ASEAN carbon markets diverge as policy turns to execution

RHB sees Malaysia, Indonesia, and Singapore taking distinct roles.

ASEAN’s carbon market is moving from policy design to practical execution, with Malaysia, Indonesia, and Singapore emerging with distinct roles across pricing, supply, and market infrastructure.

RHB said Malaysia remains at a nascent stage of carbon price discovery, Indonesia is shaping up as the region’s main carbon-credit supply hub, and Singapore has taken the lead as the financial and trading hub.

The bank said private green investment across six Southeast Asian markets rose 43% in 2024 to $8b, whilst the ASEAN Common Carbon Framework could generate $3t in cumulative revenue and create 13.7 million green jobs by 2050.

It added that ASEAN had 432 carbon projects and 194 million carbon credits documented by four major registries as of March 2024, with 66.8% tied to forestry and other land use projects.

In Malaysia, RHB said the upcoming Climate Change Bill is expected to introduce a monitoring, reporting, and verification system and pave the way for a carbon tax initially targeting iron, steel, and energy.

It said the move should support demand for offsets on Bursa Carbon Exchange, which it estimated has traded 186,500 carbon-credit units across 13 contracts at an average MYR48 per tonne of carbon dioxide equivalent.

The bank said Indonesia offers the region’s strongest supply story, supported by a large forestry base, 24.2 million hectares of peatland, 3.4 million hectares of mangroves, and a carbon project pipeline of more than 32 million tonnes of carbon dioxide over time.

Still, it said near-term growth depends on execution and foreign demand, with domestic demand still relatively weak and monetisation likely to favour forestry and other land use projects over renewable energy credits.

Singapore, meanwhile, is positioned as ASEAN’s carbon-market hub, where credits are structured, financed, verified, traded, and retired rather than generated domestically.

RHB said the city-state’s carbon services and trading ecosystem has more than 150 firms and could contribute up to SGD7.6b in gross value-add, supported by a carbon tax of SGD45 per tonne, Article 6 agreements with 10 countries, and stronger market infrastructure through exchanges and advisory platforms.

RHB’s top picks are Tenaga Nasional, Press Metal, and Yinson in Malaysia, Pertamina Geothermal Energy and Integra Indocabinet in Indonesia, and DBS, Keppel Infrastructure Trust, and Singapore Exchange in Singapore.

It said the investment case is not uniform across the region, with Malaysia offering a carbon-tax and exchange-liquidity story, Indonesia a nature-based supply and export story, and Singapore a hub-and-services model.