Minister of Environment Peng Chi-ming (fifth from the left) attends the 2025 Asia Carbon Pricing Forum. (Photo: Ministry of Environment)
Taiwan launched its carbon pricing scheme this year, but industry calls for delaying carbon fees highlight the challenge of driving emission cuts. The Ministry of Environment hosted the “2025 Asia Carbon Pricing Forum,” gathering experts from Europe and Asia to share market developments and cap-and-trade practices in Japan, South Korea, and Indonesia.
Japan to enforce mandatory ETS in 2026
Japan’s carbon emissions in FY2023 reached 1.017 billion tons, marking both a two-year decline and the lowest level since 1990. The country’s cap-and-trade scheme, the Green Transformation ETS (GX-ETS), began in 2023 with voluntary corporate participation and is set to become mandatory by 2026, though related rules are still under discussion.
Under the current plan, companies emitting more than 100,000 tons annually will be the first to be regulated. They will be required to disclose carbon information and set reduction targets. Around 300–400 companies will be affected, accounting for 60% of total emissions. Allowances will be distributed free of charge based on government targets, but firms short on allowances can purchase them through the market, either via J-Credits or unused allocations from other companies. For the power sector, initial allocations may instead be obtained through auctions.
According to Sawako Tada, General Manager of the Carbon Pricing Department at Japan’s GX Promotion Agency, the government will set a price floor and ceiling for allowances. If prices fall too low for a sustained period, the government will intervene by buying back allowances to stabilize the market.
South Korea faces low liquidity in ETS
South Korea’s ETS has been in place since 2015 and is now in the final year of its third phase, covering over 73% of national emissions across sectors including power, industry, buildings, transportation, and public services. More than 750 participants are involved, including 685 regulated companies, 8 market makers, and 21 financial institutions.
Maureen Lee, Project Manager at carbon management developer Ecoeye, noted that South Korea’s carbon market suffers from high volatility and relatively low prices compared to international levels, caused by overallocation and supply-demand imbalances. The price of Korean Allowance Units (KAU) has swung from over KRW 40,000 (around USD 28.31) to below KRW 10,000 (around USD 7.08), a fourfold gap.
Korea’s carbon allowance prices are highly volatile. (Photo: Ecoeye)
Lee added that changes in market mechanisms, along with shifts in Korea’s energy and power structure, have increased allowance supply while reducing demand, leading to surplus credits. The surplus reached 90 million tons last year and is expected to surpass 100 million tons this year, the highest on record, revealing weaker-than-expected government control.
To address liquidity issues, South Korea plans reforms in its fourth phase beginning in 2026. These include expanding paid allocation coverage (particularly in the power sector), relaxing carryover restrictions, increasing participation from third-party entities such as asset managers, banks, and insurers, and diversifying products with ETFs and futures.
Ecoeye projects that under Korea’s carbon neutrality pathway, reduced allocations, higher auctioning, and the influence of the EU’s Carbon Border Adjustment Mechanism (CBAM) could push allowance prices to KRW 85,000 (around USD 60) by 2030, and as high as KRW 136,000 (around USD 96.27) by 2040.
Indonesia expands ETS to gas-fired power plants
Indonesia has divided its ETS rollout into three phases: 2023–2024, 2025–2027, and 2027–2030. Currently, only coal-fired power plants connected to the national grid are included. Government data shows that Indonesia’s ETS trading volume reached 7.85 million tons in 2024, with a transaction value of USD 5.15 million, both slightly higher than the previous year.
Anandini Mayang, a representative from the Ministry of Energy and Mineral Resources’ Directorate of Electricity Environmental Protection, said the government plans to expand coverage to gas-fired power plants this year. By the third phase, all fossil fuel power plants are expected to participate, with 574 facilities joining the market, accelerating the country’s energy transition.
.jpg)
