Conservation news

Singapore launches new carbon marketplace for nature conservancy projects

Reforestation project in Borneo using native species. Photo credit: Rhett A. Butler

Reforestation project in Borneo using native species. Photo credit: Rhett A. Butler

  • Singapore last month launched a carbon trading marketplace backed by its state investment firm, stock exchange and largest bank.
  • The Climate Impact X initiative has two main platforms: a marketplace for nature-based projects, and an exchange where carbon credits can be freely traded in larger quantities.
  • Demand for nature-based carbon credits — those linked to ecosystem conservation and restoration projects — has been growing in recent years, but high-quality credits remain scarce.
  • The new platform aims to harness the potential of nature-based solutions in Southeast Asia, protecting at-risk forests while unlocking high-quality carbon credits for businesses.

SINGAPORE — Singapore is launching a carbon trading marketplace focused on nature conservancy projects, a move that could protect at-risk tropical forests in the region while unlocking a ready source of carbon credits for businesses.

The initiative, known as Climate Impact X (CIX), will have two main platforms: a marketplace of nature-based projects for firms to invest in, and an exchange where high-quality carbon credits are freely traded in larger quantities, catering mainly to multinationals and institutional investors.

Backed by Singapore’s state investment firm, stock exchange, its largest bank, DBS, and U.K. bank Standard Chartered, the voluntary marketplace could be Southeast Asia’s “solution” to the problem of “fragmented carbon credit markets characterized by thin liquidity and credits of questionable quality,” Ravi Menon, managing director of Singapore’s central bank, said at the virtual launch last month.

Through CIX, companies big and small can directly purchase high-quality, nature-based carbon credits from specific projects in Southeast Asia and elsewhere, Menon said, allowing for a broader range of businesses to participate in the voluntary carbon market and back solutions to conserve, restore and protect natural ecosystems while meeting their sustainability goals.

“Singapore is located at the heart of Southeast Asia which is fertile ground to harness the potential of nature-based solutions,” Menon said, noting that the region holds more than one-third of the world’s mangroves and has about 120 million hectares (297 million acres) of land — an area four times the size of Malaysia — suitable for reforestation. “Proximity to Southeast Asia will enable CIX and its ecosystem partners to work closely with project developers to procure a supply of high-quality carbon credits.”

Demand for nature-based carbon credits, such as those from forest conservation and reforestation programs, or wetlands and grasslands restoration projects, has been growing in recent years. Verra, one of the main standard-setting bodies for voluntary carbon markets, reported that nature-based solutions represented 68% of its total issuances in the first quarter of this year, compared with 38% in 2016.

Rainforest in Borneo. Carbon conservation projects in Southeast Asia have been tapping into the voluntary carbon markets since the mid-2000s. Photo credit: Rhett A. Butler.

Unlike compliance carbon markets, where companies that fail to meet specified carbon emission limits are required to buy credits to offset their greenhouse gas releases, firms in voluntary carbon markets purchase credits to offset their carbon footprint of their own accord.

In voluntary markets, price is only one area of concern; the co-benefits a project brings about, such as community economic development or biodiversity conservation, are also valued. “There is now realization that nature-based solutions include biodiversity, livelihood, and climate outcomes, and support agendas like the Sustainable Development Goals,” Alain Frechette, strategic analysis and global engagement director at Rights and Resources Initiative, an NGO, said in a phone interview.

“Nature-based solutions support global priorities that all countries have committed to, so that might explain why companies view those investments as a better strategy for now until they can get a handle on their own emissions and start reducing those,” he added.

In spite of their popularity, high-quality, nature-based carbon credits remain a scarce commodity, plagued by four main issues: leakage, additionality, permanence and measurement. Leakage refers to how ecosystem conservation projects, even if successful in one area, often shift deforestation to another place or country; additionality refers to the inability to predict what would have happened in the absence of the project and hence, the project’s true benefits; permanence refers to the difficulty of protecting ecosystems for the long term; and measurement refers to the challenge of accurately counting the amount of carbon stored in nature.

In 2019, supply of nature-based projects fell but demand remained strong, resulting in prices surging 30% across voluntary markets, data from Ecosystem Marketplace showed. That same year, nature-based offsets were three times pricier, on average, than renewable energy ones.

Transacted voluntary carbon offset volumes, values and prices across categories. Image courtesy of Ecosystem Marketplace.

In ensuring the quality of the credits supplied, CIX is banking on the reputation and know-how of its backers, Singapore’s record for governance and infrastructure, and technology. The platform will use satellites, artificial intelligence and blockchain to verify the integrity of its projects.

As demand for nature-based offsets continues to grow, prices could increase further, resulting in more projects becoming economical across Southeast Asia and elsewhere. While such investments could be a win-win for protecting forests and promoting developing economies, experts warn they must meaningfully include local communities — or risk worsening conflicts and land grabs.

“Unless communities are part of the solution, those projects are likely to both trespass on customary land and the rights of communities,” Frechette said. “That’s the clincher that needs to be taken into consideration … otherwise, companies would be exposing themselves to human rights violations.”

“As a trading platform, CIX has the power and the responsibility to hold both the suppliers and buyers of nature-based carbon products to account for their environmental performance,” said Lian Pin Koh, director of the Centre for Nature-based Climate Solutions in Singapore.

Beyond ensuring suppliers meet internationally recognized standards, CIX could adopt “measures to ensure that buyers of their carbon products are at least equally vested in their business transformation efforts to decarbonize and transition away from fossil fuel use to renewables,” Koh added.

“If CIX is able to act as a gatekeeper of the highest quality nature-based carbon products … that would … shift capital away from carbon emissions to carbon capture,” he said.

Banner image of restoration project in Borneo using native species, by Rhett Butler/Mongabay.

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