The long anticipated 26th United Nations Climate Change Conference of the Parties kicked off last week in Glasgow and we have been closely monitoring the events of the conference, particularly where Singapore and the wider Asia Pacific region are concerned.
Beyond the nation states, 11 new financial institutions made their commitment known—with banks such as NatWest, HSBC and Lloyds Bank contributing to the total of $17 trillion in assets newly signed on.
Ms. Fu delivered Singapore’s national statement at COP26 on Tuesday, calling for “urgent collective action to address the global climate crisis3.” The statement also called for other countries to set out more ambitious climate targets and low emissions strategies, as well as highlighting Singapore’s Green Plan 2030 which sets out “concrete near-term plans” geared towards achieving its net zero ambition.
The announcements made during the course of SIEW form part of wider efforts being undertaken by Singapore in the battle to combat climate change, both at home and abroad.
In addition to the above, Singapore was also one of the first thirty countries to ratify the “Paris Agreement” on September 21, 2016, an international treaty setting out a global framework for the reduction of greenhouse gas emissions, adopted at the 21st Conference of the Parties to the UNFCCC , setting out the “modalities, procedures and guidelines7” for the implementation of the Paris Agreement.
We understand that Singapore and Norway are currently leading the charge in attempting to reach consensus on the application of Article 6 at COP26 and a variety of proposals are currently on the table, but an agreement has yet to be reached.
Falling under the “Green Economy” pillar of the Green Plan, the creation of a carbon trading and services hub will encompass “green finance, sustainability, verification, credits trading and risk management.” Singapore is already at the forefront of global efforts to create a “carbon economy” and took its first steps towards price discovery in this field by introducing a carbon tax in 2019, the first nation in Southeast Asia to do so.
In its comprehensive report, the EST recommended that a concerted effort be made in this area, focusing firstly on developing a carbon marketplace “built on quality and trust that addresses gaps in the voluntary carbon market, establishing a one-stop solution for companies to measure, mitigate, and offset their carbon footprint, and convening partnerships to capture opportunities through research and innovation.” Perhaps the most significant criticisms currently levelled at the voluntary carbon market are that it is too fragmented to achieve its ultimate goal , to create a world-leading carbon marketplace while, at the same time, contribute towards Singapore’s own commitments relating to climate change14.
With the global carbon credit market predicted to grow upwards of $50 billion by 2030, Singapore has the ability to steal a march on potential rivals in this space by launching initiatives such as CIX.
It is therefore crucial for any prospective carbon exchange to take these issues into consideration and create a platform which seeks to address them—this is where Singapore has an advantage over other countries looking to establish a market for trading carbon credits, given its existing status as a global financial hub, robust regulation of commodity trading and financial services, as well as its reputation for transparency.
However, it should be noted that the interest in carbon markets has increased dramatically in the intervening period since 2010 and the prospects for CIX must be considerably more favorable than carbon exchanges that historically failed to make the grade.
The auction successfully cleared 170,000 carbon credits, supported by 19 buyers from across various industries including ENGIE, Trafigura, Boston Consulting Group and City Developments Limited, as well as the co-investors in CIX .
While the announcements over the course of the first week of COP26 have certainly been positive, there are key issues which need to be closed out by the conclusion of the conference, most notably in relation to Article 6 which will be pivotal to the creation of a global carbon market system.
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