In context of our planet’s dynamics and its consequences, global, regional and national Asia’s energy transition is critical. The evolution and complexity of multilateral cooperation need to be examined from multiple vantage points. Energy transition is imperative given energy dependence on coal, fuel, and other fossil-based sources[mk1] (given over a trillion of subsidies) have phenomenal consequences for climate. Delayed action enhances the climate risk and cost of transitioning to renewables.
Global climate inaction costs trillion of dollars far exceeding the investment needed for climate action that could cost up to a third of global GDP in this century. By 2023 global immediate losses from disasters ranged around USD 368 billion, while over business-as-usual scenarios, economic damage can potentially rise to over USD 2,000 [mk2]trillion (Climate Policy Initiative, 2024). The economic cost of health impacts of climate change is projected to reach between USD 8.6 to USD 15.4 trillion by 2050. Climate change has serious consequences of food insecurity and people’s health.
Climate action is urgent and if effectively steered and coordinated at the Conference of Party (COP) level would lend hope to humanity.
First, the fracturing fault lines are stress testing the foundations of international cooperation in ways not seen since the end of the Second World War. Faltering leadership and shifting commitments among global powers are straining global governance frameworks and the cooperative arrangements that have underpinned development and climate action for decades.
Yet multilateralism is resilient. The question is not whether cooperation will continue, but who leads it and what form it will take. For Asia, this is not a crisis but a clarion call.
Consider the paradox we inhabit: geopolitical fragmentation threatens to slow decarbonization by inaction and has limited the diffusion of technologies and raised transition costs. However, Asia has emerged as the undisputed center of clean energy manufacturing, deployment, and innovation. China and other Asian economies have added renewable capacity at an unprecedented scale in recent years—a statement of where momentum and capability now reside in the global energy transition.
Second, there is great divergence between transition aspirations versus energy realities. JP Morgan: Assessing Climate Change Risks: Energy Transition report, 2025 offers a sobering reality check: despite unprecedented investment, the renewable share of total final energy has risen only gradually.
The transition should be measured in decades, not years. Why this disconnect between ambition and reality? McKinsey’s Global Energy Perspective, 2025 underscores the need for cost competitiveness and pragmatic approaches over aspiration alone. Their “hard stuff” catalog underscores grid modernisation, critical minerals, hydrogen infrastructure, and carbon capture and reminds us that physical constraints must be overcome.
An analysis for Asia reveals both the scale of opportunity and the magnitude of the challenge. The region could unlock trillions in revenue opportunities by 2030 from renewables and clean technologies, but must multiply annual investment—on the order of trillions—to align with net-zero pathways.
The infrastructure gap is staggering. The Asian Development Bank’s Energy Transition Mechanism pilots—most advanced in Southeast Asia—are expanding, with additional countries exploring participation. Flagship initiatives will need more predictable financing and stronger implementation strategies to reach breakthrough scale.
Third, it’s urgent to finance the unfunded mandate. At COP29, developed countries signaled intent to increase climate finance—figures discussed include at least USD 300 billion annually by 2035—with pathways to mobilize over USD 1 trillion from broader sources. Yet Asia alone requires investment on the order of trillions annually to stay on track for net-zero pathways. The gap between intent and delivery is sobering and must be closed.
Fourth, our current climate finance architecture remains insufficiently fit for purpose. Let me enumerate the challenges—and the fixes we need:
Scale and access: The Green Climate Fund and Global Environment Facility operate below the scale required, with access pathways that need simplification, capacity support, and predictable replenishments.
Multilateral development banks’ capital adequacy and lending headroom frameworks and hybrid capital require to be scaled, and guarantees be deployed to scale lending for long-gestation energy transition projects.
Risk and bankability require private capital flows to where returns are certain and risks are minimal. We must crowd it in through guarantees for first-loss tranches, credit enhancements, standardized Power Purchase Agreements (PPAs), and robust procurement.
Programme integration and uptake is under way. The innovative instruments like the IMF’s Resilience and Sustainability Framework have been introduced but its uptake depends on building capacities, project pipelines and expanding eligible windows to accelerate deployment.
