Inaction and maintaining the status quo of fossil fuel dependence carry significant costs. The recent closure of the Strait of Hormuz, for instance, caused enormous losses to the global economy, with many Asia-Pacific countries bearing disproportionately larger adverse impacts. Had these economies had a more diversified energy mix, they would have benefited from such resilience under current circumstances. 

Green transition, however, comes at a significant cost – investment in environmental sustainability. This investment brings tangible returns and benefits, such as cleaner air, better health, a vibrant natural environment or reduced negative climate impacts. What is the overall balance of these costs and benefits, opportunities seized or lost, innovation, or status quo maintenance?

This overall balance amounts to decisions for a faster or slower shift towards environmental sustainability and green transition. Each carries fiscal, investment and financing consequences with differing socioeconomic outcomes. Overall, because of these countless dimensions, decision-making for green transition is inherently complex. In principle, humanity has never undertaken a green transition before and lacks established blueprints.

ESCAP’s Economic and Social Survey of Asia and the Pacific 2026 sheds light on this challenge. The report identifies decarbonisation pathways that offer lower costs and higher benefits, highlights bottlenecks that inflate expenses, clarifies current priorities, and examines socioeconomic impacts. In short, the Survey 2026 identifies cheaper options with greater impacts.

For instance, in some Asia-Pacific countries, the choices on decarbonisation are relatively straightforward. With limited fossil fuel dependence, low risks of asset stranding and minimal vested interests in coal, oil and gas industries, these economies are advancing renewable energy expansion. They are leapfrogging decarbonisation hurdles and reaping steady benefits from carbon-free energy.

However, economies heavily reliant on fossil fuels are confronting tougher dilemmas. Faster carbon withdrawal brings higher immediate costs, offset only by longer-term benefits. Labour markets face greater pressure from anticipated reskilling and green sector development. These economies face elevated risks and must proceed cautiously. Ultimately, the green transition demands strong and prosperous economies capable of delivering goods and services to build a carbon-free world.

As for labour markets, net employment effects of green transition can be positive overall, yet uneven across countries and sectors. Fossil fuel job losses, potentially abrupt ones, are often concentrated in mineral-rich areas, with knock-on effects on related industries. Historical coal phase-outs without prompt government support reveal prolonged unemployment, youth out-migration, and community decline. Older workers are particularly at risk of exiting the labour force permanently. In contrast, green jobs emerge more gradually, often elsewhere, and require different skills. This mismatch highlights the need for proactive government planning – including funded reskilling and economic diversification – to redeploy skills from declining sectors.

Inflation provides another example of dilemmas faced by policymakers that are or want to pursue green transition. Higher inflation undermines economic activity and complicates transition-oriented policymaking. For instance, green transition policies, such as carbon pricing, can gradually increase prices, and thus inflation. This can raise interest rates, hinder capital-intensive green investments and pose financial stability challenges for central banks. Economies may tolerate modest and stable inflation, but high and volatile inflation will undermine the green transition efforts.

The Survey 2026 also highlights that government interventions like subsidies can be beneficial but can also lock-in suboptimal technologies. Too much of a good thing can be harmful. Government policies should guide objectives and priorities, for example, the need for better and cheaper energy storage, and enable people and enterprises to discover the most effective solutions. Market-friendly policy tools, such as technology-neutral emission limits, clear long-term plans and streamlined permitting, are all important policy adjustments.

“Take the right decisions, allow markets to work in a fair way” was a message on climate action by the UN Secretary-General António Guterres in 2025. The Survey 2026 builds on this, emphasising that market mechanisms can drive decarbonisation by identifying the best opportunities. The report also reinforces the call for “right decisions” to ensure a just and inclusive transition. 

There are often easier and harder paths to the same goal. With due regard to diverse national circumstances, Asia-Pacific economies must progressively move to a low-carbon future, while safeguarding socioeconomic well-being of their people. There is no universal set of policies, but there is one clear direction. Although some costs may seem high today, inaction would prove far more expensive. At the end, optimal paths require pragmatic, evidence-based judgement: gradual where necessary, ambitious where feasible, and always mindful of who bears today’s costs versus tomorrow’s benefits.