Carbon pricing is one of the key mitigation measures to cut greenhouse gas (GHG) emissions by putting prices on carbon. Climate change has a far-ranging impact on the environment and public health, with a high cost on the public and on future generations. Given the negative externality of GHG emissions, economic theory prescribes internalizing the social cost of emissions by setting the carbon price equal to the social cost of carbon emissions and charging all parties that produce emissions. With proper price signals from the carbon pricing system, GHG emitters are expected to reduce their emissions by reducing energy consumption, shifting to cleaner fuels, and redirecting new investment to clean technologies.

This note aims to review progress in carbon pricing implementation in the ASEAN+3 region, and discusses the challenges in the adoption and implementation of carbon pricing.