Regional spotlight: Carbon markets & offsets integrity in Southeast Asia — what's different and why it matters

Southeast Asia has emerged as one of the most consequential regions in global carbon markets, supplying an estimated 30-35% of all voluntary carbon credits retired between 2020 and 2025. Yet the region's carbon market dynamics diverge sharply from the frameworks that dominate policy conversations in Brussels, Washington, and Geneva. Understanding these differences is not merely academic: organizations sourcing offsets, deploying capital, or building project pipelines in the region face regulatory, reputational, and financial risks that standard market analyses routinely underestimate.

Why It Matters

The voluntary carbon market (VCM) contracted globally in 2023 and 2024, with total retirement volumes declining approximately 12% from their 2022 peak of 155 million tonnes of CO2 equivalent. Southeast Asia bucked this trend. Credit issuance from projects in Indonesia, Vietnam, Cambodia, and the Philippines grew by an estimated 18% year-over-year in 2024, driven by nature-based solutions (NBS) projects that leverage the region's vast tropical forests, peatlands, and mangrove ecosystems. According to Ecosystem Marketplace, Southeast Asian projects accounted for over $1.2 billion in primary market value in 2024, representing roughly 28% of global VCM transaction value.

This growth has arrived alongside intensifying scrutiny. The Integrity Council for the Voluntary Carbon Market (ICVCM) began applying its Core Carbon Principles (CCPs) assessment framework to existing methodologies in 2024, and early indications suggest that a significant share of Southeast Asian forestry and peatland credits may not meet the new additionality and permanence thresholds. Simultaneously, several ASEAN member states have implemented or proposed sovereign carbon market regulations that fundamentally alter the rules governing credit generation, ownership, and export. These developments create a bifurcated landscape where legacy projects face integrity challenges while new compliance frameworks reshape opportunity sets.

For corporations with net-zero commitments, the implications are direct. Scope 3 reduction targets increasingly require credible offsetting for residual emissions, and Southeast Asian credits remain among the most cost-effective options available. However, the reputational and regulatory risks of procuring credits later deemed non-additional or non-permanent have intensified dramatically. The 2023 Guardian/Die Zeit investigation into Verra-certified REDD+ projects, several of which were located in Southeast Asia, demonstrated how quickly market confidence can erode when integrity concerns surface.

Regional Regulatory Landscape

Indonesia: Article 6 Pioneer with Sovereign Ambitions

Indonesia represents the single largest source of nature-based carbon credits in Southeast Asia, with over 50 million hectares of tropical forest and 21 million hectares of peatland eligible for conservation and restoration crediting. The government's approach has been assertive. Presidential Regulation No. 98 of 2021 established the legal framework for carbon trading, requiring all carbon credit projects to register with the national registry and obtain government approval before issuing credits. The regulation explicitly subordinates voluntary market activities to Indonesia's Nationally Determined Contribution (NDC) under the Paris Agreement.

In practice, this means Indonesian authorities can restrict or prohibit the export of carbon credits that the government determines are needed to meet its own climate targets. A moratorium on new REDD+ crediting in primary forests, announced in late 2023, demonstrated this authority. The Indonesia Carbon Exchange (IDX Carbon), launched in September 2023, provides a domestic trading platform, but liquidity remains thin, with approximately 460,000 tonnes traded in its first year. Foreign buyers must navigate both the voluntary registry (Verra or Gold Standard) and the national regulatory layer, creating procedural complexity that adds 3-6 months to transaction timelines.

Vietnam: Emerging Compliance Market

Vietnam's 2022 revision of its Law on Environmental Protection established the legal basis for a domestic emissions trading system (ETS), with Phase 1 pilot operations expected to begin in 2027. The government has identified approximately 1,900 facilities across steel, cement, thermal power, and chemicals sectors for potential inclusion. Critically, Vietnam has signaled that domestically generated carbon credits may be required to satisfy compliance obligations under this ETS, potentially restricting supply available for voluntary market export.

Vietnam's forestry sector generated approximately 10 million verified credits between 2020 and 2025, predominantly from REDD+ and afforestation/reforestation projects. The government's $51.5 million agreement with the World Bank's Forest Carbon Partnership Facility (FCPF) for results-based payments on emission reductions from forests in the North Central and South Central Coast regions illustrates the scale of activity. However, the government retains authority over corresponding adjustments under Article 6.2 of the Paris Agreement, meaning credits sold internationally must be explicitly authorized to avoid double-counting against Vietnam's NDC.

