The ICC Framework, introduced in November 2022 through the Carbon Pricing Act (CPA), offers a viable avenue for carbon-tax liable enterprises to fulfill a portion of their carbon tax obligations by surrendering eligible ICCs. It is important to note that the ICC framework does not extend to the voluntary carbon market.
Together with the ICC framework, CPA supports Singapore's overarching strategy to achieve net zero emissions by 2050, by introducing a pricing mechanism to quantify carbon and GHG emissions into several industries in Singapore. These industries include manufacturing and related services, the supply of electricity, gas, steam, compressed air, chilled water for air-conditioning, and water supply, sewage, and waste management. The target for CPA is to progressively increase carbon tax rate from the current S$5/ per tonne of emissions to S$25 per tonne in 2024 and 2025, and S$45 per tonne in 2026 and beyond.
Primarily, by setting out the eligibility criteria for ICC to be used by carbon tax in-scope companies in Singapore to offset their emission by up to 5% of their total taxable emission from 1 January 2024.
The ICC framework requires NEA to develop a national registry to account and track ICC surrendered by taxable facilities in compliance with Article 6 (Paris Agreement). This enables the matching of demand-supply of high-quality ICC and allows companies participating in hard-to-abate segments to channel resources to materialise their decarbonisation goals.
ICC framework also sets out 7 eligibility criteria for ICC. 5 carbon credit programmes were chosen so that NEA can leverage on their capabilities in ensuring that ICCs issued under their programmes are robustly validated, verified, issued and retired. These high-quality ICCs will be used to offset taxable emissions in SIngapore. These programmes (with more to be added in the future) include:
Definition: The certified emissions reductions or removals must not be counted more than once in contravention of the Paris Agreement.
Examples: Singapore has an Implementation Agreement in place with Country X, which sets out the requirements and processes for carbon credits to come with corresponding adjustments, i.e., the emissions reductions represented by the carbon credit used by carbon tax-liable companies in Singapore to offset their taxable emissions will only be counted towards Singapore’s climate targets. These emissions reductions will not also be counted towards Country X’s climate targets.
Definition: The certified emissions reductions or removals must exceed any emissions reduction or removals required by any law or regulatory requirement of the host country, and that would otherwise have occurred in a conservative, business-as-usual scenario..
Examples: Under a business-as-usual (BAU) scenario where the project did not occur, residents would have continued to collect and burn firewood to heat up their homes and cook food. This would have resulted in carbon emissions from deforestation.
However, with the implementation of the project and the financing from carbon credits, households are provided with biogas digesters which ferment organic waste such as manure, offering an alternative source of clean energy in the form of biomethane. This reduces the reliance on firewood, and the resulting carbon emissions from deforestation. Hence, the project fulfils the “additional” principle.
Definition: The certified emissions reductions or removals must have been quantified based on a realistic, defensible, and conservative estimate of the amount of emissions that would have occurred in a business-as-usual scenario, assuming the project or programme that generated the certified emission reductions or removals had not been carried out.
Examples: With the implementation of the project, emissions have been reduced from a credible and conservative baseline, resulting in real emissions reductions. This baseline is the BAU scenario whereby firewood continues to be used, and was determined from field studies that ascertain the prevalence and entrenchment of firewood use as a community practice.
Definition: The certified emissions reductions or removals must have been calculated in a manner that is conservative and transparent, and must have been measured and verified by an accredited and independent third-party verification entity before the ICC was issued.
Examples: Independent, third-party verifiers have quantified and verified the emissions reduced by the project during the entire project timeframe, based on a robust measurement, reporting and verification framework.
Definition: The certified emissions reductions or removals must not be reversible, or if there is a risk that the certified emissions reductions or removals may be reversible, there must be measures in place to monitor, mitigate and compensate any material reversal of the certified emissions reductions or removals.
Examples: The emissions reductions derived from biogas digesters and resulting reduction in use of firewood are not reversible, as the energy needs of the rural community across the project timeframe have already been met through biomethane from biogas digesters instead of firewood or other emissive fuels.
Definition: The project or programme that generated the certified emissions reductions or removals must not violate any applicable laws, regulatory requirements, or international obligations of the host country..
Examples: Biogas digesters has resulted in no net harm, and even delivered co-benefits to local communities in Country X, such as cleaner air quality from burning biomethane, a smokeless fuel, instead of firewood.
Definition: The project or programme that generated the certified emissions reductions or removals must not result in a material increase in emissions elsewhere, or if there is a risk of a material increase in emissions elsewhere, there must be measures in place to monitor, mitigate and compensate for any such material increase in emissions.
Examples: The use of biogas digesters in the community did not lead to an increase in deforestation in other communities or elsewhere. Hence, the project does not cause leakage, i.e., an increase in emissions elsewhere.
