December 4, 2023
SINGAPORE – Singapore is a step closer towards signing an agreement with Paraguay that would allow Singapore companies to purchase carbon credits from projects there to offset part of their carbon tax.
Both countries will sign the agreement in early 2024, which would potentially be Paraguay’s first such agreement and Singapore’s first with a country in Latin America, said Singapore’s National Climate Change Secretariat (NCCS) on Dec 3.
The agreement will enable the bilateral transfer of carbon credits that is aligned with Article 6 of the Paris Agreement, which sets out criteria and processes for carbon credit projects to be developed and traded.
The announcement comes after Paraguayan President Santiago Pena and Senior Minister and Coordinating Minister for National Security Teo Chee Hean met on the sidelines of the COP28 climate conference in Dubai.
Mr Teo said: “We are concluding negotiations on the implementation agreement which, when fully operationalised, will allow carbon credits to be traded between Singapore and Paraguay in line with the rulebook for Article 6 of the Paris Agreement.
“It underscores both countries’ belief in the potential of carbon markets to enable global climate ambition and achieve our climate targets through cooperation.”
Both countries will cooperate on a work programme to fully operationalise the Implementation Agreement, which can consist of exchanges of information and best practices, identification of potential projects, and mutual efforts to build capacities for Article 6 cooperation, said NCCS.
Paraguay’s Minister of Environment and Sustainable Development Rolando de Barros Barreto said: “We have laid the foundations for a bilateral agreement with the Republic of Singapore with the aim of advancing the country towards full sustainable development that benefits all Paraguayans.”
From 2024, Singapore’s carbon tax will increase from $5 per tonne currently to $25 per tonne. After the agreement with Paraguay is in place, companies in Singapore will be able to purchase carbon credits from projects there to meet up to 5 per cent of their carbon tax obligations.
Singapore has also substantively concluded similar implementation agreements on carbon credits cooperation with Ghana and Vietnam.
In the meantime, Temasek-owned investment platform GenZero is working on a carbon project involving restoring about 100,000ha of degraded land in Ghana, and growing cocoa trees sustainably in shaded farms to shield these plantations from potentially damaging climate impacts such as floods, heat stress and pests.
Ghana has a rich, diverse forest ecosystem and productive agricultural land, but this has been threatened by deforestation arising from agricultural expansion and logging.
Therefore, embarking on nature-based solutions could help the country with reforestation and remove the planet-warming gas from the atmosphere, which can generate carbon credits in the process.