Cambodia at the Energy Test: The Textile Industry Confronts Its Green Transition

The garment sector, a pillar of the Cambodian economy, faces a contradictory injunction: to decarbonize massively by 2030 to satisfy major global brands, while controlling some of the highest energy costs in the region. A report from EnergyLab Asia outlines a pathway out at a higher level.

A key sector caught in a vise

With nearly one million employees and $13.74 billion in export revenues in 2024, representing 52% of the country's export GDP, the Cambodian textile industry is not just another sector: it is the backbone of the national economy. Nearly 800 factories, concentrated around Phnom Penh and the Sihanoukville special economic zones, supply global fashion giants from H&M to Inditex, and from Ralph Lauren to ASOS.

But this model, built on wage competitiveness and cheap thermal energy from wood, is now weakened by a double pressure: the country's imminent graduation from Least Developed Country (LDC) status, which will end certain trade preferences with the European Union, and the increasing climate demands of international buyers.

2030: Brands' Ultimatum

Major fashion brands' commitments are no longer mere statements of intent. Through the UNFCCC Fashion Charter, the Science Based Targets initiative (SBTi), or the RE100 program, companies such as H&M Group, Burberry, Ralph Lauren, PVH, and ASOS have committed to sourcing 100% renewable electricity by 2030 — and to eliminate all coal from their supply chains. Brands like Patagonia, Chanel, or Stella McCartney are even targeting carbon neutrality as early as 2040.

The consequence for Cambodian factories is direct: those unable to demonstrate certified green energy production risk losing orders to countries better equipped regulatory-wise, such as Vietnam, Bangladesh, or China.

The wood problem: a time bomb

Cambodia's historical energy advantage rested on abundant wood from rubber, mango, or acacia plantations, used as thermal fuel in factory boilers. For years, this wood was considered a renewable, zero-carbon energy.

That status is now seriously challenged. Investigative journalism, academic studies — notably the work of British researcher Laurie Parsons — and repeated warnings from environmental NGOs have established that a significant portion of the wood burned in Cambodian textile factories actually comes from cleared forests, not certified agricultural waste. In 2023, TAFTAC — the garment exporters' association — itself acknowledged that at least 300,000 tonnes of forest wood were burned annually in sector factories.

Unlike Vietnam, which has a structured rice husk valorization industry, Cambodia has no truly operational agricultural-waste supply chain. In this context, the only credible route to produce renewable and traceable heat remains the full electrification of thermal processes.

Electrify or die

This is the central message of the report published on June 4 by EnergyLab Asia. The non-profit organization, based in Phnom Penh since 2018, demonstrates that a complete electrification of Tier 1 factories — those that assemble and finish garments — is not only technically and financially feasible, but would enable Cambodia to become the first garment-producing country operating entirely on renewable electricity.

Today, 55% of the energy consumed by Cambodian textile factories is thermal — mainly wood — versus 45% electricity. If all biomass boilers were replaced with electric equipment, the sector's electricity consumption would double, rising from about 6,267 GWh to more than 13,000 GWh. Compared with the Cambodian national grid capacity, estimated at 44,185 GWh per year, this effort is perfectly absorbable according to projections in the national Power Development Plan.

For Kim Hellström, Head of Sustainability at H&M Group: "Access to unbundled renewable energy certificates, such as I-REC in Cambodia, is crucial to reach our 100% renewable electricity goal. In neighboring countries like Vietnam and Bangladesh, the recent introduction of corporate power purchase agreements (C-PPAs) has offered significant competitive advantages."

Three urgent policy levers

The report identifies three priority workstreams for policymakers. In the short term, the Cambodian government is urged to finalize the rollout of renewable energy certificates (RECs), according to the international I-REC standard, to allow factories to certify their green electricity consumption. Next, a review of rooftop solar policy (RTS) is needed to remove tariff barriers that hinder the installation of photovoltaic panels on factories. In the medium term, creating a regulatory framework for corporate power purchase agreements (C-PPAs) — already in place in Vietnam, China, the Philippines, India, and Turkey — would send a strong signal to investors."Energy policy is no longer a niche environmental priority.

It is an economic resilience imperative," says Dean Rizzetti, Director of Energy Policy at EnergyLab Asia. "Cambodia has one of the cleanest power grids in Southeast Asia, with rapidly growing solar capacity. With the right policy signals, the garment sector can electrify and lead the world in decarbonization."

The Tier 2 map: the challenge of the next decade

Beyond protecting the existing industrial fabric, the report opens another perspective: the development of Tier 2 factories, which produce raw materials — woven fabrics, knits, dyed textiles — used by Tier 1 garment factories. Cambodia currently has only about twenty of them, compared with hundreds in Vietnam or China. Yet 90% of the fabrics used by the sector are still imported.

"Maximizing the potential of clean energy could directly protect Tier 1 and support Tier 2 production, advancing Cambodia up the garment value chain and continuing to anchor the sector in the national economy for decades to come," concludes Natharoun Ngo Son, Country Director of EnergyLab Asia.

« Maximiser le potentiel de l'énergie propre pourrait directement protéger le Tier 1 et soutenir la production Tier 2, faisant progresser le Cambodge dans la chaîne de valeur du vêtement, et continuer à ancrer le secteur à l'économie nationale pour les décennies à venir », conclut Natharoun Ngo Son, directeur pays d'EnergyLab Asia.

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The report "Cambodia's Garment Sector: Scaling Electrification to Deliver Growth" was published on June 4, 2026, by EnergyLab Asia.