Developing Asia face fiscal constraints, energy security imperatives, and large climate finance requirements. Besides reforms, co-designed solutions with partners are critical to reinforcing macro-stability and climate ambition.
Fifth, move South–South cooperation from rhetoric to reality. If the existing architecture is not yet fit for purpose, Asia must build its own—complementing, not replacing, global pathways.
The foundations already exist. The Asian Infrastructure Investment Bank has mobilized substantial capital for regional connectivity and green infrastructure. The Asian Development Bank’s Energy Transition Mechanism (ETM) financing scheme allows for working models for ETMs. Like support for Pakistan to scale and accelerate the transition from coal and other fossil fuels to clean and renewable sources. Regional grid interconnection initiatives in ASEAN and South Asia demonstrate the technical feasibility of cross-border energy cooperation.
Sixth, to go further and faster, I propose three pillars for renewed Asian multilateralism:
- Pillar One: An Asian Climate Transition Fund. We need a dedicated, well-capitalized regional financing mechanism—a genuine pool of patient capital for the energy transition in emerging Asian economies.
o Capital structure: Mobilize sovereign and private capital, with explicit first-loss tranches provided by Asian MDBs.
o Use of proceeds: Concessional financing for early coal retirement, grid flexibility and modernization, utility-scale storage, and renewable deployment.
o Project preparation: Technical assistance facilities to build bankable pipelines—addressing the commitment-to-implementation bottleneck.
o Governance and criteria: Clear, transparent standards that balance climate ambition with development priorities, overseen by a coalition of Asian MDBs and sovereign contributors.
Pillar Two: Regional technology cooperation and supply chain integration. China’s leadership in solar manufacturing, batteries, and wind is pivotal for scaling. We should leverage regional strengths while diversifying supply chains, advancing common standards, and fostering joint manufacturing, R&D, and workforce development.
Pillar Three: Just transition frameworks with real teeth. Implementation must be community-centric, equitable, and locally empowered.
o District-level planning: Develop transition plans that begin at the district level, not just in capital cities.
o Social protection and reskilling: Establish reskilling funds and community benefit compacts for workers and communities dependent on fossil fuels.
o Energy access and affordability: Ensure reliable, affordable energy as we decarbonize—recognizing that many still lack dependable electricity.
o Local government empowerment: Provide performance-based grants and project preparation facilities to provinces and municipalities, supported by transparent dashboards.
Seventh, promote Pakistan’s pathway: from laggard to laboratory
Pakistan’s recent IMF engagements—the Extended Fund Facility and the RSF—offer a framework, however imperfect. The RSF focuses on strengthening public investment processes, improving water resource management, enhancing intergovernmental coordination on disaster financing, and improving climate risk disclosure.
But implementation is everything. Here is what Pakistan must do—and what it can teach the region:
Bridge federal–provincial divides: Our 18th Constitutional Amendment decentralized power but fragmented climate governance. The 2025 NDC update must inaugurate binding provincial climate action plans with ring-fenced budgets and timelines, aligned to the Enhanced Transparency Framework.
Adopt a portfolio approach to energy security: Modern grids can integrate high shares of variable renewables with appropriate flexibility mechanisms and storage. Pragmatic pathways should phase out the most polluting assets first, while building infrastructure for a diverse, resilient mix that safeguards baseload needs and affordability.
Mobilize private capital at scale: Government resources will never be sufficient. We need regulatory frameworks that make green investments attractive—contract sanctity, transparent tariffs, standardised PPAs, predictable procurement, and streamlined approvals.
Rebuild credibility through transparency: Deliver robust monitoring, reporting, and verification under NDC 3.0. Establish real-time dashboards, independent audits, and regular public reporting to build international confidence and unlock finance.
Pakistan climate challenges, a mirror for the region, are however unique, as they illuminate the broader tensions faced by many nations. Pakistan-updated Nationally Determined Contributions (NDCs) commit to reducing projected emissions by 50 percent by 2030—15 percent unconditionally, 35 percent conditional on international support. Pakistan aims to expand renewables, accelerate electric mobility, and halt new imported coal capacity. These ambitions are significant, yet closely, requiring tens of billions over coming decades.
