Towards A Just Energy Transition In Southeast Asia – Analysis

By Mirza Sadaqat Huda

Southeast Asian policymakers are faced with the complex task of replacing fossil fuels with renewable energy in a timely, just and equitable manner. Energy transition is necessary not only for addressing climate change, but also for sustaining economic growth and employment generation; at the same time, high levels of fossil fuel dependency worsen the risks of transition. Currently, around 70 per cent of Southeast Asia’s electricity generation and more than 80 per cent of total primary energy supply depend on fossil fuels.[1] As shown in Figure 1, renewables make up around 30 per cent of electricity generation, of which the largest share comes from hydro, followed by bioenergy and solar energy.

In addition to electricity supply, fossil fuels play a critical role in employment, industry, exports, road, rail and maritime transport as well as regional geopolitics in Southeast Asia.[2] The coal mining industry employs approximately 180,000, 86,000 and 4,000 people in Indonesia, Vietnam and the Philippines.[3] The export of coal is a significant source of revenue for Indonesia, amounting to US$34.59 billion in 2023,[4] while Malaysia is one of the world’s largest liquefied natural gas exporters, with revenue of over US$13 billion in 2023.[5] Although employment and energy exports will be affected by the phasing out of fossil fuels, the transition also bears significant opportunities for Southeast Asia – the region can earn as much as US$300 billion by 2030 from green investments.[6] Replacing fossil fuels with renewable energy will thus have deep implications not only for energy security, but also for the region’s politics, economic growth and social cohesion.

Energy policies at the regional and national levels are increasingly being framed by the concept of just transition. For example, in 2024, the 42^nd ASEAN Ministers on Energy Meeting (AMEM) endorsed the theme of the next ASEAN Plan of Action for Energy Cooperation (APAEC) 2026–2030 as “Advancing Regional Cooperation in Ensuring Energy Security and Accelerating Decarbonisation for a Just and Inclusive Energy Transition”.[7] In 2021, the launch of the Just Energy Transition Partnership (JETP) at the 26^th Conference of the Parties (COP) has fostered the development of policies that aim to increase renewable energy capacities, while also addressing just transition concerns. The JETP will provide US$20 billion and US$15.5 billion to Indonesia and Vietnam, respectively, to phase out fossil fuels and increase the contribution of renewables in electricity generation to 34 per cent and 47 per cent by 2030, respectively. The two countries have developed policies for implementing the JETP, namely Indonesia’s Comprehensive Investment and Policy Plan (CIPP) and Vietnam’s Resource Mobilisation Plan (RMP).

This Perspective undertakes a brief review of the most critical challenges to a just transition in Southeast Asia and evaluates the effectiveness of contemporary policy frameworks to address them. The article is divided into four sections. The first provides a conceptual overview of just transition. This is followed by an analysis of the challenges to a just transition in two key areas: job losses, and the social and environmental impacts of energy infrastructure development and mineral extraction. The third section discusses the salient features of three key policy documents on just transition: Indonesia’s CIPP, Vietnam’s RMP and A Guide to a Just and Inclusive Energy Transition in ASEAN developed by the ASEAN Centre for Energy (ACE). The final section provides a conclusion and policy recommendations.

Figure 1 Energy Mix of Southeast Asia (2022)

Source: ACE (2024). 8th ASEAN Energy Outlook (AEO8). ASEAN Centre for Energy (ACE), Jakarta. Available for download from https://aseanenergy.org/.

JUST TRANSITION IN SOUTHEAST ASIA: A CONCEPTUAL OVERVIEW

Over the last decade, the topic of just energy transition has garnered increasing academic and policy interest due to global momentum towards achieving net zero emissions.[8] As shown in Table 1, just energy transition does not have a universal definition and has been interpreted and conceptualised in multiple ways. A widely-cited interpretation by the International Labour Organization (ILO) describes just transition as “Greening the economy in a way that is as fair and inclusive as possible to everyone concerned, creating decent work opportunities and leaving no one behind”. Setyowati[9] proposes that the concept of just transition rests on three broad themes of environmental justice: 1) Distributive justice, which relates to equitable distribution of the costs and benefits of shifting from fossil fuels to renewables; 2) Procedural justice which relates to representation and inclusion in energy decision making; and 3) Recognition justice, which relates to particular considerations for vulnerable communities.

