The National Environmental Agency (NEA) announced on Thursday a new $500,000 grant which will provide funding of up to half the cost of a carbon credit project, capped at $100,000.

These ventures, known as Clean Development Mechanism (CDM) projects, are regulated and approved by the United Nations (UN) under the Kyoto Protocol.

Under the global agreement, companies from non-Annex 1 countries, which are not obliged to cut emissions, can convert any carbon dioxide emissions reductions in their business operations, into carbon credits.

One credit, or Certified Emissions Reduction (CER), is equivalent to one less tonne of carbon dioxide emitted. This is currently priced around 20 euros (S$42).

'CDM projects are mutually beneficial for companies and the environment,' said NEA's chief executive, Mr Lee Yuen Hee.

With the launch of this grant, NEA would like to see more companies join this 'win-win scheme,' he added.

There are currently four local companies - Bee Joo Industries, Power Seraya, Kim Hock Corporation and IUT Global - which are in the process of getting their carbon credit projects approved.

Their projects range in sectors from waste heat recovery to biomass energy.

NEA said together, the four projects will reduce Singapore's annual carbon dioxide emissions - which scientists have blamed for global warming - by 533 kilotonnes a year.

Based on a current price of 22 euros, the firms can earn a total of $235 million over the 10-year period set out by the UN, said NEA.

Dr Amy Khor, Senior Parliamentary Secretary in the Ministry of the Environment and Water Resources, who launched the grant at an industry event on Thursday, said:

'NEA's grant helps companies reduce the risk in undertaking these projects, such as failure and financial cost.'

The grant size may increase in the future, but the agency will monitor its take-up rate before deciding, she said.

The grant is part of Singapore's effort to become a carbon trading hub.

A new platform - the Singapore Mercantile Exchange - was launched recently. It will operate by early next year and allow investors to buy and sell carbon credits for the first time.

Dr Khor said Singapore hopes to attract international players in the carbon market to locate here.

'Other than our geographic advantage, we have access to CDM projects in the region, and a strong financial services industry, which are very complementary,' she added