SINGAPORE – In just over a year since its launch, a Singapore-backed effort to improve the credibility of the carbon credit trade has grown to cover 85 per cent of all credits issued to date and is set to expand coverage even more in 2024, a senior government official said.

Known as the Climate Action Data Trust (CAD Trust), the platform was launched in late 2022 by the Government, World Bank and the International Emissions Trading Association to boost trust in the global carbon market.

“The main reason why Singapore supports CAD Trust is really about enhancing transparency,” Mr Benedict Chia, director-general of climate change at the National Climate Change Secretariat, told The Straits Times in an interview on March 15.

“We needed to get a good sense of tracking the various flows and transactions of carbon credits,” he said.

Singapore wants to be a global carbon trading and financing hub, and tools like CAD Trust are a key part of achieving this goal. Greater transparency will help to improve confidence in carbon markets, which is something the markets are struggling with amid concerns about the quality of carbon credits.

“Within 12 months, we managed to onboard six registries, and the six registries represent 85 per cent of carbon credits issued to date,” said Mr Chia.

The six include Verra, the world’s largest carbon credit issuer for the voluntary carbon market, Qatar-based Global Carbon Council and the Kingdom of Bhutan.

The aim is to expand this by bringing on board most of the large independent registries by the end of June, Mr Chia added.

There are at least 26 carbon credit registries in the world, each with its own system of tracking the issuance, transfer and retirement of carbon credits from various project developers. Registries can be operated by governments, non-profit organisations or private companies.

Discussions are ongoing with Gold Standard in Geneva, and three United States-based groups: the American Carbon Registry, Architecture for Redd+ Transactions and Climate Action Reserve.

National registries, many of which are still in development, will also be brought on board over time, Mr Chia said.

CAD Trust’s purpose is to improve transparency in the often opaque world of carbon credit trading by tracking the full life cycle of carbon credits – from the projects that generate the credits, to who buys them and who finally “retires” them by using the credits to offset their carbon footprint.

The retirement of carbon credits takes them out of circulation, preventing the same credit from being claimed by more than one party.

Each carbon credit represents one tonne of planet-warming carbon dioxide (CO2) that is either removed from the atmosphere – such as through technology that directly removes CO2 from the air – or prevented from being emitted, such as when a forest is saved from the axe.

Emitters can meet their climate change targets, such as the goal to taper planet-warming emissions to net zero by the middle of the century, by buying credits from carbon projects around the world and counting the emissions savings from those projects as their own.

As many carbon projects tend to be located in developing countries, the revenue from carbon credits also helps to channel investments into climate-friendly projects in these areas.

But the diversity of carbon credit registries makes it difficult to ensure that the same carbon credit is not counted twice, since each credit could be cross-listed on multiple registries.

What CAD Trust does is to link, aggregate and harmonise the data from major carbon credit registries using blockchain technology. This provides an integrated platform that will improve transparency of the market, and increase trust and confidence that the global trade in carbon credits truly benefits the climate, said Mr Chia.

To help visualise the data, CAD Trust also developed an interactive data dashboard. This took a year to develop and was launched during the COP28 United Nations climate change conference in Dubai in December 2023.

The dashboard allows users to track carbon offsets generated by more than 17,300 projects approved by the six registries.

CAD Trust executive director Dinesh Babu said: “CAD Trust is unique. Nobody has attempted to do this before.”

Users can track where the credit is, where it originated, who is holding the offset right now and what purpose it is being used for.

Mr Chia, one of CAD Trust’s three board members, said: “That injects transparency in the market, and we feel that transparency is absolutely critical if you want carbon markets to work well.”

But the US$2 billion (S$2.7 billion) carbon market has been overshadowed in recent years by criticism about poor-quality offsets from projects that failed to achieve the emissions reductions as planned, double counting and limited co-benefits, such as excluding local communities from a protected forest or monoculture forest plantations having no beneficial biodiversity outcome.

Going forward, the market is set to focus more on high-integrity offsets that have clear climate, social and biodiversity benefits.

“It is becoming increasingly important that credits, when they are being generated, result in benefits that flow through more widely,” said Mr Chia.

The issues of transparency and integrity are only going to become more important as the carbon market expands, he noted.

Under the Paris Agreement, countries are allowed to buy carbon credits to meet their national climate pledges.

This means that other than taking steps to cut emissions within their borders, such as by investing in renewable energy infrastructure, countries can purchase carbon credits generated elsewhere and count these savings towards their target.

Countries can either purchase these credits from another country through a bilateral agreement or buy them from a new carbon credit market administered by the UN. The mechanisms for this UN market are still being negotiated but could be finalised in the next year or two.

“You have credits generated by different registries, which are then transferred to maybe a private sector company, transferred to a country, and they move all over the place. This underlines the importance of CAD Trust because it shines a light and makes it very transparent where all the credits are flowing and being used within this more diverse landscape,” said Mr Chia.

Leading market participants ST spoke to said CAD Trust is playing an important role.

“CAD Trust has had a good start,” said Mr Law Heng Dean, managing director at Pollination, an international climate change investment and advisory firm, and co-leader of its Singapore office.

“Going forward, CAD Trust will need to get more national registries on board – especially those from major demand and host countries – to be more effective.”

He added: “All of us will benefit if it works as intended in building trust in carbon markets, the lack of which is a challenge that all of us operating in those markets can face at this point in time.”

Mr Duncan van Bergen, co-founder of carbon credit ratings company Calyx Global, said: “The transparency and interoperability that CAD Trust is creating between registries is another key building block towards a more accessible and scalable global carbon market.”

Funding for the platform remains a question mark. Mr Chia said that as the service is a public good, it must remain free. The Government has helped fund CAD Trust from the start and continues to provide support, he added.

“We need to demonstrate that the product is valuable. And we also need to work with different stakeholders to see how best they are able to support this platform,” said Mr Chia, adding that these stakeholders could include foundations and other governments.

Mr Dinesh said he is in discussions with potential funders. He said CAD Trust had received a grant from Google.org, the charitable arm of Google, to help fund early development of the platform, and he is looking for similar support from other foundations and governments.

He also pointed to the strong interest in the platform, with the data dashboard receiving 730,000 visits since its launch in December 2023. The top five source countries for visitors are the US, Britain, Singapore, India and Canada.

This reflects the strong international interest in Asia and Singapore because of growing investment in carbon credit projects, especially nature-based projects, in this region, he added.