The governments of Singapore and Sri Lanka have signed a memorandum of understanding to facilitate carbon credit trading in line with the framework of Article 6.2 of the Paris Agreement, Singapore's Ministry of Trade and Industry said Aug. 22.
This marks another move by Singapore, a city-state with limited resources to offset emissions domestically, to collaborate with countries willing to leverage the carbon market to attract climate finance and gain broader supports from Singapore.
"Under the MOU, Singapore and Sri Lanka will work towards a legally binding Implementation Agreement that sets out a bilateral framework for the international transfer of correspondingly adjusted carbon credits aligned with Article 6.2 of the Paris Agreement," MTI said in a statement.
Bilateral carbon trades under Article 6.2 are different from normal trading of voluntary carbon credits between private entities. Under Article 6.2, countries are authorized to decide whether the traded carbon credits can be used to claim emissions reductions under their national commitments.
From 2024, the government of Singapore will increase its carbon tax to S$25/mtCO2e ($18.46/mtCO2e) from S$5/mtCO2e ($3.69/mtCO2e) and allow compliance taxpayers to purchase high-quality international carbon credits to offset up to 5% of their tax-liable emissions.
To facilitate this, Singapore has signed similar MOUs or letters of intent with Bhutan, Cambodia, Chile, Colombia, the Dominican Republic, Ghana, Kenya, Mongolia, Morocco, Papua New Guinea, Peru, and Vietnam, MTI said in the statement.