The African nation is one of only two countries where carbon tax-liable companies in Singapore can currently source for carbon credits. - PHOTO: REUTERS
SINGAPORE (The Straits Times/ANN): Singapore’s search for carbon credits is hotting up, with companies here eyeing opportunities in Ghana on the back of the hike in carbon taxes that took effect in 2024.
The African nation is one of only two countries where carbon tax-liable companies in Singapore can currently source for carbon credits to reduce the amount of tax they have to pay. The other country is Papua New Guinea.
In July, the Ministry of Trade and Industry (MTI) led the first carbon credits business mission to Ghana with a delegation of 22 Singapore-based companies. They range from project developers to traders and financiers, said the ministry.
More than 30 Ghanaian project developers, which have existing carbon credit project proposals in Ghana, participated in a business-matching session with the Singapore companies, MTI said in a statement on Aug 8.
In Ghana, projects that could supply carbon credits to the global market are in sectors such as energy, transport and forestry.
But The Straits Times understands that some project developers looking to sell credits to Singapore-based firms are banking on cookstove projects that can replace open-fire stoves with cleaner-burning ones, and potentially the green mobility solution sector, such as electric vehicles (EVs).
For now, the bulk of reforestation projects in Ghana appear to be ineligible as a supplier of carbon credits to Singapore firms, amid an ongoing review of whether current methodologies are robust enough to ensure the quality of forest-based credits.
How carbon credits work
One carbon credit represents one tonne of planet-warming emissions that is either prevented from being released, such as when an open-fire cookstove is replaced with an electric one, or removed from the atmosphere, such as through a reforestation project.
By purchasing carbon credits to offset their own emissions, large emitters in Singapore can “shrink” their carbon footprint and reduce the amount of carbon tax they have to pay.
Firms in Singapore which produce more than 25,000 tonnes of planet-warming carbon dioxide (CO2) a year are subject to a carbon tax of $25 per tonne of CO2 from 2024 to 2025, a marked increase from the $5 since 2019. The tax will eventually increase to $50 to $80 per tonne by 2030.
Currently, however, there are no available carbon credits for sale to Singapore firms looking to offset their carbon tax.
Even though Singapore has agreements with the governments of Ghana and Papua New Guinea to ensure that carbon credits are not double-counted – meaning the same credit is not claimed by both buyer and seller countries – the deal has to be greenlit by the authorities on both sides for it to take effect.
In Singapore, carbon tax-liable companies can only purchase government-approved carbon credits that have been identified to be high-quality and truly beneficial to the climate, based on a list of eligibility criteria.
The Republic’s eligibility list takes reference from the Carbon Offsetting and Reduction Scheme for International Aviation (Corsia) – which is considered the most rigorous and reputable of offsetting schemes.
The credits used by Singapore’s firms to offset their emissions are counted towards Singapore’s national climate target of reaching net-zero emissions by 2050. Ghana, in return, has to “add” this same amount of emissions back to their emissions inventory.
Mr Law Heng Dean, managing director of Pollination’s Singapore office, said that while the demand for credits in Singapore may not be significant due to the nation’s small size, the emphasis on quality will send a signal to the rest of the market, which can hopefully stimulate the development of high-quality projects.
Cookstoves and green mobility
Ms Molly Brown, head of carbon strategy from Kenya-based company Burn told ST that it hopes to issue credits from its two cookstove projects in Ghana from early 2025.
“We’re exploring opportunities with this Ghana-Singapore bilateral deal, which would allow projects approved by both governments to sell credits to Singapore companies to offset their carbon tax,” she added.
Ms Brown said she expects that both governments will give their approval for the project by the end of 2024, and that credits can be issued as early as 2025. This will be in time for companies in Singapore to declare their use of carbon credits by June 2025 as part of their carbon tax filings for the 2024 financial year.
The first project entails selling electric cookstoves to communities in urban areas like Accra, Ghana’s capital city, at subsidised rates, while the second project entails subsidising the cost of charcoal stoves for communities living in rural areas.
South Korean renewable energy company EcoLinks is also interested in developing carbon projects in Ghana. It aims to distribute 100,000 charcoal-based cookstoves to local communities to replace traditional cooking methods involving open fires.
But its chief executive Johnson Penn said buyers from Singapore are still looking for greater clarity if the credits from the EcoLinks project will be approved by the Singapore Government for carbon tax offsetting.
As for green mobility, Ms Valerie Labi, co-founder and chief executive of Wahu Mobility, said carbon credits could help provide the financing needed to green Ghana’s transport sector away from diesel vehicles to EVs.
“Many of Ghana’s vehicles will be reaching the end of their lifespan in the next few years, and we want to help them make the switch to EVs in that time,” said Ms Labi.
Under a Ghana-Switzerland bilateral deal, the company is looking to supply a fleet of some 100,000 e-bikes for delivery riders at subsidised prices, replacing the use of fossil-fuel vehicles.
Wahu is hoping to explore a similar project with Singapore entities, now that the carbon credit agreement has been signed between both countries, she added.
Forestry credits
Currently, based on the list of carbon-crediting methodologies released by both Singapore and Ghana authorities, the majority of projects that fall under the land use, forestry and agricultural sectors have been excluded.
When asked why, a spokesman for the National Environment Agency (NEA), which is in charge of administering Singapore’s carbon tax, said the new afforestation, reforestation, and revegetation methodology by Verra – one of the largest global carbon-standard firms – is currently under assessment by Corsia.
“We will take into consideration the outcomes of Corsia’s assessment as part of our review of the eligibility list,” said the NEA spokesman.
Mr John Mason, chief executive and co-founder of Singapore-based AJA Climate Solutions, which has an ongoing forest restoration project in Ghana, said he was disappointed to learn about the exclusion when the eligibility list was released.
In collaboration with Singapore’s investment platform GenZero, the project is expected to restore about 100,000ha of degraded land in Ghana’s Kwahu region, and plant cocoa trees sustainably in shaded farms.
The project was expected to be able to start issuing carbon credits by around 2028.
“We will still continue with our project as there will still be non-Singapore markets, which we can potentially sell to. There is some hope that the list may be revised in due course as things become clearer from demand or supply stakeholders,” he added.
Other project developers who are working on forest restoration works are also hoping for future revisions to the eligibility criteria.
For instance, Singapore-based ThreeTrees, is reforesting trees across some 50,000ha in the Ashanti and western north region of Ghana, and is expected to start generating carbon credits in 2027.
Its chief executive Ian Shimizu noted native reforestation without carbon credits is uncommon in Ghana, with past efforts being sporadic and small-scale owing to the substantial capital investments needed for the project to be rolled out.
Ms Melissa Low, a research fellow at the National University of Singapore’s Centre for Nature-based Climate Solutions, cautioned that the implementation of bilateral carbon credit-sourcing agreements would take time, given that such arrangements are new.
“Given that this was the first business mission that Singapore organised to Ghana, it’s too early to tell or speculate about the risk appetite for types of carbon projects,” she said.
“The implementation of such agreements takes time, especially for both countries and the stakeholders in the space to understand each other’s eligibility criteria and domestic regulations and processes in place.”
Other than the agreements that Singapore has with Ghana and Papua New Guinea to collaborate on carbon projects, the Republic is also in talks with more than 20 countries, including Vietnam, Paraguay and Bhutan, on this issue. - The Straits Times/ANN
