Asia's Carbon Markets Strategic Imperatives for Corporations 2025

Introduction This report examines the evolution of Asian carbon markets in both established and emerging economies, and discusses the strategic implications and opportunities for corporations. Carbon markets provide a structured platform for trading carbon allowances and credits for market. Figure 1 outlines the different types of carbon pricing instruments, including carbon markets. Carbon markets are critical for global decarbonization, offering a market-based mechanism to reduce greenhouse gas (GHG) emissions while promoting economic efficiency and enhancing business competitiveness. These markets incentivize innovation and adoption of green transitions through carbon pricing and trading. Recent advancements in Article 6 of the Paris Agreement, which establishes rules for countries to voluntarily collaborate on emissions reductions, bolster international cooperation, further amplifying the global impact of carbon markets. Existing carbon pricing mechanisms FIGURE 1 Compliance Voluntary Representative Asian countries Japan Singapor e Thailand Malaysia Predictable carbon cost Easy to enfor ce into tax system Entities covered are required to pay a fixed price per tonne of carbon emitted — Unlike ETS, total emissions are not pre-defined. — Can serve as an interim policy to build carbon pricing infrastructur e befor e transitioning to an ETS. Representative Asian countries China Japan Indonesia Korea Singapor e Supports innovative development & capital flows Facilitates global financing for new carbon projects Covers offset transactions not intended for regulatory compliance — Includes offsets bought to resell or retire for envir onmental claims such as carbon-neutral. — Driven by both purely voluntary buyers and pre-compliance buyers anticipating futur e regulatory obligations. Representative Asian countries China India Japan Indonesia KoreaEmissions trading scheme (ETS) Carbon tax Voluntary carbon market Capped emissions offer certainty about exact emissions reduction Operates on a cap-and-trade principle — A cap is set on total GHG emissions, with allowances issued equal to the cap. — Entities must hold one allowance per tonne of GHG emitted but can trade allowances in the market. — Carbon price emerges from supply (allowance issued) and demand (actual emissions). Source: United Nations Framework Convention on Climate Change.5 Asia’s Carbon Markets: Strategic Imperatives for Corporations 6