Singapore and Laos have signed a legally binding agreement establishing a framework for developing and transferring carbon credits under Article 6 of the Paris Agreement. The agreement is intended to create new opportunities for carbon-market projects between the two Southeast Asian countries while directing climate finance toward adaptation measures in Laos.
Key Overview
- Singapore and Laos signed the agreement virtually on September 4.
- It is Singapore’s 12th bilateral implementation agreement on carbon credits and its fourth with an ASEAN member state.
- The framework covers the international transfer of correspondingly adjusted carbon credits.
- Eligible credits could offset up to 5% of a company’s taxable emissions under Singapore’s International Carbon Credits framework.
- Singapore will direct 5% of proceeds from authorized credits toward climate adaptation measures in Laos.
- 2% of correspondingly adjusted credits will be cancelled when first issued to prevent them from being traded or counted toward emissions targets.
- Projects are expected to support emissions reductions, job creation and reduced environmental pollution in Laos.
Singapore and Laos Establish Article 6 Carbon Credit Framework
Singapore and Laos have signed a legally binding agreement establishing a framework for developing and transferring carbon credits under Article 6 of the Paris Agreement, opening a new channel for climate finance projects between the two Southeast Asian countries.
The agreement was signed virtually on September 4 and represents Singapore’s 12th bilateral implementation agreement on carbon-credit collaboration and its fourth with an ASEAN member state.
The framework will allow project developers to pursue carbon mitigation projects aligned with the Article 6 rulebook. Singapore’s Ministry of Trade and Industry said procedures for project authorization and eligible carbon-crediting methodologies will be published in due course.
The collaboration is intended to support additional emissions-reduction opportunities in Lao PDR while directing climate finance toward adaptation measures.
Carbon Credits to Undergo Corresponding Adjustments
The agreement covers the international transfer of high-integrity carbon credits that have undergone corresponding adjustments.
The corresponding adjustment mechanism is intended to prevent the same emissions reductions or removals from being counted by both the host and buyer countries in their greenhouse-gas inventories.
Under the framework, authorized carbon credits could be used for several purposes in Singapore.
Subject to eligibility, authorized credits could be used for several purposes, including offsetting up to 5% of a company’s taxable emissions under Singapore’s International Carbon Credits framework.
The credits could also be used toward national climate commitments, known as Nationally Determined Contributions (NDCs), as well as international mitigation requirements such as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).
Singapore to Channel Carbon Credit Proceeds to Laos
The agreement also establishes financial and environmental commitments linked to the authorized carbon credits.
Singapore will direct 5% of proceeds from authorized carbon credits under the agreement toward climate adaptation measures in Laos.
In addition, 2% of the correspondingly adjusted carbon credits authorized under the framework will be cancelled at first issuance.
The cancelled credits cannot be sold, traded or counted toward any country’s emissions targets.
These measures are intended to strengthen the environmental integrity of the carbon-credit collaboration while ensuring that the framework contributes to climate adaptation in Laos.
Carbon Projects to Support Jobs and Sustainable Development
Project developers will be able to develop carbon mitigation projects under the framework.
Projects authorized under the agreement are expected to support emissions reductions while contributing to sustainable development in Laos. This includes job creation and reduced environmental pollution.
Lao PDR’s Minister of Agriculture and Environment Dr Pinkham Douangsavanh said the agreement provides a “transparent, high-integrity framework” for developing carbon-credit projects that create jobs, protect the environment and direct climate finance toward adaptation in Lao PDR.
Laos’ Agriculture and Environment Minister Linkham Douangsavanh said:
“We are proud to show that our region can lead in building carbon markets that deliver real, tangible benefits for our people and for the global effort against climate change.”
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Agreement Creates New Carbon Market Opportunities
Singapore’s Minister for Sustainability and the Environment and Minister-in-charge of Trade Relations Grace Fu said the agreement “is an important milestone in our bilateral partnership and unlocks new opportunities in carbon markets for businesses and local communities”.
The collaboration is expected to strengthen cooperation between the two ASEAN countries while providing project developers with a framework for developing carbon-credit projects aligned with Article 6.
Information on the process for authorizing projects and eligible carbon-crediting methodologies will be released later.
Singapore Expands Bilateral Carbon Credit Cooperation
The Singapore-Laos agreement adds to Singapore’s growing network of bilateral implementation agreements on carbon credits.
Singapore has previously signed similar implementation agreements with Bhutan, Chile, Ghana, Mongolia, Paraguay, Papua New Guinea, Peru, Rwanda, Thailand, the Philippines and Vietnam.
The new agreement expands this cooperation to another ASEAN member state and establishes a framework for the international transfer of correspondingly adjusted carbon credits.
Outlook
The Singapore-Laos agreement establishes a legally binding Article 6 framework for carbon-credit development and transfers between the two countries. By linking authorized carbon credits with potential corporate, national and international mitigation uses while directing 5% of proceeds to climate adaptation in Laos, the framework is designed to combine carbon-market activity with climate finance and sustainable development.
FAQs
1. What did Singapore and Laos sign?
They signed a legally binding agreement establishing a framework for developing and transferring carbon credits under Article 6 of the Paris Agreement.
2. How can the authorized carbon credits be used?
Subject to eligibility, they can be used to offset up to 5% of a company’s taxable emissions under Singapore’s ICC framework and toward national and international mitigation requirements, including CORSIA.
3. How will Laos benefit financially from the agreement?
Singapore will direct 5% of proceeds from authorized carbon credits toward climate adaptation measures in Laos.
4. Why will 2% of the carbon credits be cancelled?
The 2% of correspondingly adjusted credits will be cancelled at first issuance and cannot be traded or counted toward any country’s emissions targets.
Sources: Carbon Herald, Singapore Business Review, Ecobiz Asia
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