Jakarta – ASEAN countries need to realign and reassess their national standard on carbon credit accounting with international standards to elevate the carbon market, the ASEAN Center for Energy (ACE) said in its latest report entitled ASEAN Energy in 2025. The Carbon market is still in the early development stages in the region, both in compliance and voluntary carbon markets, including Indonesia.
The report said that considering the energy sector’s 50% share of total ASEAN emissions, additional financial sources from the carbon market would significantly impact mitigation efforts in the region’s energy sector.
“However, the carbon market in ASEAN is still at an early development stage in compliance and voluntary carbon markets. It requires more effort in setting a clear regulatory framework, scope, and compliance with the international standards applied to the global carbon market,” the report, which was issued on February 18, said.
Thus, the re-assessment and realignment of the existing regulation and national standards applied for the carbon market in each of ASEAN member countries, including any existing carbon trading initiatives in the ASEAN energy sector, would be the first step that needs to be implemented by the region.
It cited the case of Indonesia. It said the existing Indonesian national standard on carbon credit accounting is based on the national standard on climate change mitigation set by the Ministry of Environment and Forestry of Indonesia. It said that this carbon credit accounting standard needs to be adjusted with the new Paris Agreement Credit Mechanism to ensure environmental integrity inclusion and its compatibility with the international standard applied under Article 6.
ASEAN’s position in the global energy supply chain is crucial, considering 35% of its energy share is in global energy demand. Most ASEAN member states, it said, have also submitted their national targets towards net zero or carbon neutrality by 2050 or 2060. Moreover, ASEAN also announced the regional strategy on ASEAN carbon neutrality as the key starting guide for the region in reducing emissions in ASEAN.
The energy sector (including power, transport, and industrial processes) accounts for more than half of ASEAN’s total emissions. Therefore, decarbonisation in the energy sector is urged as one key to meeting ASEAN’s carbon neutrality targets.
To meet carbon neutrality in 2050, the region would need around USD 3.7-6.7 trillion of investment. Moreover, the most recent 8th ASEAN Energy Outlook estimated about 5.1 GtCO2e greenhouse gas emissions will be produced by 2050 under the Baseline Scenario and could be reduced to 1.1 GtCO2e in the most ambitious scenario, which required about USD 371 billion in the regional power sector.
Given the vast investment needed to finance carbon neutrality, the region accounted for only 2% of global clean energy investment in 2024.
Although several AMS depend significantly on foreign direct investment than domestic financial sources in financing their energy infrastructure, about 60% of the regional clean energy investment came from public finance.
ASEAN absorbed around 5% of the total climate finance in Asia and Pacific in 2019, on which around 84% was spent on climate mitigation, and around 54% of the climate mitigation finance of ASEAN was spent on renewable energy. Around 68% of it was financed through debts, including 26% from project market debt, 25% from low-cost project debt, and 17% from balance sheet debt.
“Utilisation of the carbon market to provide additional financial sources for ASEAN has not yet been explored due to the early stage of carbon market development in ASEAN,” it said.
Therefore, the report suggests ASEAN member countries to reassess and realign national accounting standards with international standards to boost the carbon market in the hope that more funding will flow into the region to finance energy transition projects. (Roffie Kurniawan)
Banner photo: Image generated by OpenAI’s DALL·E via ChatGPT (2025)
