Nations, private companies and NGOs must tackle emissions together, with teamwork, planning and great storytelling key in driving today’s climate action agenda

In June this year, Singapore announced ambitious plans for a global carbon market, Climate Impact X, or CIX.

The initiative sets out to not only help reduce the amount of carbon in the atmosphere, but also goes further than most other markets – in utilising cutting-edge technologies to monitor the proceeds of carbon offsetting.

This is a timely move, and one that further elevates Singapore’s environmental charge to stay above the pack in Asia. Already Singapore has a carbon-tax on high-emitting industries such as petrochemicals, chemicals and semiconductor businesses, as well as electricity providers and airlines.

Under the scheme, rolled out in 2018, any company that emits more than 2,000 tonnes of carbon dioxide equivalent (tCO2e) must pay S$5 per tonne on these, with this figure expected to rise to S$15 per ton by 2030.

While at the time of writing the city-state is the only the Asian nation outside of Japan with such a tax, many believe even the price of S$15 is too low. Compared to European countries, where most countries pay on average €25 per tonne — the equivalent of about S$40 per tonne — it does appear particularly low.

Naysayers miss four points, however. First, by introducing a tax that’s moderately priced, this encourages companies to stay in the market: Shell and ExxonMobil have expressed their opposition to the tax, with the former claiming it would impact Singapore’s competitiveness as an export manufacturing hub. Rightly or wrongly, higher taxes do provide a huge deterrent for MNCs. Second, without such a tax, heavy polluters might have carte blanch to emit what they like, irrespective of the epic greenwashing that typically goes on in such industries. Thirdly, how can people expect Southeast Asia to clean its environmental act up when nobody has taken the plunge first? And lastly, carbon markets in general are complex, and setting an appropriate price that’s welcomed by both the participants, environmentalists and regulators is no easy task. All parties must meet somewhere in the middle.

The proceeds of carbon tax can go to anywhere that needs it, whether it is R&D for new environmental solutions, to build new homes and cities, or to help balance the books of governments. Interestingly, Indonesia, Taiwan, Thailand South Korea and Vietnam have also announced they are considering carbon tax initiatives.

Caution ahead

Singapore’s CIX proposition is intriguing on a number of fronts. But before I elaborate, let’s explore how carbon markets work, and where historically they’ve struggled.

Take the European Union’s Emissions Trading Scheme as an example. Formed in 2005, it forced heavy polluters to purchase carbon credits, which channelled money to environmental projects. The amount of emissions these companies pumped into the atmosphere is capped, and each year this quota is lowered. If they can’t cut their emissions to meet this quota, they must offset their carbon and trade it in for a green project. Gradually over many years, such businesses become lesser polluters, and there are more and more environmentally enhancing projects. That’s the theory, at least.

On paper, it’s been an enormous success, saving more than 1 billion tCO2e between 2006 and 2018. Yet in reality, it has also attracted an enormous amount of fraud, and gigatonnes of (yes, you guessed it) greenwashing.

In fact, a study carried out by the recently formed international NGO cum thinktank Taskforce for Scaling Voluntary Carbon Markets (TSVCM) found that only 4% of offsets purchased globally remove CO2 from the atmosphere – a shockingly low statistic, especially when compared to the proportion of offsets that go to ‘avoiding’ deforestation, which stands at 32%.

Quite frankly, the world shouldn’t be financing the ‘avoiding’ of deforestation, whatever this really means. Plus, profiting from ‘saving’ trees seems somewhat unethical. In the event that trees have to be removed for urban development purposes, authorities and developers must do so while planting others elsewhere. Money shouldn’t be the deciding factor.

How much money is actually channelled into projects is also questionable. Recently, US-headquartered CarbonPlan unearthed that US$400 million worth of offsets had been sold in California without absorbing a single tonne of CO2. Similarly, Finland-based Compensate established that 90% of offsets fail to deliver what they set out to achieve, or introduce damaging side-effects for local communities. The challenge is therefore twofold – standards and monitoring.

These are challenges that TSVCM aspires to tackle. However, as of yet, the organisation has yet to publish its view on both of these. Worryingly, a recent Bloomberg report highlighted disagreements with the 400-member entities from mostly the private sector, headed by ex-Bank of England Governor, Mark Carney, and represented by a raft of sustainability champions. Even between the best brains of the business, standards and ways of enforcing these standards, cannot be established.

Checks in place

Back in Singapore, CIX plans to tackle the issues of standards and monitoring in a robust fashion. Looking at standards, the Singapore government will, through numerous agencies and industry bodies, oversee a coalition of buyers and sellers in establishing robust standards around the projects that can be financed through offsets. Secondly, the use of cutting-edge tools including satellite imagery, AI and blockchain will help them to monitor the progress of these projects.

Nature-based solutions including reforestation, restoring peatlands and mangroves, could provide more than 30% of the climate mitigation needed by 2030.

The Singapore example highlights the need for governments to take the lead. While there are many well-intentioned private companies doing their bit for the environment, governments can mandate agendas by law – or at least set frameworks that encourage businesses to act appropriately.

The likes of Singapore will only be able to do so much on its own. That’s why there is an enormous opportunity around the forthcoming COP26 to be held in Glasgow, Scotland, in November 2021. As with the achievements of COP21 in Paris, where more than 190 states signed up to an agreement that pledges to limit global warming to 1.5 °C above pre-​industrial levels, there is the potential in Glasgow to get everyone onboard with schemes like a global carbon market.

Indeed, the opportunity stands for all nations to pledge to further reduce emissions through both carbon tax and emissions trading, and other such solutions — irrespective of the nuances that reside within each state.

Standards and pricing can be set in stone; a vision of what these markets will look like all around the world can be set forth – and a positive narrative for the next hundred years or more can be written, signed and sealed into action.

Think about it for a moment. Clean air. Less volatile weather systems. Thriving biodiversity. That’s a great story, and one worth advocating, time and time again.

At CP5, we tell sustainability stories on behalf of some of the world’s leading organisations. To find out more about how we can help you with yours, talk to us.