Natural capital is a high-return investment in resilience

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Key points:

  • Evidence from multiple sectors shows that investing in natural capital – the world’s forests, wetlands, rivers and other natural assets — delivers broad economic returns: driving affordable emissions reductions, reducing climate-related losses, and generating high-value benefits across entire ecosystems.
  • Land-based solutions such as reforestation, when combined with demand-side measures such as dietary change and waste reduction, could provide in the order of 50% or more of the cost-effective global mitigation needed over coming decades to limit warming to 2°C – mostly in tropical developing countries in Asia, Latin America and Africa. 
  • Protecting and restoring nature can also reduce the intensity of climate- and weather-related hazards by at least 26%, cutting losses in developing countries by up to a quarter in 2030. 
  • The world’s wetlands generate USD 39 trillion in ecosystem services each year – equal to 36% of global GDP.  If we protect them, they will provide annual ecosystem services worth approximately 40 times more than the adaptation finance currently needed in developing countries. 
  • Forests provide ecosystem services worth more than USD 7.5 trillion annually – around 100 times the annual adaptation finance needed by smallholder farmers to help secure the global food supply. 
  • Across studies, rehabilitating and conserving wetlands, restoring forests and landscapes, and transforming food systems generate outsized economic returns, with every USD 1 invested returning between USD 6.8 and 51, depending on the intervention.
  • Despite this clear economic case, current public and private financial flows are misaligned, with far too little directed to conservation, restoration and food-system transformation. Meanwhile, governments still channel vast sums each year into harmful environmental subsidies that drive costly land degradation, deforestation and food insecurity.

The economic case for investing in nature is clear

Evidence from multiple sectors shows that investing in natural capital – the world’s stock of natural assets and ecosystem services that support economies and human well-being – delivers strong and measurable economic value.

The gains range from affordable emissions reductions to cost-effective infrastructure and major savings in avoided climate-related losses. 

High returns across climate, resilience and infrastructure

Almost 40% of the cost-effective emissions mitigation needed by 2030 to stay under 2°C1 could be achieved using nature-based solutions. Forest conservation and restoration contribute a little over two-thirds, grassland and agricultural improvements about one-fifth, and wetland restoration about 14%. 

A more recent analysis estimated that, alongside demand-side measures such as dietary change and waste reduction, land-based solutions could provide in the order of 50% or more of the cost-effective global mitigation potential needed over coming decades for a 2°C pathway.2

The majority of this potential is located in tropical developing regions, particularly Asia, Latin America and Africa, where lower implementation costs and high opportunities in forestry and land-use make action particularly efficient.

In tropical countries, cost-effective natural climate solutions such as reforestation, mangrove restoration and agroforestry – the co-planting of trees and crops – could mitigate more than half of the national emissions in at least half of the countries, and even exceed total emissions in about a quarter.

Investing in natural capital also reduces the escalating costs of climate impacts. This is especially critical for developing countries, where the cost of climate-related ‘loss and damage’ (harms that go beyond what can be managed through adaptation) is anticipated to reach between USD 402 billion and USD 805 billion per year by 2030.

But by protecting and restoring nature, countries could reduce the intensity of climate- and weather-related hazards by at least 26%, cutting losses in developing countries by up to a quarter in 2030. This equates to a saving of at least USD 104 billion in 2030 for developing countries, compared with a business-as-usual pathway. 

The same applies to nature-based solutions that use or mimic natural processes to provide infrastructure services. Landscapes such as wetlands, sand dunes and forests can provide the same services as man-made “grey” infrastructure for meeting development goals (such as water purification) at half the cost.

In a scenario where just around 11% of global development infrastructure needs were met through nature-based solutions, the saving would free up almost 6% of the estimated global annual infrastructure budget (or USD 248 billion) for other development priorities.3 

For example, in the Gulf of Mexico, nature-based adaptation could prevent USD 49 billion in climate-related flood damages by 2030. This represents 85% of the total cost-effective risk reduction identified, and would cut projected losses by over 40%.

Nature-positive investments consistently deliver benefits that far exceed their costs

Across studies, rehabilitating and conserving wetlands, restoring forests and other natural landscapes, and transforming food systems all generate outsized returns. These are explored sector by sector, below. 

