Article 6 Implementation Partnership
Singapore joined the Article 6 Implementation Partnership as a member country at the 27th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP27) in Egypt, which aims to foster the trade of carbon credits and thereby advance the implementation of carbon markets around the world through coordination of international capacity-building efforts.2
Article 6 of the Paris Agreement allows countries to voluntarily cooperate with each other to achieve emission reduction targets set out in their Nationally Determined Contributions (NDCs) via transfer of carbon credits between countries. The new Article 6 Implementation Partnership launched by Japan’s Ministry of the Environment during the COP27 conference will serve as an information platform for implantation of Article 6 and provide the support required to pilot Article 6 initiatives.3 At the time of launch of the partnership, 40 countries and 23 institutions have pledged to participate, and the partnership membership is expected to further grow in the future.4
As we highlighted in “Singapore: COP26 and Creating a Center for Carbon Trading”, Singapore has been taking steps to establish itself as a carbon services and trading hub. Its participation in the Article 6 Implementation Partnership is one of such steps. As greater clarity on cross-border carbon market mechanisms will flow from implementation of the rules set by Article 6, this will in turn lead to an increase in demand for associated services (such as carbon financing and trading, verification of carbon credits, legal services and carbon credit risk management), which are all areas that Singapore has been keen to foster and promote.
Singapore’s contribution to “the development of baseline methodologies for carbon markets and the promotion of the use of transparency tools and national frameworks for carbon markets”5 as a member of the Article 6 Implementation Partnership reflects its continued commitment to contribute to global greenhouse gas emission reductions, and we expect that Singapore will continue to play a vital role in supporting Article 6 implementation and facilitating international cooperation and partnership for carbon markets.
Singapore’s Bilateral Efforts
In addition to serving as a strong supporter of multilateral approaches to the green energy transition, Singapore has also pursued bilateral efforts such as:
- Singapore-Australia Green Economy Agreement
Singapore and Australia signed the Singapore-Australia Green Economy Agreement on 18 October 2022. The agreement is considered “a first-of-its-kind agreement and pathfinder for rules and standards in advancing trade and environmental sustainability”6, and both countries seek to closely cooperate in the following seven areas: (i) trade and investment; (ii) standards and conformance; (iii) green and transition finance; (iv) carbon markets; (v) clean energy, decarbonisation and technology; (vi) skills and capabilities; and (vii) business engagements and partnerships.
By reducing barriers to cross-border trade in clean energy and promoting business engagements in trade and investment in green sectors, the bilateral agreement is expected to catalyse economic growth and job creation in green sectors, as well as promote decarbonisation and support both countries’ green economy transition.7
Although it is an agreement between two countries, market participants are eagerly tracking its implementation and waiting to see whether the Singapore-Australia Green Economy Agreement will create a positive ripple effect across the Asia-Pacific region and beyond and serve as a stepping stone to greater regional cooperation in addressing the global challenges of climate change and promoting energy transition to clean energy sources.
- Singapore-Ghana Implementation Agreement on Carbon Credits Cooperation
Singapore and Ghana have substantively concluded negotiations on an Implementation Agreement on carbon credits cooperation, which is expected to be formally signed in early 2023.8 Once the Implementation Agreement becomes operational and the bilateral transfer of carbon credits commences, companies in Singapore will be allowed to purchase carbon credits from emission-reduction projects in Ghana to partially offset their carbon tax liabilities under Singapore’s carbon tax.
As noted above, Singapore is taking a leading role in terms of supporting Article 6 implementation, and the progress made with the Implementation Agreement with Ghana underscores Singapore’s leadership in establishing bilateral agreements for cooperation under Article 6.
- Singapore’s Memoranda of Understanding for Collaboration under Article 6 of the Paris Agreement with Papua New Guinea and Peru
Singapore also signed a memorandum of understanding (MOU) with Papua New Guinea on 14 November 20229 and another MOU with Peru on 18 November 2022 to collaborate on carbon markets.10 Under each of the MOUs, Singapore will further discuss with Papua New Guinea and Peru, respectively, to work towards a legally binding agreement that sets out a bilateral framework to permit generation and sharing of carbon credits and help Singapore and its partner countries achieve targets set out in their respective NDCs. We expect that Singapore’s active bilateral discussions with countries such as Papua New Guinea and Peru can also help other countries in the Asia-Pacific region develop capacity, readiness and awareness on using Article 6 and participating in international carbon markets.
Climate Action Data Trust
As a part of its efforts to contribute to development of carbon markets, Singapore along with the World Bank and the International Emissions Trading Association launched the Climate Action Data Trust (CAD Trust) at the Asia Climate Summit 2022 on 7 December 2022. The CAD Trust will serve as a global platform that provides a decentralised record of data from major carbon credit registries including Verra and Gold Standard, and it is expected to enhance transparency and confidence in carbon markets by addressing issues such as double-counting which is an inevitable byproduct of the fragmented nature of current carbon markets. Please refer to our previous article “Insights from the Asia Climate Summit 2022” for the more in-depth coverage of the Asia Climate Summit 2022 and the CAD Trust.
1 Please see, for example, “The Singapore Budget 2022 – A Continuing Commitment to Advancing Singapore’s Green Transition”, “Energy in ASEAN: Singapore and Hydrogen”, “COP26 and Article 6: Where Did Singapore End Up?”, “Singapore: COP26 and Creating a Center for Carbon Trading” and “Singapore’s Green Finance Drive”.
2 mti.gov.sg/Newsroom/Press-Releases/2022/11/Article-6-Implementation-Partnership-at-COP27.
3 https://www.nccs.gov.sg/media/press-releases/article-6-implementation-partnership-at-cop27/.
4 https://www.env.go.jp/en/press/press_00741.html.
5 https://www.nccs.gov.sg/media/press-releases/article-6-implementation-partnership-at-cop27/.
6 https://www.mti.gov.sg/-/media/MTI/Newsroom/Press-Releases/2022/10/MTI-MSE-Press-release-and-Factsheet-on-the-SAGEA.pdf.
7 https://www.mti.gov.sg/-/media/MTI/Newsroom/Press-Releases/2022/10/MTI-MSE-Press-release-and-Factsheet-on-the-SAGEA.pdf.
8 https://www.mse.gov.sg/resource-room/category/2022-11-15-media-release-singapore-and-ghana-implementation-agreement-article-6.
9 https://www.mse.gov.sg/resource-room/category/2022-11-14-media-release-singapore-and-papua-new-guinea-collaborate-advancing-climate-actions-and-ambition.
10 https://www.mse.gov.sg/resource-room/category/2022-11-18-media-release-singapore-and-peru-collaborate-on-carbon-markets-advance-climate-ambition
