Seminar on “Carbon Markets: An ASEAN Outlook”

In this hybrid seminar, Dr. Raúl Rosales from the Imperial College Business School of London and Ms. Melissa Low from the National University of Singapore (NUS) offered their perspectives on ASEAN member states’ current progress and prospects on the carbon market landscape. This is the second instalment of a seminar series exploring carbon markets in the Southeast Asian region. A recording of the webinar can be viewed here.


Tuesday, 12 July 2022 – Dr. Raúl Rosales, Senior Executive Fellow in the Centre for Climate Finance & Investment at Imperial College Business School and Ms. Melissa Low, Research Fellow at the Centre for Nature-based Climate Solutions at NUS, spoke on the various complexities and challenges which Southeast Asian countries must navigate in the rapidly growing voluntary carbon market landscape. The session was moderated by Ms. Sharon Seah, Senior Fellow and Coordinator of the Climate Change in Southeast Asia Programme (CCSEAP) and the ASEAN Studies Centre at the ISEAS – Yusof Ishak Institute.

Left to right: Ms. Sharon Seah (moderator) with speakers Ms. Melissa Low, and Dr. Raúl Rosales. (Credit: ISEAS – Yusof Ishak Institute)

Dr. Rosales began by highlighting opportunities in scaling up voluntary carbon market (VCMs) in the region. As lead author of the COP26 Green Finance Report on Voluntary Carbon Markets in ASEAN, he saw potential in Southeast Asia’s vast natural capital and massive potential for renewable investment. VCMs can channel finance towards these opportunities. Certain sectors particularly deserve more attention in this regard, including regenerative agricultural practices, which can generate revenue for landowners and farmers; and hard-to-decarbonize industries like steel, which require the resources to implement carbon mitigation measures. Albeit in its initial stages, carbon crediting is not new to the region. Challenges, however, include gaps in policy frameworks, geopolitical tensions, transparency, a “lack of trust” in reporting; and an unwillingness to implement carbon taxes. Such challenges mirror other Asian economies: China had launched its national emissions trading scheme (ETS) last year and reintroduced the China Certified Emission Reduction scheme (CCER) for voluntary credits; and Hong Kong plays a crucial role in bridging the mainland’s carbon market internationally. To Dr. Rosales, the main challenge here is the stark differences in the governance systems of the two.

Dr Rosales also shared exciting developments such as the London Stock Exchange’s newly developed VCM, which uses its existing market infrastructure to provide the regulatory scrutiny and market access needed for carbon trading. He commended the use of blockchain technology in an upcoming VCM settlement platform “Carbonplace” to strengthen accessibility and integrity.

Dr Rosales emphasised the need for government policy frameworks to guide the effective operationalisation of Article 6 of the Paris Agreement, which will help remove barriers for the private sector to drive the expansion of carbon markets. He also noted the importance of common taxonomies, transparency and credible reporting standards; pointing to Singapore’s carbon tax framework as an example. In addition, sound accounting frameworks must be developed– at the moment, there is no specific accounting definition for carbon products. Other areas to be explored include the regulatory obligations of banks, carbon certificates, and credit contracts. Dr. Rosales, finally, pointed out the strength of the private sector in developing voluntary carbon trading.

Ms. Low focused on the current outlook of monitoring, reporting, and verification (MRV) among ASEAN member states. She cited transparency as the driving factor in successful carbon trading at the regional level. As signatories of the Paris Agreement, all ASEAN member states had commendably submitted their Nationally Determined Contributions (NDCs), which consist of information to facilitate clarity, transparency, and understanding (ICTU) of climate commitments. We also see the region acting collectively with the release of the ASEAN State of Climate Change Report, which explores the region’s current climate mitigation capacity as well as opportunities to collaborate towards net zero targets.

However, certain aspects of ASEAN also undermine the strength of their climate commitments. For instance, many NDC targets are set as “conditional” on international support. Demand and production in the energy sector (most notably coal production) continue to expand with GDP growth. The diversity in national circumstances and major emitting sectors also hinders efforts to monitor and evaluate climate action across countries. As it stands, ASEAN member states continue to vary in their levels of transparency. Only Singapore submitted all four Biennial Update Reports (BUR) to the UNFCCC; seven member states submitted at least one, and a few submitted none. Ms. Low reflected that this serves as an insight into the current institutional frameworks present for transparency in each country. The Biennial Transparency Report (BTR) is viewed as ASEAN’s next MRV challenge as it supersedes the BUR in 2024.

Ms. Low also introduced the notion of nationalisation risk, in which national governments may pass laws to control the movement of carbon credits. Article 6 of the Paris Agreement requires an authorisation framework for traded credits, and thus giving national legislation the prerogative to control and potentially limit their sale in VCMs. Countries may opt to do this in order to meet their own climate targets.

During the Q&A session, the speakers addressed questions regarding international and regional standardization of carbon market frameworks, Singapore’s role in the World Bank’s “Climate Warehouse” initiative, and ensuring quality in carbon credits. Insights arising out of the discussion included, most notably an agreement between the speakers and participants that the role of carbon markets was not a replacement for deep decarbonization, but rather as part of a larger transition to reduce carbon emissions altogether. The seminar drew an audience of nearly 80 online and 15 in-person participants.

(Credit: ISEAS – Yusof Ishak Institute)