The benefit–cost ratios (BCRs) of investing in nature range from several dollars of benefit for every USD 1 invested, and in many cases are far higher (see Figure 1 and Table 1, in which  a BCR >1.0 indicates that the benefits outweigh the costs).

Figure 1
Table 1
Protecting the world’s wetlands can secure future ecosystem services worth almost twice global GDP

The world’s wetlands represent one of the most valuable investment opportunities in natural capital. Wetlands generate an average of USD 39.01 trillion in ecosystem services annually – equal to 36.7% of global GDP in 2023. 

The total long-term value of the benefits we get from wetlands – such as clean water, flood control and food – is remarkable. If we protect and sustainably manage these valuable environments until 2050, the world’s wetlands will provide ecosystem services worth more than USD 205 trillion over that period, a sum nearly twice the size of the global economy in 2023.

The median annual value of wetland ecosystem services – used for long-term projections – is around USD 8 trillion. This is approximately 40 times the adaptation finance currently needed in developing countries (estimated at USD 215 billion per year).4

Protecting mangroves alone prevents losses of over USD 80 billion per year by averting flood damage. Without these ecosystems, the annual global bill for flood damage would go up by more than 16%.  

Sustainable forest management could cost as little as 2% of the value forests currently generate each year in ecosystem services

According to FAO’s State of the World’s Forests 2022 report, the formal forest sector contributed USD 1.52 trillion to national economies in 2015 (the most recent comprehensive global data available). The formal sector includes direct activity within forestry and wood products industries, plus the ripple effects through supplier industries and worker spending. 

The investment needed to halt deforestation and achieve sustainable forest management this decade is estimated at USD 150 billion–460 billion per year. This is just 10-30% of the annual economic activity forests already generate. 

This estimate does not even account for the immense non-market value of forests. From carbon sequestration to water regulation, soil protection and biodiversity, forests provide ecosystem services valued at more than USD 7.5 trillion annually. This is 100 times greater than the annual adaptation finance needed by smallholder farmers to help secure the global food supply (USD 75 billion/yr).

Investing in forest protection and sustainable management would cost just 2-6% of the annual non-market benefits they provide. Put differently, for roughly a week’s worth of the value forests deliver annually, we could finance their protection for an entire year. 

Despite the clear economic case for investing in forests, total forest finance flows were only around one-fifth of the value of damaging environmental subsidies in 2023.5 Private financial institutions provided almost USD 9 trillion in finance to companies with high tropical deforestation risk in 2024.

Land degradation already costs the world more than twice the annual investment needed  to reverse it

As much as 40% of the world’s land is degraded, affecting over one-third of the global population. Land degradation, desertification and drought cost the global economy USD 878 billion every year – more than double the annual investment needed until 2030 to address these issues (USD 355 billion per year).

The cumulative investment needed by 2030 is roughly equivalent to what the world currently spends every year on harmful environmental subsidies.

Transforming global food systems could deliver staggering returns on investment 

Our current unsustainable food systems impose hidden costs of USD 15 trillion per year on society6 through environmental degradation, health-related factors and their contribution to structural poverty through food prices.

In contrast, globally transforming food systems would generate net benefits of USD 5 to 10 trillion per year – or between 5 and 10% of global GDP in 2023. 

With the costs of investing in agricultural research and development, reducing food waste, supporting dietary shifts, upgrading rural infrastructure and restoring habitats totalling just 200-500 billion USD per year, this represents a return of 11 to 51 times the initial outlay.7

