SINGAPORE – The authorities are urging companies to prioritise all possible ways to reduce their emissions before turning to carbon credits to offset their remaining carbon emissions.
This is one of the key recommendations that the Government has sent to Singapore companies that are thinking of using carbon credits voluntarily to decarbonise and meet their respective net-zero targets.
The eight-page draft guide – prepared by the National Climate Change Secretariat, the Ministry of Trade and Industry and Enterprise Singapore – was made available online on June 20. Public feedback on the guide is welcomed until July 20.
One carbon credit represents one tonne of carbon dioxide that is either removed from the atmosphere, such as through carbon capture, or prevented from being released. There are two main types of carbon credits – nature-based ones like reforestation, and technological ones that include switching from pollutive firewood to cleaner cooking stoves.
In the draft, the authorities also emphasised that the credits that companies buy will not be counted into the country’s climate targets. This is because companies will be buying credits from the voluntary carbon market (VCM).
Carbon credits can be bought and traded in the voluntary market or the compliance market – which is regulated by the authorities.
For example, carbon-tax-paying firms are subject to compliance because they are allowed to use eligible credits to offset up to 5 per cent of their taxable emissions each year. These credits will be counted under Singapore’s emission reductions, and they can be bought only from carbon projects hosted by countries that Singapore has bilateral agreements with.
The seven countries include Paraguay, Bhutan and Ghana.
In contrast, credits from the voluntary market are not legally required or regulated to be used to offset carbon emissions, and this has led to criticisms about the effectiveness and quality of such credits.
In 2023, The Guardian reported that more than 90 per cent of rainforest credits did not represent genuine carbon reductions.
The Singapore Government is therefore putting out this guidance document to help raise the standards of the VCM.
The authorities have received feedback from the industry on the need for the Government to provide guidance on the voluntary market and how companies can use carbon credits as part of a credible decarbonisation plan.
“The growth of carbon markets has been constrained by a few factors. One of the main challenges in the VCM is the lack of standardisation which has led to confusion around various industry-led standards. This has undermined market confidence, and companies concerned about reputational risks are holding back from the VCM,” said the three government bodies in a joint statement.
To address these, the eight-page draft guide defines what a high-quality carbon credit should be, emphasising that there should be no double counting of credits or fraud, where one credit is claimed by more than one firm.
Firms should buy credits that have been registered with a reputable registry that keeps count of the trading, and claim each credit only once.
The authorities also encouraged companies to transparently disclose their use of credits and make known the amount and type of credits they bought, why they chose to use credits, the project location and which registry they used.
Mr Rueban Manokara, global lead of the carbon finance and markets task force at conservation group World Wide Fund for Nature, said of the draft: “By offering clarity on what that high integrity means, including highlighting that credits are not a substitute for real emissions cuts… it may give companies more confidence to include carbon credits as part of their climate action.”
He noted that the guide could go further in recognising how high-integrity credits can help firms raise their climate ambition, invest in nature-based solutions and deliver greater impact.
Associate Professor Daniel Lee, director of the Carbon Markets Academy of Singapore at Nanyang Technological University, said the document underscores the Government’s support for the role of the voluntary carbon market in helping firms decarbonise.
“Such clarity is important because there are many conflicting opinions out there on the role of carbon credits, including views that suggest carbon credits are simply greenwashing,” he added.
The draft guidance can be found on NCCS’ website. Feedback can be submitted via https://www.go.gov.sg/vcmguidance
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