SINGAPORE – Thailand has become the first South-east Asian country to finalise a carbon trading agreement with Singapore, paving the way for the Republic to buy carbon credits generated there.
The bilateral agreement allows the Singapore Government or carbon tax-liable firms here to buy eligible credits in Thailand to offset a fraction of their planet-warming emissions.
The implementation agreement was signed on Aug 19 by Dr Tan See Leng, Singapore’s Minister for Manpower and Minister-in-charge of Energy and Science and Technology, and Thai Minister of Natural Resources and Environment Chalermchai Sri-on on the sidelines of the ninth Singapore Regional Business Forum.
The annual event organised by the Singapore Business Federation brings together policymakers, top business leaders, senior government officials and other stakeholders to explore business opportunities in the region.
This is the eighth implementation agreement that Singapore has so far. The seven other countries that have such pacts with Singapore are Papua New Guinea, Ghana, Bhutan, Peru, Chile, Rwanda and Paraguay.
Under the Paris Agreement – an international treaty adopted by 195 parties to limit global warming – countries can buy carbon credits generated in other jurisdictions to meet domestic climate targets.
The carbon markets will benefit carbon credit buyers, as buying credits from elsewhere can sometimes be cheaper than reducing emissions on their own.
Countries hosting these projects also stand to gain, since these climate-friendly projects become an additional source of revenue.
An implementation agreement is a legally binding document that governs the international transfer of carbon credits between two countries.
A key element of these agreements is to prevent double counting, a situation where both the buyer and host country count the same emissions reductions or removals toward their own targets.
A host country must agree to make a “corresponding adjustment” to add the emissions sold back to its national inventory.
One carbon credit represents one tonne of carbon dioxide that is either absorbed from the atmosphere, such as through a forest restoration project, or prevented from being released. This could also happen by replacing open-fire stoves with cleaner-burning ones.
Credits used to offset Singapore’s national emissions can be bought only from projects in countries that the Republic has implementation agreements with.
These credits can be bought by the Singapore Government, or by large emitters here that have to pay a carbon tax. These firms can buy credits from projects in countries that Singapore has implementation agreements with to offset up to 5 per cent of taxable emissions.
submitted to the UN
its target to reduce greenhouse gas emissions to between 45 million and 50 million tonnes (Mt) by 2035, down from around 60Mt in 2030. In the longer term, Singapore aims to reach net-zero emissions by 2050.
Singapore’s constraints as a land-scarce island-state means that it will likely have to buy carbon credits to offset its carbon footprint. The Republic relies on imported natural gas for almost all of its energy needs, with limited options for renewable energy.
Singapore has estimated that it would use high-quality carbon credits to offset roughly 2.5 million tonnes of emissions a year from 2021 to 2030.
Dr Tan said he hopes that the agreement will demonstrate how South-east Asia can develop and scale high-quality carbon credit projects that will drive meaningful emissions reductions while unlocking new opportunities in the carbon market for businesses.
Asean’s green economy
could unlock US$300 billion (S$385 billion) in additional annual revenue, an estimate from a 2024 report.
He said: “Singapore and Thailand have a longstanding partnership in trade, investment, and sustainable development.
“This year marks the 60th anniversary of our diplomatic relations, and it is especially meaningful that climate action is becoming an increasingly important pillar of our collaboration, reflecting our shared commitment to addressing global challenges.”
Describing Thailand as a forerunner in carbon markets, Dr Tan noted that the Land of Smiles was the first country to complete a transfer of carbon credits under the Paris Agreement with Switzerland.
Mr Chalermchai said such cooperation is “a clear signal” that Asean can drive high-quality, internationally aligned greenhouse gas mitigation.
He added: “We value Singapore’s partnership in unlocking climate finance and advancing credible carbon credit projects in Thailand – from forestry and clean energy to zero-emission transport – that deliver environmental, economic, and social benefits for our people.
“Thailand is committed to becoming a hub for such projects and is ready to share our approach as a model for the region.”
The Ministry of Trade and Industry said in a statement that the deal will advance both countries’ climate ambitions by directing financing to projects in Thailand that can benefit local communities in various ways. These include improved waste management, enhanced energy efficiency and more jobs.
Carbon market observers said Thailand is an encouraging addition to Singapore’s list of partners.
Ms Melissa Low, research fellow at the NUS’ Centre for Nature-based Climate Solutions, said the Asean member has much potential for carbon mitigation projects such as renewable energy and energy savings in its vast manufacturing sector.
Mr Alvin Lim, chief executive of carbon finance firm Climate Bridge International, said Thailand’s familiarity and strong profile with Asean-focused financial investors position it well to unlock private capital and scale carbon credit projects.
“This implementation agreement also sends a strong signal to other Asean countries on the potential of carbon finance as a market-based mechanism to drive low-carbon investments across the region,” he added.
The Republic is still negotiating deals with the Asian countries of Malaysia, the Philippines and Sri Lanka.
In a bid to become a regional hub for carbon markets, Singapore hosts more than 120 carbon services and trading firms, the highest concentration of such service providers in South-east Asia, according to state agency Enterprise Singapore.
