For a small nation, Singapore plays an outsize role in various areas. After success with commodity trading, shipping and aviation, the latest area where the city state is punching well above its weight is in the carbon markets. The country has also been a frontrunner in establishing a carbon tax, as part of its efforts to reach net zero by 2050. Companies that exceed emission thresholds must either pay a tax or offset their emissions through purchasing credits. The advent of this regulated carbon market has also helped Singapore, a major regional financial centre, position itself as a hub for carbon trading.
Under a framework introduced in 2022, a key feature of Singapore's carbon market is that companies can purchase credits issued in countries that have signed deals with Singapore under Article 6 of the Paris Agreement struck at COP21 in 2015. The implementation of Article 6, which provides for the cross-border trading of carbon credits, was delayed for almost a decade, but a breakthrough was finally agreed at COP29 in Baku last year to allow mechanisms to be fully operationalised.
Singapore has been quick off the mark in signing deals under Article 6 with a range of countries, including Ghana. These deals create a process for carbon credit projects to be assessed to ensure they meet both countries' standards of integrity, before the projects can issue credits to purchasers in Singapore.