Seven principles will guide Singapore’s selection of international carbon credits that its big polluters can use to offset carbon tax obligations, and the city-state itself can count towards its national climate targets.
To continue reading, subscribe to Eco‑Business.
There's something for everyone. We offer a range of subscription plans.
- Access our stories and receive our Insights Weekly newsletter with the free EB Member plan.
- Unlock unlimited access to our content and archive with EB Circle.
- Publish your content with EB Premium.
The criteria are that the credits are not double-counted, represent additional emissions cuts, are real, have been quantified and verified, are permanent, cause no net harm, and do not cause emissions to increase elsewhere.
The actual list of overseas projects from which such credits can be sourced is not yet known; more details are due by the end of the year.
Singapore is among a group of nations, which also includes Australia, South Korea and Switzerland, that sees a global carbon market under the United Nations (UN) as crucial to its climate efforts. Currently, few deals have been struck under the “Article 6” market, as it is commonly known.
The “Eligibility Criteria”, as Singapore’s set of principles are called, were announced at an industry conference on Wednesday. Speaking in a video message, sustainability and environment minister Grace Fu said growing carbon markets that “effectively matches the demand and supply of high-quality carbon credits” is vital to global decarbonisation efforts.
Carbon tax payers in Singapore, mainly its gas power generators, can offset 5 per cent of their emissions using carbon credits that pass the government’s quality screening starting next year. The city-state will hike its carbon price from S$5 (US$3.60) per tonne of emissions to S$25 in 2024, and S$45 in 2026.
The Eligibility Criteria do not apply to carbon credits Singapore businesses buy voluntarily to advance corporate climate targets.
The city-state’s government said its criteria take reference from international standards such as Corsia, the offsetting system used by airlines worldwide, and ICVCM, a group that sets standards for the voluntary market.
Carbon credit complexities
Here is how Singapore is approaching some of the biggest carbon market conundrums:
Q: What happens if emissions stored in a carbon project are re-emitted (such as when a forest burns down)?
Carbon tax payers who have used credits from that project will not be asked to retrospectively pay more. There is some safeguard in asking firms to surrender credits annually, instead of offsetting emissions across many years at a time. This will limit how much affected carbon projects are tapped on.
Q: Why do the criteria call for no “net harm”, instead of no harm at all?
The reality is that almost everything we do will entail some harm, such as a loss of jobs in transiting away from fossil fuels. Singapore will study if further safeguards against such harms are needed beyond what certification bodies already call for.
Q: What happens if carbon project certifiers land themselves in trouble?
Not all methodologies by a partner certifier will automatically be whitelisted. In regular reviews, the government will add or de-list methodologies based on the principles in the Eligibility Criteria. It will also take reference from actions by other organisations such as Corsia.
Q: Can carbon tax payers use the same credits towards both offsetting tax obligations and pursuing their own voluntary climate goals?
Right now we are not putting in restrictions. There are currently no explicit rules in the voluntary carbon market concerning such uses of credits, although there are ongoing studies.
Q: What happens if Singapore cannot sign implementation agreements with Vietnam and Ghana by 2024?
We are also working with other countries on implementation agreements. Some are in a more advanced stage of discussions. Companies only need to surrender carbon credits in mid-2025 for their 2024 dues, so there is still some time next year to seal deals.
It means, for instance, that forest conservation projects need to reference baseline deforestation rates set across entire jurisdictions, which reduces the risk of over-crediting and “leakage”, or logging being shifted elsewhere.
As it stands, such projects are a rarity, especially in Asia. Most forest carbon project developers pick their own reference areas to measure deforestation and carbon savings.
Authorities also say that Singapore’s system goes beyond Corsia in some areas. For example, the government is “not fully satisfied” that high-forest, low-deforestation projects – which protects pristine forests against future deforestation – checks out against Singapore’s criteria.
Detractors have said high-forest, low-deforestation projects do not represent additional emissions savings, while proponents say they keep intact forests from harm. While Corsia has given the green light, Singapore says it is still assessing such projects and has not reached any conclusions.
Singapore’s rules also contain some business flexibilities. In the case that a carbon project fails – such as if a forest reserve burns down – and carbon credits sourced from it have already been used by a carbon tax payer, the government will not retrospectively annul the credits and seek higher tax payments.
The principle of no “net harm” – which follows wording by Corsia – reflects the difficulty in sourcing projects with no adverse impacts at all, the government said. It noted that carbon project certifiers already call for safeguards, and Singapore will assess if additional rules are needed in the future.
The government said it will both add and if necessary remove carbon crediting methodologies from its whitelist in periodical reviews, based on their compliance with the Eligibility Criteria.
Singapore has agreements with five carbon project certifiers that create the methodologies – Verra, Gold Standard, Global Carbon Council, American Carbon Registry and the Architecture for REDD+ Transactions.
An advisory panel has been set up to advise the government on carbon market policies, led by Professor Bertil Andersson, president emeritus of Singapore’s Nanyang Technological University.
The other five members are former Canadian climate minister Catherine McKenna, carbon markets expert Professor Koh Lian Pin, former head of the United Nations’ climate change office Patricia Espinosa, former executive in the UN’s development programme Usha Rao-Monari and Yuki Yasui, Asia Pacific director of the Glasgow Financial Alliance for Net Zero.
Carbon credit diplomacy
Singapore also wants to use the same set of screened credits towards its climate goals under the global Paris Agreement climate treaty – to peak emissions before 2030, and reach net-zero emissions by 2050.
To that end, the carbon credits must be generated from emissions savings occurring between 2021 and 2030, as per UN rules.
The city-state has also been working on bilateral deals with over a dozen countries, who must pledge to not count carbon credits sold to Singapore towards their own decarbonisation efforts.
Talks with Vietnam and Ghana appear to be closest to the finish line, with “substantive” talks already completed. The Singapore government says it is “on track” to sign the first deal by end-2023 for carbon credits to flow.
The Singapore government said it currently does not have a forecast on the supply of credits available from the upcoming bilateral deals, and the pricing will be left to market forces.
