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Singapore doubles down on carbon trading at COP27

Jovi Ho
Jovi Ho11/24/2022 10:30 AM GMT+08  • 8 min read
Singapore doubles down on carbon trading at COP27
Minister Grace Fu at the Singapore Pavilion at COP27. Photo: Singapore Pavilion COP27
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A deal gavelled through in the final moments of the United Nations’ climate summit COP27 has been described as a “historic” coup for small islands and other vulnerable nations. After two days of extra time, delegates from nearly 200 countries agreed in the early hours of Nov 20 to set up a climate “loss and damage fund” to help poor countries battered by climate disasters.

That said, it could be several years before the fund materialises, as the agreement only sets out a roadmap for the effort. Egypt’s Foreign Minister Sameh Shoukry, who presided over the COP27 talks, has pledged to complete this outline before handing the presidency over to the United Arab Emirates (UAE).

The agreement calls for a committee with representatives from 24 countries to lay out which countries and financial institutions should contribute and where the money should go. The committee will have two co-chairs, one from a developed country and one from a developing country.

Missing from the final deal, however, are further commitments to reduce emissions, in part due to a global energy crunch. After two weeks in Sharm El-Sheikh, Egypt, the COP27 summit adopted an accord that does not increase ambitions on lowering emissions or take new steps to contain temperatures from rising above 1.5°C.

Alok Sharma, president of last year’s COP26 in Glasgow, Scotland, complained that key points from the preceding climate pact were either missing or watered down. “Emissions peaking before 2025 as the science tells us is necessary? Not in this text. Clear follow-through on the phasing down of coal? Not in this text. Clear commitment to phase out all fossil fuels? Not in this text. The energy text? Weakened in the final minutes.”

See also: COP27 approves last-ditch deal for historic climate damage fund

Instead, this year’s final text allows for a transition to “low-emission” sources, interpreted as a loophole for natural gas, the lowest-emitting of fossil fuels.

Shoukry drew flak for his hands-off approach, which ultimately allowed oil-exporting countries to block language critical of oil and gas. The trend could continue at the next summit, with COP28 scheduled to be held in the UAE next year.

European Commission executive vice-president Frans Timmermans says climate negotiators were confronted with a moral dilemma. “We had to give up some of the things we wanted to help this process and its parties to find a way forward.”

See also: Singapore Pavilion launched at COP27 in Egypt, listcos to join talks and panels

After talks went into overtime on Nov 19, Timmermans, who is also the EU climate policy chief, warned that the bloc was prepared to walk away from climate negotiations “if we do not have a result that does justice to what the world is waiting for”.

Minister of Health, Wellness and the Environment Molwyn Joseph of Antigua and Barbuda says in a statement that the agreements made at COP27 are “a win for our entire world”.

Joseph, who is chair of the Alliance of Small Island States (AOSIS), says: “AOSIS promised the world we would not leave Sharm El-Sheikh without achieving the establishment of a loss and damage response fund. A mission thirty years in the making has been accomplished.”

Singapore is among AOSIS’s 39 members. The ad-hoc lobby group’s core focus areas are climate change, sustainable development and ocean conservation.

“Today, the international community has restored global faith in this critical process that is dedicated to ensuring no one is left behind,” says Joseph. “Now, we must solidify our ties across territories. We must work even harder to hold firm to the 1.5°C warming limit, to operationalise the loss and damage fund and continue to create a world that is safe, fair and equitable for all.”

Singapore at COP27

Against a backdrop of humanitarian and economic crises, the COP27’s gains are “very respectable”, says Heng Jian Wei, director of the policy and planning division at the National Climate Change Secretariat (NCCS).

See also: Parliament passes carbon tax rate hike from 2024, Singapore's emissions to peak by 2028

“I think the creation of an L&D fund and no backsliding for climate ambition are very respectable outcomes given the global challenges this year — Ukraine war, global energy crisis, stagflation — coupled with serious climate disasters in Pakistan and Bangladesh, to name a few,” says Heng in a LinkedIn post. “These are not easy outcomes to land on, with multiple parties with points of disagreements until the very end.”