Thailand and Malaysia: Developing Frameworks

Thailand launched the Thailand Voluntary Emission Reduction Program (T-VER) through the Thailand Greenhouse Gas Management Organization (TGO), which has certified over 200 projects generating approximately 15 million tonnes of reductions since inception. The framework is well-established but faces challenges scaling to meet international demand. T-VER credits are recognized by some international buyers but lack automatic equivalency with ICVCM Core Carbon Principles, requiring project-level assessment.

Malaysia's approach remains more fragmented. The Bursa Carbon Exchange (BCX), launched in December 2022, provides a centralized trading platform, but voluntary market activity is dispersed across multiple project developers operating under international registries. Malaysia's extensive palm oil sector creates both opportunities (methane capture from palm oil mill effluent) and reputational challenges (historical association with deforestation) that complicate market development.

Project Types and Integrity Dynamics

Nature-Based Solutions: Scale and Scrutiny

NBS projects dominate Southeast Asian carbon credit supply, comprising an estimated 65-70% of issued credits by volume. REDD+ (Reducing Emissions from Deforestation and Forest Degradation) projects represent the largest category, followed by mangrove conservation and restoration, peatland rewetting, and afforestation/reforestation.

The integrity challenges facing NBS credits in the region are well-documented. Independent analyses by the University of Cambridge and West et al. (2023) found that a significant proportion of REDD+ projects globally overestimated baseline deforestation rates, thereby inflating the volume of credits generated. In Southeast Asia, where deforestation drivers include palm oil expansion, logging, and smallholder agriculture, establishing credible baselines requires sophisticated remote sensing analysis and ground-truthing that many early projects lacked.

Permanence presents an additional challenge. Southeast Asian forests face ongoing threats from fire (particularly in Indonesian peatlands), encroachment, and policy changes. The 2023 El Nino-driven fires in Borneo and Sumatra released an estimated 120 million tonnes of CO2, underscoring the vulnerability of forest carbon stocks. Projects that generated credits based on assumed 40-year permanence periods face legitimate questions about whether those stocks will endure.

Cookstove and Energy Access Projects

Improved cookstove distribution projects represent the second-largest credit category in parts of mainland Southeast Asia, particularly Cambodia and Myanmar. These projects distribute fuel-efficient or clean-burning stoves to rural households, generating credits based on reduced fuelwood consumption and associated emissions. Typical crediting yields range from 2-5 tonnes of CO2e per stove per year.

Integrity concerns center on usage rates and attribution. Field surveys conducted by the Stockholm Environment Institute found that 30-50% of distributed cookstoves were not in regular use two years after distribution, a finding that calls into question the emission reductions claimed. Additionally, establishing additionality (proving that households would not have adopted improved stoves without carbon finance) becomes increasingly difficult as government clean cooking programs expand across the region.

Blue Carbon: Mangroves and Coastal Wetlands

Mangrove conservation and restoration projects represent a growing and potentially high-integrity segment of Southeast Asian carbon markets. Southeast Asia contains approximately 42% of the world's mangrove forests, with Indonesia alone holding 3.3 million hectares. Mangrove ecosystems sequester carbon at rates 3-5 times higher per unit area than tropical forests, and their co-benefits (coastal protection, fisheries habitat, biodiversity) strengthen the case for credit integrity.

The development of Verra's VM0033 methodology and subsequent updates have improved the rigor of blue carbon crediting. Projects such as the Mikoko Pamoja model (originally developed in Kenya but replicated in parts of Southeast Asia) demonstrate that community-led mangrove restoration can deliver verified emission reductions while generating tangible local benefits. Average credit prices for blue carbon projects in the region range from $15-35 per tonne, a significant premium over terrestrial forestry credits ($4-12 per tonne), reflecting buyer willingness to pay for higher-integrity, co-benefit-rich credits.

