Why ASEAN Still Can't Agree on a Carbon Price

MANILA — When Singapore's carbon tax climbed to S$25 a tonne last year and is set to reach S$50 to S$80 by 2030, it became the most expensive place in Southeast Asia to emit a tonne of carbon dioxide. Drive a notional tonne of emissions 1,500 kilometres west to Jakarta and the same molecule trades, on a good day, for under $2 on the Indonesia Carbon Exchange.

That spread — a 25-fold gap between neighbours in the same trade bloc — is the single clearest illustration of why ASEAN's much-discussed regional carbon market remains a communique rather than a market.

The bloc has talked about an interoperable framework since at least 2021. What it has instead is a patchwork: a handful of national pricing schemes at wildly different stages, competing crediting standards, and a deep political reluctance to let carbon — and the revenue attached to it — flow across borders.

Six schemes, six speeds

Singapore runs a straightforward tax. Indonesia launched a power-sector emissions-trading scheme and a voltage-limited exchange, IDXCarbon, but its cap is generous enough that prices have stayed near the floor. Thailand operates a voluntary scheme, the T-VER, that issues credits without an overarching cap. Malaysia opened the Bursa Carbon Exchange as a voluntary auction venue. Vietnam has legislated a compliance market that is not yet live. The Philippines is still drafting its enabling law.

The result is that a Malaysian palm-oil refiner, an Indonesian cement plant and a Singaporean shipping line face entirely different carbon costs for chemically identical emissions — and there is no mechanism to arbitrage that difference into a single regional price.

Compliance markets put a hard cap on emitters and force a price. Voluntary markets sell credits to buyers who choose to pay. Mixing the two across borders, without agreeing whose tonnes count, is the technical heart of the deadlock.

The credibility problem

Even within voluntary trading, the region is fighting over what a credit is worth. A wave of investigations into over-credited forest-protection projects — several in Indonesia and Cambodia — has left institutional buyers wary of nature-based credits from the region, precisely the supply ASEAN has most of.

Indonesia's blue-carbon mangrove projects, potentially worth billions if certified to a standard the market trusts, have been slowed by exactly this caution. Buyers in Tokyo and Zurich want a methodology that survives an audit; sellers in Sumatra want a price that justifies not clearing the land.

The constraint is no longer supply of trees or supply of capital. It is supply of credibility. Nobody wants to be the buyer holding a credit that gets downgraded to zero in a newspaper investigation, said an emissions-markets adviser at a Singapore trading house who asked not to be named.

That fear has a price. High-integrity removal credits now trade at a widening premium to avoidance credits — sometimes a tenfold gap — fracturing what was supposed to be one market into a quality tier and a junk tier.

Why governments resist convergence

Beneath the technical arguments sits a sovereignty one. Under Article 6 of the Paris Agreement, when a country sells a carbon credit abroad it must apply a corresponding adjustment — in effect adding the exported tonne back to its own national ledger. That makes hitting its own climate target harder.

So a credit-rich nation like Indonesia or Vietnam faces a genuine bind: sell credits and earn foreign exchange, or hoard them to meet its own Nationally Determined Contribution. Most have chosen to restrict exports until their domestic schemes mature, which is precisely what blocks the cross-border flows a regional market would need.

Singapore, a buyer with cash and no land, has signed bilateral Article 6 deals with several neighbours to route around the impasse. But bilateral plumbing is the opposite of a single market — it entrenches the fragmentation it was meant to bridge.

What would actually unlock it

Most analysts converge on three preconditions: a shared registry so a tonne retired in one country cannot be resold in another; a minimum-quality floor that screens out the discredited project types; and an agreement on how to split corresponding-adjustment liability between buyer and seller states.

None of those is technically hard. All three are politically loaded, because each redistributes who captures the value of a tonne. That is why a working group that has met for years keeps producing roadmaps rather than rules.

The deadline pressure is real, though. As the EU's carbon border levy phases in and starts taxing the embedded emissions of ASEAN exports, the incentive flips: a credible regional price keeps that revenue inside the bloc rather than sending it to Brussels.

Whether that external pressure finally forces convergence, or simply produces another communique, is the question that will define ASEAN's climate-finance decade. For now, the same tonne is still worth $50 in one capital and $2 in another, and no one has built the pipe between them.