Sector deep-dive

Industrial Decarbonisation

"The region's largest mitigation lever — and the foundation of resilience."

Companies

191

Top activity (Agriculture Processes)

1,148

Startups across ASEAN-6

Top Stories 2026

The scale of the challenge starts with a blunt fact: Asian fossil fuel and cement producers accounted for nearly a third of global fossil CO2 emissions in 2024, with state-owned coal producers driving most of the increase. Industrial decarbonisation in this region is not a niche problem.

Even where cleaner alternatives exist, the economics often do not: green steel remains 30 to 60% more expensive than the conventional product.

Supply-side solutions are outpacing the demand-side conditions needed to make them commercially viable. Buyers willing to pay a premium, and policy that requires buyers or producers to adopt solutions. If a sector cannot generate its own demand and has to rely on external pressure to move, it has little capacity to organise its own transition.

Green industrial clusters are working around the grid bottleneck.

Green industrial clusters with dedicated, ring-fenced renewable supply can enable Southeast Asia's heaviest industries decarbonise faster than the wider grid can be upgraded. Malaysia's Bintulu is developing as a low-carbon cluster. Indonesia has green industrial parks forming in Kalimantan and Java. Singapore's Jurong Island functions as the region's most integrated example.¹ The number of such clusters has roughly doubled since 2021, from ~45 to ~90.

The proposed Singapore-Indonesia CCS corridor and Malaysia's CCUS Act 870, which enables Malaysia to receive and store CO2 on behalf of emitters in Singapore and other regional economies lacking domestic geological storage, are examples of infrastructure built for shared, cluster-scale use. Shared, service-model provision already works for utilities, for example, at Malaysia's Pengerang Integrated Complex, where power, steam and industrial gases are supplied centrally.

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Verification and Licensing Infrastructure for Cluster-based Carbon Capture

There is a gap between policies paving the way for shared carbon capture and storage across industrial clusters and the capabilities needed to put them into practice: capturing CO2 at source, verifying that it stays stored, and taking projects through licensing.

CO2 monitoring, reporting and verification services
Modular CO2 capture equipment and process engineering for point-source emitters on Singapore’s Jurong Island
Ground validation and monitoring services for cross-border CCS arrangements
Compliance MRV tooling
Licensing and permitting advisory for the pipeline of 19 CCS and CCUS projects Indonesia and Malaysia together are targeting for operations by 2030

Shared Infrastructure Services within Industrial Clusters

Clusters create value because tenants share infrastructure rather than each building their own. This model is under-utilised beyond a few flagship examples now operating.

Shared service models, steam, compressed air, nitrogen and low-carbon heat
Precinct level shared hydrogen and low-carbon energy system structuring
Demand aggregation and power purchase agreement structuring services letting cluster tenants contract renewable power collectively rather than negotiating individually
Cross-tenant carbon-capture-as-a-service
Industrial symbiosis platforms matching waste heat, CO2 and by-product streams between co-located tenants

Heat-as-a-service is opening a path for hard-to-abate sectors.

According to International Energy Agency (IEA), ~35% of Southeast Asia's industrial energy demand is low-temperature heat that could already be electrified with commercially available technologies. Most industrial heat in the region is produced by burning natural gas, oil or coal in equipment such as cement kilns and textile dyeing boilers. Given the region's cement, food processing and textile base, a significant opportunity lies in decarbonising these heat-intensive sectors through new technology and heat-as-a-service models.

Manufacturers may hesitate to invest upfront in energy equipment, but they can more readily accept a known heat cost per unit delivered, an operating expense. This is the logic behind heat-as-a-service. Industrial heat pumps are well suited to this model, since they deliver two to five units of heat for every unit of electricity and can be used in a range of industries, from food and beverage, dairy, textile dyeing, to pharmaceutical manufacturing.

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High-temperature Heat-as-a-service for Hard-to-abate Process Heat

The technologies exist and are commercially proven elsewhere. The opening in this region is in the service structure and the capital-light deployment model.

Heat-as-a-service structures for high-temperature kiln and furnace applications
Industrial heat pump deployment for the 80-to-150 degree range
Combined heat pump and direct power purchase agreement, bundling renewable electricity procurement with the equipment itself
Shared, precinct-level heat infrastructure, spreading the capital cost of heat equipment across multiple industrial tenants at once.

Waste-to-heat Feedstock and Gas Supply

Most waste that could fuel industrial heat is released from open ponds, flared or burned in the field. The gap is turning it into fuel that can replace gas and coal in boilers.

