Asian bourses join top race to tap carbon offset boom

Bloomberg

The drive to launch new carbon exchanges in Asia has reached new heights with Malaysia entering the fray, raising questions about how many will survive in a market that could be worth hundreds of billions in a few decades.
Bursa Malaysia Bhd opened an exchange this month, joining more than a dozen that are under way or planned across the region. Thailand and Japan debuted their platforms in September, followed by Hong Kong a month later. Singapore has two fledgling bourses.
“We’re in another one of those mad dashes,” Thomas McMahon, co-founder of Singapore’s AirCarbon Pte, said. “We’ve seen this rush before, if you look at the early days of blockchain” and cryptocurrencies.
The exchanges enter a crowded voluntary offsets market that could soar over the next few decades but has so far gotten off to a slow start. Trading and prices have slumped, while concerns mount about how much offsets actually contribute to fighting climate change.
What’s clear is that money in Asia is flowing into the space, with investors betting the flurry of climate pledges from countries and companies will drive growth.
The exchanges have raised tens of millions of dollars, with powerful backers including sovereign wealth funds like Temasek Holdings Pte of Singapore, along with banks such as Standard Chartered Plc and DBS Group Holdings Ltd.
Demand for offsets could grow 40-fold between now and 2050, to 5.2 billion tons of CO2 equivalent, or about 10% of global emissions, according to BloombergNEF. Prices could reach $120 per ton by then, making it potentially a $600 billion market. Companies are drawn to the offsets market as a way to counter their emissions from burning fossil fuels. An offset is a promissory note that represents a ton of carbon dioxide emissions removed, or not added, to the atmosphere in return for a payment. Some regions, including the European Union and California, have mandatory programs imposed on some polluters, while many of the fledgling exchanges are voluntary markets.
Some of these new bourses are setting themselves up for what’s to come in the region, including additional compliance credit schemes that are set to grow, said Hannah Hauman, global head of carbon trading at Trafigura Pte.
“It’s a mix of national interest, capacity building, and that down the road, somebody could eventually have a lot of liquidity and win the game,” said Federico Di Credico, Asia-Pacific managing director at ACT Commodities.
More platforms are coming. Indonesia’s bourse is looking to develop its own carbon exchange, while India is putting together a blueprint for a voluntary carbon market.