Singapore scores first carbon credit transfer deal at COP28

CARBON credits from Papua New Guinea will make up the pool of credits Singapore’s high emitters can use to offset up to 5 per cent of their taxable emissions from 2024. This is when the carbon tax rate rises to S$25 per tonne of emissions, from the current S$5 per tonne.

The confirmation came at the United Nations (UN) Climate Change Conference in Dubai on Friday (Dec 8), as Singapore scored its first carbon credit transfer agreement with the Oceanian country, which shares a border with Indonesia.

The implementation agreement is aligned with Article 6 of the Paris Agreement, which sets out a legally binding framework and processes for the generation and international transfer of carbon credits between countries to avoid double counting.

The signing means that Singapore has successfully negotiated for Papua New Guinea to give up its claims on emissions reductions or removals, which are to be sold to Singapore buyers in the form of carbon credits. Papua New Guinea will make a “corresponding adjustment” to its inventory, so that the climate impact represented by each transacted credit is not counted twice.

There are some unique elements built into the agreement to sweeten the deal for Papua New Guinea.

There is a clause stating that project developers will be required to cancel 2 per cent of the carbon credits authorised under the implementation agreement at first issuance, to ensure additional contribution to overall mitigation of global emissions. These carbon credits will not be sold, traded or counted towards any country’s emission targets, and will instead contribute towards a net reduction in global emissions.

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Project developers will also be required to make a contribution equivalent to a 5 per cent share of proceeds or authorised carbon credits towards climate adaptation in Papua New Guinea.

The adaptation actions, which could include heat-resilience measures and coastal projection efforts, can help the country prepare for and adjust to climate change.

Laying these out in a joint statement on Friday, Singapore’s Ministry of Trade and Industry, Ministry of Sustainability and the Environment and the National Climate Change Secretariat (NCCS) said that the collaboration will advance both countries’ climate ambition. 

It will also help to channel financing towards mitigation efforts, which would otherwise be impossible, as well as lead to projects that promote sustainable development and generate benefits for local communities, such as job creation and access to clean water, they added.

Inking at least one of these agreements by the end of the year is important to Singapore as it has announced that companies can offset up to 5 per cent of their carbon tax liabilities under its International Carbon Credit (ICC) framework from Jan 1, 2024.

Carbon credits eligible under the ICC framework must be from a country with a standing implementation agreement with Singapore. The government has indicated that it will unveil a list of eligible host countries by the end of the year.

While only one implementation agreement has come through so far, more are expected in the pipeline. Singapore has “substantively concluded” negotiations on an implementation agreement with four other countries so far – Ghana, Vietnam, Paraguay and Bhutan. NCCS said on Dec 3 that the one with Paraguay is targeted to be signed in early 2024.

Singapore also signed memoranda of understanding (MOUs) or letters of intent on carbon credit collaboration with more than 10 countries, including Fiji, Cambodia and Sri Lanka, with the aim of inking similar implementation agreements.

The implementation agreement with Papua New Guinea was the result of an MOU. The two countries entered into one on the sidelines of last year’s UN Climate Change Conference at Sharm El-Sheikh in Egypt.

Friday’s statement noted that the operationalisation of the implementation agreement will be overseen by a joint committee comprising representatives from both countries. The committee – co-chaired by NCCS director-general of climate change Benedict Chia and Papua New Guinea’s Climate Change and Development Authority managing director Ruel Yamuna – will release more information on this, it added.

Singapore Minister for Sustainability and the Environment Grace Fu and Papua New Guinea Minister for Environment, Conservation and Climate Change Simo Kilepa were at the signing ceremony of the implementation agreement between Singapore and Papua New Guinea.

Separately, the government on Friday signed an MOU with Senegal to collaborate on carbon credits with the goal of working towards an implementation agreement.

The MOU was signed by Permanent Secretary of the Ministry for Sustainability and the Environment Stanley Loh and the West African country’s Minister of Environment, Sustainable Development and Ecological Transition Alioune Ndoye at the COP.

Loh said Singapore hopes that the collaboration will “spur climate investments, enable innovation and create jobs in our transition to a low-carbon future”.