How a centralised global carbon scheme will affect S'pore

Consistent approach to carbon trading will provide more clarity to the market

- Shabana Begum and Audrey Tan

A centralised global carbon programme was given the green light to begin operations during the UN climate conference COP29, paving the way for greater cooperation between countries to achieve their climate goals.

Once it is up and running, the UN-managed carbon programme will provide countries with a one-stop shop for eligible carbon credits of high environmental integrity standards. Countries can use these credits to offset their greenhouse gas emissions and help them meet their national climate change targets under the Paris Agreement.

It could take between one and two years for the first credits to come online via this centralised mechanism, as it will take time for projects to be approved by the UN technical body.

Before then, countries will be able to get access to such internationally transferable credits that they can use to meet their climate commitments under the Paris Agreement only by making bilateral agreements with one another.

Carbon credits are generated from projects aimed at reducing or removing greenhouse gases from the atmosphere.

Projects that remove carbon include reforestation efforts or direct air capture and storage technology. Carbon reduction projects include swapping pollutive cookstoves for cleaner ones and switching to electric vehicles.

The Straits Times explains the importance of the carbon markets to countries' efforts to cut their emissions, and how the new centralised mechanism could impact the growing carbon services sector in Singapore.

WHY ARE CARBON MARKETS IMPORTANT?

Carbon markets can benefit both buyer and seller countries.

For buyer countries, carbon markets provide access to carbon credits that they can use to meet their climate change targets under the Paris Agreement.