On April 1, 2025, Singapore and Peru signed an Implementation Agreement on carbon credits collaboration under Article 6 of the Paris Agreement.
The Implementation Agreement was signed virtually by Singapore’s Minister for Sustainability and the Environment and Minister-in-Charge of Trade Relations, Grace Fu, and Peru’s Minister of the Environment, Juan Carlos Castro Vargas. This marks Singapore's first such agreement with a Latin American country and its fourth overall, following agreements with Papua New Guinea, Ghana, and Bhutan.
Following the signing, both countries will initiate the ratification process and implement the Agreement.
The Implementation Agreement establishes a structured framework for the generation and transfer of carbon credits from carbon mitigation projects aligned with Article 6 of the Paris Agreement.
Project developers can leverage this framework to develop high-quality carbon credit projects that are aligned with the Article 6 rulebook. Information on the authorization process for these carbon credit projects and the eligible methodologies under the Implementation Agreement will be released in due course.
Under the framework, carbon credits will undergo corresponding adjustments to prevent double counting of emission reductions. The immediate priority for the two countries is to establish a pipeline of Article 6 carbon credit projects for authorization.
Peru’s national RENAMI registry features projects aligned with Paris Agreement Article 6, designed to issue Internationally Transferred Mitigation Outcomes.
The Article 6 Implementation Agreement Factsheet states that carbon credits authorized with corresponding adjustments may be used for various purposes, including:
- Offsetting up to 5% of a company’s taxable emissions under Singapore’s International Carbon Credits (ICC) framework from January 1, 2024, subject to eligibility.
- Fulfilling compliance obligations under binding mandates, such as Nationally Determined Contributions (NDCs) and international mitigation initiatives, e.g., the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).
As part of this agreement, Singapore will allocate 5% of the financial value from its authorized carbon credits to climate adaptation efforts in Peru.
To contribute towards a net reduction in global emissions, Singapore has committed to canceling 2% of the authorized carbon credits under this agreement at the point of first issuance. These canceled carbon credits cannot be traded, sold, or counted towards any nation’s emission reduction targets.
Singapore implemented the first carbon pricing scheme in Southeast Asia in 2019. The carbon tax was set at S$25/tCO2e from 2019 to 2023. The carbon tax price was raised to S$25/tCO2e with effect from 2024. It will be raised to S$45/tCO2e in 2026 and 2027, with a view to reaching S$50-80/tCO2e by 2030.
The country has stated that this increased price will enhance the incentive for businesses and individuals to reduce their carbon footprint in alignment with national climate goals. In Singapore, the carbon tax applies to all facilities emitting at least 25,000 tCO2e annually.
Singapore's Implementation Agreement with Peru under Article 6 of the Paris Agreement presents several potential benefits:
- Diversification of Carbon Credit Sources
By partnering with Peru, Singapore gains access to a broader range of high-quality carbon credits, reducing dependency on a limited number of suppliers and strengthening the resilience of its carbon market.
- Meeting Climate Targets
The agreement enhances Singapore's ability to achieve its national climate change targets by enabling the use of internationally transferred mitigation outcomes (ITMOs) from Peru.
- Supporting Climate Adaptation in Peru
Singapore's commitment to channeling a percentage of the carbon credit proceeds towards climate adaptation measures in Peru provides financial support for climate resilience efforts in the Latin American nation.