The National Climate Change Secretariat (NCCS), Ministry of Trade and Industry (MTI), Enterprise Singapore (EnterpriseSG) and Monetary Authority of Singapore (MAS) are advancing initiatives to support the development of high-integrity carbon markets.
The parties said in a statement on Tuesday that these include the publication of voluntary carbon market (VCM) guidance on how companies can use carbon credits as part of their decarbonisation plans; ongoing discussions with leading corporates in Asia to set up an industry-led buyers’ coalition to aggregate demand for high-quality carbon credits; and the introduction of a new Financial Sector Carbon Market Development Grant to support financial institutions’ participation in carbon markets.
According to the statement, Carbon markets are a critical enabler for the global transition to net zero, channeling capital towards climate action.
However, the growth of carbon markets has been constrained in recent years by weak demand, limited supply of high-integrity projects, and underdeveloped market infrastructure.
To address these gaps, the Singapore government has introduced a suite of initiatives to catalyze demand for high-quality carbon credits, grow the pipeline of credible projects, and strengthen market infrastructure and capabilities across the carbon market value chain.
These initiatives include the launch of the Carbon Project Development Grant at COP29, and active collaboration with international partners through Singapore’s Article 6 partnerships and the Coalition to Grow Carbon Markets announced at London Climate Action Week earlier this year.
NCCS, MTI and EnterpriseSG have also jointly published the VCM guidance on Tuesday to guide companies in using carbon credits as part of a credible decarbonization plan.
The VCM guidance was developed in close consultation with the Singapore Sustainable Finance Association (SSFA), industry partners, academics, and international organizations.
It will be regularly reviewed and updated to keep pace with the latest developments.
To demonstrate application of the key principles outlined within the VCM guidance, EnterpriseSG is also in discussions with leading corporates in Asia to establish an industry-led buyers’ coalition to align and channel demand towards high-integrity carbon credits in the region and beyond.
The statement also highlighted that financial institutions play a key enabling role in the carbon market value chain — from structuring transactions and financing projects, to underwriting risk mitigation solutions, and trading credits.
Apart from concerns over market integrity and demand, financial institutions may also face high upfront costs in developing needed expertise, and managing the complexity and risks of early transactions.
To address these challenges, MAS will introduce a Financial Sector Carbon Market Development Grant, to help alleviate near-term cost barriers faced by financial institutions and build the foundation for their sustained involvement in carbon markets.
MAS will also set aside S$15 million ($11.59 million) over three years till 2028, from the Financial Sector Development Fund to support building carbon market capabilities and catalyzing innovative financing solutions and platforms.
The fund is supporting the establishment or expansion of financial institutions teams engaged in carbon-project financing, trading, insurance and related services.
It is also defraying upfront costs associated with transaction structuring, financing, risk management, and trading of carbon credits – including for due diligence, verification and carbon credit insurance premiums.
Together, these initiatives aim to help catalyze the development of high-integrity carbon markets, to deliver tangible and credible impact for global climate action.
“Carbon markets play an important role in mobilizing finance for climate action and supporting the global transition to net zero. At the same time, they support sustainable development and growth in countries where the carbon projects are situated,
“Through the VCM guidance, we seek to provide our businesses with greater clarity and assurance to tap on high-quality credits, alongside their own efforts to decarbonize. We hope that this can encourage greater corporate climate ambition, contributing to global climate action,” said Ravi Menon, Ambassador for Climate Action and Senior Adviser, NCCS.
Lee Pak Sing, Assistant Managing Director for Trade and Connectivity at Enterprise Singapore, said this VCM guidance provides companies with clarity to incorporate the use of carbon credits in their decarbonization plans.
“By outlining how to identify high-quality carbon credits, when to use them and how to transparently disclose their use, companies can develop credible decarbonization strategies and contribute to global climate action,” he added.
Abigail Ng, Chief Sustainability Officer of MAS, said high-integrity carbon markets are integral to financing the global transition, and financial institutions play a key role in bringing capital, innovation and scale to this space.
“The new Financial Sector Carbon Market Development Grant will enable financial institutions to deepen expertise, forge partnerships and develop solutions, laying the foundations for their sustained engagement in the carbon markets,” she added.
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