Ensuring Credibility of Carbon Products to be Traded through Singapore

As announced under the Singapore Green Plan 2030, Singapore aims to be a leading carbon services and trading hub, as we seek to create new business opportunities and jobs in the green sector for Singaporeans. Our country, Singapore's robust legislative, commodities trading and financial services foundation has put us in a good position to grow an internationally-trusted carbon services and trading eco-system in Asia.

Today, the carbon trading eco-system in this region comprises primarily of the trading of voluntary carbon credits. These credits are used by companies to meet their voluntary corporate climate targets, alongside other decarbonisation strategies.

The main risk for buyers in voluntary carbon credits markets has been on the integrity and the quality of such carbon credits. The Government is working with industry, with international and local experts, as well as environmental groups to address this risk.

First, we are developing a taxonomy and guidelines on the quality of these carbon credits. Second, we are exploring the use of technology to improve the verification of these credits. In December 2020, DBS and Temasek, with Google Cloud, NUS, Verra and the World Bank as partners, launched the Sustainable Xcelerator to improve the efficiency of verifying emissions reductions and sequestration. Third, the Emerging Stronger Taskforce Alliance for Action on Sustainability is also looking at establishing a marketplace and exchange to improve transparency in carbon credit transactions.

Alongside carbon trading, there are opportunities in the carbon services market. For example, we aim to anchor key activities in Singapore, such as in project development, carbon credits trading, financing and measurement, reporting and verification services. We will continue to work with like-minded partners to support the development of an overall well-functioning global carbon market, and build capabilities and capacities to grow our local eco-system.

To answer Miss Cheryl Chan's question, organisations can use carbon credits, alongside other decarbonisation strategies, to mitigate the greenhouse emissions resulting from their operating units or businesses. Today, this is done on a voluntary basis to meet companies' climate targets.

Pavilion Energy has announced that it had imported the first carbon-neutral liquefied natural gas cargo into Singapore in April 2021. Under this commercial arrangement, Pavilion Energy required its suppliers to provide a statement of greenhouse gas emissions of each cargo, measured from the production of the gas to the delivery to end-users in Singapore. Pavilion Energy then offsets these greenhouse gas emissions by retiring a corresponding amount of carbon credits sourced from its portfolio of carbon offset projects in Peru and China. Pavilion Energy has published the amount of emissions it has offset from the two projects, which are certified under the Verified Carbon Standard and the Climate, Community and Biodiversity Standard.

While the Government today does not regulate voluntary offsetting activities, we are working with the industry, international and local experts, as well as many environmental groups to develop – as I have alluded to earlier on – a taxonomy and guidelines on the quality of these carbon credits. The guidelines can then be adopted by companies undertaking commercial agreements in carbon offset activities.

Thank you, Mr Speaker. I would like to thank the Minister for his very comprehensive reply. I am heartened that we are taking a lot of active actions in terms of what we are doing around carbon credits and how we are going to measure that on an international basis. I have one supplementary question for the Minister.

Given the fact that we are now trying to do all these carbon sequestration with other countries overseas, over time, there will come a challenge between countries putting up their carbon taxes as well as how we are going to exchange this in terms of carbon credits. Is the Minister able to give us an insight on what are Singapore's plans if the carbon taxes do rise to a certain significant sum in other countries, because it does not make economic sense in terms of carbon credit offsets between countries?

I thank the hon Member Miss Cheryl Chan for her very insightful question. Indeed, I think this is a point of concern alongside many, many other competing concerns that we have. Today, we have an Emerging Stronger Taskforce. We have also got an AfA that we have set up to look at sustainability in terms of a broader overall picture not just from the carbon credit, carbon trading and carbon tax's point of view but to see how sustainable they would be on top of our overall energy story in our own country's energy roadmap moving forward for the next foreseeable 10, 20 to 30 years.

I think these are early days. We are happy to take feedback and suggestions and, as I have alluded to earlier in my answer, we are actively sourcing and working with partners not just locally, internationally, but as well as with many of the environmental partners to see how we can nuance this in a very, very good and strategic path to ensure not just our own sustainability but, more importantly, our own resilience, moving forward.

I thank the Minister for the comprehensive response to my Parliamentary Question. There were recent media reports on the sale of meaningless carbon credits by a top US supplier. I originally had two supplementary questions, but the Minister has answered my second one. So, I will just tackle the first one.

How does the Government plan to increase the awareness amongst Singapore companies with this relatively new product? We know Singapore has worked so hard to attain a stellar reputation as a credible and trusted hub and partner. As the Minister has shared just now, I am very excited to hear about all the opportunities as well as the work that we are doing to develop a taxonomy and guidelines and so on. How are we going to engage the companies in Singapore so that they will not be scammed or they can be better prepared as they prepare for their alignment to the Singapore Green Plan 2030?

I thank Ms Janet Ang for her question. I think there are different types of carbon markets today. Suffice to say – I hope I am not over-simplifying them – that, broadly, there are two broad categories. They are the compliance markets and then you have the voluntary markets. The compliance markets are created. They are regulated by mandatory national, regional or international carbon reduction regimes. One of the examples is the European Union ETS, which is the world's first carbon market. Of course, at the international level, discussions are also underway at the UN Conference for Climate Change. Again, this kind of meetings seeks to recognise the use of carbon credits to offset national emissions.

On the other hand, what I have shared with Members earlier on are voluntary markets. They function outside of these compliance markets. They enable companies, individuals to purchase carbon offsets on a voluntary basis to manage their carbon emissions. This is in addition to other decarbonisation strategies. They do not have an intended use for compliance purposes. So, these compliance credits may, in some instances, be purchased by voluntary non-regulated entities. They are not broadly accepted into a compliance regime unless they fulfil a broader perspective. And therein lies the challenge which the hon Member has alluded to.

At our end, we have actually been working with the different groups to see how we can nuance this approach and the key thing is to articulate and communicate this strategy and also educate many more of our companies to embark on this roadmap and to come onto this platform with us. Many of the companies looking to invest in Singapore, particularly from the semi-conductors to even data centres and so on, they have also moved on to source for many of these carbon credits.

I think it is now an opportune moment for us to work collectively together to nuance this approach and, at the same time, bring many of our own enterprises locally, as well as regional SMEs that have decided to sink roots here in Singapore, along with us. So, I thank the Member for highlighting this. It is certainly one of those targets that we not just aspire to do, but we have every intention to fulfil.