Carbon Pricing Potential in East and South Asia

The effectiveness of carbon pricing as a market-based policy tool with economy-wide transformation potential has increasingly rendered it the instrument of choice to combat climate change. However, the potential for jurisdictions to introduce carbon pricing instruments varies considerably owing to differences in political, legal, economic, technical, and multilateral contexts. Previous work under this project developed an analytical framework to assess this potential, along these five dimensions. This report now applies the framework to 15 Asian jurisdictions in a series of detailed factsheets; it reveals pathways for carbon pricing and points to emerging opportunities in jurisdictions where the challenges to it seem greatest.

Overall, climate ambition in the region is on the rise. Multiple jurisdictions have made considerable headway in advancing their long-term climate strategies in which carbon pricing is expected to drive a major part of mitigation outcomes. Yet, obstacles to introducing carbon pricing may be more difficult to overcome in the presence of a heavy reliance on fossil fuels for government and export revenues; subsidized and historically low energy prices; and a heavily regulated and fossil-fuel reliant power sector, among others. The findings of the report underscore the relevance of framework conditions for carbon pricing to be feasible and effective at delivering emission reductions. Based on the findings, three jurisdictions (Indonesia, Pakistan, and Vietnam) are selected for in-depth analysis in future work under this project.