Singapore Establishes Guidelines for Obtaining UN-Aligned Carbon Credits

04 Oct, 2023

Singapore Establishes Guidelines for Obtaining UN-Aligned Carbon Credits

Singapore has unveiled seven guiding principles that will determine the selection of international carbon credits used by the city-state's major polluters to offset their carbon tax obligations. These principles are also intended to contribute to Singapore's national climate targets.

The "Eligibility Criteria," as Singapore's set of principles are referred to, were announced during an industry conference. Sustainability and Environment Minister Grace Fu emphasized the importance of growing carbon markets that effectively match the demand and supply of high-quality carbon credits to support global decarbonization efforts.

Starting next year, carbon tax payers in Singapore, primarily gas power generators, can offset 5 percent of their emissions using carbon credits that meet the government's quality screening. The city-state plans to increase its carbon price from S$5 (US$3.60) per tonne of emissions to S$25 in 2024 and S$45 in 2026.

It's important to note that the Eligibility Criteria do not apply to carbon credits purchased voluntarily by Singaporean businesses to advance their corporate climate targets.

Singapore's criteria take references from international standards such as Corsia, the offsetting system used by airlines worldwide, and ICVCM, a group that sets standards for the voluntary market. For example, forest conservation projects need to reference baseline deforestation rates set across entire jurisdictions, reducing the risk of over-crediting and "leakage," where logging is shifted elsewhere.

Singapore's system goes beyond Corsia in some areas, particularly regarding high-forest, low-deforestation projects, which aim to protect pristine forests against future deforestation. While Corsia has approved such projects, Singapore is still assessing their compliance with its criteria.

The principle of no "net harm" acknowledges the difficulty in sourcing projects with absolutely no adverse impacts. The government will periodically review and update its whitelist of carbon crediting methodologies based on their compliance with the Eligibility Criteria.

Singapore has agreements with five carbon project certifiers responsible for creating these methodologies. An advisory panel, led by Professor Bertil Andersson, president emeritus of Singapore's Nanyang Technological University, has been established to advise the government on carbon market policies.

Singapore also intends to use the same screened carbon credits to achieve its climate goals under the global Paris Agreement, aiming to peak emissions before 2030 and reach net-zero emissions by 2050. These credits must be generated from emissions savings occurring between 2021 and 2030.

Additionally, Singapore is working on bilateral agreements with over a dozen countries to ensure that carbon credits sold to the city-state do not count toward the seller's own decarbonization efforts. Talks with Vietnam and Ghana are progressing, with expectations to sign the first deal by the end of 2023.

While Singapore does not yet have a forecast for the supply of credits from these bilateral deals, pricing will be determined by market forces.