But the uncomfortable truth is that country’s credibility gap has weakened Pakistan’s negotiating position. Past NDCs were not fully implemented. Provincial plans remain incomplete. Budgets remain insufficient. Meanwhile, Pakistan is among the world’s most climate-vulnerable countries, evidenced by the devastating 2022 floods and recurring monsoon impacts causing widespread displacement and economic loss.
The 2025 Residence Sustainability Fund (RSF) arrangement of USD 1.4 billion is welcome, but IMF estimates that Pakistan needs sustained adaptation spending of approximately 1 percent of GDP annually. Energy demand is projected to outpace domestic supply significantly by the mid-2030, even as renewables grow from a low base.
This reflects a broader dilemma across the developing world: climate finance often flows through macroeconomic programs that must balance fiscal sustainability with climate ambition.
The path forward lies in integrated design sequencing fiscal reforms alongside targeted green investments, leveraging blended finance, and building scalable, bankable project pipelines.
Asia’s energy future is promising but depends on how the geopolitical realities shape it. The China-Pakistan Economic Corridor delivered critical generation capacity and grid assets. It also introduced long-term fiscal commitments through capacity payments that require periodic optimization and transparency as demand patterns evolve. Pakistan and China can jointly calibrate contract structures—aligning capacity payments with system flexibility, renewable integration, and affordability—while safeguarding bankability.
Shifting trade policies and technology restrictions complicate choices. Europe’s Carbon Border Adjustment Mechanism is moving from transitional to financial phases, with obligations commencing in 2026; decarbonizing export-oriented industries is now a competitiveness imperative. Similar mechanisms could proliferate.
The emerging architecture of “climate clubs” and green alliances risks creating a tiered system where countries with resources and capabilities accelerate ahead, while others are left behind—not for lack of ambition, but for lack of access to technology and finance on fair terms.
Asia’s response must be strategic unity without conformity. We need platforms for coordinated negotiation in international forums, alongside flexibility for diverse national pathways that reflect different circumstances, capacities, and development stages.
In conclusion, to build a fit-for-purpose order for Asia’s transition it is critical to recognize that the new multilateralism principles for the road ahead are anchored on several foundational principles:
Equity with accountability: Differentiated responsibilities must be matched with transparent commitments and robust monitoring. The era of pledges without performance must end.
Localisation with standards: Solutions tailored to national and sub-national contexts should operate within regional and global standards that enable trade, technology transfer, and mutual recognition.
Flexibility with ambition: Transition pathways should be pragmatic about sequencing and timing, while staying aligned with planetary boundaries.
Public leadership with private partnership: Governments must set direction and enable conditions, while mobilizing private investment through genuine risk-sharing mechanisms.
South–South cooperation with North–South accountability: Regional cooperation complements—not replaces—the responsibilities and obligations of developed countries. Climate finance is obligation and investment, not charity.
Call to action is critical.
We stand at an inflection point. The old multilateral order is fracturing, and a new one has not yet taken shape. In this interregnum, as Antonio Gramsci observed, “great variety of morbid symptoms appear,” describing “organic crisis” where dominant ideology losses its efficacy.
But interregnums also create space—for innovation, new forms of cooperation, and leadership from unexpected quarters. Asia—home to 60 percent of humanity, the fastest-growing economies, the most dynamic clean energy sectors, and, tragically, some of the most severe climate vulnerabilities—must seize this moment.
The old multilateralism is indeed at the brink. But from its rubble, we can build something more fit for purpose—more inclusive, more action-oriented, more accountable, and more effective.
The window for limiting warming to even well below 2 degrees C[mk3] is narrowing. The window for building the multilateral cooperation that can deliver on climate commitments is also narrowing—but it has not yet closed. Whether nations seize this opportunity or squander it will determine not just our energy future, but the future of billions of Asians who depend on us to get this right.
It’s time for global collective action to move from diagnosis to prescription, from pledges to implementation, from fragmentation to focused cooperation. The stakes could not be higher. The time for action is now.
[mk1]fossil-based
[mk2]
[mk3], even well below 2 degrees C
Copyright Business Recorder, 2025
The writer is a former Governor of State Bank of Pakistan, Finance Minister and United Nations Under Secretary General