Asia's Carbon Markets Strategic Imperatives for Corporations 2025

–Joint capacity and project building: regional disparities within Asia have led to uneven capabilities in carbon market participation. Established markets with strong financial infrastructures and academic expertise can complement resource-rich but less developed markets. China with its unique “dual-layer framework” (coordinated national and local carbon markets) and Japan with its experience from JCM can offer valuable insights on improving efficiency and effectiveness. For example, leading Asian carbon markets can pilot model clauses for carbon credit mutual recognition, data-sharing protocols or common MRV templates and advise emerging markets on next steps. –Innovative linkage mechanisms: countries are exploring mechanisms that facilitate interoperability between national and international systems. For example, China’s Belt and Road Initiative is attracting the participation of state-owned enterprises by managing overseas carbon assets in infrastructure projects. Japan’s JCM is partnering with developing nations to co- develop projects and share emissions reduction credits. The Coalition to Grow Carbon Markets – launched by Singapore, the UK and Kenya – establishes globally recognized principles for high-integrity carbon credits and provides clear guidelines for businesses to encourage the development and trade of high-integrity projects. Strategic initiatives for accelerated interlinkage Against the backdrop of interoperability barriers – such as legal, technical and regulatory discrepancies across national systems – achieving interlinkage grows difficult and demands joint efforts. To effectively accelerate international connectivity, three critical dimensions must be addressed: –Fostering communication: this builds the foundation for cross-border cooperation. Establishing platforms such as a regional carbon market council can reduce policy fragmentation, align regulatory frameworks and support capacity building among policy-makers and regulators. –Harmonizing consistent and fair standards, while building infrastructure: this provides the structural basis for scalable, credible market operations. Alignment of MRV and offset standards, guided by ICVCM’s integrity principles and Article 6’s cross-border recognition rules – plus the establishment of shared, interoperable and AI-powered data infrastructure – can reduce redundant verification costs, improve data reliability and transparency, and support the development of traceable carbon-linked products. Singapore exemplifies this by developing policies to accept internationally generated carbon credits for domestic compliance. –Strategic cooperative partnerships: countries could aim to join hands in driving green and low- carbon technologies to achieve breakthroughs and large-scale applications.As barriers to market interoperability are removed, trading platforms and participants can drive transformative market upgrades. Once communication channels and market infrastructure are in place, it becomes more feasible to enable transactions. Cross-border trading corridors under Article 6 – critical for accessing compliance markets including CORSIA – can improve liquidity and price discovery, reduce transaction costs and connect fragmented pools of supply and demand. To leverage these corridors, countries must establish robust infrastructure, streamlined processes and clear decision frameworks to grant letters of approval (LoAs) and implement corresponding adjustments, to ensure environmental integrity and avoid double- counting. For example, countries can engage in the development, scaling-up and transaction of carbon credits within the scope of the voluntary carbon market. If establishing such nation-to-nation transactions is complex, smaller-scale pilots, such as city-to-city or industry-to-industry mechanisms, can serve as practical starting points. Engaging participants ensures sustained growth and market depth. Acceleration programmes targeting regional industrial champions can catalyse technology validation and value chain transformation, particularly in hard-to-abate sectors. Regional hubs, as envisioned by Singapore and South Korea, can amplify efforts by facilitating best practice exchange and knowledge spillovers, laying the groundwork for broader industrial transformation at the global level. Regional hubs, as envisioned by Singapore and South Korea, can amplify efforts by facilitating best practice exchange and knowledge spillovers. Asia’s Carbon Markets: Strategic Imperatives for Corporations 21