Carbon pricing potential in East and South Asia

Carbon pricing instruments have a crucial role to play in responding to the climate emergency and in delivering on the ambitious targets of the Paris Agreement. Dozens of advanced and developing countries have already deployed carbon taxes and emissions trading systems to impose a price on GHG emissions and reduce their contribution to climate change in a cost-effective way. Yet only about 20 % of global GHG emissions are covered by a carbon price. Increasing the rate of coverage and building a network of carbon pricing instruments are required for successful climate action but impossible without a robust assessment of the potential of countries considering these instruments.

This project, led by adelphi and financed by the German Environment Agency (UBA) and the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU), delivered this assessment for selected countries in East Asia in cooperation with Duke University and the Chinese University of Hong Kong. Many countries in East Asia are characterised by low per capita incomes, but they are forecast to grow strongly in the coming decades and lie at the heart of the global merchandise trade network. This makes them crucial for successful climate action at the global scale. Currently, their increasing energy demand is primarily met with fossil fuels, although they also have a significant renewable energy potential. A successful implementation of carbon pricing thus will not only bolster regional mitigation efforts but will also provide incentives for low-carbon investments and avoid costly carbon lock-in.

To assist the adoption, interconnection and ultimate effectiveness of carbon pricing initiatives in the region, adelphi developed an analytical framework built on political, legal, economic, technical and transnational pillars identified in the literature and drawing on the academic expertise of our partners. The framework was applied in two stages. In the first stage, all countries in the region were assessed using a subset of framework components for which quantitative and qualitative data are available broadly and up to four countries were selected for in-depth analysis. In the second stage, adelphi planned and conducted field research involving on-site interviews with key policymakers and stakeholders which complement the analysis of data from primary and secondary sources for the case study countries.

The final project report and webinars were released in late 2022. They consisted of in-depth case studies of carbon pricing potential in Vietnam, Indonesia, and Pakistan and provided guidance for regional governments which may be interested in introducing carbon pricing. These documents and the recorded webinar also serve as a crucial information base supporting Germany’s capacity building efforts in the region.

Watch the final webinar of the project, in which policy experts from adelphi, the Asia Society Policy Institute (ASPI), and the ASEAN Centre for Energy (ACE) weighed in on some of the most pressing opportunities and issues for carbon pricing in the South and East Asia region. In addition, we are providing the presentation as a PDF here.