This policy brief provides insights into global carbon markets for ASEAN, drawing on discussions from a roundtable held in Singapore on 4 November 2024, supplemented by additional insights provided by the author. It also incorporates updates from the COP29 agreement on carbon trading under Article 6 of the Paris Agreement. As part of the broader initiative launched at the Guildhall in the City of London in October 2023, this roundtable focused on strategies to enhance the integrity and infrastructure of ASEAN’s carbon markets, emphasising the critical roles of exchanges, rating agencies, and banks providing liquidity in scaling these markets.
The discussions drew on experiences from Singapore, Malaysia, the UK, and the EU—exploring the potential linkage of the UK and EU Emissions Trading Systems (ETS) and the implications of the Carbon Border Adjustment Mechanism (CBAM).
Hosted by the Singapore Exchange and organised by the Singapore Green Finance Centre, the roundtable highlighted the importance of collaboration in shaping a sustainable and integrated carbon market in ASEAN. It aimed to define a focused, actionable agenda for the next five years, guiding governments, policymakers, industries, and financial institutions toward strengthening the region’s carbon markets and supporting infrastructure.
This initiative will continue through 2025 with a series of workshops and two roundtables in Singapore, engaging exchanges, banks, and key stakeholders to advance impactful research and practical case studies that support the development of the ASEAN Common Carbon Framework.
Key takeaways:
- Standardisation and Alignment in ASEAN Carbon Markets: There is an urgent need to standardise and align ASEAN’s fragmented carbon markets to prevent carbon leakage and ensure robust carbon pricing mechanisms. This requires significant governmental efforts and strong political will.
- Operationalisation of Article 6: COP29 marks the full operationalisation of Article 6, establishing a system to expand and link global markets with higher integrity and environmental standards. The focus now shifts to effective implementation, with clear definitions and mutual recognition of carbon credits.
- Institutionalising Carbon Markets: Establishing a robust, ‘investment-grade’ market infrastructure is essential for the energy transition. This includes integrating nature-based and technology-driven solutions and preparing corporations for compliance. The memorandum of collaboration signed by five ASEAN carbon market associations at COP29 is a pivotal step toward developing the ASEAN Common Carbon Framework (AACF).
- Role of Stock Exchanges and Rating Agencies: Stock exchanges provide price transparency and tradable instruments, while rating agencies assess the quality of carbon credits. Together, they build a regulated market infrastructure that fosters investor confidence, transparency, and liquidity.
- Challenges and Opportunities for Banks: Banks face challenges such as the lack of standardised data and geopolitical risks in cross-border financing. However, they have opportunities to finance carbon markets by providing liquidity, integrating carbon pricing into risk assessments, and collaborating with insurance firms and development finance institutions to de-risk investments.