Report on the Outcome of the AZEC International Conference to Develop Carbon Market Published

1. AZEC International Conference to Develop Carbon Market*

The AZEC International Conference to Develop Carbon Market (AZEC-DCM) was launched as a platform for policymakers’ dialogue to discuss matters specified in the Action Plan for Next Decade adopted at the 2nd AZEC Leaders’ Meeting in October 2024. Specifically, the AZEC-DCM addresses enhancing the competitiveness of industries through the visualization of GHG emissions throughout the supply chain and the promotion of high-integrity carbon markets.

The first AZEC-DCM was held online in May of this year, and the second one was held in Kobe City, Hyogo Prefecture, in August.

* Note that the AZEC International Conference to Promote the JCM and Develop Carbon Markets (AZEC-JCM International Conference), held twice up to 2024, has been integrated into the AZEC-DCM.

2. Key points of the report

(1) Visualization of GHG emissions (including carbon pricing)

• Visualizing GHG emissions across supply chains is an approach that enhances the competitiveness of Asia, particularly for export-oriented industries centered on manufacturing, by supporting their entry into international business. Initiatives such as the Partnership to Strengthen Transparency for co-Innovation (PaSTI) have supported institutional development and formulating facility-level measurement and reporting guidelines for the ASEAN region. Private-sector services for emissions measurement are also expanding, enabling the tracking of emissions across entire cross-border supply chains.
• Discussions on introducing carbon pricing are in progress across Asian countries, with some nations already operating such schemes. Japan is advancing its GX-ETS, which combines the introduction of an Emission Trading Scheme (ETS) with upfront investments for decarbonization. The AZEC countries noted the importance of such policies that combine carbon pricing with decarbonization investments.

(2) Development of high-integrity carbon markets

• Building high-integrity carbon markets is central to deepening GHG emissions reductions. The AZEC-DCM recognized the need to expand the use of decarbonization technologies through bilateral cooperation, including the Joint Crediting Mechanism (JCM), and to encourage wider use of carbon credits. Considering trends in the global carbon market and from the perspective of building a high-integrity carbon market, the latest developments and initiatives regarding registries—the foundational infrastructure for implementing Article 6 of the Paris Agreement—and new methodologies for creating carbon credits, such as CCS, were introduced. Furthermore, to ensure transparency and credibility, it was shared that the partner countries were exploring ways to harmonize diverse systems while aligning with Article 6 of the Paris Agreement. Regarding the expansion of the JCM partnership, it was noted that consultations are progressing toward the signing of a memorandum between Malaysia and Japan.
• Regional cooperation among AZEC partner countries is highly impactful in accelerating emission reductions. The countries discussed approaches to regional cooperation going forward. While stressing the importance of formulating realistic, practical and actionable initiatives to promote decarbonization within the framework of AZEC, the partner countries acknowledged that discussions should continue on ensuring the integrity (quality) of credits, infrastructure (registries), and focus areas and methodologies, from the perspectives of both scheme operators and users. They also confirmed that, in addition to the more traditional areas of energy efficiency, renewable energy and waste management, there is still potential for reducing GHG emissions from Carbon dioxide Capture and Storage (CCS), agriculture and peatland management.

Related Links

• ERIA｜Report on the AZEC International Conference to Develop Carbon Market (AZEC-DCM)
• The First AZEC International Conference to Develop Carbon Markets Held (METI) (Japanese)
• The Second AZEC International Conference to Develop Carbon Markets Held (Japanese)
• Asia Zero Emission Community (AZEC) Leaders’ Joint Statement and its Action Plan for Next Decade(PDF:218KB)
• Asia Zero Emission Community (AZEC) Leaders’ Joint Statement and its Action Plan for Next Decade (Provisional translation into Japanese)(PDF:406KB)

Division in Charge

Global Environmental Affairs Office, GX Policy Group