Pricing pollution will be critical for decarbonization in the Asia-Pacific
The Asia-Pacific region is home to 17 of the world’s 28 megacities, some of the world’s major carbon emitters, and several of the world’s most vulnerable developing countries, including small island nations. Lead by China and India, 60% of the world’s population lives in the region. The growing population and economy come with increased demands for energy and resources and therefore centralizes the Asia-Pacific as a make-or-break region for combatting climate change. To-date, there has been progress in climate action and countries can use carbon pricing to raise their climate ambition.
At Asia-Pacific Climate Week, stakeholders from more than 60 countries, from government, private sector, academia and civil society, gathered to explore opportunities to reduce carbon pollution and drive low-carbon and climate resilient development. While many topics were discussed (see key outcomes here), including increasing climate finance, expanding renewable energy access, and mainstreaming nature-based solutions into climate action plans, speakers and participants emphasized pricing carbon pollution as an essential element of the region’s climate action strategy.
The Asia-Pacific region is responsible for 47 percent of global GHG emissions, with China alone responsible for 23 percent. Currently, there are 17 carbon pricing initiatives implemented or scheduled for implementation in the region, but these initiatives only cover 26 percent of emissions with prices ranging from less than US$1/tCO2e to US$24.5/tCO2e. Despite slow progress to date, there is growing attention to the opportunity that pricing policies offer to drive social, economic, and climate benefits.
During the Climate Week, the Carbon Pricing Leadership Coalition (CPLC), World Bank, and International Emissions Trading Association (IETA) hosted a full day of workshops and panels on carbon pricing and markets in the Asia-Pacific. This followed similar carbon pricing days at Africa Climate Week and Latin America and the Caribbean Climate Week earlier in the year, reflecting a growing global interest in using carbon pricing instruments to meet the goals of the Paris Agreement. Regional representatives from Japan, Indonesia, Thailand, Pakistan, Singapore, and China (among others) outlined the role carbon pricing could play in countries’ larger decarbonization strategies and their ongoing efforts to put a price on carbon. For example, Aulia Putra Saragih from the Republic of Indonesia explained how his country, with technical assistance from the Partnership for Market Readiness (PMR), is considering market-based instruments to cost-effectively deliver real, additional, and permanent emission reductions. In a “ted talk” style presentation later in the day, Cyril Cassia of the International Energy Agency emphasized how international cooperation and comprehensive policy packages will be key to driving a net-zero energy transition. Covering five topics (see full agenda) including the operationalization of climate markets under Article 6 of the Paris Agreement, the use of carbon revenues, and the role of carbon pricing in the energy transition, the discussions revealed several key messages including:
1. Carefully planned carbon pricing mechanisms can help countries in the Asia-Pacific region – and the whole world – accelerate the energy transition by reducing carbon pollution and generating benefits such as cleaner air and new economic opportunities.
2. Carbon pricing policies and cooperation under the Paris Agreement (Article 6) could drive higher climate ambition while generating new financing for low-carbon projects and reducing the cost of decarbonization.
3. Businesses and investors are critical actors for delivering climate action in the Asia-Pacific. Several participants highlighted that to have a successful UN Climate Action Summit, businesses should have a central role.
The World Bank, CPLC, and IETA also hosted a high-level plenary with representatives from Indonesia, Thailand, and the United Nations Framework Convention of Climate Change, among others. Panelists dove deep into the potential for Article 6 to increase climate ambition in the region and unlock additional climate finance, including to protect forests and fund sustainable development.
On the final day, ICF and CPLC hosted a workshop, which included participation from representatives of the IEA, Tsinghua University, and the World Bank, with over 70 participants, on the perspectives of market players on carbon pricing policies. Panelists discussed critical, yet often overlooked aspects of the policy design process, such as monitoring, reporting, and verification (MRV) of carbon emissions and stakeholder engagement with businesses regulated under a carbon price. For example, Wang Shu of ICF China presented the findings of their annual carbon pricing survey in China and Professor Da Zhang of Tsinghua University explained the key messages from their recently published paper on the integrity of emissions reporting in China. Professor Zhang detailed how their research found significant errors in firms’ reporting of emissions due to inattention (e.g. reading meters incorrectly), misunderstanding of the rules (e.g. misunderstanding definitions of installation coverage), and other reasons (e.g. not keeping complete invoices for energy purchases). The panel stressed that for successful implementation of carbon pricing programs, learning, capacity building and stakeholder engagement is critical not just for governments but also for regulated entities.
Throughout the week, there was a strong youth presence. To facilitate further engagement, Connect4Climate and CPLC teamed up to host a #YouthTakeover. Students from a local university covered the event using Connect4Climate’s social media channels to highlight youth perspectives on key conference topics. Notably, during the Climate Week’s opening high-level plenary, the Asia-Pacific Climate Week Youth Representative Punyapha Visavakornvisid listed several calls to action: she started by calling for a strong resolution to Article 6 negotiations at the upcoming Conference of the Parties (COP25) in Santiago. This message reflected the emphasis youth are putting on concrete actions (like effective climate markets), rather than just goals.
Successful implementation of carbon pricing initiatives will play a decisive role in whether countries can meet their ambitious climate goals. As evidenced throughout the week, carbon pricing mechanisms provide a fair and cost-effective way to reduce pollution and drive benefits such as better respiratory health outcomes and green economic opportunities. Currently, only 20 out of the 45 parties in the Asia-Pacific region that have submitted their Nationally Determined Contributions (NDCs) have mentioned carbon pricing in their NDCs. Moving forward, the Carbon Pricing Leadership Coalition will enhance engagement with regional partners to ensure more effective knowledge exchange and communication to strengthen existing initiatives and spur new ones.