Rethinking carbon lock-in: Financial and contractual drivers in Southeast Asian power systems

What explains Southeast Asia's persistent resistance to decarbonization despite falling renewable costs and growing climate commitments? While existing literature points to carbon lock-in through technological and institutional dynamics, it under-theorizes how financial and contractual arrangements — especially in emerging economies — interact to stabilize and reinforce fossil fuel dependence across contexts. We develop a financial–contractual lock-in framework that conceptualizes how project-level funding structures and long-term contractual commitments aggregate into system-level inertia. Applying this framework across five major Southeast Asian power systems (Indonesia, Malaysia, Thailand, Vietnam, and the Philippines), we trace how these mechanisms convert private investment protections into public fiscal rigidity, aligning state and investor interests around continued fossil fuel operation. Our findings reveal that the tractability of exit depends on creditor reachability, counterparty coordination, residual financial exposure, and state fiscal or institutional restructuring capacity. Where market liberalization has advanced, lock-in is relocated rather than removed: legacy obligations are socialized through consumer charges rather than the sovereign balance sheet, and renegotiation is complicated by the dispersal of contractual obligations across multiple private counterparties, even as forward-looking fossil investment faces genuine market discipline. Gas risks replicating coal's bankability logic where states extend comparable risk mitigation, making a second generation of lock-in a policy choice rather than an inevitability. The framework offers a transferable diagnostic lens for scholars examining fiscal and legal dimensions of fossil fuel persistence beyond these cases.