  1. For a >66% chance of keeping global warming below 2°C above pre-industrial levels. Values are from 2017. ↩︎
  2. This is not a 2030 deliverable and is constrained by feasibility, land-competition and scope. Roe et al. (2021) estimate 8–13.8 Gt CO₂e yr⁻¹ of cost-effective (≤ USD 100 t⁻¹ CO₂e) mitigation potential from land-based and demand-side measures between 2020 and 2050. For comparison, the IPCC AR6 WG III (2022) finds that a likely-below-2°C pathway requires global GHG reductions of roughly 10–16 Gt CO₂e yr⁻¹ by 2030 relative to 2019 levels. This implies that the Roe et al. range represents half or more of the total cost-effective mitigation needed this decade for a 2°C pathway. While the time horizons differ, the Roe et al. range is of the same order of magnitude as the near-term mitigation challenge, indicating that land-based and demand-side actions could sustainably contribute roughly half or more of the required cost-effective reductions if feasibility barriers are addressed. ↩︎
  3. According to the report, global infrastructure needs are USD 4.29 trillion/yr. As nature-based infrastructure provides USD 248 billion/yr in savings, then USD 248 billion / 4.29 trillion = 5.8%. ↩︎
  4. The comparisons made here are used to show magnitude and are not intended as one-to-one reallocations. ↩︎
  5. According to the State of Finance for Forests 2025 report, potentially damaging subsidies reached around USD 406 billion in 2023, while in the same year, annual forest investment was USD 84 billion. ↩︎
  6. Value is Purchasing Power Parity (PPP)-adjusted for 2020. ↩︎
  7. The return on investment is derived from the Food System Transformation (FST) scenario in the Food System Economics Commission (2024) report, which estimates annual net benefits from transforming global food systems at USD 5–10 trillion per year, for annual investment costs of USD 200–500 billion (all in 2020 PPP, to 2050). Interpreting these figures as net benefits, the corresponding benefit–cost ratio (BCR) can be expressed as 1 + (net benefits / costs). Using the lower bound of benefits with the upper bound of costs gives a conservative BCR of 1 + (5 / 0.5) = 11, while the upper bound of benefits with the lower bound of costs yields an optimistic BCR of 1 + (10 / 0.2) = 51. This equates to roughly USD 11–51 in benefits for every USD 1 invested in food system transformation. ↩︎

It is unclear if LNG imports can guarantee Southeast Asia’s energy security

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Key points:

  • ASEAN members plan to import more LNG, including as part of tariff negotiations with the Trump administration. 
  • Southeast Asian countries are planning LNG import infrastructure investments that will cost an estimated USD 11.8 billion.
  • As a fuel that must be continuously imported, LNG has a mixed record in delivering energy security in ASEAN because it can become unaffordable or supply can be disrupted.
  • Asia now has to live with the risk of LNG price volatility and sudden surges in demand from Europe. In recent years traders have diverted LNG cargoes from Asia towards Europe because they can obtain higher profits, and this trend is likely to continue if European demand for LNG remains high. 
  • Southeast Asian countries have alternatives to importing LNG that can increase their energy independence and resilience. 
  • Options include investing in the ASEAN Power Grid and using President Trump’s recent tariffs on solar panels on Southeast Asian countries as an opportunity to direct their clean energy manufacturing base to installing more domestic renewable energy.

LNG’s promise of energy security in ASEAN

Momentum is growing behind the narrative that importing more LNG, including from the United States, is a crucial way to strengthen energy security in Southeast Asia. Japan has been promoting LNG as one option to enhance energy security and reduce emissions as part of its Asia Zero Emission Community (AZEC) initiative. One justification given by proponents of increasing LNG use in Southeast Asia is that it reduces dependence on specific energy suppliers or transit routes, thereby building supply resilience. 

The energy security narrative is driven in part by the impending growth in global LNG supplies, which is projected to increase as the United States and Qatar, in particular, expand their export infrastructure. International Energy Agency (IEA) data shows cumulative liquefaction export capacity growing 33% between 2024 and 2028, from 665 billion cubic metres (bcm) per year to 884 bcm per year.

Countries in Southeast Asia are projected to increase their use of gas as they seek to meet growing energy demand while accelerating their switch away from coal. As part of this, they are embracing LNG with plans to invest USD 11.8 billion to increase existing import capacity. The recent introduction of extensive tariffs by the US has created an impetus for affected nations to strongly signal that they wish to buy more LNG from the US.

Current regional LNG market and country-level growth plans

Thailand is one of the region’s more established LNG importers, and in line with its Gas Plan 2040 aims to increase the share of LNG used to meet its gas needs from 31% in 2024 to around 40% by 2030. Some 41% of electricity generation is projected to be from gas power plants by the mid-2030s. As part of negotiating with US President Trump over tariffs in April 2025, Thailand said it would import an additional 1 million metric tons of US LNG in 2026, and then another 1 million metric tons over the next five years. In May 2025, state-owned oil and gas company PTT said it was ready to help by importing more LNG from the US, including from the Alaska LNG project. 

