DBS, SGX, StanChart and Temasek to launch global carbon exchange

Singapore

SINGAPORE is set to raise its green game. Four key entities - DBS, the Singapore Exchange, Standard Chartered (StanChart) and Temasek Holdings - have joined forces to launch a global exchange and marketplace for high-quality carbon credits by end of the year to incentivise emissions cuts.

It is hoped that the Singapore-headquartered exchange called Climate Impact X (CIX) will provide better price transparency and verification of the quality of carbon credits - two current challenges in the global voluntary carbon market as companies and governments work towards a net-zero future.

At the event held virtually to unveil the latest initiative, Ravi Menon, managing director of the Monetary Authority of Singapore said: "CIX is a promising solution to the problem we face today of fragmented carbon credit markets characterised by thin liquidity and credits of questionable quality".

To start with, CIX will feature carbon credits from various high-quality Natural Climate Solutions (NCS), said CIX's interim chief executive officer Mikkel Larsen, who is also chief sustainability officer at DBS. NCS involve protection and restoration of natural systems from forests and wetlands to mangroves.

Temasek's chief investment strategist Rohit Sipahimalani said CIX is in talks with global rating agencies to provide independent ratings to these projects.

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Carbon pricing, a key tool to combat carbon emissions, is gaining momentum. Globally, there are 61 carbon-pricing initiatives in place, half of them carbon taxes and the other, emissions trading systems.

"A meaningful price on carbon is critical to create the right incentives to reduce emissions. The challenge is to arrive at the right price, one that does not unduly impede economic development and yet is sufficient to drive decarbonisation efforts that will enable the world to meet its climate targets," said Mr Menon.

According to DBS CEO Piyush Gupta, the project, which was a year in the making, will eventually be scaled up with more partners - apart from the original four - to fund the project.

As more companies pledge to stop climate change by reducing greenhouse gas emissions, many, especially those with net-zero targets - there were some 1,500 of them last year - have also turned to carbon credits to offset emissions they can't get rid of by other means.

Carbon credits are essentially tradable certificates that represent the reduction, avoidance, or removal of a certain amount of emissions from the atmosphere. Firms can buy these credits to offset hard-to-abate emissions.

It is estimated that demand for voluntary carbon credits will grow 15-fold or more by 2030 and the market for carbon credits could be worth more than US$50 billion by then.

CIX will use satellite monitoring, machine learning and blockchain technology to enhance transparency, integrity and quality of carbon credits. It will offer distinct platforms and products that cater to the needs of different buyers and sellers of carbon credits.

The latest initiative, part of the city-state's goal to become a leading carbon services and trading hub, was borne out of Singapore's Emerging Stronger Taskforce's Alliance for Action on Sustainability.

Mr Menon said: "We are strengthening the carbon credit value chain. This includes growing capabilities to develop projects, conduct certification and validation of project design, and monitor and verify project outcomes."

In 2019, Singapore introduced a carbon tax of S$5 per tonne of greenhouse gas emissions, to establish the principle of a price on emissions. The original intention was to gradually raise the tax from 2023 onwards to between S$10 and S$15 per tonne of emissions by 2030.

Mr Menon added that the government is now reviewing both the post-2023 trajectory and the level of the carbon tax to ensure sufficient impetus for emissions reduction and restructuring towards a greener economy.

READ MORE: South-east Asia needs tangible socio-economic drivers to speed up green transition: experts