Powering Asia’s Future: Legal Insights on Energy Transition Trends for 202528 January 2025

ASEAN: Regional Collaboration for Energy Transition

ASEAN plays a critical role in advancing renewable energy adoption across its 10 member states. ASEAN is driving collective progress through several key initiatives:

• CCS Deployment Framework and Roadmap: ASEAN is implementing a series of initiatives to achieve its energy transition targets, including developing policies and legal and regulatory frameworks to facilitate the adoption of CCS technology. CCS is anticipated to play a pivotal role in ASEAN’s efforts to meet its carbon neutrality goal by 2050. The ASEAN CCS Deployment Framework and Roadmap, published in September 2024, outlines policy recommendations for member states to consider and implement in the coming years;
• ASEAN Plan of Action: Under the ASEAN Plan of Action for Energy Cooperation (“APAEC”) Phase II (2021-2025), ambitious targets and initiatives aim to enhance energy security and sustainability across the region. APAEC Phase II includes promoting clean and renewable energy integration into the regional power grid and optimising clean coal technology as part of the transition to lower-emission development. Key targets for 2025 include, a reduction in energy intensity by 32% (compared to 2005 levels), increasing the share of renewable energy to 23% in the ASEAN energy mix and raising the share of renewable energy in installed power capacity to 35%; and
• ASEAN Centre for Energy (“ACE”): The 8th ASEAN Energy Outlook, released in September 2024, projected delays in achieving the region’s energy intensity and renewable energy mix targets—now expected by 2026 and 2030, respectively. However, the ASEAN was expected to exceed its target for the share of renewable energy in installed power capacity by 4%.

Challenges such as inconsistent policy implementation and infrastructure disparities continue to hinder progress. ASEAN member states face the dual challenge of meeting rapidly rising energy demand while transitioning towards sustainable energy. Coordinated regional efforts will be essential to overcoming these obstacles and achieving the ambitious targets set by ASEAN.

Hong Kong: Transition Finance Hub

Hong Kong continues to position itself as a leader in sustainable finance and transition funding through:

• Green Bond Market Growth: In 2024, Hong Kong’s green bond market recorded its largest growth to date, entering the global top ten for the first time. This was driven by record issuances under the Government Sustainable Bond Programme (“GSBP”), launched in 2018. As of August 2024, HK$220bn (approx. US$28.2bn) equivalent of green bonds have been issued, making the HKSAR Government the largest source of aligned government bonds in Asia and the fourth-largest cumulative government green bond issuer globally. While 92% of the bond volume originated from government sources, 2024 also saw significant private sector issuances, including MTR Corporation’s landmark CNH 3bn 10-year and CNH 1.5bn 30-year green bonds. Supported by government subsidies and initiatives to develop green financing products, 2025 is expected to bring a resurgence in sustainable debt offerings by private issuers and financial institutions.
• Private Capital Mobilisation: As a leading asset and wealth management (“AWM”) centre, Hong Kong offers a robust platform for the private equity and fund management industry. The city provides tax exemptions for mutual funds authorised under section 104 of the Securities and Futures Ordinance (“SFO”) and private funds under the Unified Fund Exemption Regime (“UFE”). Since 2022, offshore funds have been allowed to re-domicile in Hong Kong. At present, over 200 ESG funds and 11 listed ESG exchange-traded funds (“ETFs”) are authorised by the Securities and Futures Commission (“SFC”). With Hong Kong-based institutional investors increasingly focussed on innovative technology and infrastructure aligned with global sustainability goals, 2025 is expected to see a robust pipeline of investment opportunities across Asia.
• Taxonomy for Sustainable Finance: Introduced in 2024, Hong Kong’s taxonomy provides a unified framework for identifying and categorising green investments. However, it is acknowledged as a “living document” that does not yet address transition activities or frontier technologies such as hydrogen and carbon capture. Substantial work remains to refine the taxonomy to ensure consistent identification of investments supporting the city’s transition to a low-carbon future.

Hong Kong’s strategic initiatives, supported by strong financial expertise, position it as a vital hub for transition finance in Asia, bridging global sustainability ambitions with regional investment opportunities.

Japan: Hydrogen, Offshore Wind, and Carbon Capture

Japan’s energy transition strategy exemplifies its leadership in innovation and sustainability, with a strong focus on advancing low-carbon technology including:

