Singapore’s National Environment Agency (NEA) has signed separate memorandums of understanding with two of the world’s biggest international carbon offset standard programmes, Gold Standard and Verra. The memorandums support Singapore-based companies in using eligible carbon credits issued by Verra and Gold Standard to meet part of their carbon tax obligations in Singapore.

The memorandums form part of Singapore’s efforts to put Article 6 of the Paris climate agreement into action using the mechanism of carbon credits. Carbon credits are permits that certify measurable reductions in carbon emissions created by certified climate action projects, such as restoring forests and investing in renewable energy. Such projects reduce, remove or avoid carbon emissions.

Article 6 of the Paris agreement outlines the ways in which countries can cooperate to achieve climate goals, and includes the trading of carbon credits in the public and private sector on international markets.

The NEA told GovInsider that the memorandums lay out procedures for transferring information on the retirement and use of carbon credits between the Gold Standard or Verra registries and Singapore’s international carbon credit, and that the procedures would ensure transparency, integrity and alignment with Article 6, providing proper accounting for carbon credits by reducing the risk of double-counting.

In a post on the NEA’s LinkedIn feed this week, its Deputy Chief Executive and Director-General of Environment Protection, Ananda Ram Bhaskar, said: “Singapore’s collaboration with Gold Standard and Verra/Verified Carbon Standard, two credible international offset programmes, will hopefully contribute to the mobilisation of the supply of high-quality carbon credits internationally.”

Singapore Deputy Prime Minister Lawrence Wong announced in this year’s budget in February that from 2024, high carbon emitters in Singapore would be able to use recognised international carbon credits to offset up to 5 per cent of taxable carbon emissions in place of paying the country’s carbon tax. Businesses can acquire the credits from Gold Standard and Verra to surrender to the government, subject to carbon tax rules.

Wong said the tax break was intended to stimulate demand for carbon credits and accelerate the development of carbon markets.

Singapore’s carbon tax is set to increase from the current S$5 (US$3.60) per tonne of emissions to S$25 in 2024-25 before eventually reaching S$50 to S$80 per tonne by 2030.

Verifying carbon credibility

Carbon offsetting has drawn criticism related to the difficulty of verifying the impact of carbon-lowering projects.

Third-party registries such as Verra and Gold Standard help to verify projects’ carbon-lowering activities using rigorous criteria, and can provide certification to attest that projects are real, verifiable and impactful, helping to address concerns over carbon offset programmes overstating their beneficial effects. The companies are two of the world’s leading carbon crediting programmes by volume of credits traded.

Partly to address such concerns, Singapore bank DBS, Singapore Exchange (SGX), Standard Chartered bank and state investment fund Temasek Holdings last year set up a Singapore-based global carbon exchange and marketplace for high-quality carbon credits. The joint venture, named Climate Impact X, aims to overcome the lack of verifiability of some carbon projects by using satellite monitoring, machine learning and blockchain, according to market intelligence company Eco-Business.

The Climate Impact X website says the venture offers curated projects and user-friendly data and insights. Its credits are currently verified by Verra and Gold Standard.

Marc Allen, co-founder of Unravel Carbon, which provides enterprise software for companies to track and reduce their carbon emissions, told GovInsider that it was critical that companies “take the time to understand the offset market and the offsets they are trying to buy”. He added that reputable registries such as Verra and Gold Standard “should be used wherever possible, as these registries use well defined methodologies and have good quality verification and validation processes”.

Beyond carbon credits

Apart from verifying carbon offset programmes, experts warn that carbon offsetting must be complemented by efforts to reduce actual emissions as much as possible.

Professor Koh Lian Pin, Director of the National University of Singapore’s Centre for Nature-based Climate Solutions, told GovInsider: “Singapore’s success in achieving [its Nationally Determined Contribution to the Paris Agreement] requires a whole-of-nation effort to draw down our carbon emissions by transitioning away from fossil fuel use, increasing energy usage efficiency, and investing in high-quality carbon projects and credits to offset any residual, unavoidable emissions.”

He explained that at the level of individual businesses, that meant going further than simply buying carbon offsets.

“Carbon offsetting is only part of a much bigger set of climate actions to help companies achieve their climate targets. The far more important action to take is to decarbonize their business and value chains. In fact, if carbon offsetting is carried out without a clear climate action policy, companies run a high risk of being accused of greenwashing,” Professor Koh said.

Rachel Koh, Conservation Manager at the World Wide Fund for Nature Singapore, told delegates at GovInsider’s Festival of Innovation 2022 in July that companies should not look towards carbon credits as a first priority, and that they needed to take action to reduce their emissions internally by such means as investing in cooling technologies and switching to renewable energy rather than just offsetting.

– Additional reporting by Rachel Teng