Vietnam began importing LNG in 2023. According to its power development plan it aims to generate 22,524 MW of electricity from LNG by 2030 under its recently updated plan (for comparison plans are to use up to 14,930 MW from domestic gas, 31,055 MW from coal and up to 73,416 MW from solar) and has provided guarantees to make this a reality. In addition, preferential import tariffs on LNG were lowered from 5% to 2% in May 2025. In March Vietnam signed LNG agreements with US suppliers and in May it received its first LNG shipment from Russia. 

The Philippines also started imports in 2023. In March 2025 it agreed a deal with commodities trader Vitol for 8 million tonnes over the next ten years (an estimated 103 cargoes) and is considering securing LNG from Alaska in the future. The Philippines’ reference scenario in its power development plan could see LNG imports climb from zero in 2022 to 24.3 million tonnes of oil equivalent by 2050.

Malaysia is primarily an LNG exporter. As the country reduces the use of its coal power plants, it is expected to redirect some of its LNG exports to meet domestic demand. Declining reserves could see Malaysia ramp up its LNG imports in the future. Malaysia’s state-owned energy firm Petronas has been in negotiations to purchase 1 million metric tons a year from US firm Commonwealth LNG’s facilities in Louisiana since 2024 and could reach a deal soon. 

Indonesia is also an LNG exporter in a similar position to Malaysia in that it is using more of its LNG to satisfy domestic demand. The government is pushing ahead with a programme to switch power plants from diesel to LNG – the boost in gas consumption could contribute to Indonesia becoming a net LNG importer by the 2040s. In April the country announced that it was considering new LNG imports from the US as part of negotiations over tariffs. 

As part of these plans, import capacity is projected to increase in the region. Thailand currently has the largest operational LNG import capacity at 19 million tonnes per annum (mtpa) and plans to build another terminal at Map Ta Phut that could add another 5 mtpa. Vietnam has 14 projects that would bring capacity from 1 mtpa to 19.2 mtpa. Meanwhile, the Philippines has eight projects that could increase capacity by nearly 200%, making it a regional leader with 30.2 mtpa (see Fig. 1). 

These new projects are estimated to cost USD 4.9 billion in Vietnam and USD 4.2 billion in the Philippines (see Fig. 2). If all the Southeast Asian LNG projects in development (proposed and under construction) are completed, it would give the region a total import capacity of 111 mtpa of LNG and would require a total of USD 11.8 billion of investment.

Fig. 1: Planned LNG infrastructure would create new import leaders (mtpa)


Fig. 2: Vietnam and the Philippines have the largest estimated capital expenditure for LNG import projects (US$ billion)

LNG’s mixed record of delivering energy security in ASEAN

Despite the narrative that importing LNG will strengthen energy security and the plans being enacted to increase dependence on imports, LNG has an uneven track record on meeting common indicators of energy security such as security of supply and affordability. 

The 2022 energy crisis highlighted that LNG can quickly become unaffordable, and the diversion of shipments from Asia towards Europe in recent years illustrates that it does not always arrive as planned. Price volatility of LNG in an increasingly globalised market that sees Asian and European prices highly correlated is another important factor against the argument that LNG supports energy security for ASEAN.

An updated understanding of energy security

Since its creation in the mid-1970s, following the oil crisis and the economic downturn that ensued, the IEA has defined energy security on the basis of the accessibility and affordability of supply. That is, is there sufficient supply and is its price within reach?

The world has evolved since the 1970s, and so has what is understood as energy security. As the IEA’s 2024 World Energy Outlook emphasised, “shifting market trends, evolving geopolitical uncertainties, emerging technologies, advancing clean energy transitions and growing climate change impacts are all changing what it means to have secure energy systems.” 

In its summary of the IEA-UK government-hosted Summit on the Future of Energy Security April 2025, the organisers noted that a holistic approach to energy security would emphasise the importance of clean technologies that provide “opportunities to diversify energy supply, harness domestic resources, reduce import dependency and protect billpayers from volatile fossil fuel markets”.

The consequences of relying on the fluctuating price of fossil fuels were illustrated during the energy crisis of 2021-2022 when prices for gas, coal and oil surged upwards with harsh social and economic consequences for many citizens around the world.


