Potential of Carbon Pricing in ASEAN for
Decarbonization of Energy Sector
ASEAN-Japan Insight Series
26 March 2024

Dr Zulfikar Yurnaidi
ManagerEnergy Modelling and Policy Planning (MPP) Department
ASEAN Centre for Energy

Decarbonization in ASEAN Energy Sector is Guided by APAECASEAN Center for Energy Role
Catalyst
To unify and strengthen ASEAN Energy Cooperation by
providing platform for sharing, policy advisory, bestpractices, capacity building.

Knowledge Hub
To provide a knowledge repository for ASEAN Member
States (AMS) and services through data Management,
publication, dissemination.

Think Tank
To assist AMS on research and identifying practical &specific solution policies, legal & regulatory framework,technologies, innovative Solutions

Enhancing Energy Connectivity and Market
Integration in ASEAN to Achieve Energy Security,Accessibility, Affordability & Sustainability for All
Accelerating Energy Transition andStrengthening Energy Resilience ThroughGreater Innovation and Cooperation

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ASEAN Plan of Action for Energy Cooperation (APAEC)
Phase II (2016-2025)
Focus

Program Area & Key Strategy
ASEAN Power Grid: Expand MPT, Grid resiliency andclean & renewable energy integration
Trans ASEAN Gas Pipeline : Develop Common Gas
Market by LNG connectivity and accessibility
Clean Coal Utilization: Optimize the role of Clean Coal inenergy transition
Energy Efficiency: Reduce energy intensity by 32% in2025 based on 2005 level

Renewable Energy: Achieve 23% share of RE in ASEAN
energy mix and 35% share of RE in ASEAN installed
Capacity
Regional Energy Policy and Planning: Advance energy
policy and accelerate region’s energy transition &resilience
Nuclear Energy: Build human resources capabilities onnuclear technology for power generation2

AEO7: Pathways of ASEAN Energy System
Demand Growth By Sector❑ Baseline Scenario projected a 4x of energy required to fuelthe economic growth from 2020 to 2050. Energy efficiency
measures reduce the need of energy to 3x and 2.7x in ATSand APS.
❑ LCO Scenario reduces the demand further to 2.5x of 2020.
❑ In all scenarios, fossil fuels remain the largest component.
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Industry and transport sectors continue to be thehighest energy consuming sectors in the region,dominated by oil especially in transport

3Status and Progress of Carbon Pricing in ASEAN
In the context of ASEAN countries, carbon pricing is
widely recognized as a key instrument for climatechange mitigation within their respective climate
policies or national climate reports. Nearly all thesenations are at various stages of engagement withcarbon pricing policies, ranging from assessment anddesign to implementation.
As of now, the only operational ETS within ASEAN is
Indonesia's, launched in February 2023. This ETS
specifically targets emissions from coal-fired power
plants. On the other hand, Singapore introduced acarbon tax in 2019, marking another significant step inthe region's carbon pricing initiatives.
Regarding the carbon market, almost all AMS areinvolved in carbon credit activities, which arepredominantly voluntary. This widespread participation
highlights the region's commitment to exploring diverse
approaches to carbon management and climatechange mitigation.
Source: ACE, “Progress of Carbon Pricing in ASEAN to Support theShift Towards a Low Carbon Economy” (2024)
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4ACE Survey on CBAM and AMS Responses
WILL CBAM BE EFFECTIVE FOR AMSTO ACHIEVE NET-ZERO TARGET?
YES (77%) AGREE THAT CBAM WILLHELP ACHIEVE NET ZEROYesARE AMS READY FOR CBAM?
69% ARE NOT READY YET FOR CBAMIMPLEMENTATIONYesNoIS CBAM MAY RESULT IN HIGHERPRODUCT PRICES ?
YES (97%) THE PRODUCT PRICE WILL
BE HIGHER DUE TO CBAMYes

3%

23%

77%

No

31%

69%

IS CBAM BE EFFECTIVE FOREMISSION REDUCTION FROMENERGY INTENSIVE INDUSTRIES?
YES (92%) CBAM WILL REDUCEEMISSION IN INDUSTRYYesNo
8%

92%
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97%

WILL CBAM INCREASE TO MORERENEWABLE ENERGY INSTALLATION ININDUSTRY SECTOR?
YES (92%), CBAM WILL INCREASE RE IN
INDUSTRYYes

No8%92%5

ACE Survey on CBAM and AMS Responses

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6ACE Survey on CBAM and AMS Responses

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7Recommendations in Promoting Carbon Pricing Policy in ASEAN

1. Enhance Understanding and Capacity Building: Launch comprehensive educational and training programs aimed
at all stakeholders, including policymakers, industry leaders, and the workforce within energy-intensive sectors. Theseprograms should focus on the mechanics of CBAM and Carbon Pricing, their implications for competitiveness, andstrategies for adaptation.
2. Develop and Implement Carbon Pricing Policies: ASEAN countries should consider adopting or enhancing Carbon
Pricing mechanisms. This could involve direct carbon taxes or cap-and-trade systems tailored to the specificeconomic and environmental contexts of each country.
3. Foster Renewable Energy and Technological Innovation: Incentivize the adoption of renewable energy sources
and the development of low-carbon technologies. This can be achieved through subsidies, tax incentives, and support
for research and development projects.
4. Collaborate Regionally and Internationally: Strengthen cooperation among ASEAN members to share bestpractices, develop regional guidelines for Carbon Pricing and CBAM adaptation, and engage in dialogue with partners
outside the region to ensure that ASEAN's interests are represented and protected.
5. Strengthen Policy and Regulatory Frameworks: Update and refine regulatory frameworks to support the transition
to low-carbon technologies and practices, ensuring they are conducive to innovation and competitiveness.
6. Engage Stakeholders: Establish platforms for ongoing dialogue with all stakeholders, including the private sector,
civil society, and the international community, to gather feedback, build consensus, and ensure that policies areeffectively implemented and adjusted as necessary.

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8To know more about the latest ACE Publications,those are available for download from:aseanenergy.org/category/publications/

For further information or to provide feedback, please contact ACE atsecretariat@aseanenergy.org

Thank You