Asia's Carbon Markets Strategic Imperatives for Corporations 2025

1.5 Regional and international collaboration Each of these Asian markets has distinct characteristics and should follow its own development path. However, they can achieve greater effectiveness by complementing one another, bridging their differences and optimizing outcomes. Article 6 of the Paris Agreement holds significant potential to usher in a transformative era of global multilateral carbon pricing by creating a cohesive framework for international cooperation. It facilitates linking regional and national systems through Internationally Transferred Mitigation Outcomes (Articles 6.2 and 6.4), promoting collaboration and reducing market fragmentation. The Asia region is the leading issuer of Article 6.2 deals, with Japan, Singapore and South Korea among the most actively involved buyers. The region, led by China, also represents a substantial proportion of the CDM credits that have applied for transfer to the new Article 6 mechanism.International connectivity could be a transformative force in global markets, by driving development in: –Market scale and liquidity: expanded cross- border participation stimulates supply-demand matching and attracts global capital. –Economic optimization: access to global resources can secure the most cost-effective solutions and suitable financing options. –Climate goal acceleration: fostering synergies across jurisdictions, mobilizing global resources and expanding mitigation opportunities can accelerate the achievement of global climate goals. Article 6 of the Paris Agreement holds significant potential to usher in a transformative era of global multilateral carbon pricing by creating a cohesive framework for international cooperation. From regional collaboration to global linkage In the near term, deepening cooperation among neighbouring markets lays the groundwork for longer-term global integration. Early signs of progress are emerging in efforts to accelerate the development of harmonized, interoperable carbon credit markets across Asia, for example: the ASEAN Common Carbon Framework (see Box 2); the Coalition to Grow Carbon Markets, launched by Singapore, UK and Kenya; and the JCM launched by Japan. A more interconnected Asian carbon market can be built on these foundations, to drive closer regional cooperation and synergy. The ASEAN Common Carbon Framework BOX 2 The ASEAN Common Carbon Framework (ACCF) operationalizes the ASEAN Strategy for Carbon Neutrality by creating an integrated, interoperable carbon market across ASEAN member states. ACCF emphasizes localized methodologies, standard recognition, compliance linkages and shared MRV tools to drive collaboration. ACCF adopts a phased implementation roadmap, focused initially on expanding high-integrity carbon projects, then improving market liquidity and price discovery, and eventually advancing deeper integration. Source: ASEAN Business Council.41 Multiple carbon credit exchange platforms are being established across Asia to foster interconnectivity. More mature platforms include: China’s Beijing Green Exchange, Shanghai Environmental Energy Exchange, and Hong Kong Exchanges and Clearing Limited (HKEX); Japan’s Tokyo Carbon Credit Market; South Korea’s K-ETS (traded in KRX Exchange); and Singapore’s Climate Impact X (CIX) and AirCarbon Exchange (ACX). Emerging platforms such as Malaysia’s BCE (Bursa Carbon Exchange), Indonesia’s Indonesian Carbon Exchange and Thailand’s FTIX are also gaining traction. Collaboration between exchanges could enable international projects to achieve interconnectivity and interoperability.Linking carbon pricing mechanisms while respecting national priorities is challenging, as the push for carbon pricing can conflict with domestic economic growth. Hence, for both regional and global collaboration, various forms can be adopted to match needs in each jurisdiction and boost efficiency. Three distinct types of collaboration opportunities are emerging: –Cross-border market matching: Asian markets exhibit distinct supply-demand dynamics. For example, China shows substantial demand potential as the world’s largest compliance market, while India and South East Asian countries possess the capacity to supply abundant carbon credits in the near term, if robust MRV systems are ready. Asia’s Carbon Markets: Strategic Imperatives for Corporations 20