Past as prologue: Lessons from recent geopolitical shocks

In assessing the ability of LNG to provide energy security, it is important to understand the different ways in which it can be acquired. Long-term contracts agree a price mechanism for LNG at a set delivery schedule for between 20-25 years – in Asia this price has usually been indexed to the price of crude oil but is now sometimes linked to coal or indexed to a particular hub in the US or Asia. Historically, long-term contracts were common in the LNG trade, and substantial volumes continue to be traded this way – both globally and in Asia specifically – but there are now also more flexible options available, including short-term contracts (four years or less) and spot markets. Buying LNG on spot markets allows buyers to make more flexible purchases as needs shift, but exposes them to greater volatility. The International Group of Liquefied Natural Gas Importers (GIIGNL) refers to “true” spot volumes as those delivered within three months from the transaction date.

In light of current price trajectories, it could appear that LNG will be able to meet the IEA’s energy security indicator of affordability. In 2025, Asian LNG prices on spot markets are falling, partially in response to fears of a slowdown in global economic activity due to tariff wars. The general trend is that prices are forecast to continue falling in the next few years, which could make LNG more affordable in the region. 

However, despite falling prices, price volatility remains an issue, especially on spot markets, where sudden changes can impact affordability and availability, as sales shift to the highest bidder. Volatility-linked supply issues can also impact contract buyers.

The increased globalisation of gas markets has contributed to a stronger correlation between benchmark European gas prices (TTF) and Asian prices (JKM) since 2019. This can mean that when European gas prices increase, it can lead to rising LNG prices in Asia. If this happens at the same time as Asia needs LNG, it can then lead to higher prices in these markets.

This is what happened in 2021 and 2022 when European countries suddenly started buying up LNG from global spot markets after Russia invaded Ukraine in February 2022. The knock-on effect was that countries in Asia, notably Pakistan and Bangladesh, could not access or afford LNG. Some of Pakistan’s LNG contracts were broken by traders seeking higher profits in Europe – illustrating that even if a country has negotiated a contract, this does not guarantee the security of supply metric of energy security.

Overall, the Institute of Energy Economics Japan and the Economic Research Institute for ASEAN and East Asia – two agencies that are supportive of increased LNG use in the region – note that the 2020-2022 period was a time of increasing volatility in LNG prices and that combined with high prices, this “caused serious effects on economic development and steps towards decarbonisation” for the ASEAN region.

In Thailand, for example, more expensive LNG imports in 2022 were a driver of surging electricity prices. This period corresponds with a 28% rise in LNG imports to make up for reduced domestic and pipeline supplies. The Institute for Energy Economics and Financial Analysis (IEEFA) estimates that growing LNG imports contributed to a doubling of domestic gas prices and record electricity prices. In response, the government took several fiscal measures to help consumers facing higher electricity bills. Additionally, the power regulator did not raise tariffs until April 2022, despite increased fuel costs. Tariffs were subsequently raised by 6.4% for May-August, and by 17% for September-December, rates that did not fully cover the spike in LNG prices. The cost to the government to compensate for higher electricity prices for the first four months 2023 came to THB 75 billion (USD 2.2 billion). Since then LNG prices have fallen. But in an example of the long-term consequences of LNG price volatility, state-owned Electricity Generating Authority of Thailand (EGAT) uses a portion of current electricity bills to reimburse itself for the period of high LNG prices when it subsidised electricity.

In Singapore, the government confirmed in October 2022 that higher LNG prices contributed to a rise in electricity prices. It reported that between August 2021 and August 2022 there was a year-on-year increase of 50% for LNG contracts and 224% for spot LNG prices. The difference in these increases shows that compared to spot market purchases, long-term LNG contracts can, to some extent, better shield countries from price volatility, but not completely. 

The utility company SP Group said higher global gas prices were a factor in tariffs rising 8% (by 2.21 cents per kWh) in Q3 2022 compared to Q2. The surge in LNG prices also had a cost to public finances. The Ministry of Finance distributed USD 100 per household in compensation to help with their utility bills, as part of a USD 1.5 billion package to help citizens with rising inflation.

