New global carbon exchange to be headquartered in Singapore

SINGAPORE: Plans for a new global carbon exchange and marketplace that will be headquartered in Singapore were unveiled on Thursday (May 20) as part of efforts to further tackle climate change.

A joint venture by DBS Bank, Singapore Exchange (SGX), Standard Chartered and Temasek, Climate Impact X (CIX) aims to provide organisations with "high-quality carbon credits to address hard-to-abate emissions", said the four parties in a joint press release.

"Global efforts to address climate change have been driving demand for solutions to help corporates effectively reduce their carbon emissions. However, today's low-carbon technologies including current renewable energy solutions are unlikely to be enough in the near term," they said.

"Certain research shows that such technologies may only reduce two-thirds of global emissions, which may not be sufficient to achieve the goal under the 2015 Paris Climate Agreement to limit global warming preferably to 1.5 degrees Celsius. High-quality carbon credits can provide a practical solution to bridge this gap, especially in the near term, and will play an important role in a holistic climate mitigation strategy."

Delivering his opening remarks at a virtual event to mark the new venture, Monetary Authority of Singapore managing director Ravi Menon said adopting a "twin strategy" of reducing and offsetting carbon emissions would be a "practical and effective" way to reach climate goals.

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Given that it could be a challenge for some sectors to significantly reduce emissions in the short to medium term, this is where a strong carbon market comes in, said Mr Menon.

"Carbon credits are essentially tradable certificates that represent the reduction, avoidance, or removal of a certain amount of emissions from the atmosphere. Firms can buy these credits to offset their hard-to-abate emissions," he explained.

"To efficiently match the demand for carbon credits with the supply of these credits, we need a robust carbon market. In so doing, a carbon market becomes an important mechanism to channel funds to eemission reduction and removal projects that generate the carbon credits."

The CIX will offer different platforms and products to cater to the needs of different buyers and sellers of carbon credits. These include the exchange and the project marketplace, which are expected to be launched by the end of the year.

The exchange will facilitate the sale of large-scale high-quality carbon credits through standardised contracts catering primarily to multinational corporations and institutional investors, said the four parties.

In addition, the project marketplace will cater to a broader scope of companies seeking to participate in the voluntary carbon market, providing them with a selection of natural climate solutions (NCS) projects that can help meet their sustainability objectives. Each project on the marketplace will be supported by environmental impact, risk and pricing data.

"To start with, CIX will focus on helping to catalyse the market for NCS, which involve protection and restoration of natural ecosystems such as forests, wetlands and mangroves," said the four parties.

"NCS are cost effective and provide significant benefits by supporting biodiversity and generating income for local communities. Asia houses a third of the global supply potential and is therefore one of the largest suppliers of NCS globally. 

"CIX will feature carbon credits from various high-quality NCS projects around the globe on its platforms. It is also in conversations with global rating agencies to provide independent ratings to these projects."

CIX will also be guided by an International Advisory Council - an independent expert body comprising non-governmental organisations, leading corporates and project developers, and academics and thought leaders.

SINGAPORE AS AN 'ANCHOR'

The CIX, an initiative which originated from the Emerging Stronger Taskforce's Alliance for Action (AfA) on Sustainability, will leverage Singapore's internationally recognised financial, legal and commodities hub infrastructures, said the four parties.

"These infrastructures are foundational to nurturing a trusted ecosystem of partners required to scale the global voluntary market. In addition, Singapore has been supportive of initiatives that strengthen the trust and verifiability of carbon credits, as part of the nation's ambition to become a global carbon services and trading hub," said the press release.

Singapore would be a good place for CIX to realise its vision of becoming a global carbon exchange and marketplace, added Mr Menon.

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"We have a sound infrastructure, good governance, and a premium on trust - critical ingredients for a marketplace," he explained. 

"I believe Singapore has what it takes to anchor a thriving carbon marketplace at the heart of a vibrant carbon services hub, supporting Asia's transition towards greater sustainability."