SINGAPORE – As global leaders gather in Brazil from November 10 for COP30, the focus on climate action intensifies. Singapore sees carbon markets as a crucial area for collaboration at this conference.
Carbon markets allow countries to buy carbon credits, helping them meet their emissions goals set by the Paris Agreement. This agreement aims to keep global warming below 1.5 degrees Celsius. For a small country like Singapore, which has limited low-carbon energy options, this market is especially beneficial.
Ahead of the conference, Minister for Sustainability and the Environment, Grace Fu, emphasized the importance of establishing international partnerships. These collaborations could drive meaningful climate action in Singapore and Southeast Asia.
The framework for global carbon credit trading was finalized at COP26 in 2021 after many years of negotiations. Countries can now trade credits through two main methods. The first involves bilateral agreements between nations. So far, only Switzerland has officially traded credits with Thailand, derived from converting traditional buses to electric ones in Bangkok. Singapore is proactive in this area, having made agreements with ten countries, including Bhutan and Thailand. A spokesperson from the Ministry of Trade and Industry (MTI) noted that they expect 2025 to be a significant year for Singapore in this effort.
Importantly, when trading carbon credits, it’s essential to avoid double-counting, ensuring that emissions reductions aren’t counted by both the buyer and the host country.
The second method involves a UN-managed program that aims to standardize the carbon credit market and ensure high environmental integrity.
Experts like Bjorn Fonden from the International Emissions Trading Association believe COP30 will clarify how this centralized market will operate, including which projects can participate. One key topic is whether nature-based projects, such as reforestation, can be traded. These projects, which help remove CO2 from the atmosphere, make up about one-third of the global carbon market supply.
However, challenges remain. Experts worry about the temporary nature of these solutions; for instance, a forest fire could release stored carbon back into the atmosphere. Fonden stresses the need for these projects to maintain high environmental integrity, ensuring permanence and avoiding leakage.
A Brazilian initiative proposed at COP30 aims to create a coalition for unifying carbon trading systems across different jurisdictions, facilitating easier collaboration among countries. Rajiv Lall, a member of Singapore’s Green Finance Centre, believes this could boost Singapore’s position in the carbon credit market. Singapore has established strict criteria for carbon credits to ensure they meet high environmental standards.
As regional interest in carbon markets grows, countries like Indonesia, Malaysia, and Vietnam are stepping up to participate. This signals new opportunities for them to host carbon credit-generating projects.
In addition to nature-based solutions, technological innovations, like direct air capture, are also emerging as sources for carbon credits. A new type of credit called transition credits aims to reward countries that phase out coal plants early in favor of cleaner energy solutions. This initiative, developed in Singapore, is already being discussed for application in the Philippines.
As the green economy evolves, clear commitments and frameworks will unlock new business opportunities and jobs. For example, countries hosting carbon projects stand to gain sustainable benefits, such as job creation and community development.
Currently, Singapore is home to over 150 firms involved in the carbon services sector, which offers diverse job roles ranging from project development to carbon trading. The Monetary Authority of Singapore has committed $35 million to nurture specialists in sustainable finance.
Mr. Fonden points out that Southeast Asia’s carbon markets are already aiding in the conservation of vital ecosystems, renewable energy deployment, and sustainable waste management. However, scaling these markets requires overcoming challenges in interoperability and standardization.
Singapore’s commitment to aligning with international standards has positioned it as a leader in this sphere. During COP30, Singapore will showcase its ambitions through its Pavilion, highlighting a high-quality carbon market framework.
For additional insights on the significance of COP30, you can refer to resources like the UNFCCC and Climate Action Tracker, which provide valuable information on climate agreements and their impacts.