• Hydrogen and Ammonia Infrastructure: Japan continues to prioritise hydrogen and ammonia as strategic alternatives to fossil fuels. The updated Basic Hydrogen Strategy (2023) and the Hydrogen Society Promotion Act (2024) have established a comprehensive framework to accelerate the supply and adoption of low-carbon hydrogen and ammonia. The Hydrogen Society Promotion Act, enacted in October 2024, introduces measures to promote ammonia as a competitive fuel for power production. These initiatives underline Japan’s commitment to building robust infrastructure for hydrogen and ammonia integration across its energy systems.
• Offshore Wind Expansion: Japan’s offshore wind sector achieved a milestone with the successful conclusion of the ‘Round 3’ public auction process on 24 December 2024. Targeting 30-45 GW of offshore wind capacity by 2040, the government announced its intention to further streamline the permitting processes in the forthcoming 3rd edition of the ‘Operational Auction Guidelines for Occupancy of the General Sea Area’ expected to be released this year. Also anticipated in the coming months are changes to the rules providing for exceptions to Japan’s maritime cabotage rules. With the announcement last year that Japan plans to expand offshore wind development into the waters within its ‘Exclusive Economic Zone’, reforms to the cabotage rules for offshore wind construction, operation and maintenance vessels are seen as important to the successful development of the industry.
• Battery Storage Investments: Japan has increased its support for large-scale battery storage technologies as part of its efforts to enhance grid reliability and address the intermittent nature of renewable energy sources. Amendments to the Electricity Business Act in 2022 and the introduction of the Long-term Decarbonisation Power Auction in 2024 provide revenue predictability and incentivise investments in decarbonised power projects. These initiatives are crucial for integrating renewable energy more effectively into the national grid.
• Carbon Capture and Storage: Recognised as a vital component of Japan’s carbon reduction strategy, CCS is being integrated into large-scale industrial decarbonisation efforts. The Carbon Dioxide Storage Businesses Act, enacted in May 2024, supports the development of domestic carbon storage infrastructure. To encourage innovation, the government has provided financial incentives and research and development grants, fostering technological advancements in CCS.

These developments highlight Japan’s strong commitment to a low-carbon energy economy, positioning the country as a technological pioneer in the Asia-Pacific region and a leader in the global energy transition. Additionally, Japan has been and continues to be a source of significant investment and financing for projects across Asia, leveraging both public and private channels, including ECAs and multilateral development banks.

Challenges and Opportunities in Asia’s Energy Transition

Asia’s energy transition represents a pivotal moment for the region, bringing both significant challenges and transformative opportunities. Achieving ambitious sustainability goals will require coordinated efforts in innovation, investment, and policy alignment.

Challenges

• regulatory complexity: Inconsistent legal and regulatory frameworks across the region hinder cross-border investment and project execution. Whilst Thailand seems to be making strides with its comprehensive draft Climate Change Act, Vietnam still faces challenges with licensing delays and tariff negotiations. Such disparities slow the pace of energy integration and transition efforts;
• infrastructure gaps: Uneven grid infrastructure, particularly in markets like Indonesia, limits the scalability of renewable energy projects. Additionally, the ASEAN Power Grid, a cornerstone for regional energy collaboration, requires substantial investment to harmonise infrastructure across member states and ensure seamless cross-border electricity trade; and
• high costs of innovation: Advanced technology such as hydrogen, CCS and battery storage remain expensive, requiring substantial investment and scaling to achieve commercial viability. These high upfront costs can deter private sector participation and delay widespread adoption.

Opportunities

• regional collaboration: ASEAN’s collective initiatives, such as the ASEAN Power Grid and the APAEC Phase II, demonstrate the potential for resource sharing and cross-border cooperation. These efforts enable member states to pool resources, reduce energy disparities and accelerate renewable energy adoption;
• green financing: Financial hubs like Singapore and Hong Kong are driving renewable energy investment through innovative financing mechanisms. Singapore’s Green Finance Action Plan and Hong Kong’s expanding green bond market offer critical platforms for mobilising capital to fund large-scale renewable energy projects and infrastructure; and
• technological advances: Singapore’s advancements in hydrogen technology, supported by its Directed Hydrogen Programme, highlight its ability to develop safe and economical solutions for hydrogen utilisation. Similarly, Japan’s progress in CCS and battery storage underlines its commitment to low-carbon energy pathways. These developments demonstrate Asia’s capacity to pioneer transformative solutions for global energy challenges.

By addressing regulatory and infrastructure challenges whilst capitalising on regional collaboration, green financing and technological innovation, Asia is uniquely positioned to lead the global energy transition. These efforts will not only bolster regional sustainability but also set a benchmark for other economies navigating the complexities of energy transformation.

Asia’s Transformative Role in the Global Energy Transition

Asia’s energy transition embodies the region’s determination to reshape the global energy landscape through innovation, collaboration and bold policy commitments. Thailand’s ambitious emission reduction strategies, Vietnam’s offshore wind leadership and Japan’s cutting-edge hydrogen and CCS advancements demonstrate how targeted approaches drive transformative outcomes. Singapore’s Green Plan and regulatory foresight, Indonesia’s geothermal potential and Hong Kong’s green bond market further illustrate the critical role of resource optimisation and financial innovation in achieving sustainable growth.

These collective efforts establish Asia as a global leader in the energy transition, setting benchmarks for innovation, sustainability and regional cooperation. While challenges such as regulatory complexity, infrastructure gaps, and the high costs of innovation remain, the region’s proactive initiatives and technological advancements highlight its readiness to address these hurdles and seize emerging opportunities.

As stakeholders navigate this transformative period, the importance of strategic guidance and tailored solutions cannot be overstated. With deep regional expertise and a forward-looking approach, our firm is uniquely positioned to help clients capitalise on these opportunities, turning ambitious visions into impactful results and contributing to a sustainable future for all.

Hanoi Trainee Quynh Nguyen also contributed to this article.