Carbon Pricing Innovation
Asia-Pacific is now the epicentre of carbon pricing innovation, yet most prices remain too low to drive meaningful change. The region accounts for 60% of global CO₂ emissions, 36% of GDP, and 80% of coal consumption, while climate impacts are already reshaping economies.Governments are turning to carbon pricing as a key tool, but not yet at the scale required. Globally, 78 carbon pricing instruments now exist, covering 28% of emissions and raising over US$100 billion annually.
The Asia-Pacific region contributes to this momentum: China operates the world’s largest ETS, Singapore is increasing its carbon tax, and Indonesia and Thailand are piloting hybrid schemes, while Japan and South Korea refine their frameworks. Still, most prices remain below US$20 per tonne - far from the US$50–100 range needed by 2030.
The region reflects both innovation and fragmentation: China (US$12.5), Korea (US$6.3), Singapore (US$18.6, rising to US$80 by 2030), Japan (US$2), Indonesia (US$1.8, pilot), Thailand (US$6.2), Malaysia (planned 2026), and Australia (no national price, relying on regulation). Nearly all are moving; none yet at scale.
Australia illustrates the challenge. After repealing its carbon price in 2014, it now leans on regulatory levers such as the Safeguard Mechanism and renewable investment.
Recently, Canberra raised its ambition with a 2035 target of 62–70% below 2005 levels, anchored by five policy levers, ranging from renewables to carbon removals. However, emissions of 440 million tonnes must fall nearly twice as fast to meet the goal. Without reintroducing pricing, analysts warn targets may fall short.Meanwhile, carbon markets are booming. The region’s credit market, valued at US$36.7 billion in 2023, is expected to exceed US$423 billion by 2030, with China’s ETS potentially worth US$84 billion. Singapore is positioning itself as a hub for voluntary markets. Yet markets lack liquidity.
Evidence increasingly favours emissions trading, associated with 20% lower emissions and faster renewable uptake. Carbon taxes also work, but only if prices rise predictably and revenues are recycled into clean energy, equity, and competitiveness. Asia-Pacific is uniquely running both models side by side.
Momentum is building toward integration. ASEAN is drafting a regional carbon framework, while Japan, Singapore, and South Korea are already piloting cross-border trades under Article 6 of the Paris Agreement.
However, five obstacles persist:
- low prices
- sectoral gaps (notably in agriculture, aviation, and shipping), fossil fuel subsidies of US$1.25 trillion
- fragmented systems
- political resistance to higher costs.
Closing the gap requires three imperatives: raising prices toward US$50–100, expanding coverage while phasing out subsidies, and embracing integration with credible governance and digital infrastructure. Equally critical is revenue recycling, which ensures that funds support both just transitions and competitiveness.
Get In Touch
For more information please contact Michael Velten.
michael@veltenadvisors.com
+6590687547
37 Ann Siang Rd, Singapore 069715
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