Dear IEEFA Asia Community,
This month’s research presents an in-depth report on the critical role of carbon pricing in driving decarbonization across Asia—a region responsible for over 50% of global annual emissions. Although several Asian countries have implemented carbon taxes and emissions trading systems, current pricing levels remain far below what is needed to align with international climate goals.
Key findings include:
- Carbon prices in Asia are below USD20 per tonne of carbon dioxide equivalent (tCO2e) — far short of the USD50–USD100/tCO2e needed to align by 2030 with Paris Agreement targets.
- The effectiveness of the region’s carbon markets is limited by the oversupply of emissions allowances, resulting from overly generous allocation. Carbon prices are low due to allocations favoring fossil fuel-intensive firms, limited sectoral coverage, weak emission targets, and persistent fossil fuel subsidies.
- A phased carbon price starting at USD15–USD25/tCO₂e, with predictable annual increases of USD10–USD15/tCO₂e, can provide investment certainty and support long-term decarbonization. In addition to incentivizing low- and zero-emission technologies, revenue from carbon pricing instruments can also fund regional climate initiatives.
In addition, we released another report highlighting how gas turbine production bottlenecks add to a lengthy list of regulatory and financial challenges delaying gas power expansion. This makes the case for renewable energy in Vietnam and the Philippines even clearer.
Our joint commentary with Climate Group’s RE100 and the Institute for Essential Services Reform (IESR) highlights how Indonesia should prioritize reliable and affordable renewables to stay competitive via a shared transmission and distribution network.
Warm regards,
Paige Nguyen
Director, Asia
Institute for Energy Economics and Financial Analysis
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