Currency concerns

The 2022 energy crisis also highlights that Southeast Asian countries are at a disadvantage when purchasing LNG because, as the pro-LNG Asia Natural Gas & Energy Association puts it, “these developing nations have fewer financial resources to compete for LNG”, which they note can result in energy shortages or more reliance on oil or coal. One reason for this is that LNG purchases (made on the spot market or via long-term contracts) are often made in US dollars, which is expensive for countries in the region with weaker local currencies (this also means Southeast Asian countries are especially disadvantaged compared to buyers in Europe because the euro is a stronger currency than the dollar).

In practice, this has meant a higher financial burden associated with LNG purchases. For example, depreciation of the Bangladeshi taka between December 2021 and September 2023 increased the cost of LNG imports in local currency terms, putting additional pressure on tight fiscal conditions. Meanwhile, in Thailand, the depreciation of the baht in April 2023 contributed to higher LNG costs and electricity prices for citizens. More recently, in May 2025, Vietnam faced the prospect of more expensive LNG imports, with a knock-on impact on electricity costs, because of the weakening of its currency against the US dollar on the back of the US reciprocal tariffs.

Diversion of LNG cargoes from Asia to Europe

As well as having the potential to make gas more expensive, price volatility and competition with Europe have affected the predictability of LNG shipments arriving in Asia. 

In autumn 2024, a period of low wind speeds in Europe led to a surge in demand for gas to power grids there. This contributed to pushing up European gas prices, and the resulting competition with Asia in turn lifted Asian LNG prices. However, as traders could still get higher profits from shipping to Europe, LNG flows from the US to Asia fell. In October 2024 at least four cargoes were rerouted and another seven changed course in November 2024.  

This cycle of competition-driven supply diversions repeated itself in the first quarter of 2025, when at least ten more shipments were diverted. More profitable market conditions in Europe led to a higher volume of cargoes shipped there and a reduction in imports in Asia, while also contributing to upward pressure on LNG prices in Asia.

LNG imports to Asia are predicted to fall throughout 2025 due to intense competition with Europe for flexible LNG cargoes that can, at times, command a more favourable price compared to Asian spot LNG benchmarks. In short, Asia now has to live with the risk of volatility and sudden surges in demand from Europe. 

Disruptions on shipping routes 

Gas going to an Asian destination takes a route to market that is likely to be longer and slower than in the past. Severe disruptions to LNG supply routes to Asia from the US (the world’s largest LNG producer) have been ongoing for several years, and there is no clarity about when these will be resolved.

Panama Canal: Drought reduced transit of LNG from the US to Asia through the Panama Canal, the quickest route, in 2023. It is uncertain how often these drought conditions will occur again and to what extent they would disrupt future LNG shipping to Asia, but the revenue losses in 2023 convinced the Panama Canal Authority to push forward a USD 1.6 billion plan to build a reservoir in 2027. While this backup water source could be a solution, it is not due for completion until 2032, and its construction could be slowed by resistance from local communities. 

Suez Canal: The 2023 drought at the Panama Canal forced LNG shipping companies to turn to the Suez Canal. This meant higher costs and longer travel distances, alongside disruptions due to ongoing security risks in the Red Sea linked to conflicts in the Middle East. In 2023, around 8% of global LNG shipments went through the Suez Canal. These flows fell from 32.36 million tonnes in 2023 to just 4.15 million tonnes in 2024. Despite the US and the Houthis in Yemen reaching a tentative truce in early May 2025, LNG suppliers are expected to adopt a cautious approach to restarting shipping via this route. 

Cape of Good Hope: The result of disruption via the Panama and Suez canals is that the favoured route from the US to Asia has become via the Cape of Good Hope, which adds significant time. Compared to approximately 28 days via the Panama Canal, or the 34 days via the Suez Canal, it can take around 37.5 days to go round the Cape of Good Hope, incurring higher shipping costs and using more fuel at sea. 

The Oxford Institute for Energy Studies calculates that compared to going through the Suez Canal, a tanker travelling from Texas to Hong Kong via the Cape of Good Hope would increase its round-trip time, potentially reducing the number of round-trips by 10% a year. 

