Climate handouts are not enough: Asia must build its own carbon credit market
- Voluntary carbon markets can encourage carbon sequestering while generating revenue, but they are held back by a lack of standardisation and transparency
- With robust systems in place, emerging markets stand to benefit from new revenue drivers as part of a global carbon trading network
From heatwaves to flash floods, Asia has borne the brunt of “one-in-a-lifetime” weather events in recent years. The continent sees temperatures rising at twice the rate of the global average, making it far more prone to frequent, severe weather events and, consequently, the economic burden of destabilised communities and infrastructure.
There are no easy choices. The climate crisis, however, only serves to exacerbate economic challenges: whether it’s the impact of diminished water supplies that lead to reduced crop yields, or novel health hazards emerging as a result of community and nature displacement.
And then comes the structural challenges. Despite being home to some of the world’s smallest and most climate-vulnerable countries, Asia simultaneously accounts for two of the three largest carbon dioxide emitters globally.
As the continent continues its green transition on an uneven footing, its effects will be felt across the globe.
Green shoots of investment in renewable energy are starting to be seen, but most of this capital is being channelled towards China, India, Japan and South Korea. Though this bodes well for the budding green finance sector, more needs to be done.
When carbon credits can be easily traded across borders, the economic potential of these projects is realised, injecting fresh overseas capital and support for local communities.
But voluntary carbon markets remain held back by a lack of standardisation and transparency. While renewable energy projects and nature-based solutions represent 80 per cent of all credit issuances on Climate Focus’ Voluntary Carbon Market Dashboard, a lack of consistency in project methodologies and measurement models is casting doubt on the veracity and environmental integrity of these voluntary emission reductions.
In addition, double counting of credits remains an issue – it is unclear whether the country that produced and sold the credit, or the country that bought it, can claim it towards its NDC.
Before these markets can scale up, there is a trust gap that needs to be filled. Tech-based solutions can do that by shaping the infrastructure that carbon registries and carbon trading systems are built on – where public-private partnerships can be leveraged to encourage high-integrity, internationally recognised standards, verifiably transparent registry systems, and a firm understanding of international carbon policy.
With robust systems in place, emerging markets stand to benefit from new revenue drivers – at the very minimum, US$40-60 per tonne – borne out of being part of a global carbon trading network.
As Asia grapples with its green transition, it’s clear the region can no longer rely on the support of its neighbours. Change must come from within, driven by innovators coupled with meaningful changes in carbon policy.
Michael Sheren is president and chief strategy officer of MetaVerse Green Exchange