Singapore to host global effort to boost transparency of carbon credit trade

The World Bank has asked Singapore to anchor an international effort that aims to make the international trade in carbon credits more transparent and trustworthy.

The Republic has accepted the invitation to work closely with the World Bank on the Climate Warehouse initiative, which aims to connect the various carbon credit registries in the world.

Carbon credit registries track offset projects - which are sources of carbon credits, such as a forest protection project - and issue credits for each unit of emission reduction or removal that is verified and certified.

However, transactions happening outside each registry, which are currently operated by various governments or non-state actors, including international organisations, non-profit groups or private firms, currently cannot be captured.

This could raise issues, such as the double issuance of the same credit in multiple registries.

Many of these systems also differ in governance rules and technology systems, ranging from basic spreadsheets to sophisticated registries, to store information on climate activities and assets, said a spokesman for the World Bank.

But this is something Climate Warehouse aims to resolve.

The effort is now in the third phase of testing, which will last until August this year.

The World Bank spokesman told The Straits Times in April: "Given that Singapore is interested to become a carbon trading hub, and that an information system like the Climate Warehouse can play an important role in providing backbone infrastructure for well-functioning carbon markets, we reached out to the Government of Singapore to seek its interest in operationalising the Climate Warehouse."

She added that Singapore is an ideal place to host the initiative, given its world-class market and trading infrastructure, good governance, and highly skilled work force.

Each carbon credit refers to one tonne of carbon dioxide that is removed from the atmosphere, or prevented from being produced.

These credits can be bought by an emitter elsewhere to offset its own emissions.

During the United Nations climate change conference COP26 last November, countries agreed on a framework that will allow nations to trade emissions reductions among themselves to meet their climate targets under the Paris Agreement.

The decision at the summit also gives private entities greater confidence to participate in global markets, by investing in carbon reduction projects around the world and selling the credits.

But to ensure that international carbon markets truly benefit the climate, the credits should not be double counted.

This means that countries selling the carbon credits should not count the savings under their own national targets, or sell the same credit to two different parties.

A spokesman for Singapore's National Climate Change Secretariat said Climate Warehouse can help to improve transparency and minimise double counting risks across the fragmented international carbon markets.

This will enhance the credibility of international carbon credits, she added.

Mr Dirk Forrister, chief executive of the International Emissions Trading Association, a non-profit business organisation, said that establishing a common data environment for tracking carbon credits is also important for the private sector.

"The underlying data system must have high integrity, or businesses will not have confidence to invest at scale," he said.

Mr Forrister said that under the Paris Agreement, all countries that trade emissions credits must have a registry to track and report transfers.

He added: "Eventually, many countries will operate their own, or join international registries. The Warehouse will be open to any country that wants to participate, so long as it meets the key registry specifications that will be made available (to all)."

The National Climate Change Secretariat spokesman added that Climate Warehouse will provide the global platform needed for more transparent reporting and closer tracking of carbon credits.

She said: "This will enhance the credibility of international carbon credits as a legitimate way for companies and countries to decarbonise and offset their residual emissions."

Source: The Straits Times © SPH Media Limited. Permission needed for reproduction.