Strait of Hormuz: The Strait of Hormuz has long been identified as a route that would have a significant impact on global LNG supply, as it is the only transport route for LNG from Qatar and the UAE, which together account for around a fifth of the global market. Simmering, and sometimes active, conflicts in the Middle East highlight the potential vulnerability to LNG travelling along this trade route. Modelling published in June 2025 finds that if, in the unlikely event, the strait was blocked for a year, this could remove 110 bcm of LNG supply from the Middle East, resulting in a potential price shock at European and Asian gas hubs similar to that which occurred after Russia invaded Ukraine in 2022. 

Uncertain future: European demand for LNG is the ongoing wildcard that impacts Asia’s energy security

It is difficult to predict how much LNG Europe will require. On the one hand, between 2022 and 2024 energy-efficiency measures and efforts to increase the use of renewable energy contributed to the EU reducing its gas imports by around 60 bcm. The EU calculated that if key policies (including the energy transition framework and the Action Plan for Affordable Energy) are fully implemented, this could lead to a further reduction in gas consumption of between 40 bcm and 50 bcm by 2027.

However, as Europe reinforces its search for alternatives to Russian gas (which currently makes up 19% of gas imports) the region is projected to increase LNG imports by 25% in 2025. If there is slower decarbonisation within the EU, this could mean an additional 30 bcm of LNG imports by 2030. In preparation for this influx, the EU expects its LNG capacity to grow by approximately 200 bcm by 2028. 

Ultimately, a lot hinges on if the European Commission gets approval from the European Parliament to press ahead with its May 2025 proposal to completely phase out Russian gas by 2027. If this is fully implemented it could lead to an increase in demand for LNG from the global market, and therefore competition with Asia.

If Europe does significantly increase its imports of LNG in 2025 and the next few years, this could lead to spikes in LNG prices in Asia that push up domestic gas and electricity prices for citizens and businesses in ASEAN – in summary, a repeat of the dynamic during the 2022 European energy crisis. 



Alternative power sources could provide energy security

Despite the risks to availability, affordability and volatility described above, a number of Southeast Asian countries are planning to increase LNG imports.

The question remains whether this investment is a good one for ASEAN’s long-term energy security. At a time of falling prices, LNG could be seen as an attractive option for Southeast Asian countries, but it cannot guarantee energy security in terms of offering security of supply, affordability and protection from price volatility. 

Investing in LNG-related infrastructure represents an opportunity cost in that it diverts money from developing renewable sources of power that do not face the same risks for energy security.

Renewable potential

Governments in the region understand this reality. For example, the Malaysian National Energy Transition Roadmap, published in 2023 by the Ministry of Economy, notes: “there are concerns about Malaysia’s growing dependence on fuel imports, particularly natural gas imports. Given the anticipated rise in reliance on natural gas and crude oil by 2050, there is a heightened need to focus on ensuring energy security. Moving forward, Malaysia will look to reduce this dependence on natural gas by scaling up of RE capacity and exploring potential non-carbon energy sources.”

There is huge potential for renewable energy in Southeast Asia, but the region is moving too slowly. Based on National Renewable Energy Laboratory (NREL) data, Ember finds that in 2022 ASEAN was using just 1% of its solar (30,523 GW) and wind (1,383 GW) potential. Meanwhile, Global Energy Monitor finds that plans in ASEAN for new utility-scale solar and wind projects use just 3% of its 220-GW prospective capacity, adding just 6 GW to its 28 GW of current operating capacity.

At its April 2025 Summit on the Future of Energy Security, the IEA underscored that clean technologies are helping to maximise domestic energy sources, reduce imports and shield users from fossil fuel price volatility. Therefore, Southeast Asian nations face a choice. They can either import LNG with the uncertainty that brings, or they can look towards their domestic renewable energy sources to strengthen their resilience. 

What steps could ASEAN countries take to increase their use of clean technologies to enhance energy security?

Invest in rapid and ambitious renewables generation

Vietnam shows what is possible. It raised its solar PV  capacity from 105 MW in 2018 to 17.07 GW by 2023 – more than a 16-fold increase. This boost in solar helped the country reduce its import bill. A report by Ember, Centre for Research on Energy and Clean Air (CREA) and IEEFA estimates that between January and June 2022 Vietnam avoided USD 1.7 billion that it would otherwise have spent on imports of oil, gas and coal.

