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ASEAN previously believed that developed countries should bear more climate responsibility, but it has now begun actively promoting carbon pricing to drive corporate decarbonization. (Image: Unsplash)
Malaysia’s Sarawak has recently called for the establishment of a unified carbon market across ASEAN to boost carbon credit prices and address climate challenges.
The call comes amid delays in Southeast Asian countries’ efforts to implement carbon taxes and emissions trading systems (ETS), despite regional plans to align with the EU’s Carbon Border Adjustment Mechanism (CBAM).
Southeast Asia’s carbon pricing push faces repeated delays
ASEAN countries have stepped up efforts to introduce carbon pricing as part of their decarbonization strategy, shifting from their earlier stance that developed countries should bear primary responsibility for climate action.
The move reflects the bloc’s growing exposure to climate risks, as well as a warning from the World Bank that ASEAN economies could face losses of up to USD 18 billion over the next century without stronger climate measures.
Thailand and Malaysia are among the latest to announce carbon tax plans aimed at encouraging emissions reductions. Thailand approved a carbon tax of THB 200 per tonne (about USD 6.24) in January on producers of gasoline and aviation fuel. Malaysia plans to impose a carbon tax starting in 2026, targeting the steel and energy sectors, though the tax rates have yet to be published.
Progress on carbon pricing remains uneven across the region. Indonesia passed a carbon tax law in 2021, setting a rate of IDR 30,000 per tonne (about USD 2.13), but has repeatedly delayed implementation. Although the country launched a trial ETS in 2023, initially covering coal-fired power plants and planning to extend to gas-fired plants by 2025, its carbon tax has yet to be enforced.
Vietnam is also lagging behind on carbon pricing efforts. According to “Southeast Asia Renewable Market x Global Carbon Trends: 2024 Review & 2025 Outlook,” RECCESSARY’s latest annual report, Vietnam plans to launch a trial phase of its ETS in June, initially covering the steel and cement industries. However, progress has stalled due to gaps in its monitoring, reporting and verification (MRV) framework.
Although Vietnam introduced its carbon pricing plan earlier than Thailand and Malaysia, implementation has fallen behind expectations. The report points out that Vietnam will need to expedite regulatory details in the short term to ensure the ETS trial can proceed this year.
Carbon pricing policy progress in Southeast Asian countries. (Chart: RECCESSARY’s annual report)
For ASEAN, advancing carbon taxes and ETS is not just about climate action, but it’s also critical to preserving industrial competitiveness. With the EU set to fully implement CBAM, ASEAN countries without effective carbon pricing frameworks risk falling behind in international trade.
Sarawak pushes for ASEAN ETS amid global momentum
Hazland Abang Hipni, deputy minister of Energy and Environmental Sustainability of Sarawak, said on March 1 that a unified ETS could boost carbon credit prices in the region to USD 100 to 120 per tonne, a level far higher than the current voluntary market range of USD 8 to 30.
According to Hazland, major economies such as the EU, the U.S., Canada, China, and South Korea have established ETS, while most ASEAN countries still rely on voluntary carbon markets. He proposed that a regional ETS could set standardized carbon pricing benchmarks for the region, which in turn could guide future carbon taxes and carbon storage fees.
“The amount of carbon tax we impose on industries across ASEAN should be determined by carbon prices shaped through an ETS,” he said.
Carbon price levels in Asia. (Chart: RECCESSARY’s annual report)
Scholars outline three priorities to advance ASEAN unified carbon market
RECCESSARY’s report, echoing ASEAN’s initiative, notes that despite differing policy timelines among member states, mounting pressure from international carbon tariffs is expected to accelerate the region’s efforts to build mechanisms aligned with global standards. The report also highlights Southeast Asia’s growing potential to emerge as a regional hub for cross-border carbon trading.
ASEAN has previously approved the ASEAN Strategy for Carbon Neutrality, which outlines eight key actions to accelerate an inclusive transition towards a green economy. Among them is the goal of establishing interoperable carbon markets to strengthen regional cooperation on emissions reductions.
However, creating a unified market will require overcoming differences in national development stages. Indonesia, for example, launched an ETS pilot in 2023 focusing on coal-fired power plants, while Singapore has taken the lead in voluntary carbon markets, leveraging its position as a financial hub to attract carbon offset projects.
The ASEAN Climate Change and Energy Project (ACCEPT II) has highlighted regulatory and accounting discrepancies among member states as a key challenge. It identified three priority areas for building a unified carbon market: standardizing carbon credit frameworks, integrating regulations, and strengthening capacity-building and technical support.
1. Carbon credit standardization
Developing a regional framework with unified standards would improve market transparency and enhance the attractiveness of carbon credits in both regional and global markets. Singapore’s efforts in recent years to collaborate with international institutions and establish stringent carbon credit standards could serve as a reference for other ASEAN countries, helping advance regional standardization.
2. Regulatory alignment
Varying progress across ASEAN countries in developing carbon markets makes regulatory alignment crucial for facilitating cross-border transactions and integrating compliance and voluntary markets. Unifying carbon accounting, emissions tracking, and trading rules would lower legal barriers and transaction costs for international companies operating in ASEAN economies, while improving market efficiency and reducing administrative burdens.
3. Capacity building and technical support
To advance a unified carbon market, ASEAN must strengthen capacity among its member states, particularly those in the early stages of development. This can be achieved through training on MRV systems, and by establishing regional technical support centers to provide infrastructure and expertise. Digital carbon trading platforms would also play a key role in improving market liquidity and transparency, encouraging broader investor participation.
While challenges remain in rolling out carbon pricing mechanisms across Southeast Asia, the successful establishment of a unified ASEAN carbon market could boost carbon credit prices and enhance integration with international markets. As climate pressures mount, regional collaboration and institutional innovation will be essential to supporting Southeast Asia’s low-carbon transition.
Source: Nikkei Asia, The Star, ACCEPT II, Southeast Asia Renewable Market x Global Carbon Trends: 2024 Review & 2025 Outlook
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