Southeast Asia is emerging as a critical player in global energy markets, driven by rapid economic growth and demographic expansion. According to the 2024 Southeast Asia Energy Outlook by the International Energy Agency (IEA), energy demand in the region is set to rise sharply, second only to India in terms of the increase scale. Between 2010 and 2035, the area will account for over 25% of global energy demand growth, a significant jump from its 11% share between 2010 and 2020.
This rise in energy consumption is underpinned by Southeast Asia’s role as a global industrial hub and its growing population. By 2030, the region will be one of the five largest economies globally, with over 720 million residents. This increase in demand highlights the urgent need to balance energy security, economic growth, and environmental sustainability.
Southeast Asia’s energy demand surge is fueled by robust economic expansion and increasing urbanization. The report highlights that countries like Indonesia, Thailand, Malaysia, and Vietnam are experiencing unprecedented industrial growth. This region’s economic output is expected to grow at an annual rate of 4.4% between 2024 and 2035, leading to substantial increases in energy consumption.
As industrialization intensifies, countries like Cambodia, Laos, and Myanmar are seeing rapid growth in energy demand. The electrification of rural areas, urban migration, and rising incomes are driving further energy use, especially in buildings and transport.
The IEA’s projections indicate that Southeast Asia’s total energy demand could surpass the European Union’s by 2050. This dramatic rise is accompanied by a forecasted increase in CO2 emissions, challenging global climate goals. The report estimates that energy-related CO2 emissions in the region could grow by as much as one-third by 2050 if no substantial changes are made to current policies and energy mixes.
Despite strides in renewable energy, the region remains heavily dependent on fossil fuels. Coal, oil, and natural gas have met nearly 80% of the region’s energy demand growth since 2010. As the region’s largest coal producer, Indonesia plays a central role in meeting these energy needs, with other key players such as Vietnam and Malaysia following suit.
This dependence on fossil fuels, particularly coal, complicates efforts to decouple economic growth from emissions. Southeast Asia’s energy intensity, or the energy required to produce economic output, remains high, reflecting a carbon-intensive development path.
Southeast Asia’s energy consumption trends have broader implications for global energy markets. Its increasing reliance on imported fossil fuels, particularly oil and natural gas, raises energy security and price volatility concerns. With around 60% of its oil imports coming from the Middle East, the region is vulnerable to geopolitical disruptions.
Moreover, fossil fuel subsidies, which reached a record $105 billion in 2022, present fiscal challenges for regional governments. These subsidies often disproportionately benefit wealthier households and are seen as obstacles to transitioning towards cleaner energy solutions.
Southeast Asia’s dynamic energy landscape presents both opportunities and challenges. The region’s rapid industrialization and growing energy demand position it as a crucial player in global energy markets. However, its heavy reliance on fossil fuels and the projected increase in CO2 emissions pose significant risks to energy security and international climate goals.
To meet these challenges, policymakers must prioritize a balanced energy strategy that supports economic growth while promoting clean energy transitions. Subsequent articles in this series will explore the region’s efforts to increase renewable energy capacity, reduce fossil fuel dependence, and address climate-related environmental challenges.