Pricing and Market Structure

Southeast Asian carbon credit prices exhibit significant stratification based on project type, vintage, and perceived integrity. As of early 2026, indicative price ranges include:

Project Type	2023 Vintage	2025 Vintage	CCP-Eligible (Est.)
REDD+ (Large-scale)	$2-6/tonne	$4-10/tonne	$8-15/tonne
Mangrove/Blue Carbon	$12-25/tonne	$18-35/tonne	$25-45/tonne
Cookstove	$3-8/tonne	$5-12/tonne	$8-18/tonne
Renewable Energy	$1-3/tonne	$2-5/tonne	Limited eligibility

The price differential between standard and CCP-eligible credits is expected to widen as corporate buyers increasingly mandate ICVCM compliance. Early data from the ICVCM assessment process suggests that CCP-labeled credits will command premiums of 40-80% over non-labeled equivalents, creating strong incentives for project developers to invest in methodology upgrades and enhanced monitoring.

Market intermediaries play a disproportionately large role in Southeast Asian carbon trading compared to other regions. Major project developers (South Pole, Verra-listed developers, local entities such as Rimba Makmur Utama in Indonesia) typically sell credits to brokers or aggregators who then resell to corporate end-buyers. This intermediation adds 20-40% to final prices but also provides due diligence and transaction structuring services that many buyers require.

What Buyers Should Watch

Corresponding Adjustments and Double Counting

The single most important regulatory risk for international buyers of Southeast Asian credits is the status of corresponding adjustments under Article 6 of the Paris Agreement. Without a corresponding adjustment, a credit sold to an international buyer may also be counted toward the host country's NDC, resulting in double claiming of the same emission reduction. As of early 2026, Indonesia, Vietnam, and Thailand have not established systematic processes for granting corresponding adjustments to voluntary market transactions, though bilateral agreements under Article 6.2 are under negotiation with Switzerland, Singapore, and Japan.

ICVCM Assessment Outcomes

The ICVCM's assessment of major crediting methodologies will reshape the Southeast Asian market. Methodologies that receive CCP labels will see increased demand and price premiums; those that do not will face declining buyer interest. The assessment process is ongoing, but preliminary signals suggest that large-scale avoided deforestation methodologies face the most significant hurdles due to additionality and baseline concerns.

Jurisdictional REDD+

The shift from project-level to jurisdictional REDD+ (where entire provinces or nations account for forest emissions at scale) represents a potential paradigm shift for Southeast Asian markets. Indonesia's FOLU Net Sink 2030 strategy and Vietnam's FCPF agreement both operate at jurisdictional scales. This approach addresses many of the leakage and baseline concerns associated with project-level crediting but requires robust national monitoring systems and governance frameworks that remain under development.

Action Checklist

• Assess whether credits under consideration have received or are eligible for ICVCM Core Carbon Principles labeling
• Verify the status of corresponding adjustments for credits intended for international use under Article 6
• Evaluate host country regulatory frameworks to understand restrictions on credit export and ownership transfer
• Request project-level monitoring data and third-party verification reports, not just registry documentation
• Prioritize credits with demonstrated co-benefits (community livelihoods, biodiversity, coastal resilience) that strengthen integrity narratives
• Establish direct relationships with project developers where possible to reduce intermediary costs and improve transparency
• Monitor ASEAN member state carbon market legislation for changes that could affect existing credit portfolios
• Diversify credit sourcing across multiple project types and countries to reduce concentration risk

Sources

• Ecosystem Marketplace. (2025). State of the Voluntary Carbon Markets 2025. Washington, DC: Forest Trends.
• Integrity Council for the Voluntary Carbon Market. (2025). Assessment Framework: Core Carbon Principles and Methodology Assessment. London: ICVCM Secretariat.
• West, T.A.P., et al. (2023). "Action needed to make carbon offsets from forest conservation work for climate change mitigation." Science, 381(6660), 873-877.
• Government of Indonesia. (2021). Presidential Regulation No. 98/2021 on Carbon Economic Value. Jakarta: Republic of Indonesia.
• World Bank Forest Carbon Partnership Facility. (2024). Vietnam Emissions Reduction Program: Results and Lessons Learned. Washington, DC: World Bank.
• Stockholm Environment Institute. (2024). Cookstove Carbon Credits: Usage Rates and Emission Reduction Verification in Southeast Asia. Stockholm: SEI.
• Friess, D.A., et al. (2024). "Mangrove blue carbon in Southeast Asia: Current knowledge and future directions." Nature Climate Change, 14, 234-245.