SRI Lanka has been added to the list of countries that Singapore has signed a memorandum of understanding (MOU) with to collaborate on carbon credits.

In a statement on Tuesday (Aug 22), the Ministry of Trade and Industry (MTI) said both countries will collaborate on credits aligned to Article 6.2 of the Paris Agreement and related carbon market initiatives.

Article 6.2 establishes a carbon accounting mechanism known as “corresponding adjustment”, which ensures that countries 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.

In a fact sheet, MTI said the MOU will see the two countries working towards a legally binding implementation agreement that sets out a bilateral framework for the international transfer of correspondingly adjusted carbon credits.

MTI added that when completed, carbon tax-liable companies in Singapore will be able to buy carbon credits from eligible projects to offset their taxable emissions.

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The government had previously announced that companies may use high-quality international carbon credits to offset up to 5 per cent of their taxable emissions from 2024, but details about which credits can be used are still being worked out.

Singapore’s carbon tax will be raised to S$25 per tonne of greenhouse gas emissions from 2024, up from S$5 per tonne currently, so that the country can meet its climate ambition of achieving net-zero emissions by 2050.

In its statement, MTI added that the collaboration includes the exchange of best practices on carbon credits, and the identification of mutually beneficial projects. Singapore and Sri Lanka will also explore potential collaboration opportunities in carbon markets with third countries.

Permanent Secretary (Development) of the Ministry of Trade and Industry, Dr Beh Swan Gin, and Sri Lanka High Commissioner to Singapore, Sashikala Premawardhane, signed the MOU on Tuesday.

Dr Beh said the agreement allows both countries to make progress on their respective climate targets while enabling mutually beneficial outcomes, such as creating new jobs in the green economy and enhancing biodiversity protection.

Singapore has signed similar MOUs or letters of intent with 12 other countries. They are Bhutan, Cambodia, Chile, Colombia, Dominican Republic, Ghana, Kenya, Mongolia, Morocco, Papua New Guinea, Peru, and Vietnam.