Compared to the EU’s mature, single jurisdiction carbon market, Asia features multiple large, diverse and fast-growing carbon markets, each at a different stage of development. In total, the region hosts 17 national or sub-national carbon-pricing instruments and four national emissions trading systems (ETS) that generate over $4 billion from carbon schemes.15 As pivotal instruments for a just transition, these markets require greater alignment, particularly given the significant variability in carbon pricing across Asian economies. Achieving carbon price convergence will be key to mobilizing large- scale investment for low-carbon transformation. Asia’s carbon markets are evolving with distinct characteristics, which can be categorized into three groups: –China as a unique case, which operates the world’s largest carbon market, underpinned by its vast emissions profile, a complex, rapidly scaling ETS, and its relaunched voluntary carbon market (Chinese Certified Emissions Reduction or CCER). –Developed Asian economies, such as Japan, South Korea and Singapore, which have established advanced carbon pricing mechanisms, leveraging their economic maturity and policy innovation to reduce emissions. –Emerging Asian economies, including India, Indonesia, Thailand, Malaysia and Vietnam, which are developing nascent carbon markets, overcoming structural and regulatory challenges to lay the groundwork for future growth. Recognizing the potential of cross-border interconnectivity, Asian nations are undertaking preliminary efforts to connect markets, exploring pilots and models that could serve as global examples to amplify their collective impact. Many Asian countries are embracing innovation by embedding digital technologies into their carbon markets, highlighting the need to further discuss shared data infrastructure for enhancing market integrity. Meanwhile, Asia’s high degree of industrial supply chain integration in manufacturing, renewable energy and other sectors means that intra-regional carbon market cooperation can significantly accelerate the application of low- carbon technologies across value chains. This chapter explores China’s carbon market as a cornerstone of regional and global climate action, given its scale and influence, emphasising the importance of strengthening China’s role in global climate governance. It also examines the pioneering approaches of Japan, South Korea and Singapore, alongside the potential of emerging Asian markets. By exploring these developments, the chapter identifies opportunities for regional collaboration, including market linkages, knowledge sharing and harmonized standards.1.1 Regional overview Carbon markets in key Asian countries TABLE 1 Region Market overview China The world’s largest ETS market, with market capacity reaching 8 billion tonnes CO2-equivalent by 2025 and expanding to an estimated 9-11 billion tonnes by 2030. Voluntary market (CCER) relaunched in 2024. Japan National GX-ETS (2026) builds on 15+ years of regional pilots in Tokyo (2010) and Saitama (2011). J-Credit (domestic) and JCM (tech-transfer credits) dominate voluntary market. South Korea First national ETS in East Asia, covers 816 top emitters as of 2024. K-ETS offsets drive the voluntary market. India Voluntary carbon market dominates (led by renewable energy projects), with 10 certified sectors by 2024. Piloting a national compliance market with detailed regulations adopted in 2024. South East Asia Piloting compliance markets: ETS in force in Indonesia, under development in Viet Nam and Malaysia, under consideration in Philippines and Thailand. Singapore has adopted carbon taxes with carbon credit compensation mechanisms. Voluntary market features NbS carbon credits with high forest coverage rate. Regional cooperation frameworks (e.g. ACCF) are emerging. Notes: CO2e = carbon dioxide-equivalent; CCER = Chinese Certified Emissions Reduction market; GX-ETS = Japan’s Green Transformation Emissions Trading Scheme; J-Credit = Japan’s domestic carbon credits scheme; JCM = Japan’s Joint Crediting Mechanism, by which Japan provides developing countries with advanced decarbonization technologies; K-ETS = Korea’s Emissions Trading Scheme; NbS = nature-based solutions; ACCF = ASEAN Common Carbon Framework. Sources: International Carbon Action Partnership, World Bank Group, Bain & Company analysis.16 Asia’s Carbon Markets: Strategic Imperatives for Corporations 9

Asia's Carbon Markets Strategic Imperatives for Corporations 2025