Singapore, Ghana ink carbon credit agreement allowing firms to offset carbon tax


Office buildings in Singapore. (Photo: Pexels)

Companies in Singapore aiming to offset part of their carbon tax liability will soon be able to purchase carbon credits from projects in Ghana, following an agreement signed between the two countries on May 27.

Singapore carbon tax to hit $50 to $80 by 2030

Starting in 2024, Singapore’s carbon tax has increased to $25 per ton of CO2 emissions, up from $5 per ton previously. By 2030, the tax will eventually reach $50 to $80 per ton of CO2 emissions.

Companies can purchase carbon credits to offset up to 5% of their taxable emissions, provided the carbon projects meet Singapore’s eligibility criteria, such as achieving permanent emissions reductions.

A similar carbon credit agreement was signed between Singapore and Papua New Guinea on December 8, 2023, at the United Nations’ COP28 climate conference in Dubai.

In a joint statement on May 27, Singapore’s National Climate Change Secretariat, Ministry of Trade and Industry, and Ministry of Sustainability and the Environment said the collaboration with Ghana will advance climate ambitions for both countries and channel financing towards climate mitigation efforts.

The carbon credit projects authorized under the agreement will promote sustainable development and generate benefits for local communities, such as job creation, access to clean water, improved energy security, and reduced environmental pollution.

Carbon credit agreement benefits Ghana's climate adaptation

As part of the agreement, carbon credit project developers are required to allocate 5% of the proceeds from authorized carbon credits to climate adaptation efforts in Ghana, aiding the country in preparing for and adjusting to the impacts of climate change.

Developers will also be required to cancel 2% of authorized carbon credits upon first issuance to contribute to global greenhouse gas emissions mitigation.

The bilateral agreement follows investments by Temasek-backed platform GenZero in a forest restoration project in the Kwahu region of Ghana.

A Straits Times report published in July 2023 indicated that the first phase of the project was to start in the last quarter of 2023, with the second phase beginning in 2027.

The project, a collaboration with Singapore-based AJA Climate Solutions, involves replanting degraded forest reserves, including growing cocoa trees sustainably in shaded farms to protect these plantations from potential climate impacts such as floods, heat stress, and pests.

The project area in the Kwahu region had been a lush forest about 40 to 50 years ago but has been heavily exploited for timber over the past few decades. Deforestation has led to Ghana losing more cocoa hectares each year, which is economically damaging as the country is among the world’s largest cocoa producers.

In the second phase of the forest restoration project, the focus will shift to regenerating native tree species across degraded forests, with more than 20 million seedlings of native species to be planted over seven years.

Once a lush forest, Kwahu region now bears the scars of logging. (Photo: GenZero)

Agreements pending: Vietnam, Paraguay, Bhutan

Jobs in farming and agroforestry training will be created, providing new income opportunities for local indigenous communities, and empowering about 22,000 families, said AJA Climate Solutions’ co-chief executive John Mason in July 2023.

The verification of carbon credits from the Ghana project will start in 2028.

Checks by The Straits Times in January revealed that firms seeking to purchase carbon credits from Papua New Guinea to offset part of their carbon tax would have to wait longer for eligible, high-quality projects, as none of the currently available credits meet the Singapore Government's criteria.

Singapore has also finalized negotiations on similar carbon credit schemes with Vietnam, Paraguay, and Bhutan, but formal agreements have not yet been signed with these countries.

Source: The Straits TimesNCCS

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