The Asia Climate Summit 2022 - Insights

Published date23 December 2022
Subject MatterEnvironment, Environmental Law, Climate Change
Law FirmAkin Gump Strauss Hauer & Feld LLP
AuthorJooyoung Song and Paul Greening

Last week, the Asia Climate Summit 2022 ("ACS 2022") organized by the International Emissions Trading Association (IETA) took place in Singapore. The ACS 2022, which was held shortly after the 27th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP27) Climate Summit in Egypt, served as an important follow-up forum for dialogue among policy-makers, corporates and innovators to continue discussions on the world's evolving net-zero landscape and clean energy growth opportunities. Paul Greening (Partner) and Jooyoung Song (Counsel), who are both members of Akin Gump Strauss Hauer & Feld LLP's global energy and transactions team, attended ACS 2022 and wanted to share the following observations:

Voluntary v. Compliance

Two distinct markets'compliance and voluntary'have developed around the world in response to increasing interest in reducing greenhouse gas emissions. As the names suggest, compliance markets serve as a regulated mechanism for market participants to trade allowances (representing a permit issued by a regulator for certain carbon emissions) to comply with a regulatory regime (such as California's cap-and-trade market and the emissions trading system in South Korea), whereas voluntary carbon markets (VCMs) operating with various accreditor organizations (such as Gold Standard and Verra) have emerged where private-sector firms voluntarily purchase carbon credits generated by projects that avoid or remove greenhouse gas emissions to offset or compensate for their emissions.

Throughout ACS 2022, the fundamental question over whether it will be VCMs or compliance carbon markets that will better achieve the goal of reduction and/or removal of greenhouse gas emissions was repeatedly debated, and there was a general consensus that "light-touch regulation" of carbon markets is imperative to enhance carbon market accessibility and liquidity. Although there were different views about the timing and scope of the required carbon market regulations, ACS 2022 participants generally acknowledged that (1) the current VCMs are highly fragmented and opaque, so some form of "soft regulation" can be helpful to mitigate issues such as lack of standardization and transparency, but (2) over-regulation of carbon markets (in the form of too onerous reporting and disclosure requirements, for example) could deter development of carbon projects and lead to a liquidity crunch. In the Asia-Pacific region, this debate becomes further complicated because countries in the region have to maintain the balance between the current momentum to actively develop and implement emissions trading systems to meet their Nationally Determined Contribution (NDC) targets and the need to increase cooperation with different countries to make their national policies more effective, consistent and harmonized.

Although no specific next steps were presented at ACS 2022, it was clear that (i) stakeholders in the region and around the world (including relevant authorities) are heading in the same...

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