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The Carbon Market in Southeast Asia Embarks on a New Chapter

Writer: Albert SUTANTO, Jonathan PHILLIP

Social Media Team: Irina LIN

Over the last few decades, Southeast Asia has experienced a remarkable surge in socio-economic growth, rapid urbanization, and booming industrialization, resulting in an ever-increasing demand for energy. The region's development has been driven by favorable economic policies, abundant natural resources, and a thriving entrepreneurial spirit. As urban centers expand and industries thrive, the need for energy has grown exponentially, contributing significantly to the region's overall energy consumption. Consequently, Southeast Asia has become a pivotal player in shaping the global energy landscape.

However, amidst this impressive growth, there is a growing recognition of the urgent need to address climate change and its adverse impacts. As part of the global effort to combat climate change, the majority of national authorities in the Association of Southeast Asian Nations (ASEAN) have pledged to set ambitious net-zero targets, reflecting their determination to balance greenhouse gas emissions with removal efforts to achieve a sustainable, low-carbon future.

The carbon market, encompassing both compliance and voluntary mechanisms, has emerged as a crucial tool in the pursuit of carbon neutrality. Within the countries of the Association of Southeast Asian Nations (ASEAN), regulatory frameworks pertaining to the carbon market have begun to take shape, and a summary of these initiatives is provided below.


Earlier this year, Indonesia achieved a significant milestone in the fight against climate change by introducing a groundbreaking Emissions Trading System (ETS) for the power sector. This landmark initiative marked the first-ever ETS scheme to be implemented in Southeast Asia. The program's inaugural phase, which commenced in the same year, targeted 99 coal-fired power plants, collectively responsible for a substantial 81.4% of the nation's power generation.

This momentous step towards carbon pricing and emission reduction came as a logical progression following the national government's release of a comprehensive framework for the economic valuation of carbon instruments in 2021. Building on this foundation, the Ministry of Environment and Forestry took decisive action in 2022, providing essential guidelines for the effective implementation of carbon economic valuation. With these combined efforts, Indonesia is now at the forefront of combating climate change, spearheading regional efforts to create a more sustainable and environmentally responsible energy sector.


Singapore has been at the forefront of adopting carbon pricing measures in the Southeast Asian region, setting a precedent for climate action. Commencing in 2019, the country introduced a carbon tax targeting facilities emitting a minimum of 25,000 tCO2e of greenhouse gas (GHG) emissions annually. At present, this program encompasses approximately 80% of Singapore's total GHG emissions and applies to around 50 facilities across diverse sectors, including manufacturing, power generation, waste management, and water treatment.

The carbon tax was initially set at SG$5/tCO2e, signifying a starting point for incentivizing emission reductions. Over time, the tax is designed to progressively increase to SG$25/tCO2e during 2024-2025, further rising to SG$45/tCO2e in 2026-2027, and finally reaching SG$50-80/tCO2e by 2030. This gradual escalation aims to drive behavioral change and encourage companies to invest in cleaner technologies and practices to curb their carbon footprint.

Furthermore, Singapore's commitment to environmental responsibility is evident in its provision for companies to utilize high-quality international carbon credits from 2024 onwards. Up to 5% of taxable emissions can be offset using these credits, promoting global cooperation in achieving emission reduction goals and fostering a more sustainable future. By spearheading carbon pricing initiatives, Singapore is setting an exemplary model for other nations in the region to take decisive steps towards mitigating climate change and achieving a low-carbon economy.


In March of this year, Bursa Carbon Exchange, a subsidiary of Bursa Malaysia, achieved a significant milestone by successfully conducting its first voluntary carbon credit auction. During this groundbreaking auction, 15 buyers from diverse industries participated, collectively purchasing 150,000 tons of carbon credits registered under the VERRA Registry.

Although no domestic carbon projects were involved in this auction, the credits were sourced from two projects based in China and Cambodia. The project in China focused on technology-based initiatives, incorporating biogas recovery and power generation activities. On the other hand, the project in Cambodia was nature-based, operating under the REDD+ framework.

This auction's successful outcome served as a strong signal to project proponents and developers, highlighting the economic viability of carbon credits. However, it is worth noting that all the credits were sold at the minimum reserve price, reflecting the cautious approach taken in the early stages of this emerging carbon market. Nonetheless, this landmark event represents a significant step forward in promoting carbon offset projects and fostering environmental responsibility within the region.

Thailand and Vietnam

Thailand and Vietnam are among the countries actively exploring the implementation of carbon market mechanisms within their borders. Thailand has already taken strides in this direction, having initiated its voluntary carbon offsetting scheme, known as T-VER, back in 2013. On the other hand, Vietnam is progressing towards establishing a comprehensive framework for national crediting mechanisms and domestic Emissions Trading Systems (ETS), with the ambitious goal of achieving full operational status by the year 2028.

Thailand's T-VER program has provided a voluntary platform for individuals and businesses to participate in carbon offsetting initiatives, encouraging the reduction of greenhouse gas emissions. Meanwhile, Vietnam's national authority's efforts to lay the groundwork for national crediting mechanisms and ETS represent a major step forward in their commitment to combat climate change and move towards a more sustainable future.




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