Cutting fossil fuel subsidies will free up more cash for the energy transition. Over $1 trillion of external finance needs to be mobilised by 2030 to support the decarbonisation efforts of emerging markets and developing countries, except China. Total annual investment needs for these countries is estimated to be $1 trillion in 2025 and $2.4 trillion by 2030. Reducing fossil-fuel subsidies would free up fiscal space and improve incentives for private investment created by instruments such as carbon tax mechanisms.

A complete realisation of Asia-Pacific nations’ climate pledges would benefit their economic growth, employment and trade balance. Reskilling programmes are required to mitigate the impact of sizable job losses in the fossil fuel industry and ensure a just transition, while sectors that are part of the low-carbon transition supply chain would see significant growth in employment, including in construction and electricity supply. Still, the region’s commitments are not aligned with international targets. A cumulative 21% reduction in emissions is expected by 2030, compared with 2010, lagging the 45% cut required to remain on track for the 1.5˚C warming goal.

The UN’s latest emissions gap report finds that the international community is falling short of the Paris goals, with “no credible pathway” to 1.5°C. Since COP26 in 2021, progress has been “woefully inadequate”. Only an urgent system-wide transformation can avoid climate disaster. National governments should remove fossil fuel subsidies in a socially acceptable manner, remove barriers to the expansion of renewables, stop the development of fossil fuel infrastructure, plan for a just fossil fuel phase-out and adapt market rules of the electricity system for a high share of renewables.