Synergies to be reaped as Singapore and Indonesia set sights on becoming carbon trading hubs

South-east Asia is home to some of the planet's most efficient natural carbon sponges.
South-east Asia is home to some of the planet's most efficient natural carbon sponges.PHOTO: ST FILE

SINGAPORE - Singapore and Indonesia have expressed ambitions of becoming hubs for the growing carbon credit trade, but both marketplaces could be synergistic instead of competitive, said Singapore Institute of International Affairs (SIIA) chairman Simon Tay on Thursday (June 24).

While more details will be needed to flesh out the announcements made by both countries, Associate Professor Tay said he was taking an optimistic approach to looking at the situation.

Indonesia, with its bounty of carbon-rich peatland and mangrove areas, is a major source of these credits, he said, during a virtual dialogue on the haze outlook for this year.

But Singapore could also contribute in other ways, added Prof Tay, such as in the verification of carbon credits.

The Republic's established financial hub status will also allow it to offer other services associated with the trade in carbon, such as the creation of a secondary market for carbon credits, he added.

Under a carbon trading programme, the primary market refers to where carbon credits first change hands for a price. The secondary market makes up all subsequent transactions among private buyers and sellers, said the Centre for Climate and Energy Solutions, a United States-based environmental non-profit organisation.

Said Prof Tay: "The financial hub of Singapore has certain credibility, which can actually partner and synergise with the initial effort."

He added that while Indonesia was home to large swathes of natural carbon stores, these natural habitats can also be found in other parts of South-east Asia.

"So Singapore can also help to jump-start such initiatives across the region," he added.

South-east Asia is home to some of the planet's most efficient natural carbon sponges.

Peatlands, mangroves and tropical rainforests, for example, have great capacity to soak up planet-warming carbon dioxide through photosynthesis, and store the carbon in their leaves, roots, trunks and underground.

Each unit of carbon stored by a healthy forest saved from destruction could be sold as a carbon credit to a government or organisation elsewhere, to offset its emissions. In this way, forests essentially pay for their own conservation.

Last month, Singapore announced that it will be launching a new global carbon exchange and marketplace later in the year.

It comes after another initiative launched last December by entities including the National University of Singapore, DBS Bank and World Bank to boost confidence in nature-based carbon credits.

This is done through the use of technology solutions that reduce the cost and improve the accuracy of environmental verification of carbon sequestration, which refers to the ability of natural habitats to soak up planet-warming carbon dioxide.

And in April this year, Bloomberg reported that Indonesia is considering offering a carbon trading system that would allow investors to offset their emissions.

The country is mapping out peatlands, and artificial lakes in former mining areas that could house floating solar panels, to woo foreign investment.