Singapore signs agreement with Papua New Guinea to cooperate on carbon credits

SINGAPORE: Singapore and Papua New Guinea on Friday (Dec 8) signed an implementation agreement on carbon credits cooperation, which will help both countries advance their climate goals.

The agreement was signed by Singapore's Minister for Sustainability and the Environment Grace Fu and Papua New Guinea's Minister of Environment, Conservation and Climate Change Simo Kilepa on the sidelines of the 2023 UN Climate Change Conference (COP28).

It comes after both countries signed a memorandum of understanding during COP27 last year.

It also marks the first implementation agreement for Singapore, said the Ministry of Trade and Industry (MTI), the Ministry of Sustainability and the Environment (MSE) and the National Climate Change Secretariat (NCCS) in a joint press release.

The agreement sets out a legally binding framework and processes for the generation and international transfer of carbon credits between Singapore and Papua New Guinea.

"This collaboration will advance both countries’ climate ambition and help to channel financing towards additional mitigation efforts through carbon credit projects which would otherwise not be possible," said the MTI, MSE and NCCS.

"The carbon credit projects authorised under the implementation agreement will also promote sustainable development and generate benefits for local communities, such as the creation of jobs, access to clean water, improved energy security, and reduction of environmental pollution."

As part of Singapore’s cooperation with Article 6 of the Paris Agreement, project developers will be required to cancel 2 per cent of the carbon credits issued under the implementation agreement at first issuance to ensure additional contribution to overall mitigation of global emissions.

They will also be required to make a contribution equivalent to 5 per cent share of proceeds or authorised carbon credits towards climate adaptation in Papua New Guinea.

"This will help Papua New Guinea prepare for and adjust to the impacts of climate change," the authorities said.

NEW OPPORTUNITIES FOR COMPANIES

A carbon credit is generated through activities that aim to reduce, remove or avoid carbon emissions - such as restoring forests or investing in renewable energy.

It is a permit or certificate that represents a reduction of one tonne of carbon dioxide emission. By buying these credits, companies can offset up to 5 per cent of their taxable carbon emission. 

"Singapore is also supporting the development of carbon markets, by enabling the demand and supply of high-quality carbon credits to be matched," said MSE, MTI and NCCS.

Under Singapore's international carbon credit (ICC) framework, Singapore-based carbon tax-liable companies can source for eligible ICCs generated under this implementation agreement to offset up to 5 per cent of their taxable emissions.

Trading these credits through Singapore will help to "unlock new business opportunities in areas such as carbon services and sustainability solutions, strengthening Singapore’s position as a carbon services and trading hub".

"High-integrity carbon markets can contribute to much-needed climate action globally. As an alternative energy disadvantaged country, effective international cooperation, such as through carbon markets, will also help us to achieve our climate ambitions," said Ms Fu.

"We are delighted to sign our first implementation agreement with Papua New Guinea, a fellow Alliance of Small Island States member. We look forward to working with Papua New Guinea to advance climate action together.”