Asia-Pacific simultaneously holds 64% of the world’s solar capacity and the distinction of being the only region on Earth still expanding its coal infrastructure, a contradiction that a major new HSBC research report warns could determine the fate of global climate targets.
Asia-Pacific’s Energy Paradox
- The region leads globally in renewables (64% of solar, 54% of wind capacity) yet is the only region still expanding coal infrastructure.
- Coal generates more than half of APAC’s electricity, with installed capacity growing ~3% annually (2019–2024).
- Much of the coal fleet is relatively new, making early retirement politically and economically difficult.
The findings, published in March 2026 by HSBC Global Investment Research analysts Nneka Chike-Obi and Zoë Knight as part of the bank’s Net-Zero Navigator series, paint a region defined by competing imperatives: record-breaking clean energy deployment on one hand, and deepening fossil fuel dependency on the other.
The stakes could hardly be higher. Asia-Pacific accounts for more than half of all annual global greenhouse gas emissions and consumes more than three-quarters of the world’s coal. How the region navigates its energy transition, the report concludes, will shape the trajectory of the Paris Agreement itself.
Coal capacity is still growing, and only in APAC
Despite commanding 54% of global wind capacity and doubling its installed renewable energy since 2015, the region’s coal dependency remains entrenched.
Coal continues to generate more than half of the Asia-Pacific’s electricity, according to the report. More significantly, APAC is the only region in the world recording positive growth in installed coal capacity, rising at approximately 3% per annum between 2019 and 2024, per BloombergNEF data cited in the report.
The report’s authors highlight a structural reason for the persistence of coal: much of the region’s coal fleet is relatively new. That youth means the assets are far from being financially written off, making early retirement politically and economically difficult for governments to justify.
The ten economies examined in the report, mainland China, Japan, India, South Korea, Australia, Indonesia, Taiwan, Singapore, Thailand, and Vietnam, collectively account for some of the world’s largest coal consumers and producers.
Hard-to-abate sectors: 30% of GDP, no clear exit strategy
Beyond electricity, the HSBC report flags a second structural obstacle: the decarbonisation of heavy industry and manufacturing, which together make up roughly 30% of GDP across the region’s largest economies.
- Heavy industry (steel, cement, chemicals) makes up ~30% of GDP in major APAC economies.
- These sectors lack cost-effective low-carbon alternatives, and financing gaps remain huge (~USD 800 billion annually in emerging Asia).
- Bond markets are growing but carbon-intensive industries are underrepresented among issuers.
Sectors such as steel, cement, and chemicals, classified in the report as hard-to-abate, currently lack cost-effective, commercially scaled alternatives to fossil fuels. The report notes that available low-carbon technologies for these industries remain in the early stages of development and will require significant financing to reach commercial scale.
The IMF puts the annual climate financing shortfall for emerging Asia alone at approximately USD 800 billion. While bond markets have emerged as the region’s largest source of private climate capital, the most carbon-intensive industries remain underrepresented among bond issuers, precisely the sectors where redirected capital is most urgently needed.
Eight of the ten largest economies now have green finance taxonomies
On the policy front, the report identifies meaningful progress. Eight of the ten largest APAC economies currently have, or are actively developing, sustainable finance taxonomies. These are standardised frameworks that define which economic activities qualify as green or transitional investments.
The widespread adoption of these taxonomies carries particular significance given that most of the region’s major emerging economies have set net-zero targets extending beyond 2050, later than the milestone enshrined in the Paris Agreement. For investors and companies operating in those markets, the taxonomies provide an essential reference point for evaluating the credibility of transition plans against local economic realities.
A region that skips the politics
One factor working in the region’s favour, according to the HSBC report, is the notably pragmatic tone of its domestic climate politics. Debate over the causes and impacts of climate change is described in the report as largely absent from APAC politics, a contrast to the increasingly polarised climate discourse in parts of Europe and North America.
⚖️ Political Context
- Climate politics in APAC are pragmatic, focusing on market opportunities and energy independence rather than ideological debates.
- Urbanization (9 of the world’s 10 largest cities are in Asia) makes clean air and efficient transport policies self-evident priorities.
Rather than treating the energy transition as an ideological question, governments across the region have largely approached it as a market opportunity and as a means of reducing energy import dependence.
That framing has practical consequences. Environmental policies promoting clean transportation and green buildings carry a tangible quality-of-life argument in a region where urbanisation is extreme. Nine of the ten largest cities by population in the world are located in Asia, according to United Nations data cited in the report. The case for cleaner air and more efficient transport infrastructure does not require political persuasion in that context. It is self-evident to the people living in it.
Southeast Asia and the EV opportunity
The report identifies Southeast Asia as particularly well-positioned to benefit from the global electric vehicle transition, both through foreign direct investment supporting local employment and supply chains, and through the potential to make vehicle ownership more affordable for low- and middle-income populations.
This dimension of the transition receives comparatively little attention in Western coverage of Asian climate policy. Yet the report frames it as central to the broader argument: growth in sectors aligned with the net-zero transition can contribute to sustainable development, expand access to affordable energy, and raise living standards across the region’s most populous and fastest-growing economies.
The verdict: a race against the region’s own momentum
The HSBC Net-Zero Navigator report does not offer easy conclusions, and that is precisely what gives it credibility. Asia-Pacific’s energy transition is neither the success story that clean energy optimists wish it were, nor the lost cause that climate fatalists sometimes suggest.
What it represents, the report’s analysts argue, is a race against the region’s own contradictions. Renewable energy is growing, but so is coal capacity. Finance taxonomies are multiplying, but the financing gap is measured in hundreds of billions of dollars annually. Political will exists, but it is calibrated to national development timelines that do not always align with the pace demanded by atmospheric science.
The analysts at HSBC frame the outcome as hinging on two decisive factors: how quickly hard-to-abate sectors can find cost-effective and scalable alternatives to fossil fuels, and how the region manages the rapidly shifting nature of its energy demand. These are not abstract questions. They are the variables upon which the credibility of the Paris Agreement, and the stability of the global climate system, ultimately rest.
Asia-Pacific is not failing the energy transition. But the world cannot afford for Asia-Pacific to succeed at its current pace. The gap between those two realities is where the most consequential climate story of the coming decade will be written.
