SINGAPORE, April 1, 2025 – Singapore has officially finalized a groundbreaking carbon trading agreement with Peru, marking a significant step in the Republic's strategy to meet its climate change targets. This landmark deal, announced on April 1st, represents Singapore's fourth such agreement and its first with a nation in Latin America. Singapore has previously established similar partnerships with Bhutan, Ghana, and Papua New Guinea.
Under the framework of the Paris Agreement, this bilateral pact allows Singapore to purchase carbon credits generated from environmentally beneficial projects within Peru. These carbon credits represent a tangible reduction or removal of one tonne of carbon dioxide or equivalent greenhouse gases from the atmosphere through activities such as reforestation, forest conservation, or the deployment of cleaner technologies.
While Singapore has indicated its intention to utilize these international carbon credits to contribute to its national climate goals, no purchases have been made to date. However, this agreement with Peru establishes a crucial pathway for accessing high-quality carbon offsets. Importantly, carbon credits used to offset Singapore's national emissions can only be sourced from countries with which Singapore has a formal bilateral agreement.
Furthermore, the agreement also benefits companies in Singapore that are liable for the nation's carbon tax. These entities will now have the option to utilize carbon credits originating from projects in Peru to offset up to 5 percent of their taxable emissions, providing an additional incentive for supporting climate action in partner nations.
The implementation agreement was signed virtually by Singapore's Minister for Sustainability and the Environment, Ms. Grace Fu, and Peru's Environment Minister, Mr. Juan Carlos Castro Vargas.
Minister Castro emphasized Peru's vital role in global climate stability, highlighting its exceptional biodiversity and extensive Amazonian and Andean forests. He stated, "The implementation agreement between Peru and Singapore underscores our shared dedication to fostering high-integrity carbon markets as a tool to achieve our ambitious climate goals, protect our natural resources, and support local communities."
Singapore's Ministry of Trade and Industry echoed this sentiment, noting that carbon projects developed under this agreement in Peru will prioritize sustainable development and deliver tangible benefits to local communities. These benefits are expected to include job creation, improved access to clean water and energy security, and a reduction in environmental pollution.
As a testament to its commitment to supporting Peru's climate efforts, Singapore has also pledged to voluntarily contribute 5 percent of the proceeds generated from the purchase of carbon credits back to Peru. These funds will be directed towards financing initiatives aimed at mitigating the impacts of climate change within the country. A similar provision exists in Singapore's agreement with Bhutan, where the contributed funds will support heat management measures and climate-resilient agriculture.
Carbon credits can be broadly categorized into nature-based solutions, such as forest restoration and sustainable agriculture, and technology-based solutions, like the adoption of cleaner cookstoves. Given Peru's rich natural resources, experts anticipate that the initial focus of the partnership will likely be on high-quality nature-based carbon projects.
This agreement comes at a crucial time for Singapore, as the nation looks to procure its first tranche of nature-based carbon offsets to help meet its 2030 climate change targets. In September 2024, the Singaporean government issued a call for proposals from carbon project developers and credit suppliers for nature-based projects capable of delivering at least 500,000 carbon credits each. This request garnered 17 submissions by its mid-February closing date, and it remains to be seen whether any proposals included projects in Peru.
Minister Fu commented on the strengthened ties between the two nations, saying, "Singapore and Peru are close cooperation partners and have worked on many bilateral and plurilateral initiatives over the years. This implementation agreement will further strengthen collaboration between our two countries and support efforts to advance climate action while unlocking new opportunities in the carbon market."
Of Singapore's existing carbon trading agreements, the partnership with Ghana has seen the most progress. In September 2024, both nations invited project developers to submit applications for their carbon credit projects in Ghana for authorization, and these applications are currently under assessment. A Singapore Government spokesperson indicated that potential project types in Ghana include initiatives related to clean water supply and clean cooking solutions.
Singapore is actively pursuing similar agreements with over 15 other countries, including Malaysia, Cambodia, and Colombia, with the aim of progressing these discussions into formal implementation agreements.
Dr. Kim Jeong Won, a senior research fellow at the NUS Energy Studies Institute, anticipates the emergence of high-quality nature-based projects from the Singapore-Peru collaboration. She suggested that potential projects could focus on rainforest restoration and the conservation of vital watersheds, aligning with Peru's recent efforts to leverage nature-based solutions for water security and climate resilience. Dr. Kim also noted Peru's prior experience hosting carbon projects under the Kyoto Protocol, which could provide a foundation for effective collaboration and project management.
However, Dr. Kim cautioned that successful nature-based projects require stringent measures and robust environmental and social safeguards to prevent adverse impacts on ecosystems and local communities.
Ms. Melissa Low, a climate policy observer and research fellow at the NUS Centre for Nature-based Climate Solutions, highlighted the challenge of the timeline, noting that while Singapore has bilateral pacts with four countries, no credits have been issued yet, and the 2030 target is rapidly approaching. Singapore has estimated that it will need to utilize carbon credits to offset approximately 2.51 million tonnes of emissions annually this decade to meet its 2030 goals. For context, Singapore's total greenhouse gas emissions in 2022 were 58.59 million tonnes.
Ms. Low also pointed out that nature-based projects can have longer lead times for generating carbon credits due to the natural growth cycles involved. Furthermore, she noted that Peru has not yet released its 2035 climate change targets, raising questions about the future availability of international carbon credits for sale, especially if Peru's post-2030 targets require greater domestic offsetting.
Despite these challenges, the carbon trading agreement between Singapore and Peru represents a significant step forward in fostering international cooperation on climate change and leveraging market mechanisms to drive emissions reductions and promote sustainable development. This pioneering partnership with a Latin American nation underscores Singapore's proactive approach to achieving its climate ambitions and contributing to global efforts to combat climate change.
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