New global carbon programme to reshape climate efforts and carbon trading in Singapore
A centralised global carbon programme, approved during COP29, will significantly impact the way countries work together to achieve their climate goals. Managed by the UN, this programme offers a one-stop platform for countries to purchase carbon credits of high environmental integrity, helping them meet their emissions targets under the Paris Agreement. While it may take 1 to 2 years for credits to be available, the programme will enhance global cooperation and affect how Singapore participates in carbon trading.
What are carbon markets and why are they important?
Carbon markets play a crucial role in the global fight against climate change. They allow countries to buy carbon credits to offset their emissions, enabling them to meet their climate commitments under the Paris Agreement. Rather than relying solely on domestic measures, such as installing renewable energy, countries can use credits from projects that reduce or remove greenhouse gases elsewhere. This approach can often be more cost-effective for countries, particularly industrialised ones.
For countries hosting carbon projects, such as reforestation or transitioning to cleaner technologies, carbon markets help generate revenue for sustainable initiatives, benefiting local communities and enhancing energy security.
Carbon trading under the Paris Agreement
Under the Paris Agreement, carbon trading is governed by Article 6, which allows countries to cooperate in meeting their climate goals. This cooperation can occur through bilateral agreements or through a UN-managed centralised mechanism. Currently, Singapore is actively engaged in carbon trading partnerships with over 20 countries, including Ghana and Papua New Guinea, through the bilateral approach.
The newly approved UN carbon mechanism offers a more structured way to trade credits. However, countries need to adhere to certain standards to ensure the credits meet high environmental and social criteria. These standards, finalised during COP29, cover project development, greenhouse gas removal methods, and the long-term storage of carbon.
The UN carbon mechanism: What was approved at COP29?
At COP29, two key standards were approved to guide the operation of the UN carbon mechanism. These standards outline requirements for greenhouse gas removal and carbon project assessments, ensuring that carbon credits are of high quality and that projects are environmentally and socially responsible. Once the technical body overseeing the UN mechanism begins reviewing projects, the first credits could be available by mid-2025.
How will this impact Singapore?
Singapore has already made significant strides in carbon trading, forming partnerships with countries like Ghana and Papua New Guinea. These collaborations allow Singaporean companies to buy carbon credits to offset up to 5% of their taxable emissions. Minister Grace Fu has stated that while Singapore will continue pursuing bilateral agreements, the UN carbon mechanism will guide these efforts, offering more consistency and credibility to the market.
The approval of the UN carbon rules is seen as a positive development for Singapore, which aims to become a hub for carbon services. Though it will take time for the market to expand, the eventual availability of UN credits will help Singapore meet its net-zero goals by providing access to more credible and internationally recognised credits.
Conclusion
The centralised global carbon programme announced at COP29 is a significant step towards enhancing global climate cooperation. For Singapore, it provides an opportunity to strengthen its carbon services sector and offers businesses more credible options for carbon offsetting. While the full impact may take a few years to materialise, this development positions Singapore as a key player in the evolving carbon trading market.
