INTERVIEW: EU's CBAM should be consistent with WTO, non-discriminatory: Singapore climate official

Singapore's stance on the EU's carbon border adjustment mechanism (CBAM), which seeks to impose a tax on emission-intensive imports, is that the policy should be consistent with the World Trade Organization and implemented in a non-discriminatory manner, Benedict Chia, director-general for climate change at Singapore's National Climate Change Secretariat, said in a recent interview.

"Our position has always been that we understand why certain countries have gone ahead with the CBAM," Chia said. "Our ask is two main things. First, is to ensure that while the CBAM is being implemented, it should be consistent with the WTO, and should not be inconsistent with some of the key WTO principles," he said.

"The other aspect is that the CBAM needs to be implemented in a non-discriminatory manner, so you don't apply the CBAM to one country in a different way from another country. There should be a level playing field in terms of application," Chia said.

He said these were some of the viewpoints Singapore was pushing for in order to ease some pains and difficulties that some countries faced in meeting the needs of a cross-border carbon tax system.

Singapore's official stance on the CBAM is significant due to its position as a global trading hub, which has made it influential in international trade policy, having consistently backed free trade principles and open supply chains.

Chia, however, said the upcoming COP28 summit may see limited discussion on the CBAM and the only track mentioned in passing will perhaps be response measures that help countries' transition. The CBAM has also been discussed in bilateral and plurilateral discussions outside of the multilateral space and this may continue, he added.

High bar for local offsets

Meanwhile, Singapore plans to set a high bar for its upcoming "whitelist" that will define what constitutes high-integrity carbon credits eligible for offsetting under the nation's carbon tax scheme, Chia said.

"We have had a couple of rounds of stakeholder's consultations, and we are in the midst of finalizing it. We hope to surface it later this year so that it gives clarity to companies as to what exactly we think when we say 'high environmental integrity'," Chia added.

Singapore will raise its domestic carbon tax to S$25/mtCO2e ($18.65) in 2024 and 2025, from S$5/mtCO2e now. From 2024, companies will be allowed to use the whitelisted carbon credits to offset up to 5% of their taxable emissions.

Chia said Singapore has always argued that for environmental carbon markets to work they will have to have a high level of integrity, as old systems like the Kyoto Protocol had been heavily criticized before.

"Many of these criticisms were valid. [Markets] were not bringing about real emissions reductions or helping to increase ambition overall. If we wanted to rely on markets, then the rules and standards had to be set a lot higher," he said.

Singapore's view of ensuring high integrity was not widely accepted initially, as stakeholders felt that setting a high bar would compromise liquidity, he said.

"But I think the recent crisis of trust in markets, especially over the last nine months to one year, has underlined that our approach was the right way -- to set the bar high, to be very selective and to only be interested in developing and supporting high-integrity projects," Chia said, adding that the Voluntary Carbon Markets Integrity Initiative and the Integrity Council for the Voluntary Carbon Market are moving in that direction.

Chia said the government's approach toward developing the whitelist is based on commonly accepted rules that determine environmental integrity, such as the projects' additionality, as well as measures that deal with leakage and ensure permanence of carbon sequestration.

"So, we do not presuppose that a certain project type or certain sector or certain country is of high or low quality. We set the standards and then we let the standards dictate what is of high quality or not," he explained.

More projects in pipeline

Regarding COP28, Chia said most discussions around the Article 6 rule book, which sets the guidelines for how carbon credits will be transacted between nation states, have been substantially concluded and only a few aspects need to be fleshed out such as the authorization for corresponding adjustments and the operationalization of the 6.4 mechanism.

He said the substantive components of Article 6 are there with enough detail for countries to move forward to collaborate.

Singapore has already been discussing and signing memorandums of understanding with countries like Ghana, Bhutan, Cambodia, Colombia, Vietnam and Peru for carbon credit project development and trading.

"We are in the midst of discussions to collaborate with countries on Article 6, and we hope to see more pilots and projects coming to fruition, demonstrating what Article 6 can achieve," Chia said. "Ultimately, it is about collaborative approaches, for countries to do more together and share those gains through carbon markets and carbon credits," Chia added.