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Singapore: New Eligibility Criteria under the International Carbon Credit Framework announced by MSE and NEA

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In brief

The Ministry of Sustainability and the Environment (MSE) and the National Environmental Agency (NEA) set out the Eligibility Criteria under the International Carbon Credit (ICC) Framework as part of Singapore’s efforts to achieve net-zero emissions by 2050.

In more detail

The ICC Framework

The ICC Framework was introduced in November 2022, alongside the progressive increase in the carbon tax rate under the Carbon Pricing (Amendment) Bill, from SGD 5 per tonne of emissions to SGD 25 per tonne in 2024 and 2025 and SDG 45 per tonne from 2026 onward.

From 1 January 2024, carbon tax-liable companies in Singapore will be able to rely on the ICC Framework to use eligible ICCs to fulfill part of their carbon tax liability, by offsetting up to 5% of their taxable emissions. A carbon credit is generated through activities that aim to reduce, remove or avoid carbon emissions — each ton of carbon dioxide prevented from being released into the atmosphere is equivalent to one carbon credit.

ICC Eligibility Criteria

The ICCs will be deemed eligible after satisfying two key aspects. First, the certified reductions or removals must have occurred between 1 January 2021 and 31 December 2030, in compliance with Article 6 of the Paris Agreement. Second, eligible ICCs must fulfill all seven principles to demonstrate high environmental integrity.

The seven principles are as follows:

  1. Not double counted: The certified emissions reductions or removals must not be counted more than once, pursuant to the Paris Agreement.
  2. Additional: The certified emissions reductions or removals must exceed any emissions reduction or removals required by any law or regulatory requirement of the host country, and that would otherwise have occurred in a conservative, business-as-usual scenario.
  3. Real: The certified emissions reductions or removals must have been quantified based on a realistic, defensible and conservative estimate of the amount of emissions that would have occurred in a business-as-usual scenario.
  4. Quantified and verified: The certified emissions reductions or removals must have been measured and verified by an accredited and independent third-party verification entity before the ICC was issued, and it must have been calculated in a conservative and transparent manner.
  5. Permanent: The certified emissions reductions or removals must not be reversible. If there is a risk that the certified emissions reductions or removals may be reversible, there must be measures in place to monitor, mitigate and compensate any material reversal of the certified emissions reductions or removals.
  6. No net harm: The project or program that generated the certified emissions reductions or removals must not violate any applicable laws, regulatory requirements or international obligations of the host country.
  7. No leakage: The project or program that generated the certified emissions reductions or removals must not result in a material increase in emissions elsewhere. If there is a risk of a material increase in emissions elsewhere, there must be measures in place to monitor, mitigate and compensate any such material increase in emissions.

The NEA will develop processes to assess which ICCs adhere to the Eligibility Criteria before carbon tax-liable companies use the ICCs to offset their taxable emissions, and it will release further details on the list of eligible host countries, program and methodologies by the end of this year. The NEA has signed memorandums of understanding with five carbon crediting programs — the Gold Standard, Verra’s Verified Carbon Standard, Global Carbon Council, American Carbon Registry and the Architecture of REDD+ Transactions.

The Eligibility Criteria will also be reviewed periodically to align with the developments in Article 6 of the Paris Agreement and high-integrity carbon markets.

Finally, an International Advisory Panel for Carbon Credits, comprising six esteemed members with expertise across fields of sustainability, international development and finance, has been set up to advise the Singapore government on its policies relating to carbon credits. 

Key takeaways

Carbon taxable companies looking to offset their taxable emissions from 2024 will have to ensure that the carbon credits used fulfill the eligibility criteria set out by the MSE and the NEA.

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The MSE press release can be accessed here.

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Andy Leck is the head of the Intellectual Property and Technology (IPTech) Practice Group and a member of the Dispute Resolution Practice Group in Singapore. He is a core member of Baker McKenzie's regional IP practice and also leads the Myanmar IP Practice Group. Andy is recognised by reputable global industry and legal publications as a leader in his field. He was named on "The A-List: Singapore's Top 100 lawyers" by Asia Business Law Journal 2018. In addition, Chambers Asia Pacific notes that Andy is "a well-known IP practitioner who is highlighted for his record of handling major trade mark litigation, as well as commercial exploitation of IP rights in the media and technology sectors. He's been in the industry for a long time and has always been held in high regard. He is known to be very fair and is someone you would like to be in the trenches with you during negotiations." Furthermore, Asian Legal Business acknowledges Andy as a leading practitioner in his field and notes that he “always gives good, quick advice, [is] client-focused and has strong technical knowledge for his areas of practice.” Andy was appointed by the Intellectual Property Office of Singapore (IPOS) as an IP Adjudicator to hear disputes at IPOS for a two-year term from April 2021. He has been an appointed member of the Singapore Copyright Tribunal since May 2010 and a mediator with the WIPO Arbitration and Mediation Center. He is also appointed as a Notary Public & Commissioner for Oaths in Singapore. He previously served on the International Trademark Association’s Board of Directors and was a member of the executive committee.

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Ren Jun Lim is a principal with Baker McKenzie Wong & Leow. He represents local and international clients in both contentious and non-contentious intellectual property matters. He also advises on a full range of healthcare, as well as consumer goods-related legal and regulatory issues. Ren Jun co-leads Baker McKenzie Wong & Leow's Healthcare as well as Consumer Goods & Retail industry groups. He sits on the Law Society of Singapore IP Committee and on the Executive Committee of the Association of Information Security Professionals. He is also a member of the Vaccines Working Group, Singapore Association of Pharmaceutical Industries, a member of the International Trademark Association, as well as a member of the Regulatory Affairs Professionals Association. Ren Jun is ranked in the Silver tier for Individuals: Enforcement and Litigation and Individuals: Prosecution and Strategy, and a recommended lawyer for Individuals: Transactions by WTR 1000, 2020. He is also listed in Asia IP's Best 50 IP Expert, 2020, recognised as a Rising Star by Managing IP: IP Stars, 2019 and one of Singapore's 70 most influential lawyers aged 40 and under by Singapore Business Review, 2016. Ren Jun was acknowledged by WTR 1000 as a "trademark connoisseur who boasts supplementary knowledge of regulatory issues in the consumer products industry." He was also commended by clients for being "very responsive to enquiries and with a keen eye for detail, he is extremely hands-on. His meticulous and in-depth approach to strategising is key to the excellent outcomes we enjoy."

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Ken Chia is a member of the Firm’s IP Tech, International Commercial & Trade and Competition Practice Groups. He is regularly ranked as a leading TMT and competition lawyer by top legal directories, including Chambers Asia Pacific and Legal 500 Asia Pacific. Ken is an IAPP Certified International Privacy Professional (FIP, CIPP(A), CIPT, CIPM) and a fellow of the Chartered Institute of Arbitrators and the Singapore Institute of Arbitrators.

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Sanil is a local principal in the Intellectual Property & Technology Practice Group in Baker McKenzie Wong & Leow. Sanil is qualified in both Singapore and Australia, and is a Certified Information Privacy Professional (CIPP/A) by the International Association of Privacy Professionals. Sanil is recognized as a Rising Star by both Legal 500 Asia Pacific in the Intellectual Property: Local Firms category as well as by IP Stars for his advisory work in the IP space. Sanil is also recommended by World Trademark Review 1000 for IP enforcement, litigation, prosecution and strategy.

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