High-quality international carbon credits will complement domestic emission reduction efforts to achieve net zero by 2050

JOINT NEWS RELEASE BETWEEN NEA AND MSE

Singapore, 4 October 2023 – The Ministry of Sustainability and the Environment (MSE) and the National Environment Agency (NEA) have set out the Eligibility Criteria under the International Carbon Credit (ICC) Framework.

2. The ICC Framework was introduced in November 2022, alongside the progressive increase in carbon tax rate under the Carbon Pricing (Amendment) Bill from the current S$5 per tonne of emissions to S$25 per tonne in 2024 and 2025, and S$45 per tonne in 2026 and beyond. This ICC Framework will allow carbon tax-liable companies to use eligible ICCs to offset up to five per cent of their taxable emissions from 1 Jan 2024.

3. The ICC Framework supports the development of carbon markets, by enabling the demand and supply of high-quality carbon credits to be matched. Companies can gain access to alternative decarbonisation pathways for hard-to-abate emissions, and in the process, channel financial resources to support emissions reduction or removal projects globally.

4. The ICC Framework will be aligned with Article 6 of the Paris Agreement, enabling Singapore to cooperate with other countries to support our respective climate targets. Effective international cooperation, such as through carbon markets, is an important part of Singapore’s efforts to achieve net zero emissions by 2050, given Singapore’s national circumstances as an alternative-energy disadvantaged country with limited domestic mitigation potential.

Ensuring High Environmental Integrity of ICCs

5. The Eligibility Criteria requires ICCs to represent emissions reductions or removals that occur within the timeframe specified under Article 6 of the Paris Agreement, and meet seven principles to demonstrate high environmental integrity. These seven principles were developed in consultation with more than 70 stakeholders across the industry and non-governmental organisations. They take reference from the most rigorous and reputable international standards, such as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA [1]).

6. The seven principles and their definitions are listed in Table 1 below. Please see Annex A for an illustration of how a carbon credit project is assessed against each principle. As environmental integrity standards continue to evolve, the Eligibility Criteria will be reviewed periodically to align with developments in Article 6 of the Paris Agreement and high-integrity carbon markets.

Table 1: Eligibility Criteria for ICCs

7. As the administrator of the carbon tax regime under the Carbon Pricing Act, NEA will develop processes to determine which ICCs adhere to the Eligibility Criteria before carbon tax-liable companies use the ICCs to offset their taxable emissions. More details on these processes and a list of eligible host countries, carbon credit programmes and methodologies that adhere to the Eligibility Criteria will be released by the end of this year.

Establishment of International Advisory Panel for Carbon Credits

8. An International Advisory Panel for Carbon Credits (IAPCC) has also been set up to advise the Singapore Government on Singapore’s policies relating to carbon credits, including matters on environmental integrity and carbon market development.

9. The Panel comprises six esteemed members with expertise across the fields of sustainability, international development and finance. The panel is chaired by Professor Bertil Andersson, President Emeritus of Nanyang Technological University (NTU). Membership of the IAPCC can be found in Annex B.

10. Professor Bertil Andersson said, “High-quality carbon credits have much potential to advance global climate ambition. It is important to promote transparent and robust carbon markets and uphold high environmental integrity of carbon credits. I look forward, together with my fellow panel members, to working with the Singapore Government in efforts to unlock carbon financing to accelerate the global net zero transition.”                                                                                       

Other Developments on ICCs

11. The establishment of the ICC Framework and the International Advisory Panel for Carbon Credits are among the latest initiatives to support Singapore’s position as a carbon services and trading hub. Other notable initiatives include:

12. Fostering international partnerships in the global carbon market to open new sources of ICCs that meet Singapore’s Eligibility Criteria.

a) Singapore has substantively concluded negotiations with Ghana and Vietnam on Implementation Agreements setting out the requirements and processes for Article 6 compliant carbon credit cooperation. Carbon tax-liable companies can source for ICCs generated under these Implementation Agreements to offset their taxable emissions.

b) Memoranda of Understanding (MOUs) to work towards Implementation Agreements have also been signed with other host countries: Bhutan, Cambodia, Chile, Colombia, Dominican Republic, Indonesia, Kenya, Mongolia, Morocco, Papua New Guinea, Peru and Sri Lanka. Singapore is also in active discussion with several other countries including Brazil, Brunei and Thailand.

13. Developing enabling infrastructure and the carbon services ecosystem. As part of the ICC Framework, NEA is developing a national registry to account and track the ICCs surrendered by taxable facilities in compliance with Article 6 rules.

14. NEA has signed MOUs with five carbon credit programmes to leverage on their capabilities in ensuring that ICCs issued under their programmes and subsequently used to offset taxable emissions are robustly validated, verified, issued and retired. These programmes include the Gold Standard, Verra’s Verified Carbon Standard, Global Carbon Council, American Carbon Registry and the Architecture for REDD+ Transactions. We intend to expand our partnerships to more programmes in the future.

15. Singapore has also partnered the World Bank and the International Emissions Trading Association (IETA) on the Climate Action Data Trust (CAD Trust) initiative. CAD Trust is developing a Data Dashboard to provide an open-source, decentralised blockchain infrastructure that allows the public to access information about carbon credits issued across different registries globally, enhancing transparency and minimising double counting risk. The Dashboard is expected to be launched later this year.

Illustration of how a Carbon Credit Project is Assessed under each Principle

1. Eligible ICCs must fulfil all principles under Singapore’s Eligibility Criteria.

2. Table A-1 illustrates a simplified assessment of a carbon credit project against each principle. This is meant to facilitate understanding, and is not representative of the actual processes applied in evaluating and verifying individual projects.

Table A-1: Simplified assessment of a carbon credit project against each principle                               Annex A

Membership of the International Advisory Panel for Carbon Credits (IAPCC)                                         Annex B

Article 6

1. Article 6 of the Paris Agreement sets out the framework for countries to voluntarily cooperate to achieve their Nationally Determined Contributions (NDCs) and advance global climate action and ambition. As an alternative-energy disadvantaged country with limited domestic mitigation potential, Singapore is keenly exploring cooperation on carbon markets.

2. The rules and guidelines under Article 6 facilitate the transfer of carbon credits between countries, and was finalised at the 26th United Nations Climate Change Conference (COP-26) in November 2021, following negotiations co-facilitated by Singapore and Norway. Under the Article 6 rules, the transfer of carbon credits between countries requires corresponding adjustments to be made to each country’s national greenhouse gas inventory. Corresponding adjustments prevent the double-counting of emissions reductions towards both the buyer and host country’s NDCs [2].

3. Article 6 also does not allow the use of carbon credits that represent emissions reductions or removals that occurred outside of the current NDC period. To illustrate, as countries’ 2030 NDCs encompass the years 2021 to 2030, countries ought not to trade carbon credits that represent pre-2020 emissions reductions or removals.

4. In compliance with Article 6 rules, Singapore’s Eligibility Criteria require ICCs to be authorised by the host country for corresponding adjustment, and represent emissions reductions or removals that occurred between 1 January 2021 and 31 December 2030.