Highlights

• With energy demand projected to increase 3.5 times by 2050, ASEAN’s greenhouse gas emissions are set to rise significantly. Carbon pricing (CP) mechanisms, such as carbon taxes and emissions trading systems, are vital to help ASEAN achieve its carbon neutrality goals and support the ten countries’ Nationally Determined Contributions (NDCs) 

• While CP promotes decarbonisation and technological innovation, it poses challenges to energy-intensive industries like petrochemicals and electronics because it increases production costs and eventually reduces exports. A well-designed revenue recycling mechanism can help mitigate these effects. 

• ASEAN can learn from the European Union’s Emissions Trading System (EU ETS) and Japan’s Green Transformation (GX) Transition Bonds (JCTBs) to develop a tailored revenue recycling strategy that supports green investments and minimises the disruptions of CP on key industries in ASEAN. 

• ASEAN must strengthen institutional and regulatory capacities to ensure successful CP implementation. Investing in technical expertise, data systems and analysis including an emissions database and its monitoring, reporting and verification (MRV), and international cooperation will enable smoother adoption and enhance regional and global market integration.