reaching around 500 million MT and expected to grow. These exports are mainly to China, India, South Korea and the Philippines, indicating that sustained demand from these major coal consumers, despite falling coal consumption in China, especially in recent years, continues to fuel Indonesia’s coal export bonanza.

At COP28 last year, the world pledged to transition away from fossil fuels and pursue ambitious emissions targets to try to address looming climate change. But according to the International Energy Agency’s 2023 Coal Report, overall coal dependence may not change much anytime soon, as even projected declines in consumption in advanced economies could be more than offset by growth in India, Indonesia, the Philippines and elsewhere.

Southeast Asia’s solar and wind potential remains largely untapped. Elsewhere, there have been big shifts away from coal dependence. China, while still heavily dependent on coal and historically one of the world’s biggest polluters, has repositioned its production to take a global lead in renewable energy development.

Carbon dioxide emissions from fossil fuels continue to rise in 2023, with coal the world’s largest source of CO2 emissions. Moving away from coal dependence in areas like Southeast Asia is essential to achieving global climate goals and provides an opportunity for the United States to strengthen diplomatic and economic ties, particularly through increased LNG exports and renewable projects supported by American companies, such as those included in Vietnam’s hydrogen energy efforts.

The U.S. saw record LNG production in 2023, making it the world’s largest LNG exporter. Asia was the second-largest export market, taking 26.6% of U.S. LNG exports. Compared to coal and even Russian gas, U.S. LNG is better for the climate when used to generate power in Europe and Asia, a new report finds. While LNG has been criticized for still having environmental impacts, it has a higher energy content than coal and offers a more affordable and much cleaner alternative for economies where widespread deployment of renewables may not be realistic.

The transition away from coal is essential, but it will take time. Forcing countries to phase out nuclear and gas, like Germany, not planning for depleting hydrocarbon resources, like the Philippines, or prioritizing export balances, like Indonesia, increases coal consumption and allows coal to return. Businesses and governments should treat every reduction in carbon emissions as a victory, rather than viewing energy policy as a Manichean battle of good versus evil, where only “green” renewables are acceptable. If we are not realistic about coal, the global south will be left behind in an increasingly overheated world.