Singapore-Ghana Carbon Credit Agreement
As discussed in our previous article, Singapore has introduced a carbon tax as part of a comprehensive suite of measures to encourage companies to adopt technologies for decarbonisation at an early juncture, and has implemented a staged increase in carbon tax from 2022. Currently, the rate of carbon tax is S$25 per tonne of carbon dioxide emissions, and it is set to increase to the range of S$50 to S$80 per tonne by 2030.
Companies may purchase carbon credits that fulfil certain eligibility criteria to offset up to 5.0% of their taxable emissions. These eligibility criteria include no double counting, quantified and verified, no net harm, and no leakage, in order to demonstrate a high degree of environmental integrity.
In light of the new legislative framework, Singapore and Ghana have on 27 May 2024 signed an implementation agreement under which Singapore entities will be able to purchase carbon credits from eligible projects in Ghana (the “Singapore-Ghana Agreement”) under Article 6 of the Paris Agreement. The Singapore-Ghana Agreement is legally binding and identifies processes for the generation and transfer of carbon credits between Singapore and Ghana. The carbon credit projects authorised under the Singapore-Ghana Agreement will advance sustainable development in Ghana while generating social, economic, and environmental benefits for Ghanian communities.
The Singapore-Ghana Agreement is not the first agreement entered into by Singapore with partner countries in relation to carbon credits: Singapore had signed a similar agreement with Papua New Guinea in December 2023.
Implications of the Singapore-Ghana Agreement
As the supply of high-quality international carbon credits available to Singapore increases through agreements such as the Singapore-Ghana Agreement, the notion of Singapore emerging as a hub for the origination as well as secondary trading of carbon credits in the region may no longer be far-fetched. Over time, this could lead to the development of an internationally-recognised carbon trading ecosystem in Singapore, where carbon credit trading platforms choose to headquarter their operations here. Contemporaneously, the possibility of Singapore having a voice in global carbon credits standard-setting may no longer be a distant reality.
This article is produced by our Singapore office, Bird & Bird ATMD LLP. It does not constitute legal advice and is intended to provide general information only. Information in this article is accurate as of 18 June 2024.
