Singapore is driving forward plans to become a global carbon services and trading hub as it develops a classification system and guidelines to ensure the quality and credibility of carbon credits for companies to buy and sell.

The Lion City's robust legislative, commodities trading and financial services foundation stands it in good stead to develop an internationally trusted carbon services and trading ecosystem, Second Minister for Trade & Industry Tan See Leng told parliament last week.

The ambition is supported by Singapore’s Emerging Stronger Taskforce, which on Monday unveiled its report on how the nation can reignite its economy and progress sustainability initiatives amid the Covid-19 pandemic.

Singapore’s Green Plan 2030 aims for the island nation to become a leading carbon trading hub in Asia.


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Regional carbon trading schemes are said to be mainly focused on trading voluntary carbon credits.

Carbon credits 'integrity'

"The main risk for buyers in voluntary carbon credit markets has been on the integrity and the quality of such carbon credits,” said Tan.

"The government is working with industry, with international and local experts, as well as environment groups to address this risk,” he said.

The taskforce’s Alliance for Action on sustainability is also looking at setting up a marketplace and exchange to improve transparency in carbon credit transactions.

Tan added that many companies — such as those involved in the semiconductor sector — looking to invest in Singapore have moved to source carbon credits and it is an opportune time for the government and industry to collaborate to meet the country's green objectives.

Pandemic leaves 'platform for change'

Singapore’s Deputy Prime Minister Heng Swee Keat, who chairs the Future Economy Council, on Monday said that the coronavirus pandemic had created the "burning platform" for change.

"Singapore can offer well-run, trusted carbon offset solutions that are based throughout the world," member of parliament Henry Kwek was earlier quoted as saying by the Straits Times

"And at the same time, our government-linked companies and even our government, can buy these offsets, so that we can go beyond our reduction target."

However, it will be key will to validate the emissions reductions and calculate carbon credits, hence the requirement for other carbon services.

"We can do so by encouraging the leading standards bodies to set up centres of excellence to shape and promote standards, in partnership with our accounting and professional services firms as well as tertiary institutes," said Kwek.

Carbon trading desk

Singapore-based commodities trader Trafigura in April said it was launching a carbon-trading desk.

“Regulated and voluntary carbon offset markets will have an important role to play in the progression towards a carbon neutral world for industries with emissions that cannot otherwise be eliminated or reduced through investment and operational optimisation,” said Trafigura.

“Carbon offset markets provide the means for price discovery to drive the reduction of greenhouse gas emissions in existing supply chains and to encourage investment in carbon sequestration measures and technologies."

China in February started a national emissions trading system (ETS), that is expected to be a key component in meeting its 2060 carbon-neutral ambition.

China’s ETS will regulate entities with over 26,000 tonnes per annum of carbon dioxide-equivalent emissions.

The scheme will include 2225 power operators and related entities, which accounts for 40% of the nation’s CO2 emissions and one-fifth of global CO2 output.

Under this scheme, thermal power plants and other polluting companies will have to purchase carbon credits if their emissions exceed the quotas assigned to them.

Carbon prices on the European Union’s ETS this month hit €50 (US$60.68) per tonne for the first time.

Further price increases could come as Brussels in July is due to propose reforms to the ETS that forces companies to buy permits when they pollute.

Undermining credibility

Frans Timmermans, the EU’s head of climate change policy warned against policymakers intervening even as carbon prices spiked.

“It’s a market and we should be very, very careful not to intervene because that would create a non-market-based price and that would absolutely undermine the credibility of the emissions trading system,” Timmermans told an online event hosted by the European University Institute.

Carbon pricing is noticeably absent from US President Joe Biden’s climate policy revamp.