Exploring the Role of Foreign Direct Investment in Optimal Fuel Mix for a Sustainable Energy Transition in ASEAN

Sakib Bin Amin, Fardin Anwod Ayshi, Farhad Taghizadeh-Hesary, Farhan Khan and Adiba Nawaz

Chapter 6 in Green Finance and Energy Transition in ASEAN, 2026, pp 171-202 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The purpose of this chapter is to critically discuss the role of foreign direct investment (FDI) in achieving an optimal fuel mix for a sustainable energy transition in the Association of Southeast Asian Nations (ASEAN). Globally, fossil fuel use has increased to meet the rising demand for energy brought on by economic growth. This has elevated concern for environmental sustainability as fossil fuels emit greenhouse gases, which are responsible for climate change. In this context, ASEAN Member States are making an effort to switch to renewable energy (RE) sources. The region requires huge investments to support this transition; however, present investment levels are below expectations, impeding the region’s progress toward its energy targets. FDI could play a significant role in reducing the investment gap and accelerating the RE development in ASEAN. The region does, however, confront a number of challenges that could impede the integration of FDI in RE projects. In order to reduce the challenges and make efficient use of FDI for ASEAN’s energy transition, this chapter suggests a few policy recommendations.

Keywords: Green Finance; Energy Transition; ASEAN; Carbon Neutrality; Renewable Energy; Sustainable Finance; Climate Finance; Energy Policy; Green Bonds; Net-Zero; Transition Finance; Clean Energy Investment; Sustainable Development; Decarbonization; Climate Change Mitigation; ESG (Environmental; Social; and Governance); Low-Carbon Economy; Energy Markets; Financial Mechanisms for Sustainability; Energy Efficiency; Foreign Direct Investment (FDI) in Energy; Carbon Pricing; Policy and Regulation; Just Transition; Green Sukuk; Sustainable Infrastructure; Public-Private Partnerships (PPP); Institutional Investors in Clean Energy; Green Investment Strategies; Financing Renewable Energy; Southeast Asia Energy Policy; China Energy Investment; ASEAN Climate Goals; Energy Security in ASEAN; COP28 and Energy Transition; COP29; Economic Growth and Green Energy; Sustainable Power Systems; Carbon Markets in Asia; Green Hydrogen in ASEAN; Electrification and Smart Grids (search for similar items in EconPapers)
JEL-codes: G23 O13 Q01 Q40 Q50 Q56 (search for similar items in EconPapers)
Date: 2026
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