The Asia-Pacific region is undergoing a significant transformation, driven by ambitious green industrial policies that are reshaping its industrial landscape and energy markets. Governments across the region are deploying a mix of incentives, including subsidies, tax breaks, and targeted investments, to accelerate the adoption of renewable energy, energy-efficient technologies, and sustainable industrial practices. This shift is not merely an environmental imperative but also a strategic economic move, with the region’s share of global GDP expected to reach 42% by 2040.
The implications for markets are profound. The Asia-Pacific’s appetite for clean energy is insatiable, with more than 45% of the world’s clean energy investment directed here in 2023. China, the region’s powerhouse, is projected to host more than half of global renewables by the end of the decade, accounting for 60% of all new global renewable energy installed through this decade. This surge in demand is already influencing global markets, with the region’s need for US$210 billion in investments to achieve net-zero emissions by 2050 underscoring the immense scale required for industrial decarbonisation and grid modernisation.
However, the path is not without challenges. Infrastructure bottlenecks, regulatory uncertainty, and policy fragmentation pose significant hurdles. The region’s continued dependence on fossil fuels, particularly coal, further complicates the transition. The European Union’s Carbon Border Adjustment Mechanism is already pushing Asia-Pacific exporters to accelerate carbon pricing and transparent emission reporting, a trend likely to gain momentum as global markets increasingly price in the cost of emissions.
The region’s green industrial policies are not just about reducing carbon emissions; they are about reshaping entire industries. India’s National Green Hydrogen Mission, for instance, aims to transform the hard-to-abate steel sector, while China’s Action Plan for Energy Saving and Emissions Reduction targets steep cuts in energy use and CO2 across key industries. Japan’s Green Transformation for ETS League and South Korea’s active promotion of carbon capture and utilisation technologies are further examples of how the region is leveraging industrial policy to drive decarbonisation.
For markets, this means a shift in investment flows, with green hydrogen, ammonia, carbon capture and storage, and other clean technologies gaining prominence. It also means a reconfiguration of supply chains, as the region aims to build greener regional supply chains through collaborations within and across borders. The Regional Comprehensive Economic Partnership (RCEP) and other trade frameworks are likely to play a crucial role in promoting the free flow of clean energy goods and coordinating green industrial policy best practices.
To fully realise this potential, the Asia-Pacific region must adopt a multilateral approach. This includes implementing transition policies with clear and enforceable targets, establishing robust market mechanisms, encouraging industrial innovation, and increasing investment in power grids and supply chain infrastructure. Addressing skills and finance gaps, harmonising regional standards, and introducing carbon accounting will further facilitate cross-border trade and investment that prices in the cost of emissions.
The Asia-Pacific’s experience shows that multilateralism and industrial policy are not in competition but have mutually reinforcing structures and practices. An urgent acceleration of regional arrangements, technology development and deployment, and infrastructure financing is needed. Increasing adoption of green industrial policies can help scale up regional efforts. If the Asia-Pacific succeeds, it will set a template for the world to follow, reshaping global markets in the process. The region’s journey towards a green industrial future is not just a story of environmental stewardship; it is a story of economic transformation, market evolution, and global leadership.