Singapore and Lao PDR Enter into Memorandum of Understanding to Set Up Framework for Transfer of Carbon Credits Under Article 6 of Paris Agreement

On 9 July 2024, Singapore and Lao PDR signed a Memorandum of Understanding (“MOU“) to collaborate on carbon credits aligned to Article 6 of the Paris Agreement.

Article 6 of the Paris Agreement allows countries to voluntarily cooperate to achieve emission targets set out in their Nationally Determined Contribution (“NDC“), while promoting sustainable development and ensuring high environmental integrity.

The scope of MOU includes:

(a)      Both countries working towards a legally binding Implementation Agreement that sets out a bilateral framework for the international transfer of correspondingly adjusted carbon credits, including the criteria and processes for transfer of carbon credits under Article 6 of the Paris Agreement.

(b)      Identify potential Article 6 compliant mitigation activities which can support both countries to achieve their respective NDCs.

Singapore aims to achieve net zero emissions by 2050 and is committed to advancing global climate action through international collaboration. Currently, Singapore has signed MOUs with 17 other countries, including Cambodia, Indonesia and Vietnam, with the intent to collaborate on carbon markets that are aligned with Article 6 of the Paris Agreement. Singapore has also signed Implementation Agreements with Ghana and Papua New Guinea.

By way of background, Singapore introduced the International Carbon Credit Framework (“ICC Framework“) in November 2022, alongside the progressive increase in carbon tax under the Carbon Pricing (Amendment) Act 2022, in force on 1 January 2024.  From 2024, companies in Singapore are permitted to use eligible international carbon credits to offset up to 5% of their taxable emissions under the ICC Framework. On 19 December 2023, the Ministry of Sustainability and Environment and the National Environment Agency published the Eligibility List under the ICC Framework. The Eligibility List specifies the eligible international carbon credits and currently lists projects hosted in Ghana and Papua New Guinea. With the MOU, it paves the way for more projects to be included into the Eligibility List.

Click on the following links for more information:

• Ministry of Trade and Industry (“MTI“) Press Release titled “Singapore and Lao PDR sign Memorandum of Understanding on carbon credits collaboration under Article 6 of the Paris Agreement” (available on the MTI website at www.mti.gov.sg)
• December 2023-January 2024 NewsBytes write-up titled “Release of Eligibility List for International Carbon Credits Under Singapore’s Carbon Tax Regime” (page 25)