Singapore, UK, Kenya Lead Coalition to Standardise Global Carbon Markets

Singapore, the UK, and Kenya collectively set out on a government-supported partnership to speed the growth and legitimacy of the world's carbon markets. The collaboration, launched at London Climate Action Week, brings the industry much closer to more transparency and harmonization in the application of carbon credits between firms across borders.

The coalition's number one aim is to develop a common set of principles for corporate utilization of voluntary carbon credits. Those rules, which the group hopes to complete by November 2025—the evening before the COP30 global climate conference in Belém, Brazil—are intended to alleviate long-standing business concerns regarding regulatory consistency and integrity in carbon markets.

Companies utilize carbon credits to neutralize emissions that they are unable to lower internally. Voluntary carbon markets have, however, been plagued by issues such as various methodologies and skepticism on greenwashing in the absence of united international leadership. The common principles will seek to offer solutions to these issues by enhancing investment in high-integrity credits, harmonizing national practice with global best practice, and sustaining participants' trust.

The coalition's co-founders are Singapore Ambassador for Climate Action Ravi Menon, Kenya Special Climate Envoy Ali Mohamed, and the UK Special Representative for Climate Rachel Kyte. Founding members are France and Panama, and the coalition anticipates adding carbon credit buyers and sellers as members in the run-up to COP30. Peru has also indicated its backing for the mission, valuing the central position carbon markets play in facilitating economic development in a climate-friendly way.

The group will have an intimate working connection with business to ensure that policy-making is aligned to and responsive to the requirements of the market. It will co-operate with global partners including the World Business Council for Sustainable Development and the International Chamber of Commerce, so there is widespread coverage and skills. In addition, the Integrity Council for the Voluntary Carbon Market—a long-standing governing organization with the task of establishing global standards for the provision of credits—is catalyzing the coordination between the demand and supply sides of the market.

While international coordination remains the overarching objective of the coalition, it also identifies flexibility at the national level as critical. Nations can embrace the shared principles but craft more specified national guidelines that are appropriate to their individual circumstances. This phase permits harmonisation without uniformity and allows governments to make domestic policy while keeping watch over internationally accepted paradigms.

Singapore is already at the forefront. On June 20, the country's National Climate Change Secretariat, Ministry of Trade and Industry, and Enterprise Singapore published draft guidance on how businesses can incorporate carbon credits into decarbonisation planning. There is still public consultation that permits business and civil society input into the mandated framework.

The new guidelines have the objective of increasing the integrity of carbon credits to make them authentic proxies of the true value of avoided or phased-out emissions. The process is especially crucial in developing economies, where real carbon markets will instill tremendous investment in clean energy, green agriculture, and conservation initiatives. Higher integrity of such markets will propel climate finance flows as well as make carbon credits a more trusted tool for ensuring net-zero commitments.

With increasing global interest in carbon markets, the absence of harmonized guidance has been a significant impediment. Companies have requested regulatory clarity to enable increased use of voluntary carbon credits as part of overall net-zero approaches. Providing common principles endorsed by various governments and matching best practice in markets is intended by the coalition to release greater amounts of company investment.

Upon the formation of the coalition, Menon looked forward to the expansion of the coalition, having already said that other countries were in the works. The coalition, according to him, wants to achieve a "good-sized coalition" by COP30. Timing is important as climate talks are bound to include discussions on how voluntary markets can be folded into domestic climate plans and international carbon schemes.

As the need for high-integrity offsets grows and most countries still making choices on domestic regulations, this group could lead by example regarding the use, regulation, and disclosure of international carbon credits. It is also in line with the overall global initiative to align environment disclosures, fund sustainable development, and meet the requirements of the Paris Agreement.

Source:The Business Times