Uniting Asia’s carbon markets: 5 steps for regional integration

Recent developments have shown significant progress in Asia’s carbon market landscape, which is rapidly developing and becoming increasingly interconnected. For businesses, this presents new opportunities to strengthen decarbonization plans, lower transition risk and gain a competitive edge in a low-carbon economy.

China’s new nationally determined contribution (NDC) aims to reduce economy-wide net greenhouse gas emissions by 7-10% below peak by 2035, and to expand the National Carbon Emissions Trading Market (ETS) to cover major high-emission sectors. This, combined with growing regional cooperation, signals a step change in Asia’s carbon market evolution.

Progress across the region illustrates momentum. Indonesia has proposed a two-way carbon market linkage with China and China-Japan-Korea strategic dialogues on carbon markets have been scheduled under the Asia-Pacific Financial Forum.

During the UN Climate Conference 2025 (COP30), the European Union and China agreed to join Brazil in a coalition aimed at improving collaboration on carbon markets. The coalition also includes the United Kingdom, Canada, Chile, Armenia, Zambia, France, Mexico and Germany.

As these markets mature, connectivity will be essential to ensuring scale, liquidity and integrity.

Carbon markets play a critical role in global decarbonization, enabling emissions reductions at the lowest cost while encouraging technological innovation and enhancing business competitiveness.

China’s carbon market is the backbone of Asian climate action. It is already the world’s largest by emissions coverage and has developed over the past decade through a dual-track system that combines compliance and voluntary markets. Its design draws global lessons while adapting to China’s industrial structure.

Key milestones include expansion of the ETS to steel, cement and aluminium for the first time. Its coverage now exceeds 800 million tonnes of carbon dioxide (CO2), representing more than 60% of the nation’s emissions. In the latest progress report, 1,334 new emitting entities had been added.

China’s Certified Emission Reduction programme also continues to underpin investment in innovative low-carbon technologies and nature-based solutions.

Japan, South Korea and Singapore have already peaked emissions and are progressing towards absolute emissions reductions.

They have implemented mature carbon pricing systems and are now expanding voluntary and cross-border mechanisms to complement domestic action.

Countries such as India, Indonesia, Thailand, Malaysia and Vietnam are at earlier stages. Their priorities include balancing climate ambition and development goals, safeguarding economic growth and industrial competitiveness, building demand, supply and integrity in voluntary markets and establishing credible infrastructure and governance.

Unlike the European market, Asia’s carbon markets feature diverse stages of development, rapid scaling potential and strong opportunities for regional collaboration.

Three characteristics create a strong case for regional interconnectivity:

Carbon prices across Asia vary widely. Price convergence and predictable pathways will stimulate private-sector investment in decarbonization.

Asian markets are embracing digital innovation. Shared data infrastructure can strengthen market integrity through transparent data, monitoring using artificial intelligence and interoperable registries.

Asia’s role in global manufacturing and clean-technology supply chains means regional coordination can accelerate decarbonization across entire value chains.

Asia now hosts the world’s largest compliance market – China – advanced pricing systems, as in Japan, Korea and Singapore, and rapidly expanding voluntary markets across Southeast Asia.

To turn ambition into an efficient and connected regional carbon ecosystem, Asia can prioritize five practical steps:

Create a formal platform to coordinate policies, align regulatory frameworks and build capacity. This can reduce fragmentation and support the adoption of shared standards across national systems.

Align measurement, reporting and verification (MRV) with Article 6 and integrity frameworks set by the Integrity Council for the Voluntary Carbon Market. Having harmonized standards ensures credibility, interoperability and scalability across borders.

AI-enabled, shared data infrastructure can improve transparency, reduce verification costs and support traceable carbon-linked products across supply chains.

Article 6-compliant corridors can unlock liquidity, lower transaction costs and connect supply and demand. Countries should establish clear approval processes, corresponding adjustment rules and robust infrastructure.

If national linkages are initially complex, city-to-city or industry-specific pilots can provide early proof points.

Launch acceleration programmes to support hard-to-abate sectors and scale technology deployment. Regional hubs, such as Singapore and South Korea, can facilitate best-practice exchange and drive industrial transformation.

Carbon markets are a strategic accelerator for corporations to embark on a low-carbon transition journey and achieve sustainable business value. Corporations must prioritize three strategic imperatives:

Contemporary Amperex Technology's one core initiative for reducing carbon footprint across the value chain is through zero-carbon factories. Nine such facilities have been built, with zero-carbon electricity comprising 74.5% of battery bases’ power supply.

For its supply chain, it integrates carbon footprint assessments into supplier evaluations. This has raised zero-carbon electricity usage to 57% among anode/cathode suppliers and 45% among aluminium product suppliers.

It is critical to explore potential carbon-reduction benefit-sharing frameworks that cover the entire value chain, thereby promoting equitable distribution of carbon credits.

Compliance carbon markets, supported by industrial policies such as China’s green hydrogen initiatives, signal long-term opportunities and encourage early investment. Baofeng operates one of China’s first large-scale solar-powered hydrogen and oxygen production plants, which replaces traditional coal-based hydrogen and oxygen production.

The electrolysers in Baofeng’s plants, with a single-unit capacity of 1,000 normal cubic metre per hour (Nm³/h), can produce green hydrogen with a purity of over 99%. The generated green hydrogen and oxygen directly supply chemical systems to produce a series of chemicals, demonstrating new business opportunities and growth potential.

A successful decarbonization strategy relies on solid infrastructure and carbon management. This demands specialized expertise, such as emissions-reduction planning and low-carbon investment strategies.

In addition to its internal carbon market development, which is expected to cover 80 entities and approximately 30 million tonnes of CO2 equivalent (tCO2e) in the first batch in 2025, China Southern Power Grid (CSG) has supported capacity building across the market.

One key initiative is the co-investment of near-zero/zero carbon demonstration zones, where CSG provides end-to-end services such as carbon inventories, emissions reductions and evaluation standards.

Integrating Asia’s carbon markets will be a phased and collaborative multistakeholder effort.

With coordinated action, Asia can build a high-integrity, interconnected carbon market ecosystem that drives industrial transformation, channels capital into credible climate solutions and strengthens the region’s leadership in the global net zero and nature positive transition.