Biomethane upgrading and gas supply contracts in Sumatra and Sabah, converting palm oil mill effluent biogas installations into fuel for neighbouring buyers
Biomass combined heat and power upgrades in food processing clusters, moving from raw combustion to higher-efficiency systems with biomethane input
Cassava and sugarcane bagasse waste-to-heat feedstock aggregation in Thailand, Vietnam and the Philippines.
Smallholder and processor feedstock supply platforms that convert palm oil and cassava waste disposal costs into a biomethane feedstock revenue line
MRV and fuel quality verification for biomethane and biogas offtake contracts

External compliance, not domestic policy, is driving changes in behaviour.

Low-carbon manufacturing investment in Southeast Asia remains driven primarily by external deadlines rather than domestic carbon pricing. The EU's Carbon Border Adjustment Mechanism (CBAM) embedded carbon into a direct 2026 export cost across cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. Vietnam, Indonesia and Malaysia account for significant shares of EU steel imports at emissions intensities well above EU benchmarks, and thus face substantial CBAM exposure. CBAM entered its definitive phase on 1 January 2026, requiring importers into the EU to purchase and surrender certificates proportional to verified embedded carbon, with the first surrender due in September 2027.

The other protocol that is driving behaviour change in SEA is the EU Deforestation Regulation requires proof that palm oil and rubber, two of Southeast Asia's largest agricultural exports, come from plots that were not deforested.

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Embedded Carbon Measurement and MRV for CBAM-exposed Exporters

CBAM requires data audited to EU standards, and most Southeast Asian manufacturers in covered sectors do not yet have systems that produce it to the required precision, presenting opportunities.

Factory-level embedded carbon measurement and MRV platforms calibrated to EU CBAM verification standards (the gap that becomes financially material at the September 2027 first certificate surrender)
Compliance software and reporting tool as a multi-year subscription that suits CBAM's certificate cycle that repeats every year
Calculator tool calculator that shows a factory's real carbon footprint, not EU’s default estimate
Supply chain decarbonisation services for manufacturers one or two tiers removed from direct CBAM exposure

Traceability Infrastructure for the Wider External Compliance Wave

Tightening multinational corporate Scope 3 requirements together with the EU Deforestation Regulation is driving emerging demand for verification infrastructure.

Smallholder plot registration and harvest documentation platforms, integrated with satellite land use verification (compliance with EUDR's 30 December 2026 enforcement date for palm oil and rubber)
Mixed-plastic waste aggregation and pre-processing for chemical and enzymatic recycling facilities (compliance with EU's 2030 recycled content packaging targets)
Verified recycled-content and chain-of-custody platforms
Scope 3 carbon footprint verification for suppliers to electronics, automotive and apparel buyers
Carbon intensity and deforestation risk benchmarking tools

Critical minerals position SEA to supply clean energy chains, but extraction and processing remain dirty.

Southeast Asia's abundant critical mineral reserves, including the world's largest nickel reserves in Indonesia, position the region to supply global battery and clean energy chains. But extraction and processing remain highly polluting. Mineral processing are often sited near ore deposits in remote areas that lack capacity for renewables or grid connectivity. Smelting needs constant high temperature heat that coal supplies cheaply and reliably. Nickel buyers ask for discounted prices even when requiring a lower carbon footprint. This leaves companies unable to justify the investment in cleaner processing.

Stronger incentives, including carbon credits and innovative financing, could unlock the sector's transition. Climate Policy Initiative Indonesia is developing carbon credit methodologies as a "sweetener" for economic zones to move away from captive coal, with mechanisms to incentivise early coal plant retirement and renewable replacement.

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Secondary Feedstock and Recycling Infrastructure

As processing capacity grows faster than ore supply, and end-of-life batteries and electronics accumulate across the region, the opportunity lies in new feedstock: recycled battery materials and magnets, and technology to make lower-grade ore usable.

Battery recycling and lithium-ion collection services with offtake agreements to mixed hydroxide precipitate or nickel sulphate producers
Rare earth recycling and secondary REE recovery from electronic waste and end-of-life magnets
Lower-grade limonite ore beneficiation technology
Battery take-back and collection infrastructure services
Closed-loop feedstock aggregation platforms connecting battery and magnet waste streams across borders to Indonesian and Malaysian processing capacity

Financing and Verification Tools for Cleaner Extraction

Producers need a way to make the transition bankable, and buyers need a way to trust and eventually pay for what is verified. Transitioning nickel processing from captive coal is expected to cost ~US$2.5 billion a year through 2030.

Carbon credit methodology development and structuring for nickel processors transitioning away from captive coal
Low-carbon nickel and critical minerals certification and verification platforms
Innovative financing structures, including early coal-retirement and renewable replacement vehicles, that de-risk the transition for producers
Renewable energy offtake and power purchase agreement structuring for captive power nickel processors
Lifecycle emissions verification and disclosure tools letting Indonesian producers document genuine carbon-intensity improvements