Carbon pricing for the transition toward net-zero of Asia

Working Paper
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This paper provides an overview of progress on carbon taxes, emissions trading schemes (ETS) and voluntary carbon crediting mechanisms in Asia, identifying relevant policy gaps and giving suggestions based on the lessons and experiences with pertinent policy practices in this region. Overall, carbon pricing practices in Asia are still at an early stage of development, and the resulting carbon prices in reality are much lower than the levels needed for achieving net-zero (i.e. starting from USD 30 /t-CO2 immediately, rising to around USD 100 /t-CO2 by 2030 and then going much higher by mid-century). Therefore, carbon pricing in Asia should be largely strengthened and pricing levels should become ambitious enough to catalyse a transition to net-zero.

Developing countries in Asia with no carbon pricing are strongly recommended to adopt a pricing policy that is tailored to their national circumstances and context sooner rather than later. Political leadership and decision making at the highest level is indispensable in introducing such a policy. The practice of carbon pricing may start at acceptable levels for the policy targets and be gradually strengthened through a learning-by-doing process. The domestic crediting mechanisms in voluntary should be also promoted. This approach may be scaled up by linking with mandatory carbon pricing, especially the ETS, to support a net-zero transition.