Singapore is prepared to accept forest conservation carbon credits, but they will have to come from projects that consider deforestation across an entire jurisdiction, not just deforestation on a project level, a government spokesperson has told The Business Times (BT).

The spokesperson said that the stance is aimed at addressing the risk of “carbon leakage”, which occurs when deforestation is simply “moved” from within a project to an area that is unmonitored

Leakage is of particular concern in countries with historically significant levels of deforestation, and in the class of conservation credits known as Redd+. Redd+ stands for “Reducing Emissions from Deforestation and Forest Degradation”.

Singapore is preparing to release by year’s end a list of eligible host countries, programmes and methodologies under its International Carbon Credit (ICC) framework, which will allow companies to offset up to five per cent of their taxable emissions beginning in 2024.

This comes after the Ministry of Sustainability and the Environment and the National Environment Agency (NEA) published the eligibility criteria underpinning the coming list.
 

Jurisdictional Redd+

Redd+ projects have come under intense scrutiny amid heightened scepticism about the integrity of their emissions reduction claims.

Responding to BT’s queries, the government spokesperson said Singapore recognises the need to support the management and conservation of existing forests, and to restoring deforested areas.

Therefore, “we will accept Redd+ projects that adopt a jurisdictional approach in countries with historically significant levels of deforestation”, he said. These include projects developed using the jurisdictional and nested Redd+ (JNR) framework of the Verified Carbon Standard (VCS).

JNR projects are seen to avoid some of the criticisms that have plagued the project-level Redd+ methodology. Project-level Redd+ credits have bore the brunt of criticisms about inflated baselines and over-crediting, but JNR projects are seen to be subjected to stricter oversight.

This position is aligned with the eligibility criteria set by the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which is regarded as one of the most rigorous and reputable international standards, the spokesperson explained.
 

Environmental integrity

The government is unlikely to include “high forest, low deforestation” (HFLD) credits in the initial version of the eligibility list.

The spokesperson said these credits are still new, and will require further assessment for environmental integrity.

HFLD credits have been mooted for heavily forested areas with historically low rates of deforestation, on the basis that it is important to protect these areas early on. But whether the avoided emissions from such projects are truly additional to business as usual has been a subject of debate.

The Singapore government’s stance is to monitor developments and international discourse around these credits, explore working with HFLD jurisdictions to refine HFLD methodologies, and come up with mechanisms that offer incentives to promote conservation, the spokesperson said.
 

Coal phase-out credits

“Transition credits”, recently proposed by the Monetary Authority of Singapore as a way to credit the avoided emissions when coal-fired power plants are retired early, are also unlikely to be on the eligibility list because they are still too nascent.

The same applies to carbon-capture credits tied to oil extraction processes, and direct air capture credits.

The spokesperson said: “We are unable to make an assessment on these activities, as there are no crediting methodologies meeting Article 6 requirements that have been published as of now.”

However, he said Singapore recognises the importance of developing the carbon market and the rules governing it, to facilitate international cooperation in this market. The government will review the credibility of these methodologies when they become available and assess whether they meet Singapore’s criteria.
 

Reversal protection

Accepted projects should have mechanisms to monitor, mitigate, and compensate for the possibility of “reversals”, which occur when a credit can no longer support claims for the amount of emissions it reduces or removes, the spokesperson said.

For instance, a wildfire in a forest conservation site releases carbon that had previously been stored in the area, and might require a reversal. However, projects that might face a risk of reversals might be required to maintain a “buffer” pool of credits to insure against reversals.

If there are serious concerns about the environmental integrity of any ICC project, NEA, as administrator for the carbon tax regime, may remove these projects from the eligibility list, the spokesperson said.

In terms of the scope of Singapore’s carbon tax, the spokesperson said there are no plans at the moment to lower the taxable threshold of 25,000 tonnes of greenhouse gas emissions per year. Facilities that emit above that level are subject to Singapore’s carbon tax.
 

The spokesperson explained that Singapore’s carbon tax coverage is already “one of the highest in the world”. More than 90 per cent of Singapore emissions are already subjected to a carbon price. Carbon tax covers about 80 per cent of emissions; the rest is covered through excise duties that offer incentives to lower transport emissions, he noted.

At this level of coverage, the carbon tax is imposed at key nodes, and flows through the rest of the economy. This, in turn, reduces the administrative load on small emitters – especially small and medium-sized enterprises – to measure, report and verify their emissions, he added.
 

Supply and demand

The spokesperson said it is not possible to forecast the projected supply of ICCs because Singapore is still negotiating implementation agreements with about a dozen countries, with varying levels of progress in each.

These implementation agreements are being drawn up to ensure that the credits are not double-counted in two countries’ nationally determined contributions when credit trades take place. Singapore has set these agreements as a prerequisite for credits that can be accepted under its ICC framework.

Also, commercial sensitivities may make project developers choose not to disclose what they are planning in the potential host countries. This prevents “meaningful forecasting”, the spokesperson said.

Nevertheless, Vietnam and Ghana – the countries with which Singapore is closest to signing implementation agreements – seem to have taken commercial interest in developing projects in the areas of landfill methane capture, efficient household appliances, renewable energy, and nature-based solutions, the spokesperson said.
 

In any case, the market demand for ICCs is expected to be slow at the start, he noted. “As the option to use ICCs to offset carbon tax is new, we expect that companies will need time to build up the requisite knowledge and capabilities to avail themselves of this option,” the spokesperson said.

Market observers have told BT that ICCs are expected to command a price premium over voluntary credits that do not come with corresponding adjustments

The spokesperson agreed with these higher costs, on the back of the need for host-country authorisation and higher environment integrity. Prices will, however, be determined by market dynamics, the spokesperson added.
 

Source: The Business Times ©️ SPH Media Limited. Permission required for reproduction.