SINGAPORE – Singapore on April 1 finalised a carbon trading agreement with Peru, in a move that will pave the way for the Republic to buy carbon credits from the biodiversity-rich nation.
This is the fourth such deal that Singapore has, and the first one inked with a Latin American nation. The country also has similar pacts with Bhutan, Ghana and Papua New Guinea.
Under the Paris Agreement, countries can buy carbon credits generated in other jurisdictions to meet domestic climate targets.
One carbon credit represents one tonne of carbon dioxide that is either removed from the atmosphere, such as through a restoration project, or prevented from being released, such as when a forest is saved from the axe. Buyers of carbon credits can include countries or companies.
Singapore has indicated that it plans to use such credits to meet its climate change targets, although it has not yet purchased any offsets.
Credits used to offset national emissions can be purchased only from carbon projects in countries that Singapore has bilateral pacts with.
At the same time, carbon tax-liable companies here can also buy carbon credits from projects in these partner countries to offset up to 5 per cent of their taxable emissions.
The pact between Singapore and Peru was signed virtually by Minister for Sustainability and the Environment Grace Fu and Peruvian Environment Minister Juan Carlos Castro Vargas.
In a statement, Mr Castro noted that Peru is one of the most biodiverse countries in the world, home to vast Amazon and Andean forests that play a crucial role in stabilising the global climate.
“The implementation agreement between Peru and Singapore underscores our shared dedication to fostering high-integrity carbon markets as a tool to achieve our ambitious climate goals, protect our natural resources and support local communities,” he said.
The Ministry of Trade and Industry said in a statement on April 1 that under this pact, the carbon projects in Peru will promote sustainable development and deliver tangible benefits to local communities, such as creating jobs, improving access to clean water and energy security, and reducing environmental pollution.
Singapore has also agreed to voluntarily contribute 5 per cent of proceeds from the carbon credits it purchases to help Peru finance ways to reduce the impact of climate change. In the pact with Bhutan, the 5 per cent will go to the country’s heat management measures and climate-resilient agriculture, for example.
There are two main types of carbon credits – nature-based ones and technological ones, such as switching from pollutive firewood to cleaner cookstoves. Nature-based credits could come from projects such as forest restoration and conservation, as well as sustainable agriculture.
News of the signing of the implementation agreement between Singapore and Peru comes as the Republic looks to buy its first set of nature-based carbon offsets to meet its 2030 climate change target.
The Government had in September 2024 called on carbon project developers and credit suppliers to propose nature-based projects that can deliver at least 500,000 credits each.
This request for proposal drew 17 submissions before it closed in mid-February. It is not immediately clear whether any of the submissions included proposals to purchase carbon credits from projects in Peru.
Ms Fu, who is also Minister-in-Charge of Trade Relations, said: “Singapore and Peru are close cooperation partners, and had worked on many bilateral and plurilateral initiatives over the years. This implementation agreement will further strengthen collaboration between our two countries and support efforts to advance climate action while unlocking new opportunities in the carbon market.”
Of the three other implementation agreements that Singapore has, most progress has been made with Ghana.
In September 2024, the Singapore and Ghana authorities called for project developers to submit applications for their carbon credit projects in Ghana to be authorised. These applications are now being assessed.
A Singapore Government spokesperson told The Straits Times that some possible project types that may be authorised in Ghana are related to clean water supply and clean cooking.
The Republic is also progressing on negotiations with more than 15 other countries on this front, in the hope of advancing those partnerships into implementation agreements. These countries include Malaysia, Cambodia and Colombia.
- Shabana Begum is a correspondent, with a focus on environment and science, at The Straits Times.
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