New Standards for Voluntary Carbon Market
The Singapore government unveiled its official draft guidelines for corporate voluntary carbon credit utilization on June 24th. These guidelines present core principles aligned with international standards, including Article 6 of the Paris Agreement, and aim to enhance the credibility and transparency of Voluntary Carbon Markets (VCM).
The guidelines were jointly developed by Singapore’s Ministry of Trade and Industry (MTI), National Climate Change Secretariat (NCCS), and Enterprise Singapore (EnterpriseSG), incorporating feedback from the Singapore Sustainable Finance Association (SSFA) and various industry stakeholders. The government plans to finalize the guidelines after collecting feedback from industry and civil society until July 20th.
Five Key Criteria for High-Quality Carbon Credits
The guidelines establish specific criteria for securing high-quality carbon credits and environmental integrity. The five key criteria for high-quality carbon credits include: prohibition of double counting, ensuring additionality, quantification and verification of emission reduction/removal effects, permanence, and prevention of emission increases in other regions.
Companies must use carbon credits issued only from credible registries, prohibit double claims, and establish traceable systems. The government particularly emphasizes that carbon credits must meet strict quality standards rather than serve as simple offsetting tools.
Emission Reduction First, Credits as Supplementary Tool
The guidelines stipulate that companies must prioritize implementing all feasible greenhouse gas reduction measures before utilizing carbon credits. Carbon credits should only be used supplementarily for residual emissions, establishing this as a fundamental principle.
Additionally, carbon credits used for voluntary purposes do not count toward national greenhouse gas reduction targets and are not subject to corresponding adjustments applied to international offsetting. This clearly distinguishes the voluntary market from compliance markets.
Portfolio-Based Risk Management Strategy
The guidelines provide specific risk management approaches for carbon credit utilization. Companies should manage carbon credits holistically from a portfolio perspective rather than individually, diversifying based on the quality and risk levels of each credit. The guidelines also suggest using insurance to mitigate risks when appropriate.
Enhanced Transparency Through Annual Report Disclosure Requirements
The Singapore government has mandated that companies disclose their carbon credit utilization details and plans in annual reports according to International Sustainability Standards Board (ISSB) standards. Companies must disclose comprehensive information including credit quantities and types, reduction targets, third-party verification status, project locations, and registry information.
This measure reflects Singapore’s advanced ESG disclosure trends. Recent surveys show that 84% of companies integrate ESG information with financial data in their annual reports, and an increasing proportion of companies recognize climate change as a financial risk.
Government Support for Carbon Market Ecosystem Development
These guidelines represent a core component of Singapore’s strategy for developing a carbon market ecosystem. Singapore currently operates a Carbon Project Development Grant scheme to secure high-quality carbon credits and allows carbon tax-paying companies to offset up to 5% of their annual emissions with credits meeting Paris Agreement Article 6 requirements.
The government stated that these guidelines represent “the first step incorporating industry and civil society feedback” and will provide “practical standards for companies seeking to establish credible decarbonization strategies.” The final guidelines are expected to be finalized and announced in the second half of this year.
