New global carbon exchange to launch in Singapore by year-end

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SINGAPORE - A new global exchange and marketplace for high-quality carbon credits is set to launch in Singapore by the year-end, backed by banks DBS and Standard Chartered, Singapore Exchange and state investor Temasek Holdings, the companies said on Thursday (May 21).

Under increasing pressure to cut carbon emissions and lay out sustainability plans, firms need carbon credits to offset emissions they are unable to remove from their operations.

A global private sector task force on scaling up the voluntary carbon market said last year the market would need to grow 15-fold to around 2 billion tonnes of carbon credits a year by 2030, with new trading products needed to enable companies to meet goals set under the Paris climate agreement.

Climate Impact X (CIX), the proposed Singapore-based exchange and marketplace, a joint venture between the four companies is set to launch by the end of 2021, executives told a news conference.

It aims to capitalise on Singapore’s reputation as one of the world’s leading financial and trading hubs, supported by a strong regulatory framework, Ravi Menon, managing director of the Monetary Authority of Singapore, told the news conference.

“CIX is a promising solution to the problem we face today of fragmented carbon credit markets characterised by thin liquidity and credits of questionable quality,” he said.

CIX will leverage satellite monitoring and blockchain technology to boost transparency, integrity and the quality of carbon credits.

“While there are international markets, there would be a strong preference by participants to trade in markets located close to where the projects are based,” Andrew Koscharsky, chief commercial officer at iSwitch, an electricity retailer in Singapore, told Reuters.

“This exchange will provide all parties with additional levels of transparency and liquidity,” he said.

CIX’s initial focus will be to catalyse the market for natural climate solutions, which involve protection and restoration of natural ecosystems such as forests, wetlands and mangroves.

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Executives are hopeful that CIX’s proximity to Southeast Asia, a fertile ground for nature-based solutions, will enable it and its partners to work with project developers to procure supplies of high quality carbon credits.

“The massive growth in net zero commitments and the massive growth in voluntary carbon requirements over the next decade mean there’s going to be a huge multi billion dollar opportunity to create a trading asset class,” said Piyush Gupta, CEO of DBS.

CIX will also have an international advisory council, comprising experts from non-governmental organisations and companies, among others.

Critics of carbon offsets say they allow emitters to continue to release greenhouse gases.

The voluntary carbon offset market differs from compliance, or cap-and-trade schemes, enshrined in law, which set a finite carbon budget and allow emitters to trade allowances.