SEOUL (BLOOMBERG) – More Asian governments are putting prices on emissions to try and curb global warming, but the region’s carbon markets and taxes are mostly off to slow and disappointing starts.

Carbon prices in China and South Korea are at just fractions of where they are in the European Union and also well below levels estimated to have a meaningful impact on the climate, while taxes in Japan and Singapore have been set at very low levels.

That suggests these markets – at least at their current trajectories – are not going to be sufficient to change the behaviour of polluting industries or help countries reach their net zero goals.

Asia is struggling to adopt ambitious pollution pricing instruments, especially at a time of soaring inflation, rising energy prices and economic instability. Carbon pricing is one of the most powerful tools to put economies on low-emission paths, but price signals must be sustained, strengthened, and extended to a greater portion of global emissions, the World Bank said in May.

Asia’s carbon markets lack tough regulations, “which means they are unable to give right signals that lead to emission reductions”, said Mr Youn Sejong, a director at Plan 1.5, a Seoul-based climate advocacy organisation.

“Markets will only function well once tighter limits are imposed on pollution levels, raising prices and creating urgency among companies to curb emissions and demand for credits”

Chinese carbon prices peaked at around US$9 (S$12.44) a tonne early this year, while those in South Korea are not that much higher. Only New Zealand is anywhere near the US$80-plus a tonne level in Europe, the most liquid carbon market.

Some 46 countries worldwide are now pricing carbon through trading schemes or taxes, covering around a third of emissions, according to the International Monetary Fund (IMF). The current average price of US$6 a tonne of carbon-dioxide equivalent needs to rise to US$75 by 2030 to effectively limit global warming, the multilateral lender said. Here is a round-up of the progress so far in Asia.

China

China, the world’s largest emitter, launched its emissions trading scheme in the middle of last year. The initial focus is on more than 2,200 electricity generators that account for about 40 per cent of the country’s emissions, with steel, cement, aluminum and petrochemical producers next in line to join.

Trading in what is the world’s biggest market by emissions covered has been lacklustre, however, and there have been delays in adding new industries as well as data collection problems.

Beijing seems to be trying to strike a balance between its environmental and economic goals by prioritising participation in the emissions trading system (ETS) over more stringent goals on reducing emissions, with energy shortages last year also spurring authorities to relax curbs on fossil fuels.

South Korea

South Korea introduced a national ETS in 2015, and it has since expanded to cover 74 per cent of domestic emissions across industries including power, transport, aviation, construction and waste management.

The carbon price remains relatively low, at 28,000 won (S$29.68) per tonne of carbon dioxide equivalent, around a quarter of the level in Europe. Only 10 per cent of allocated carbon credits will be auctioned between 2021 and 2025, meaning the rest will be given out to companies for free.

New Zealand

New Zealand launched an ETS in 2008, with major reforms made to it last year. Those included a new cap on unit supply and the introduction of an auction mechanism. Auctions started in March 2021, with as many as 26.3 million allowances made available for this year. Agriculture, a major sector for emissions in the country, is still not covered, however.

The nation’s carbon price is the highest in Asia, at NZ$83.32 (S$71.86).