SINGAPORE – A first-of-its-kind government alliance among Singapore, the UK and Kenya aims to spur corporates in those countries to voluntarily buy carbon credits as part of their emissions-cutting efforts.
The alliance, called The Coalition to Grow Carbon Markets, was launched on June 24 at the London Climate Action Week.
While the three countries are the pioneering members, other nations are invited to join and grow the coalition, which hopes to raise the standards of the unregulated voluntary carbon market globally. On June 24, Panama and France became the latest members.
By growing the demand for high-integrity credits, the carbon market could expand to as much as US$250 billion (S$320.5 billion) by 2050. This can support sustainable development, agriculture, clean energy and nature conservation and restoration.
The launch comes days after Singapore released a draft guide for local firms planning to use carbon credits voluntarily to meet their respective net-zero targets.
The firms are urged to exhaust all possible ways to cut their carbon footprint before turning to carbon credits to offset their remaining emissions.
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.
Countries such as Singapore will buy carbon credits to meet their climate targets, while nations like Kenya can sell credits produced by carbon projects such as direct air capture and biochar production – a process that creates a charcoal-like mass that can lock away carbon.
There are two types of carbon markets – the compliance market, which is regulated by governments, and the voluntary market, where companies can choose to buy credits.
Credits from the voluntary market are not legally required or regulated to be used for offsetting carbon emissions. This has led to criticisms about the effectiveness and quality of such credits, raising concerns about greenwashing.
The voluntary market faced greater scrutiny in 2023 after The Guardian newspaper reported that more than 90 per cent of rainforest credits did not represent genuine carbon reductions. The price and usage of carbon credits plummeted thereafter.
In 2024, the average price of a credit in the voluntary market fell to US$6.34 per tonne, down from the 15-year-high of US$7.37 in 2022, according to Ecosystem Marketplace, a global environmental finance news and analysis site. The overall value of the market was US$535 million in 2024, a plunge from about US$2 billion in 2022.
On June 24, the new coalition said: “Carbon markets direct finance to projects that can cut emissions faster and at lower cost. This helps modernise industries, cuts pollution, creates employment opportunities and delivers lasting benefits for local communities and ecosystems.
“But reputational and legal risks, concerns about integrity of supply and lack of consistent guidance have stopped companies from buying credits.”
The co-chairs of the alliance are Singapore’s Ambassador for Climate Action Ravi Menon, the UK’s special representative for climate Rachel Kyte and Kenya’s special climate envoy Ali Mohamed.
Businesses have called for greater clarity from governments on the use of carbon credits as part of corporate decarbonisation plans, the coalition said.
Answering this call, the coalition plans to release a document at the 2025 UN Climate Change Conference in November, outlining shared principles to guide businesses in their voluntary use of high-quality carbon credits.
“The shared principles will give businesses the confidence and incentives they need to invest in a proven but underused climate financing tool and continue to strengthen and scale carbon markets,” the coalition said.
Through the alliance, Mr Mohamed hopes Kenya’s carbon credits will grow in value.
“The average price for a carbon credit in Kenya, estimated at US$9.77 per tonne of CO2, is insufficient… Pricing (must) reflect the true value of emissions-reducing and emissions-removing projects,” he said.
Globally, credits from blue carbon projects, which include mangrove restoration, can fetch about US$29 per tonne in the voluntary market, according to Ecosystem Marketplace.
Mr Mohamed expects communities involved in the projects to receive a share of the revenue and benefits.
“The perceived failure by buyers and project developers to fairly compensate communities significantly contributes to negative perceptions of the carbon markets,” he said.
To date, Kenya has attracted 887 credit buyers, with 14.3 million tonnes of credits valued at around US$209 million, he added.
He hopes that the voluntary market will unlock “70 million tonnes of credits that remain in surplus and are under development in Kenya, and give climate-positive projects and business the confidence to expand”.
- Shabana Begum is a correspondent, with a focus on environment and science, at The Straits Times.
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