Teo emphasized that this approach aligns with COP28’s goal of accelerating energy transition while promoting sustainable socio-economic development. These new transition credits will enable Singapore to meet its climate targets, known as nationally determined contributions (NDCs), once they are confirmed to have high integrity.

From 2024, companies under Singapore’s carbon tax might purchase transition credits to offset up to 5% of their taxable emissions, provided these credits satisfy the eligibility requirements of Singapore’s International Carbon Credit (ICC) framework. The Monetary Authority of Singapore (MAS) has suggested creating transition credits to help compensate coal plant owners for income lost due to early closures.

Despite challenges regarding the feasibility of phasing out coal, transition credits could enhance the economic viability of these transactions if there is sufficient market confidence in this emerging asset class. Currently, transition credits do not exist as the necessary methodology has not yet received approval from international carbon credit standard setters like Verra.

Teo also announced a new blended finance initiative aimed at mobilizing up to US$5 billion, supporting the development of transition and marginally bankable green projects in Asia. He stated that Singapore would also back COP28’s call to significantly increase renewable energy capacity and improve energy efficiency by 2030.

Additionally, Singapore is collaborating with Ghana on initiatives focused on nature-based industrialization and sustainable rural development, which includes establishing carbon markets through high-quality carbon credits. Agreements on carbon trading with various countries, including a memorandum of understanding with Rwanda, are also in the pipeline to support emerging technological and market solutions.

The Singapore government is also partnering with carbon data provider Sylvera to identify and purchase high-quality carbon credits from other nations, as Sylvera expands its presence in the region by establishing an office in Singapore with support from the Economic Development Board.