The launch of the JETP in 2021 initiated renewed interest in imagining just transition as a concept rooted within the context of Southeast Asia, particularly through the frameworks of the CIPP and the RMP. It also presented just transition as something that is actionable and requires implementation, rather than an abstract academic concept.

As shown in Table 1, the definition of just transition in Indonesia’s CIPP emphasises the equitable distribution of risks and opportunities, and inclusive decision-making processes.[10] While the RMP does not provide an explicit definition, it provides a broad vision towards just transition that, in addition to benefit distribution, also touches upon affordable energy, stakeholder participation and impact on workers.[11] Interestingly, the regional definition provided by ACE in ‘A Guide to a Just and Inclusive Energy Transition in ASEAN’ emphasises heavily on the issue of protection and empowerment of citizens, energy security, and resilience.

Table 1: Definitions of Just Transition

While the definitions and concepts outlined above can inform the development of policy frameworks, the challenges posed by the transition in Southeast Asia are extremely complex. Two groups of challenges, namely job losses, followed by social and environmental impacts of infrastructure development and resource extraction, are described below.

CHALLENGES TO JUST ENERGY TRANSITION IN SOUTHEAST ASIA

Job Losses

In Southeast Asia, the energy transition is projected to create up to 5.8 million jobs in the renewable sector by 2050.[12] However, shifting to renewables will drastically reduce employment in the fossil fuel industries. Table 2 demonstrates that the coal industry remains an important source of employment in Southeast Asia. According to the ILO, coal phase-out can impact jobs worth US$ 11.78 billion, US$ 1.9 billion and US$ 59 million in Indonesia, Vietnam and the Philippines, respectively.[13] While these numbers are daunting, they only tell half the story of the difficulties of delinking coal’s connection to income generation and economic development.

Many of the region’s coal workers are low-skilled and will find it difficult to gain the necessary qualifications to obtain jobs in renewable energy industries.[14] In addition, the nature of the fossil fuel industry itself poses challenges for retraining and reskilling. Indonesia’s coal industry is fragmented – there are only 10 large companies in a landscape dominated by small players that own coal mines and coal mine concessions.[15] In addition to the formal coal industry, there is a thriving illegal mining sector that account for as much as 50–80 million tonnes of production per year. These illegal mining operations are run by local residents and cover around 700,000 hectares of land.[16] Illegal mining can occur even when permits and licenses are granted. For example, a case in 2023 revealed that a Vietnamese corporation used workers to extract 47 times the licensed amount of coal at a mine in Dai Tu district, Thai Nguyen.[17]

The retraining of workers formally employed in the sector is a huge challenge, and policymakers also need to account for the impact of the transition on those dependent on illegal mining operations. Research indicates that workers employed in illegal mining are particularly exposed to socio-economic shocks.[18]

Table 2 Coal employment and investment in Indonesia, Philippines and Vietnam

Source: International Labour Organization (ILO). (2023). Just energy transition in Southeast Asia: The impact of coal phase-out on jobs; IDNFinancials. (2024). Investment in Energy and Mineral Resources Sector Exceeds US$30.3 billion in 2023; Department of Energy, Philippines (2024). Overall Coal Statistics.

SOCIAL AND ENVIRONMENTAL IMPACTS OF INFRASTRUCTURE DEVELOPMENT AND RESOURCE EXTRACTION

Southeast Asia has enough renewable energy resources to meet two-thirds of its energy demand by 2050.[19] However, the transition can also have negative impacts, which include externalities from the construction and operation of renewable energy projects, and the extraction and processing of critical minerals.[20]

As mentioned previously, hydropower is the largest contributor to clean energy in Southeast Asia. Large-scale hydropower dams are expected to continue to play an important role in the region’s energy transition, despite increasing recognition of adverse impacts.[21], [22], [23] Several new dams are currently being planned in the region. This includes the 1,285 MW Baleh dam in Sarawak[24] and the 9,000 MW Kayan dam in Kalimantan.[25] While hydropower is a mature technology, Southeast Asia’s dams are often located in remote regions which are ecologically sensitive and home to Indigenous populations. Research on the societal and environmental impacts of hydropower dams in Southeast Asia show that there is much scope for improving safeguards to protect vulnerable communities from negative externalities.[26] In addition to domestic impacts, hydropower dams in Southeast Asia have transnational justice implications. For example, the impacts of some hydropower dams in Laos are being borne by communities in downstream Vietnam.[27]

