Singapore Issues Guidelines for Utilizing Carbon Credits in Achieving Decarbonization Objectives
New Draft Guidance on Voluntary Carbon Market Unveiled in Singapore
The National Climate Change Secretariat (NCCS), Ministry of Trade and Industry (MTI), and Enterprise Singapore have released a Draft Guidance on Voluntary Carbon Market (VCM), aiming to establish a trusted and transparent ecosystem for companies to use carbon credits in their decarbonization plans [1]. The consultation on this new draft guidance is open until 20 July 2025.
The guidance provides clarity on the use of carbon credits within credible decarbonisation plans, offering suggestions for companies to incorporate voluntary carbon credits to complement their efforts to reduce greenhouse gas emissions [1][2]. It also aims to reduce confusion caused by the lack of standardisation in voluntary carbon markets by outlining characteristics and examples of high-quality credits [1].
One of the key aspects covered in the guidance is the need for high-quality carbon credits. The document sets out principles to help companies assess the environmental integrity of a carbon credit, including ensuring additionality, permanence, and avoiding double-counting of emissions reductions [1]. It also encourages companies to consider the quality and risk of credits as a portfolio, and to consider labels and project ratings for quality and risk assessment.
To boost the supply of high-quality carbon credits, the draft guidance highlights mechanisms such as Singapore's Carbon Project Development Grant. This grant encourages the development and issuance of credible carbon credits, including those aligned with Article 6 of the Paris Agreement [5].
The new draft guidance also addresses the concern over market integrity. It encourages companies to transparently disclose their use of carbon credits, including reporting on volume, type, locations, registries, purpose, and third-party ratings if available [1]. Furthermore, it suggests the use of insurance to derisk carbon credit portfolios.
The guidance follows feedback from industry engagements on the need for government guidance on the voluntary carbon markets. The publication can be accessed by clicking the provided link.
The growth of the VCM has been held back by challenges such as a lack of standardization, which has undermined market confidence and led to company concerns over reputational risk from the use of carbon credits. The new draft guidance aims to address these issues, aligning with Singapore’s carbon tax framework and complementing its broader climate policies [4].
The new draft guidance is a significant step towards establishing a credible and transparent voluntary carbon market in Singapore. By providing clear government-backed standards, it aims to build market confidence and mitigate reputational risks for companies purchasing credits, ultimately helping them meet their net zero commitments.
- The new draft guidance in Singapore's voluntary carbon market aims to reduce climate-change by encouraging businesses to use high-quality carbon credits in their decarbonization plans, thus integrating science and environmental-science for finance-related purposes.
- To ensure the environmental integrity of carbon credits, the guidance offers principles for companies to assess additionality, permanence, and avoid double-counting of emissions reductions, thereby supporting the global effort to combat climate-change.
- Recognizing the challenges in the voluntary carbon market, such as market integrity and a lack of standardization, the new draft guidance in Singapore proposes mechanisms like insurance for derisking carbon credit portfolios and government transparency in the reporting of credit use to strengthen market confidence and mitigate business risks.