Some progress is better than no progress, writes Toh Wee Khiang, director at Singapore’s Energy Market Authority. “Who’s going to contribute to this ‘loss and damage’ fund is anyone’s guess. In terms of greater ambition [or] urgency to meet the 1.5°C target, there was no improvement from last year’s Glasgow Pact, but at least there was no backtracking.”

“Overall, we reached as good an outcome as we can get given the circumstances,” says Minister for Sustainability and the Environment Grace Fu.

At COP27, Singapore announced plans to undertake a voluntary 5% levy on bilateral carbon trade proceeds, which will go towards climate adaptation measures. In addition, the Republic committed to cancelling 2% of carbon credits. These will not be used by either country, reducing overall emissions.

These steps follow new Article 6 rules announced last December. Article 6 of the Paris Agreement (or COP21 in 2015) governs the cooperative mechanisms that facilitate the transfer of carbon credits between countries. The Article 6 rulebook was finalised at COP26, following negotiations co-facilitated by Singapore and Norway.

Fu announced the plans on Nov 15 at the launch of a collaboration between Singapore and Ghana. The two countries have agreed to develop and trade carbon credits, with an implementation agreement to be signed early next year.

Singapore also signed memoranda of understanding (MOU) with Papua New Guinea and Peru to collaborate on carbon markets in alignment with Article 6 guidelines.

In Egypt, Singapore joined over 60 countries in the Article 6 Implementation Partnership. The partnership builds on the Article 6 rulebook and aims to support “high-integrity carbon markets”, according to a joint statement by the NCCS, the Ministry of Sustainability and the Environment and the Ministry of Trade and Industry.

Together with the World Bank and International Emissions Trading Association (IETA), Singapore will launch the Climate Action Data Trust (CAD Trust) in December. The CAD Trust is an independent system that can link, aggregate and harmonise all major carbon market registry data. This will reduce the risk of double-counting, where two parties claim the same carbon removal or emission reduction.

Singapore has also joined the Forests and Climate Leaders’ Partnership (FCLP) as a member country. By joining the FCLP, Singapore commits to working with other members and partners to develop “high-integrity markets” for forestry carbon credits while implementing solutions to reduce forest loss, increase restoration and support sustainable development.

Says Fu: “The progress on carbon markets, along with increasing support for investments in low-carbon technologies worldwide, had, among others, given Singapore the confidence to raise our national climate ambition and announce our commitment to achieve net zero by 2050.”

Public sector takes the lead

Before Fu left for Egypt, she moved the Carbon Pricing (Amendment) Bill in Parliament on Nov 8, signing into law the carbon tax rate hike first announced by Deputy Prime Minister Lawrence Wong in February.

Singapore will raise its carbon tax to $25/ tCO2e in 2024 and 2025, and $45/tCO2e in 2026. This is up from the current rate of $5/ tCO2e, introduced in 2019 through the Carbon Pricing Act (CPA).

The Bill also introduced a framework for International Carbon Credits (ICC), tradable certificates that companies can use from 2024 to offset up to 5% of their taxable emissions. The certificates represent projects that reduce or remove emissions, such as reforestation.

Wong announced on Oct 25 that Singapore will raise its national climate target to achieve net zero emissions by 2050. The Republic will also reduce emissions to around 60 million tonnes of carbon dioxide equivalent (tCO2e) in 2030, down from 65 million tCO2e previously.

Singapore’s public sector will take the lead, aiming to reach net zero by 2045. With this commitment, Singapore joined 18 other countries at the launch of the Net-Zero Government Initiative on Nov 17.

The 19 countries, which include members of the European Union, Australia, New Zealand, the US, Britain, South Korea and Japan, will develop a roadmap by COP28 detailing plans to decarbonise public sector operations by 2050. The governments will then publish these plans.

Absent from the initiative, however, are India and China. India released on Nov 14 its plans to achieve net zero by 2070, also known as its Long-Term Low Emissions and Development Strategies (LT-LEDS), joining 56 other countries who have done so.

China aims to peak carbon dioxide emissions before 2030 and achieve carbon neutrality before 2060, according to its submission last October.

Following Wong’s announcements in October, Singapore submitted an addendum to its LT-LEDS on Nov 4, updating the goals it had set out in March 2020.

Photos: Bloomberg, Singapore Pavilion COP27

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