Effective carbon markets play an “indispensable role” in actively reducing planet-warming greenhouse gas emissions, he said, as they channel finance to high-impact projects and make the reduction or removal of emissions more cost-effective.
Under the Paris Agreement – an international treaty to limit global warming – countries can buy carbon credits generated in other jurisdictions to meet domestic climate targets.
Carbon markets benefit carbon credit buyers as purchasing offsets from elsewhere can sometimes be cheaper than reducing emissions on their own.
Singapore hopes to create greater international alignment in a fragmented carbon market by addressing the barriers of cost, capital, and uncertainty, said Mr Tan.
As Singapore is a small city-state with few alternatives for clean energy, buying carbon credits that help the country meet its targets under the UN climate treaty is a crucial complement to its domestic decarbonisation efforts, he noted.
Of the sum, US$10 million will finance projects that develop carbon credits for Singapore to meet its climate goals, while the remainder will help countries participate effectively in carbon markets that satisfy the treaty’s standards.
Mr Tan said: “And with these two pillars, they address both sides of the equation: strengthening supply where technical capacity is lacking, and so anchoring demand with the high-integrity frameworks the market needs to thrive.”
Singapore’s contribution joins those of Britain, New Zealand, Norway, and Sweden.
Commenting on Singapore’s contribution to the Carbon Transaction Facility, Global Green Growth Institute executive director Kim Sang-hyup welcomed the “highly appreciated development” as the institute builds a closer relationship with ASEAN countries.
“Through the facility, we work closely with governments to put in place the systems, policies, and partnerships that move countries from readiness to results – delivering climate ambition, environmental integrity, and sustainable development,” he said.
Also launched by Mr Tan was the Action for a Resilient Climate (ARC) Coalition, a multi-sector initiative that aims to aggregate corporate demand to buy at least 10 million tonnes of carbon credits by 2030.
Members of the coalition include statutory board Enterprise Singapore, Temasek-backed decarbonisation investment firm GenZero, internet company Tencent, Japan-based enterprise Mitsubishi, and non-profit World Wide Fund for Nature Singapore.
In a statement, the coalition, established as a Singapore-based non-profit organisation, said it will bring together companies, financial institutions, philanthropic organisations, government agencies, and technical experts to develop carbon markets that meet the UN climate target and strengthen market confidence.