Hydropower is not the only renewable energy source that creates negative impacts. Solar energy is the fastest growing renewable energy resource in Southeast Asia in terms of new capacity.[28] In 2023, Indonesia and Vietnam achieved an additional 0.26 GW and 0.38 GW of solar energy, respectively.[29] However, both solar and wind energy development have significant social and environmental[30] impacts. Solar farms need large tracts of land, which creates trade-offs with traditional lifestyles and food security. While pilot agrivoltaics projects have been implemented in Vietnam, Indonesia and Malaysia, much higher levels of investments are required to balance renewable energy goals with food production and other land uses.[31]

Floating solar farms can decrease the pressure on land resources, but they also impact livelihoods and food security. For example, the proposed 2 GW floating solar project on Laguna Lake in the Philippines can impact the income of 8,000 fishermen, including 2,000 people who work in aquaculture.[32] Similarly, the 660MW nearshore wind turbines at Bac Lieu, Vietnam has impacted the livelihoods of fishing communities and raised concerns about potential changes to water salinity, sea currents and sediment accumulation.[33]

The extraction and processing of critical minerals pose additional challenges to just transition. Southeast Asia has substantial deposits of copper, nickel, bauxite (alumina) and Rare Earth Elements (REE). Indonesia and the Philippines are major producers of copper and nickel, while Vietnam has the world’s fourth-largest bauxite deposit and holds almost 20 percent of global REE deposit.[34] However, only a fraction of these resources has been extracted to date.

There is increasing business and geopolitical interest in utilising Southeast Asia’s critical minerals to augment global supply chains. While the region remains an exporter of ores, Indonesia and to some extent the Philippines have undertaken several legislative steps and policy frameworks to increase processing capacity of critical minerals and develop end-to-end supply chains of electric vehicles and batteries. However, current levels of extraction have already created a plethora of social and environmental impacts. A recent study on Sulawesi, the primary nickel-producing region in Indonesia, found that deforestation nearly doubled between 2011 and 2018 in nickel-mining villages.[35] The proposed Tampakan copper-gold mining project in Southern Philippines has faced strong opposition from Indigenous communities and environmental activists.[36] If the externalities of critical mineral development are not urgently addressed, they can undermine the goal of enhancing domestic processing capacities and the growth of green industries.

POLICY FRAMEWORKS FOR JUST TRANSITION 

Existing national and regional frameworks provide insights into how Southeast Asian policymakers envision the realisation of a just transition. The CIPP just transition framework is grounded in three key principles: (1) human rights, (2) gender equality and empowerment, and (3) accountability. Under these three foundations are the two pillars of (1) Leave no one behind and (2) Sustainability and Resilience, which collectively support nine just transition standards focusing on the protection of vulnerable groups, and building resilient societies and economies, among other priorities (Figure 2).

Similarly, the RMP emphasises that energy transition projects in Vietnam should focus on enhancing people’s well-being by providing (1) access to energy and energy security, (2) benefits from sustainable and inclusive economic development, (3) protection from negative impacts, and (4) participation in the energy transition. These overarching goals will be used to develop targeted interventions for households, businesses, and workers, as shown in Figure 3.

The guide developed by ACE provides 10 guiding principles for facilitating a just energy transition at the regional level. As shown in Figure 3, these principles include key economic priorities such as affordability and economic growth, as well as social justice issues such as gender and equity, among others.

On paper, the existing policy frameworks on just transition adequately addresses the two key challenges mentioned in this paper, namely job losses and social and environmental impacts. The CIPP and the RMP build upon existing national regulations to propose project-level interventions, which are summarised in Appendix A. Project-level interventions in the CIPP and the RMP addresses labour and working conditions, training and local heritage, as well as biodiversity, disaster risk and food security. The guide on a regional just transition developed by ACE provides a comprehensive policy toolkit that covers energy access, employment and gender impacts at the project level, among other key priorities.

