4-10-2023 (SINGAPORE) The Singapore government has unveiled the eligibility criteria for international carbon credits, which companies can purchase to offset their taxable carbon emissions. The announcement was made by Minister for Sustainability and the Environment Grace Fu during the National Energy Efficiency Conference. The new criteria, consisting of seven principles, aim to ensure that the carbon credits maintain a high level of environmental integrity. Ms Fu emphasized the importance of well-functioning carbon markets in achieving global net zero emissions.
Starting in 2024, Singaporean companies will have the option to utilize eligible international carbon credits to fulfill a portion of their carbon tax obligations. The carbon tax was introduced in November 2022 as part of Singapore’s commitment to achieving net zero emissions by 2050. Carbon credits represent a reduction of one tonne of carbon dioxide emissions and can be obtained through activities that reduce, remove, or avoid carbon emissions, such as reforestation and investment in renewable energy.
Under the current regulations, Singapore’s carbon tax applies to facilities producing at least 25,000 tonnes of greenhouse gas emissions annually. The tax was initially set at S$5 per tonne and will gradually increase to S$45 per tonne by 2026. International carbon credits offer an alternative pathway for companies with hard-to-abate emissions to decarbonize by supporting global emission reduction projects.
However, critics of carbon offsetting have raised concerns about the verification process for carbon credit projects. The authenticity of carbon crediting programs, such as Verra’s, was called into question in a report by British newspaper The Guardian earlier this year. The report suggested that many forest carbon offsets approved by Verra were likely “phantom credits” with no actual climate benefit. In response, Ms Fu assured that Singapore takes these concerns seriously and is committed to maintaining high environmental integrity standards for carbon credits.
In a joint press release, the Ministry of Sustainability and the Environment (MSE) and the National Environment Agency (NEA) outlined the eligibility criteria for international carbon credits. These credits must comply with the Paris Agreement and meet seven principles developed in consultation with over 70 stakeholders. The principles, inspired by the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), require that the emissions reductions or removals associated with the carbon credits are not double-counted, additional, real, quantified and verified, permanent, not causing net harm, and not resulting in leakage.
The MSE and the NEA emphasized the importance of transparency and accountability in the carbon credit market. The emissions reductions or removals must be counted only once and must be financed solely by carbon credits. They must also be calculated conservatively, measured and verified by an accredited third party, and comply with the laws and obligations of the host country. Additionally, measures must be in place to monitor, mitigate, or compensate for any potential risk or occurrence of emissions increase or leakage.
Ms Fu stated that the government is simultaneously developing the market and rules for international carbon credits with the aim of publishing a list of eligible carbon credit programs, methodologies, and host countries later this year. This will provide companies with guidance on the environmental integrity requirements of carbon credits accepted for carbon tax offset.
Singapore has made significant progress in forging carbon credit partnerships with various countries. Implementation Agreements have been “substantively concluded” with Ghana and Vietnam, allowing companies to source international carbon credits from these countries. Memorandums of understanding (MOUs) have also been signed with 12 other nations, including Bhutan, Cambodia, Chile, and Indonesia. Discussions with Brazil and Thailand are ongoing. The NEA has signed MOUs with carbon credit programs such as Verra’s Verified Carbon Standard and others.
In addition to these developments, Minister Fu provided updates on Singapore’s carbon market infrastructure. The government is currently developing an international carbon credit registry to track the carbon credits surrendered by taxable facilities and ensure compliance with Article 6 of the Paris Agreement. Furthermore, the MSE and the NEA announced the formation of an International Advisory Panel for Carbon Credits. The panel, consisting of experts in finance, sustainability, and international development, will guide Singapore’s policies related to carbon credits and carbon market development.