Purchase cheap clean technologies from China

ASEAN members could import cheap solar, wind and battery technologies from China, the global powerhouse of clean technology, which is on their doorstep. China may also be keen to export more solar panels to Asia if it is exporting less to the US. While this would entail import dependency as technology such as solar panels would need to be purchased and replaced after around 30 years, this is a different type of exposure than that of fossil fuels, which need to be imported on a continuous basis.

Use their manufacturing base to use more renewable energy at home

Another option would be to take advantage of the clean technologies they make at home. These countries possess significant solar module manufacturing capacity – outside of China they account for over 40% of global manufacturing capacity – and cover approximately 20% of global exports. 

A new opportunity to use this capacity domestically has perhaps opened up since the Trump administration announced tariffs of up to 3,521% in April 2025 on solar panel components from Cambodia, Vietnam (395%), Thailand (375%) and Malaysia (34%). According to US Census Bureau data, in 2024 Vietnam exported 19,300 MWdc((In relation to mega watts direct current (MWdc) the IEA explains “A large majority of PV installations are grid-connected and include an inverter which converts the variable direct current (DC) output of solar modules into alternating current (AC) to be injected into the electrical grid.”)) of solar modules to the US, followed by Thailand with 13,401, Malaysia 7,594, Cambodia 4,875 and Indonesia 1,853. If governments put incentives in place and investment was found, some of these exports could instead be deployed to increase domestic energy generation within ASEAN, including potentially to expand floating solar PV.

Invest in electricity grids and storage

Alongside installing more renewable energy, complementary investments can help to successfully integrate and store the energy generated by these variable clean power sources. Measures to maximise flexibility and storage, such as pumped hydro, lithium batteries and demand-side management, could play a crucial role in ASEAN. In Thailand, BNEF analysis finds that solar energy combined with battery storage is a cheaper option compared to building a new gas or coal power plant. Such storage capacity could help maximise variable sun and wind energy, as well as reduce the need for LNG imports to back up renewables.

The rapid rise in installed solar capacity in Vietnam was slowed due to issues of grid stability and congestion but this can be overcome by upgrading national and cross-border grids.

Accelerate the ASEAN Power Grid

The ASEAN Power Grid (APG) is an ambitious group of projects that would enable the transmission of electricity throughout the region by 2045 (see Fig. 3). By sharing energy through the APG, Southeast Asian countries have the opportunity to reduce reliance on imports of volatile fossil fuels by maximising each of their respective renewable energy capacities.

By late 2024, nine out of 18 key interconnection projects were finished. These projects facilitated an estimated 266 GWh of electricity flow from Laos via Thailand and Malaysia to Singapore between June 2022 and February 2024, but to complete the APG more finance and harmonisation of regulations are needed, as well as countries to champion it. Accelerating these cross-border connections could balance peaks in demand and the variable (higher or lower) generation from renewable energy in different locations, benefiting ASEAN members as they would be able to move electricity efficiently from regions with abundant hydro, solar and wind generation capacity to major demand centres in an efficient way that strengthens collective resilience. 

Countries with more hydro generation capacity such as Laos, Vietnam and Cambodia could export to countries lacking in hydro capacity, but if hydro generation is lower due to lower rainfall they could rely on other forms of renewable energy or import from their neighbours. Future interconnections from Brunei to the Philippines have the potential to reduce electricity costs and reliance on fossil fuels, but are still in the early stages.

Fig. 3: Existing and future projects in the ASEAN Power Grid
Source: ASEAN Centre for Energy, 2023



Which future will ASEAN choose?

The unreliability of LNG raises the question about what kind of energy system is being built in ASEAN. In its 2024 World Energy Outlook the IEA made the case that: “A new energy system needs to be built to last […] one that prioritises security, resilience and flexibility”. Therefore, Southeast Asian nations face a choice. 

  • They can continue taking a step into the unknown by depending on LNG imports, despite the history and potential for future price volatility, raising doubts that it can ensure resilience and deliver on security of supply. 
  • Or, in their pursuit of enhanced resilience, security and flexibility, ASEAN countries could take steps to generate and store more of their own energy from renewable sources (taking advantage of their existing clean technology manufacturing base to do so), which they then distribute via upgraded national and cross-border electricity grids, including the APG.

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