Figure 2 CIPP Just Transition Framework

Figure 3 RMP Just Transition Framework 

Figure 4 ACE Just Transition Framework

CHALLENGES IN IMPLEMENTING JUST TRANSITION POLICIES

The just transition frameworks discussed above can be a useful mechanism for accelerating transition in Southeast Asia while addressing social and environmental challenges. These frameworks are relatively new and their impact on the societies and economies of Southeast Asia will become more apparent in the coming years. However, contemporary research and analysis has identified challenges in the implementation of just transition policies, which are rooted in the particular political and social realities of Southeast Asia.

The first issue is the lack of public participation in just transition. A major goal of all three just transition frameworks discussed in this Perspective is the development of inclusive decision-making processes. However, evidence from Indonesia and Vietnam suggests that this goal will be very difficult to implement. A recent survey found that 76% of Indonesians are unaware of JETP funding, which indicates very little public participation.[37] In addition, the same survey showed that 6 out of 10 respondents who are aware of the JETP are from urban areas, indicating a concerning gap in knowledge among rural respondents.

In Vietnam, NGOs are less willing to participate in public discussion on energy issues, following the 2022 arrest of Nguy Thi Khanh, an advocate for renewables. According to a recent study, participation by non-government stakeholders in the JETP process is impeded by lack of information from the government as well as difficulties in obtaining permits to undertake independent analysis.[38] The media in Vietnam has also not reported extensively on the JETP.[39]

The second challenge to the realisation of just transition is the gap in finance. Collectively, Southeast Asia needs as much as US $230 billion investment annually by 2050 to contribute to the target of limiting global warming to 1.5⁰C.[40] The JETP provides only a fraction of the enormous funding requirements in Indonesia and Vietnam, a majority of which will be in the form of loans rather than grants. Indonesia requires US$66.9 billion by 2030 to achieve the renewable energy goal under JETP, which leaves it with a finance gap of 70 per cent.[41] Similarly, Vietnam needs US$135 billion to achieve the JETP target, resulting in a finance gap of 89 per cent.[42] Meeting these gaps in finance within the next five years is going to be extremely difficult, particularly after the withdrawal of the United States from the Paris Agreement in 2025.

The third challenge is the vested interest of fossil fuel industries to delay the deployment of renewables, which is not addressed extensively by policy frameworks on just transition. In Indonesia, overlapping interests between the influential coal industry and some politicians perpetuate the use of fossil fuels, which undermines the country’s climate mitigation goals.[43] In Vietnam, politicians view coal-fired power plants as a stable and predictable source of electricity,[44] which provides the added benefits of employment and build-up of institutions and infrastructures.[45] In almost all Southeast Asian countries, political parties are wary of the social impact of short-term increases in electricity prices caused by the phasing-out of coal.

CONCLUSION

The energy transition will bring great economic and environmental dividends in Southeast Asia, but the shift also comes with challenges, key among which are the impact on labour and the externalities of infrastructure development and resource extraction.[46] Since the JETP was announced in 2021, Indonesia, Vietnam and regional organisations such as ACE have developed frameworks to maximise opportunities and mitigate the negative impacts of the energy transition. However, implementation faces key challenges, such as lack in participation and representation of stakeholders in renewable energy projects, gaps in finance and vested interests in fossil fuel industries. Three policy responses that can address these challenges are:

• Encourage broader public discourse and participation in renewable energy projects by building the capacities of grassroots organisations and local governments.
• Regional players should consider innovative funding mechanisms such as  cross-border Renewable Energy Certificates (RECs), and green bonds. Public sector initiatives such as Singapore’s Clean Energy Fund can boost investment in renewable energy.[47]
• Undertake a review of the political economy of fossil fuel industries, including business interests that support coal, and the vulnerabilities of formal and informal workers in the coal industry.

About the author: Mirza Sadaqat Huda is Lead Researcher in the Climate Change in Southeast Asia Programme at ISEAS – Yusof Ishak Institute. Prior to ISEAS, he worked at the Lee Kuan Yew School of Public Policy, the Organization for Security and Co-operation in Europe (OSCE) Academy, and at Nanyang Technological University. The author would like to thank Jiahui Qiu, Research Officer at the Climate Change in Southeast Asia Programme, ISEAS – Yusof Ishak Institute, for data collection and graphics development.

Source: This article was published by ISEAS – Yusof Ishak Institute

For Appendix A, please refer to the original pdf document.
For endnotes, please refer to the original pdf document.