Carbon markets are key amid economic, geopolitical headwinds, says chief of Singapore’s climate change body
These markets can unlock abatement solutions and crowd in private-sector financing, says Benedict Chia
[NEW YORK] The role of carbon markets in shoring up financing for climate-related solutions has become increasingly important amid ongoing macroeconomic and geopolitical uncertainty and volatility, said the director-general for climate change at Singapore’s National Climate Change Secretariat.
Benedict Chia noted that many countries had not yet submitted their 2035 national climate targets, and that global warming had crossed the 1.5 deg Celsius threshold, so carbon markets have thus become increasingly key in filling the gap.
He was speaking on Wednesday (Sep 24) at a panel discussion at the North American Summit of the International Emissions Trading Association (IETA). The summit is one among the many events held to mark New York Climate Week.
Chia said carbon markets take a cooperative approach, under which companies and countries work together “to unlock abatement that would not have occurred otherwise, and to crowd in private-sector financing to enable projects that would not have been able to secure that financing in any case”.
“And the cooperation on these two fronts – unlocking abatement, crowding in financing – I think, is absolutely critical.”
He added: “(The role of carbon markets) is becoming increasingly important because of the various headwinds that we have been facing in terms of economics, in terms of the geopolitical global environment. So, the importance of cooperation is becoming even more important.”
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The ability of carbon markets to rally private-sector financing is especially crucial for emerging markets and developing economies – where most carbon projects are located – because they face a huge financing gap.
The United Nations has estimated that developing countries need US$1.3 trillion a year to address the impact of climate-change events. Yet, at the close of the 2024 UN climate-change conference in Baku, Azerbaijan, or COP29, developed economies had agreed to provide only US$300 billion.
Chia said: “Our sense is that if you can get markets to work effectively, you will be able to enable carbon markets to play a very significant role in bringing in financing that would not have occurred otherwise.”
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But one obstacle stands in the way of bringing in private capital – the lack of demand among corporates for carbon credits; demand signals have been relatively weak because of the different guidelines in force on how credits can be purchased and used to offset emissions.
Chia said: “IETA says something, SBTi (Science-Based Targets initiative) says something, VCMI (Voluntary Carbon Markets Integrity Initiative) says something. So it has caused a fair bit of uncertainty and confusion. And I think it has held back more corporates from tapping carbon markets as an effective tool to unlock abatement and to drive finance itself.”
To resolve this, Singapore, the United Kingdom and Kenya have formed a government-led coalition, which will be issuing a set of shared principles on how corporates can voluntarily use carbon credits, so that there is consistency across jurisdictions.
“We are trying to bring in more industry associations, corporates and countries to be part of this sovereign-led alliance, to come up with a set of principles in terms of the corporate use of carbon credits.
“And the whole purpose of this is that with sovereign-backed principles, we hope we can give companies greater assurance in terms of the circumstances under which they can use carbon credits.”
On the compliance front, Singapore recently announced that it had awarded contracts to four carbon projects to offset its national emissions.
A total of 2.175 million carbon credits will be generated from four projects in Ghana, Peru and Paraguay, which Singapore will buy for S$76.4 million.
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