SINGAPORE – Large emitters in Singapore who plan to shrink their carbon tax bill by buying international carbon credits would only be able to do so if the credits meet certain criteria.

At minimum, for instance, the credits must be certified by Verra or Gold Standard – two international organisations that have developed standards to ensure the carbon offsets they certify truly result in a reduction in the amount of greenhouse gases in the atmosphere.

The two bodies also have registries that list certified projects, enable the trading of carbon credits and allow “used” credits to be retired so the same credit cannot be used to offset the emissions of more than one party.

The National Environment Agency (NEA), which oversees Singapore’s carbon tax regulations, said on Monday (Aug 29) that it has signed agreements with Verra and Gold Standard, to pave the way for businesses here to offset their carbon tax bill.

This update follows Deputy Prime Minister Lawrence Wong’s announcement in February that businesses who must pay a carbon tax in Singapore can, from 2024, buy “high-quality, international carbon credits” to offset up to 5 per cent of taxable emissions, in lieu of paying the tax.

Singapore’s carbon tax applies to all facilities producing 25,000 tonnes or more of greenhouse gas emissions in a year.

Said NEA in a LinkedIn post: “Companies can acquire eligible high-quality carbon credits issued by Gold Standard and Verra, and surrender them to the Singapore Government, subject to the carbon credits meeting the prescribed criteria set by the Singapore Government.”

The agency added that both Gold Standard and Verra have “robust approaches and procedures to safeguard the environmental integrity of the carbon credits they issue”.

The Straits Times understands that the full prescribed criteria for carbon credits that can be used under this scheme is still being worked out, as consultations between the Government and industry players are ongoing.

But the latest update from NEA is the first time that the Government has given an indication of what it might consider a high-quality carbon credit – that at the very least the credits must be certified by Verra or Gold Standard.

Carbon dioxide, produced from human activity like burning fossil fuels, is the main greenhouse gas driving climate change.

Companies in emissions-intensive sectors, such as the petrochemical industry, that find it hard to shrink their carbon footprint in the short term can purchase carbon credits, from say, a forest restoration project elsewhere.

Each carbon credit represents one tonne of emissions, so buyers of the credits can offset this amount from their total emissions.