Energy Security Concerns Are Entrenching Coal’s Dominance
The future of coal in Asia appears surprisingly robust, despite widespread global calls and regional commitments to transition towards cleaner energy sources, as major setbacks plague efforts to retire coal-fired power plants early across the top consuming region.
Concerns over guaranteed energy security and affordable operational costs are currently overriding the established climate agenda in Asia’s fastest-growing and highest-polluting economies, fundamentally altering the pace of the energy transition.
Indonesia, for instance, has cancelled a flagship project that was intended to be a poster child for early coal plant shuttering, while India is now actively considering extending its existing coal fleet operations until the middle of the century, a significant reversal from earlier projections that aimed to cap capacity additions by 2035.
This delay is driven by rapidly soaring power demand across the continent, fueled by everything from expanding air conditioning use in growing urban populations to the intense energy needs of emerging artificial intelligence data centers, forcing governments eager to prevent economically damaging power outages to approve new coal plant construction.
According to Jom Madan, a principal analyst at Wood Mackenzie Ltd, the situation is simply a matter of “supply security and cost,” where even record-setting deployments of wind and solar capacity are currently failing to keep pace with the exponential increase in energy demand stemming from population growth, rising incomes, and this surge in data center capacity.
This growing supply gap is readily and cost-effectively filled by reliable fossil fuels like coal and gas, providing the necessary baseload power stability that intermittent renewables currently cannot sustain without massive battery storage infrastructure.
Key Asian Economies Are Doubling Down On Coal
The collective actions of the three most significant coal users—China, India, and Indonesia—clearly reflect a global reality that was visibly underscored at the United Nations’ COP30 climate summit, where nearly 200 nations signed an agreement that strategically avoided any explicit mention of a mandatory transition away from fossil fuels, recognizing the economic development imperatives of the developing world.
China, which alone mines and consumes more than half of the world’s coal supply, has dramatically increased its support for the fuel, which the government strategically refers to as its “ballast stone,” particularly since experiencing severe, widespread power shortages in 2021 and 2022.
Since those events, China’s domestic coal production, imports, and overall consumption have all consistently soared to new record levels, with the country expected to add an unprecedented 80 gigawatts of new coal capacity in 2025, the highest level recorded in a decade, and similar figures projected for 2026 and 2027, according to analysis by the Centre for Research on Energy and Clean Air (CREA).
Simultaneously, India’s total coal-fired capacity could dramatically increase by $87\%$ to reach 420 gigawatts by 2047, extending the runway for coal use well past previous estimates.
In Indonesia, the world’s largest thermal coal exporter, power generation capacity from the fuel more than doubled in the decade leading up to 2024, and the build-out is expected to continue under the new administration, despite stated ambitions for a full transition to renewables by 2035.
These three countries are collectively responsible for the largest increase in global carbon emissions and coal-fired power generation since the 2015 Paris climate agreement, demonstrating the difficulty the region faces in weaning itself off this cost-competitive and abundant fossil fuel.
Financial And Structural Barriers Stymie Transition Efforts
Asia’s struggle to decouple its soaring economic growth from its dependence on coal is compounded by deep-seated financial and structural barriers that current transition efforts are failing to overcome.
A key structural issue is the young average age of Asia’s vast fleet of approximately 2,000 coal plants; these facilities are decades younger than their counterparts in Europe and the US, meaning they have not yet recouped their initial investment costs.
Retiring these young plants early would require substantial financial support to break long-term power-purchase agreements (PPAs), which currently lock utilities into burning coal for many years to come.
Leslie Maasdorp, CEO of British International Investment Plc, captured this reality by noting there is a “much higher degree of pragmatism and realism today,” emphasizing that closing coal and building renewables is not a simple, synchronous exercise, and governments must address the complex financial and logistical details.
For example, international initiatives designed to assist this transition, such as the US$20 billion Just Energy Transition Partnership (JETP) aimed at countries like Indonesia, have been significantly underfunded, delivering only US$3 billion so far.
This lack of financial follow-through contributed directly to Indonesia’s decision to scrap the proposed seven-year early shutdown of its flagship Cirebon-1 project.
Furthermore, efforts to leverage “transition credits” for early coal plant shutdowns, such as in the Philippines, have stalled as potential investors and governments raise concerns over accurately measuring real emissions savings, managing potential job losses in the coal mining sector, and the overall scalability of the financial model.
While the long-term trend points towards a future where rapidly falling costs for renewable energy and storage will make new coal investments increasingly hard to justify, particularly in high-growth markets like China and India, the immediate need for stable, affordable baseload power means Asia remains fundamentally reluctant to abandon coal prematurely, fearing that power shortages could derail critical economic development and trigger adverse public sentiment.
Regional Energy Mix Disruption And Global Climate Governance
The persistent reliance on and continued expansion of coal power in major Asian economies generates profound disruptions not only within the regional energy mix but also for the global climate governance framework.
The collective actions of China, India, and Indonesia, which together account for the bulk of global coal consumption growth, fundamentally challenge the efficacy of multilateral climate agreements like the Paris Accord, as their rising emissions effectively offset the decarbonization efforts of advanced economies.
From an energy market perspective, this sustained preference for coal—a cost-competitive and geopolitically secure domestic resource for nations like China and Indonesia—constrains the speed at which capital can shift towards cleaner energy.
This creates regulatory uncertainty for international renewable energy developers, who must now compete against subsidized or long-contracted coal power, often leading to the curtailment of available wind and solar capacity due to inflexible grid prioritization.
The continued investment in coal also exposes the region to significant future financial risk; the young age of these 2,000 Asian coal plants means that as global carbon pricing mechanisms become inevitable or as renewable energy costs drop below the marginal cost of coal operation, these assets are highly likely to become stranded, representing billions in unrecovered capital that may ultimately fall to government-backed utilities and taxpayers to absorb.
Therefore, the coal question in Asia is no longer simply an environmental challenge, but a complex intersection of energy security, sovereign debt risk, and global trade dynamics, with the region using its developmental mandate to effectively redefine the pace and financial architecture of the global energy transition.
