Singapore drafts framework for cross-border trade of renewable energy certificates within ASEAN

Singapore, along with an international standard setter for energy attributes, has developed a draft framework that could facilitate the cross-border trading of renewable energy certificates (RECs) within Southeast Asia.

This means that corporates in Singapore will be able to buy RECs originating from renewable energy sources in its neighbouring countries, and make exclusive claims on their emissions arising from their purchase of electricity, known as Scope 2 emissions.

While companies can already buy overseas RECs, it is complicated to track their environmental attributes across borders due to differences in government regulations across ASEAN, said the Ministry of Trade and Industry (MTI), the Energy Market Authority, and the International Tracking Standard Foundation in a joint statement on Tuesday (28 Oct).

The framework aims to help countries standardise their approaches for the tracking and accounting of cross-border RECs in three areas.

The first involves tracking the physical flow of electricity and the corresponding RECs; the second is in identifying REC registries and instruments permitted for cross-border electricity trading transactions; and the third approach relates to calculating the electricity that remains in a country’s power system after all renewable energy tracked by RECs has been subtracted.

“This framework will give companies that purchase cross-border RECs greater confidence to make exclusive claims for their sustainability reporting, without concerns that the same unit of renewable electricity is being claimed by some other entity,” read the statement.

It can also serve as a pathfinder project to complement ongoing efforts by the ASEAN Centre of Energy to develop a regional REC framework by 2027.

When completed after an industry consultation, which is underway, the framework will provide a template for ASEAN countries to account for the RECs that have been bought and sold across borders.

They can also use it to align with relevant internationally accepted standards and illustrate how global best practices are being implemented in their energy markets.

The draft framework comes a year after Singapore announced that such plans were underway. The intention was to provide market confidence that the RECs purchased from renewable energy projects overseas are properly accounted for.

RECs are tradeable assets that are issued when 1 megawatt-hour of electricity is generated and delivered to the electricity grid from a renewable energy resource.

Before this draft framework, there were no well-established international standards that recognised RECs associated with cross-border trading of electricity, outside of single markets, such as the European Union.

EMA had previously launched standards governing the measuring, reporting, and verification of RECs. This is to ensure their credibility, especially when it comes to reducing the risk from double counting.

However, these standards apply only to RECs produced and claimed in Singapore.

Given that Singapore has limited renewable energy resources, the number of RECs that can be generated locally is also constrained.

There would be only a small pool of such RECs for companies to buy to offset their Scope 2 emissions.

The establishment of the draft framework paves the way for the cross-border trading of RECs within ASEAN to become reality, and increases the supply of RECs that companies can purchase to offset their emissions.

Announcing the draft framework at the Asia Clean Energy Summit on Tuesday, Minister of State for Trade and Industry Gan Siow Huang said that there is a need to maximise the value of green electrons, to support the commercial viability of renewable energy projects.

“Many companies have shared that they need RECs to provide proof that the electricity they consume has been generated from renewable energy sources, so that they can credibly fulfil their sustainability commitments,” said Gan, who was speaking at the summit held on the sidelines of the Singapore International Energy Week.

“Today, there are systems in place for RECs generated and claimed within the same country. But with the establishment of the ASEAN Power Grid, we similarly need a framework for RECs that are traded across borders”.

The template takes reference from international best practices, and can be adapted to suit the operating context of different markets in Southeast Asia.

It is also supported by organisations across the renewable energy ecosystem, including a global renewable energy initiative called RE100, the ASEAN Centre for Energy, the Asia Clean Energy Coalition, and the energy collaborative for the semiconductor industry known as Semi.

Carbon market

Gan also announced several initiatives relating to the carbon market.

Guidelines for how companies can purchase carbon credits voluntarily as part of their decarbonisation plans have been released, following a public consultation between June and July this year.

This was developed in consultation with the Singapore Sustainable Finance Association, industry partners, academics, and international organisations, said a separate joint media statement by MTI, the National Climate Change Secretariat (NCCS), and the Monetary Authority of Singapore (MAS) on Tuesday.

Enterprise Singapore is also in discussion with large corporates in Asia to set up an industry-led coalition made up of corporate buyers of carbon credits. 

This would help to aggregate and channel demand for high-integrity voluntary carbon credits in the region and beyond. MAS is introducing a carbon market development grant for the financial sector to catalyse financial institutions’ participation across the carbon value chain.

The grant aims to alleviate near-term cost barriers faced by financial institutions and build the foundation for their sustained involvement in carbon markets, said MTI, NCCS, and MAS in the joint statement.

From now until 2028, MAS will set aside S$15 million that would go into building carbon market capabilities, including forming or expanding financial institutions teams engaged in carbon project financing, trading, insurance, and related services.

The grant would also be used for catalysing innovative financing solutions and platforms. This includes defraying upfront costs associated with transaction structuring, financing, risk management, and the trading of carbon credits.

Applications for the grant opened on 1 November.

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