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

IN WHAT marks a big step in climate action, Singapore is set to launch Climate Impact X (CIX), a global exchange and marketplace for high-quality carbon credits to provide price transparency and verifiability to incentivise emissions cuts.

The project, anchored out of Singapore, is a team effort by DBS Bank, the Singapore Exchange, Standard Chartered and Temasek Holdings. It will be launched by the end of the year.

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."

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.

CIX's interim chief executive officer Mikkel Larsen, who is also chief sustainability officer at DBS, said the carbon exchange will initially focus on Natural Climate Solutions.

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DBS chief executive Piyush Gupta said that as the project is eventually scaled up, more partners will be brought in to fund it.

The demand for voluntary carbon credits is expected to grow 15-fold to two billion tonnes in 2030.

Carbon credits are 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. A robust carbon market is one that efficiently matches the demand for carbon credits with the supply of these credits.

CIX will use satellite monitoring, machine-learning and blockchain technology to enhance the 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 carbon exchange will facilitate the sale of large-scale, high-quality carbon credits through standardised contracts - catering primarily to multinational corporations (MNCs) and institutional investors, said a joint statement issued by CIX's joint sponsors.

The initiative is part of the city state's goal to become a leading carbon services and trading hub and 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 the monitoring and verifying of 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 to between S$10 and S$15 per tonne of emissions by 2030.

Mr Menon said 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.