SINGAPORE – Companies here looking to offset part of their carbon tax liability could soon be able to purchase carbon credits from projects based in Ghana, following an agreement signed between both countries on May 27.
The carbon tax in 2024 has increased to $25 per tonne of carbon dioxide (CO2) emissions, up from $5 per tonne previously. By 2030, the tax will eventually reach $50 to $80 per tonne of CO2 emissions.
Companies can purchase carbon credits to offset up to 5 per cent of their taxable emissions, provided that the carbon projects they invest in meet Singapore’s eligibility criteria, which include having permanent emissions reductions, for instance.
A similar carbon credit agreement was signed between Singapore and Papua New Guinea on Dec 8, 2023, at the United Nations’ COP28 climate conference in Dubai.
In a joint statement on May 27, Singapore’s National Climate Change Secretariat, Ministry of Trade and Industry and Ministry of Sustainability and the Environment said the collaboration between Singapore and Ghana will advance climate ambitions for both countries and channel financing towards climate mitigation efforts.
The carbon credit projects authorised under the agreement will seek to promote sustainable development and generate benefits for the local communities, such as through the creation of jobs, access to clean water, improved energy security, and through the reduction of environmental pollution.
Under the agreement, carbon credit project developers will be required to make a contribution equivalent to 5 per cent of the share of proceeds from authorised carbon credits towards climate adaptation in Ghana, which helps Ghana to prepare and adjust to the impacts of climate change.
The project developers will also be required to cancel 2 per cent of authorised carbon credits at first issuance, to contribute to the mitigation of global greenhouse gas emissions.
The agreement was signed virtually between Singapore’s Minister for Sustainability and the Environment Grace Fu and Ghana’s Minister of Environment for Science, Technology and Innovation Ophelia Hayford.
The bilateral agreement comes as Temasek-backed investment platform GenZero has already been investing in a forest restoration project in the Kwahu region of Ghana.
A Straits Times report published in July 2023 said the first phase of the project was to start in the last quarter of 2023, with the second phase beginning in 2027.
The project, which is a collaboration with Singapore-based AJA Climate Solutions, will involve replanting degraded forest reserves, including growing cocoa trees sustainably in shaded farms to shield these plantations from potentially damaging climate impacts such as floods, heat stress and pests.
AJA Climate Solutions is focused on generating and managing climate mitigation projects in Africa and South-East Asia.
The project area within the Kwahu region was a lush forest about 40 to 50 years ago, but had been heavily exploited for timber over the past few decades.
The deforestation has led to Ghana losing more cocoa hectares year on year, which is damaging for the country economically as it is among the world’s largest cocoa producers.
In the second phase of the forest restoration project, the focus will shift to regenerating native tree species across degraded forests. More than 20 million native species seedlings are to be planted over seven years.