SINGAPORE – The landlocked East African nation of Rwanda has become the latest country to finalise a carbon trading agreement with Singapore – the sixth such pact that the Republic has inked since end-2023.
The implementation agreement was signed on May 6 by Minister for Sustainability and the Environment Grace Fu and Rwanda’s Minister of Environment, Dr Valentine Uwamariya, during the latter’s visit to Singapore.
Ms Fu – who is also Minister-in-Charge of Trade Relations – noted that the carbon-trading pact adds to Singapore and Rwanda’s “strengthened cooperation in forward-looking areas such as digital economy and fintech”.
Dr Uwamariya said: “Through this agreement, we aim to promote high-integrity carbon markets, achieve tangible emissions reductions, and support sustainable development for our communities.”
Singapore has also inked implementation agreements with Papua New Guinea, Ghana, Bhutan, Peru and Chile.
These bilateral pacts will allow Singapore to buy carbon credits to offset some of its greenhouse gas emissions, enabling the country to meet its climate targets under the Paris Agreement. Under the climate pact, countries can buy carbon credits generated in other nations or regions to meet domestic climate targets.
Singapore had earlier estimated that it would use high-quality carbon credits to offset about 2.5 million tonnes of emissions per year from 2021 to 2030.
For example, the country’s total emissions in 2030 are expected to be 62.51 million tonnes and will be brought down to its target of 60 million tonnes with the use of carbon credits.
These credits can be purchased by the Singapore Government or by carbon tax-liable companies. Such firms can buy carbon credits from projects in partner countries to offset up to 5 per cent of their taxable emissions.
Credits used to offset national emissions can be bought only from carbon projects in countries that have bilateral pacts with Singapore, formally known as implementation agreements.
One carbon credit represents one tonne of carbon dioxide that is either removed from the atmosphere or prevented from being released, such as when a forest is saved from logging.
Singapore is also progressing in carbon trading negotiations with more than 15 other countries, including Malaysia, the Philippines and Sri Lanka.
The Economic Development Board has noted that South-east Asia can be a trove of nature-based carbon credits, since it is enriched with carbon-rich peatlands and mangroves.
However, Singapore has yet to sign any implementation agreements with South-east Asian nations.
Observers say this is no surprise, given that African nations such as Ghana and Rwanda are slightly ahead in developing their carbon market capabilities, having entered this space earlier.
“Fortunately, for some of the African nations like Ghana, the Swiss and Singapore had helped cultivate the capacity-building and legislation to build Article 6 policies, so as to allow these carbon project hosting countries to sell credits,” said Mr Alvin Lim, chief executive of local carbon project developer Climate Bridge International.
“The Asean countries are only now, over the last two years, going through that same process,” he added.
Carbon trading is governed under a segment of the Paris Agreement known as Article 6.
As at November 2024, Ghana had made more than US$800 million (S$1.04 billion) by selling carbon credits to Switzerland and Sweden.
Separately, Chinese tech giant Tencent on May 6 pledged to buy at least one million carbon credits from Temasek-backed investment firm GenZero over 15 years to voluntarily meet the company’s own climate targets. Such a long-term offtake agreement is rare in Singapore.
This is an example of how Singapore is garnering demand for carbon credits, which experts said is a key challenge in the carbon market today.
While GenZero did not specify the types of carbon projects that will generate the credit, chief executive Frederick Teo said this partnership will include nature-based and technology-based solutions.
GenZero is investing in a suite of carbon projects in its portfolio. One of them is a restoration project in South Africa, which involves the replanting of spekboom, a succulent native to the region.
It was previously reported that 10,000ha is expected to be replanted by 2025, removing more than 3 million tonnes of planet-warming emissions over time. This is equivalent to the carbon emissions of more than one million cars.
GenZero added that all carbon projects under the 15-year agreement will be verified under leading international standards or the UN-managed entity to ensure that the credits produced for Tencent are of high quality.
“Tencent and GenZero will prioritise projects in areas where finance is most needed, while also ensuring that these projects deliver co-benefits, such as improved local livelihoods,” it added in a statement.
Commenting on this new partnership, Mr Rueban Manokara, global lead of the carbon finance and markets task force at conservation group World Wide Fund for Nature, said: “This move represents more than a procurement strategy; it reflects a deeper shift towards long-term thinking in carbon finance.”
He noted that carbon markets face multifaceted risks, such as project development hurdles, market volatility and evolving standards. Hence, the long-term commitment helps to reduce these risks by providing stability and predictability to project developers.
Mr Manokara added that a 15-year agreement reflects “a strong vote of confidence in Singapore’s credible carbon ecosystem”.
“As companies strengthen their net-zero commitments, they are increasingly seeking long-term, high-quality sources of carbon credits that deliver real, measurable impact,” he said.
- Shabana Begum is a correspondent, with a focus on environment and science, at The Straits Times.
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