Japan: The evolution of the compliance market began with the Tokyo Cap and Trade Programme (2010) and the Saitama ETS (2011). Building on these foundations, Japan launched the Green Transformation ETS (GX-ETS) in 2023 as a national-level voluntary system. GX-ETS is set to transition into a full compliance market by 2026, marking a strategic shift from subnational experimentation to a unified, nationwide carbon pricing framework.30 South Korea: Launched in 2015, South Korea’s ETS (K-ETS) was East Asia’s first national-level compliance carbon trading scheme. It has gradually expanded to cover 79% of national emissions and shifted towards an increased proportion of sector-specific benchmarking allowance allocation to incentivize carbon abatement efforts.31Singapore: Due to its small size, Singapore did not introduce a carbon market; but in 2019 it put a price on its emissions through a carbon tax that covers 80% of emissions. Initially set at S$5/tCO2e (2019-2023), the tax increased to S$25/tCO2e ($19.50) in 2024 and is expected to continue rising up to 2030 to strengthen the price signal and drive business actions.32 Due to mature carbon pricing schemes, evolving policies and constrained local supply of carbon credits, developed economies often welcome high- quality overseas carbon credits to support emitters in meeting their compliance requirements. Article 6 of the Paris Agreement has emerged as an essential mechanism to enable such international voluntary carbon credits to be formally used for compliance purposes. In June 2025, Singapore and Japan also released new rules for voluntary carbon credits to promote transparent, financially sound and investor- protective transactions.33 Regional and international collaboration in developed Asian economies TABLE 2 Country System Japan Established the Joint Crediting Mechanism (JCM) in 2013, which enables bilateral low-carbon projects across 30 partner countries. Its ETS is the first to explicitly include international carbon dioxide removal (CDR) projects (e.g. BECCS, DACCS, Blue Carbon)1, integrating these via the JCM framework. South Korea Allows carbon credits generated from international CDM projects if the project is either: a) developed by a company with at least 20% of Korean company ownership or operating rights; or b) supplied by a Korean company of low- carbon technology worth at least 20% of the project cost. Singapore Eligibility criteria are outlined through seven environmental integrity principles for companies to source internationally eligible carbon credits in a cost-effective manner. Actively engages in Article 6.2 activities, having signed multiple implementation agreements and MOUs to facilitate cross-border carbon transactions. Note: 1. BECCS = bioenergy with carbon capture and storage; DACCS = direct air carbon capture and storage. Sources: Intelligence, Q. C.; International Carbon Action Partnership; National Climate Change Secretariat, Singapore Prime Minister’s Office.34 Market expansion towards global leadership With growing pressure to meet NDC targets and accumulating experience from pilots, developed Asian markets are advancing their carbon pricing schemes. –Compliance market expansion: Korea’s K-ETS is set to encompass more sub-sectors in phase 4 (2026 to 2030);35 Japan’s GX-ETS is becoming mandatory by 2026.36 –Intensifying carbon pricing signals: Singapore’s carbon tax rate was raised with effect from 2024;37 the proportion of auction-based emissions permits will increase for both K-ETS in phase 4 (2026 to 2030) and GX-ETS (starting 2033).38 These markets have the chance to lead with their market frameworks and advanced low- carbon technologies. Meanwhile, both the Singapore and South Korea governments aspire to establish regional or even global hubs to facilitate international connectivity and communication, capitalizing on their advantages in stable regulation, robust infrastructure and financial systems. Asia’s Carbon Markets: Strategic Imperatives for Corporations 17

Asia's Carbon Markets Strategic Imperatives for Corporations 2025