Implementing Carbon Pricing in Southeast Asia

This policy brief by the International Institute for Sustainable Development (IISD) examines the implementation of carbon pricing mechanisms in Indonesia, the Philippines, and Viet Nam. It details the current legislative status, the deployment of emissions trading systems (ETS), and the challenges associated with carbon taxes and international trade implications, such as the EU's Carbon Border Adjustment Mechanism (CBAM).

• Indonesia has established a comprehensive legal framework for carbon pricing, including the launch of the IDXCarbon exchange in 2023 and an ETS for the power sector. As of 2024, the ETS covered 146 coal-fired power plants, representing 38% of the country's power generation capacity. However, the legislated carbon tax of IDR 30,000/tonne (USD 2/tonne) has been repeatedly delayed and is not yet in force.
• Indonesia's carbon market faces challenges regarding credibility and effectiveness. International trading on IDXCarbon began on January 20, 2025, but initial volumes were very low, with only 41,822 tonnes purchased by nine international buyers from an available 1.78 million tonnes. Additionally, current ETS emission allowances are set so high that they exceed the average emission intensity of coal-fired power plants, which dampens the demand for compliance.
• Carbon pricing in the Philippines is in its early stages, with the government focusing on ETS market design and the generation of carbon credits from activities like renewable energy deployment and coal-plant early retirement. While there is receptiveness to an ETS, carbon taxes face opposition due to concerns that they could increase electricity costs and render the power sector uncompetitive.
• Viet Nam is piloting an ETS from mid-2025 until the end of 2028, covering approximately 150 entities in the steel, cement, and power sectors. Trading on the Hanoi Stock Exchange was recently postponed from late 2025 to the end of 2026. Viet Nam allows a high proportion of offsets for compliance—up to 30%—which is significantly higher than most other jurisdictions.
• The European Union's Carbon Border Adjustment Mechanism (CBAM) is a significant driver for carbon pricing policy in the region. It is expected to have a substantial impact on Viet Nam's steel sector and has implications for Indonesia, with EU CBAM liabilities accruing as of January 2026.
• The Emissions Ambition for Sustainable Economies (EASE) in Southeast Asia is a CAD 15 million project (2024–2029) implemented by IISD. The project focuses on domestic carbon markets, fiscal policies like revenue recycling, and international trade implications to support equitable, low-carbon development.

APA

International Institute for Sustainable Development (n.d.). Implementing Carbon Pricing in Southeast Asia. https://www.iisd.org/system/files/2026-03/carbon-pricing-southeast-asia.pdf

Chicago

International Institute for Sustainable Development. Implementing Carbon Pricing in Southeast Asia. n.d. https://www.iisd.org/system/files/2026-03/carbon-pricing-southeast-asia.pdf.

Wikipedia

{{cite report |author=International Institute for Sustainable Development |title=Implementing Carbon Pricing in Southeast Asia |url=https://www.iisd.org/system/files/2026-03/carbon-pricing-southeast-asia.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{internationalinstituteforsustainabledevelopmentndimplementing, author = {{International Institute for Sustainable Development}}, title = {{Implementing Carbon Pricing in Southeast Asia}}, institution = {International Institute for Sustainable Development}, url = {https://www.iisd.org/system/files/2026-03/carbon-pricing-southeast-asia.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }