Singapore-generated carbon credits can’t be used to offset tax: MSE
CARBON credits generated from projects in Singapore cannot be used to offset emissions under the country’s carbon tax regime, the Ministry of Sustainability and the Environment (MSE) has clarified.
This means that locally generated credits from CRX CarbonBank’s Electric Vehicle Accelerator (Eva) programme cannot be used by companies here to offset up to 5 per cent of their taxable emissions.
Before the clarification, the newly registered project’s potential partners – which include charging point operators – were mulling possibly using the credits for compliance. It is now certain that the credits cannot be used for that purpose in Singapore.
MSE’s response also cleared the air on whether electricity retailer PacificLight can use credits generated from the construction and operation of its 800 MW natural gas-based power plant on Jurong Island to reduce its tax liabilities. They are not eligible for use.
A carbon tax is applied on facilities that directly emit at least 25,000 tonnes of greenhouse gas emissions annually. The new offsetting mechanism, under what the government calls the International Carbon Credit (ICC) framework, kicks in next year, when Singapore’s carbon tax rate increases to S$25 per tonne of emissions from S$5 per tonne currently.
An MSE spokesperson told The Business Times (BT) that ICCs “are generated from emissions reduction or removal projects outside Singapore”. Hence, credits generated from projects in Singapore do not fall under the ICC framework.
Besides meeting the seven criteria announced on Oct 4 to demonstrate that they are of high environmental integrity, they are required to comply with Article 6 of the Paris Agreement, the spokesperson elaborated.
Article 6 establishes a carbon accounting mechanism known as “corresponding adjustment”, which ensures that nations correct their country-to-country carbon transfer and trading mechanisms towards their Nationally Determined Contributions (NDCs). This ensures that one carbon credit is not claimed by more than one entity. NDCs are a country’s commitment to reduce greenhouse gas emissions and adapt to its climate impacts.
Vinod Kesava, the chief executive officer of CRX CarbonBank, which developed the Eva programme, reacted to the exclusion, saying it sends conflicting signals to carbon project developers here.
“Why not? Tell us how we are to balance the equation between what’s created in Singapore versus what we purchase from another country,” he said. If the rule is aimed at excluding Singapore-generated credits, developers will be compelled to export locally-generated credits, which would then mean that Singapore shouldn’t be allowed to account for reductions from such credits against Singapore’s NDC, he said.
“I think we underestimate the potential of credits that can be generated in Singapore,” he added, pointing out that 2.5 million tonnes of Singapore-based emissions reductions are estimated to be generated under the Eva programme by 2030.
A PacificLight spokesperson said the carbon credits from its Singapore-based project are sold to a variety of organisations looking to offset emissions that are generated outside of Singapore.
Aviation excluded
Last week, Singapore Airlines (SIA) said it has completed a 20-month sustainable aviation fuel pilot, which involves the generation of sustainable aviation fuel credits for sale to corporates and air cargo companies looking to decarbonise their carbon footprint. The credits are seen as a way to crowd-in financing to share the higher cost of sustainable aviation fuel.
Asked as well if such sustainable aviation fuel credits can be used for compliance here, the spokesperson said no. “Credits generated by Singapore-based airlines to reduce emissions in the international aviation sector cannot be used for carbon tax offset under the ICC framework,” he said.
This is because emissions in the international aviation sector are not counted towards a country’s greenhouse gas emissions inventory under international greenhouse gas accounting rules, he pointed out.
Credits that can be used under the ICC framework will become clear when the government releases its list of eligible host countries, carbon crediting programmes and methodologies later this year, he added.
The framework is relevant to roughly 50 Singapore facilities with emissions that exceed the taxable threshold of 25,000 tonnes of greenhouse gas emissions annually. The total emissions of these facilities – which are in the manufacturing, power, waste, and water sectors – make up 80 per cent of the country’s emissions.
The Business Times understands that SIA and land transport operators such as ComfortDelGro are not liable for carbon tax here. The carbon tax applies to facilities, not a company’s portfolio emissions, and exempts aviation.
