Singapore Issues Draft Guidance to Enhance Carbon Credit Use

In a strategic move to build trust, transparency, and momentum in the Voluntary Carbon Market (VCM), Singapore has released a draft guidance document on the credible use of carbon credits. The announcement—made jointly by the National Climate Change Secretariat (NCCS), Ministry of Trade and Industry (MTI), and Enterprise Singapore (EnterpriseSG)—signals the nation’s growing leadership in shaping high-integrity carbon markets in Asia and beyond.

With a strong call for public feedback by 20 July 2025, the draft guidance is poised to become a cornerstone of Singapore’s broader climate and sustainability strategy. It is designed to help companies across sectors effectively integrate carbon credits into their net-zero pathways, especially when it comes to tackling hard-to-abate emissions.

New Framework Aims to Boost Market Confidence and Decarbonisation Integrity

Carbon credits are market-based instruments that represent verified reductions or removals of greenhouse gas (GHG) emissions. These credits are critical in complementing internal decarbonisation efforts, especially for industries where direct emissions reductions are technically or economically challenging.

But the voluntary carbon market, despite its immense potential, has faced reputational headwinds due to inconsistent standards, opaque claims, and uncertainty around credit quality.

To address these challenges head-on, Singapore’s draft guidance introduces core principles to guide the voluntary use of carbon credits, providing clarity for both users and developers. The framework was developed in consultation with industry stakeholders and the Singapore Sustainable Finance Association (SSFA), ensuring both regulatory and practical perspectives are well-represented.

Aligning With Global Standards for Trust and Transparency

A key feature of the guidance is its alignment with international norms, including provisions under Article 6 of the Paris Agreement, wherever applicable. This alignment ensures interoperability with other global markets and supports companies in navigating cross-border sustainability disclosures and trade regulations.

The document stresses that carbon credits must exhibit high environmental integrity, verified through rigorous, science-based methodologies. It further encourages companies to prioritise internal emissions reductions first and only then use carbon credits for residual emissions that are not yet feasible to abate.

Importantly, the guidance clarifies that corresponding adjustments, often used in regulated carbon trading under Article 6, are not required for voluntary credit use, since these credits do not count toward national emissions targets.

Creating a Vibrant and High-Integrity Carbon Ecosystem

The draft guidance is a building block in Singapore’s long-term vision of creating a vibrant, high-integrity carbon services ecosystem. Several related policies and programmes have already laid the groundwork:

• Carbon tax-liable companies in Singapore can now offset up to 5% of their emissions with eligible Article 6-compliant carbon credits, providing regulatory support for voluntary offsetting.
  
• Companies are also required to disclose the role of carbon credits in their emissions strategies, using reporting frameworks aligned with the International Sustainability Standards Board (ISSB).
  
• The Carbon Project Development Grant provides direct financial support to encourage the supply of high-quality, locally originated carbon credits, further strengthening domestic capacity.
  

Industry-Led Action: SSFA and ASEAN Collaboration

While the government lays the regulatory foundation, the private sector is stepping up to accelerate adoption and innovation.

The Singapore Sustainable Finance Association (SSFA) is conducting a nationwide survey to inform the creation of a Claims Guidance Code, which will set standards for how companies communicate their carbon offset claims to consumers and investors.

In addition, Singapore is working with ASEAN partners under the Common Carbon Framework to foster a regional carbon market that supports both supply and demand of quality credits. These collaborative efforts are key to achieving a scalable, interoperable market that can unlock cross-border financing for climate solutions.

Strengthening Credibility and Investor Confidence

The release of this draft guidance also comes at a critical time for global capital flows. As institutional investors increasingly demand credible ESG disclosures, companies need structured pathways to incorporate carbon offsetting as part of a science-based decarbonisation plan.

This move by Singapore sends a powerful signal to global markets: high-quality carbon credits are not greenwashing tools, but powerful levers for financing emissions reductions, especially in emerging economies where climate financing gaps are most acute.

By embedding credibility and consistency into carbon claims, Singapore aims to turn voluntary carbon markets into trusted instruments of climate finance, capable of mobilising both private and public capital at scale.

Public Consultation Invited: Deadline 20 July 2025

The government has invited businesses, civil society, academics, and the general public to share their feedback on the draft. The consultation remains open until 20 July 2025, and insights from stakeholders will inform the final version of the guidance, expected to be released later this year.

This open and inclusive approach reflects Singapore’s commitment to co-creating policy with stakeholders, a hallmark of the country’s success in balancing economic development and environmental stewardship.

Driving Climate Leadership in Asia

As a global financial and trading hub, Singapore is uniquely positioned to become the Asia-Pacific hub for carbon services, including verification, project development, risk assessment, and trading infrastructure. This new guidance further cements its role as a trusted marketplace for climate finance and an enabler of corporate climate leadership.

The guidance also reflects Singapore’s pledge to reach net-zero emissions by 2050, and supports its wider efforts under the Green Plan 2030. It’s a strong step toward helping companies align profit with planet, turning sustainability goals into measurable, verifiable action.

From Confusion to Confidence

By introducing a clear, internationally aligned, and practical framework, Singapore is bridging the gap between ambition and action in the voluntary carbon space. The draft guidance on carbon credits is not just a policy document — it is a strategic tool for climate credibility, innovation, and investment.

Companies now have a clearer roadmap to use carbon credits responsibly, transparently, and with integrity. The call to action is clear: decarbonisation is a shared journey, and high-integrity carbon credits are key enablers in reaching that destination.

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