Asia’s energy transition is gathering pace amid increasing demand for renewable energy, with China’s leadership in electric vehicles ( EV ) set to play a crucial role in the transition journey, according to a report by index provider MSCI.

Over the past decade, the region has ramped up energy consumption to fuel its rapid economic development. According to MSCI, energy consumption in Asia surged 30% between 2014 and 2023, with low-carbon energy and coal recording the biggest growth. Ever-growing demand has pushed energy consumption in the region closer to the combined amount from the rest of the world, prompting policymakers to take steps to limit carbon emissions.

While conventional sources still form the bulk of the total energy consumption, countries are stepping up efforts to wean themselves away from high emitting sources. Asia is pivoting to wind and solar energy, while its use of natural gas is recording a steady increase.

China, the largest energy consumer in the region, is also taking earnest efforts to replace coal with gas and renewables, MSCI says. Its rapid ascent to become a top player in the global EV industry marks its resolve to curb carbon emissions from the transportation sector. As a result, China posted the highest revenue from EVs with a record pace of growth. Its EV sales in October 2024 rose above US$120 billion, a threefold increase from the same month in 2021.

While Chinese EV production and sales continue to increase, geopolitical tensions are a growing threat. Tougher tariffs and tighter control on the export of raw materials and technology can disrupt supply chains, and consequently, the energy transition process.

“Nations prioritizing self-sufficiency over international cooperation may result in more fragmented and vulnerable supply chains, which would make decarbonization goals more expensive and harder to achieve,” MSCI says in the report. “In turn, these disruptions would exacerbate the physical and economic impacts of climate change.”