In 2019, Singapore became the first country in south-east Asia to put a price on carbon – which companies will next year be able to offset by purchasing carbon credits. Last year, it became the first in the region to develop a carbon exchange. Also, it has signed a string of deals with developing countries on carbon credit collaboration.
Much of this ambition is born of necessity. With its tiny size and 5.5mn population, it has no natural resources of its own. However, its central position in Asia allows it to serve as a bridge between established carbon markets in the west and emerging markets in the region. It can also facilitate the flow of carbon credits and investments and, thereby, potentially accelerate its own emissions reduction plans.
Mostly this ambition is focused on voluntary carbon trading – a system that allows the buy and selling of carbon credits internationally to incentivise and regulate emissions reductions.
If Singapore can harness this opportunity, it stands to benefit greatly from a market that could be worth $50bn by 2030, according to the consultancy McKinsey.
Critics say this system allows companies to continue polluting without materially contributing to reducing their emissions. Pledges for carbon removal through tree planting, for example, would require a land area the size of the US, scientific studies have determined. What’s more, forests in the US that generated offsets bought by companies including BP and Microsoft were burnt in summer fires, calling into question their value.
“It is an interesting time to be going all in on carbon trading, but their reputation is good and you would probably trust an exchange in Singapore over say, Malaysia, Thailand or even Hong Kong,” says an anonymous Singaport based carbon trader.
The Singapore government has acknowledged the challenge of ensuring the carbon credits uphold high environmental integrity standards. In February, it said that later this year it would publish a “white list” of credits that would be acceptable for offsetting Singapore companies’ taxable carbon emissions. The list will include approved host countries, programmes and methodologies.
“We know this market is missing trust… Singapore has the right pedigree,” says Mikkel Larsen, chief executive of Climate Impact X, a global marketplace and exchange for carbon credits based in Singapore. “It has the basic infrastructure and experience with creating new markets.”
https://www.ft.com/content/1b1af3cc-6081-4d4f-b4b4-63940ff9482f