[DUBAI] SINGAPORE is prepared to buy carbon credits generated when coal-fired power plants are retired early and replaced with cleaner energy sources, provided they meet standards of environmental integrity, said Senior Minister and Coordinating Minister for National Security Teo Chee Hean on Saturday (Dec 2).

Teo, who was delivering Singapore’s national statement at the United Nations climate change conference in Dubai, United Arab Emirates (UAE), said that the decision to offtake this new category of carbon credits – known as transition credits – is aligned with COP28’s focus on accelerating the energy transition, while ensuring sustainable socio-economic development.

This means that Singapore will be able to buy transition credits to meet its climate targets – called nationally determined contributions (NDCs) – once such credits are deemed to have sufficiently high integrity.

Companies subjected to Singapore’s carbon tax may also be able to purchase transition credits to offset up to 5 per cent of their taxable emissions beginning 2024, if these credits meet the eligibility criteria for Singapore’s International Carbon Credit (ICC) framework.

The Monetary Authority of Singapore (MAS) in September proposed creating transition credits to provide an additional revenue stream that could be used to compensate coal plant owners for income lost from the early closure of their plants.

Concerns over the viability and scalability of early coal phase-out have long stood in the way of such projects taking off. Transition credits may help to improve the economic viability of such transactions if there is enough market confidence by capital market participants in this new asset class, MAS has said.

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Transition credits do not yet exist, because the methodology to support them have not been approved by international carbon credit standard setters such as Verra.

Under carbon tax regulations overseen by the National Environment Agency, ICCs used to offset taxable emissions in Singapore must be certified by Verra or Gold Standard.

Besides the use of transition credits as a new financing mechanism, Teo also said that Singapore will launch a new blended finance initiative that aims to mobilise up to US$5 billion.

MAS had previously announced that it was developing a blended finance platform to help scale up financing for Asia’s green and transition infrastructure.

Called the Financing Asia’s Transition Partnerships (Fast-P), it aims to bring together public and private sector partners to de-risk and fund transition and marginally-bankable green projects in Asia.

Singapore’s national statement was delivered on the second day of the world climate action summit held at COP28, a two-day event where leaders of many countries pledge their commitment to take measures to address the climate crisis.

Teo also said that Singapore will join the global momentum and support the call by COP28’s president to treble renewables capacity and double the rate of energy efficiency improvements by 2030.

Singapore, along with Canada, UAE and the United States, is also working with Ghana on an initiative to grow its economy through nature-based industrialisation and sustainable rural development.

This initiative would involve developing the West African country’s carbon markets through the sale of high-quality carbon credits, transitioning their agricultural and mining practices to be more sustainable, restoring its natural resources vis reforestation.

Singapore will also be inking several agreements on carbon trading with several countries to support the development of emerging technological and market solutions, Teo said.

One of them is a memorandum of understanding with Rwanda, which was signed on Saturday. Under the agreement, both countries will collaborate on carbon credits aligned with Article 6.2 of the Paris Agreement. Article 6.2 governs bilateral trading of carbon credits between countries to meet their NDC targets.

Separately, the Singapore government is also working with carbon data provider Sylvera in identifying high-quality carbon credits to purchase from other countries.

Sylvera provides ratings and data assessing climate action investments, including carbon credits, through automating the evaluation of carbon projects that capture, remove or avoid emissions.

The company also announced on Saturday that it is expanding its presence in the region by setting up an office in Singapore, with the support of the Economic Development Board.