Singapore looks to Africa for carbon credit opportunities

For a small nation, Singapore plays an outsize role in various areas. After success with commodity trading, shipping and aviation, the latest area where the city state is punching well above its weight is in the carbon markets. The country has also been a frontrunner in establishing a carbon tax, as part of its efforts to reach net zero by 2050. Companies that exceed emission thresholds must either pay a tax or offset their emissions through purchasing credits. The advent of this regulated carbon market has also helped Singapore, a major regional financial centre, position itself as a hub for carbon trading.

Under a framework introduced in 2022, a key feature of Singapore’s carbon market is that companies can purchase credits issued in countries that have signed deals with Singapore under Article 6 of the Paris Agreement struck at COP21 in 2015. The implementation of Article 6, which provides for the cross-border trading of carbon credits, was delayed for almost a decade, but a breakthrough was finally agreed at COP29 in Baku last year to allow mechanisms to be fully operationalised.

Singapore has been quick off the mark in signing deals under Article 6 with a range of countries, including Ghana. These deals create a process for carbon credit projects to be assessed to ensure they meet both countries’ standards of integrity, before the projects can issue credits to purchasers in Singapore.

With these key regulatory steps resolved, the door is open for Singapore to drive the development of carbon projects well beyond its shores. Carbon project developers in Africa are gearing up for the race to secure offtake agreements with Singapore-based purchasers.

Driving carbon finance

Singapore is far from unique in establishing a carbon tax scheme that allows polluters the option of offsetting part of their emissions. However, many countries with regulated carbon markets currently require that offsetting occurs within their national borders – Australian companies, for example, must offset their emissions within Australia itself. But as a small island, this approach is not viable for Singapore. The Singaporean government has therefore been eager to take the lead in signing bilateral deals under Article 6.

The approach pioneered by Singapore is “super exciting,” says Douglas Greenwell, commercial director for carbon at BURN, a company that issues carbon credits through its clean cooking projects. “It’s created a model which others most definitely are following.”

“Ultimately, what Singapore is doing is providing the opportunity to drive finance into certain markets,” Greenwell points out. So far, Singapore has signed 24 bilateral agreements under Article 6 – the second most of any country after Japan. These deals include full implementation agreements with Rwanda and Ghana, as well as memoranda of understanding (MoUs) with Kenya, Zambia, Morocco and Senegal.

Greenwell also welcomes that Singapore has sent an important “signal” by making credits issued by cookstove operators eligible for purchase by Singaporean companies. The sector has been experiencing a “crisis of confidence,” he acknowledges, as a result of several cases of cookstove project operators being accused of overstating their carbon benefits. Developers and standard-setters have responded with new methodologies designed to assure the market that clean cooking projects can offer “high integrity” in avoiding carbon emissions from highly polluting fuels, while also reducing deforestation and protecting families from indoor air pollution.

A report published by Ghana’s environment ministry shows 19 projects under the Ghana-Singapore agreement were under consideration as of March 2025, including two projects being developed by BURN and several others spearheaded by other cookstove developers.

A global hub

As well as pioneering the international trade of carbon credits for its regulated carbon market, Singapore has increasingly assumed an important role in driving the development of the voluntary carbon market globally. Alongside Britain and Kenya, Singapore announced the Coalition to Grow Carbon Markets in June. The coalition aims to strengthen voluntary demand for carbon credits through issuing a set of principles that will encourage consistency in how credits are used across jurisdictions.

In a statement, Grace Fu, Singapore’s minister for sustainability and the environment, said that the coalition was created in response to the need to “energise the carbon markets” and foster investor confidence.

“Singapore will play a meaningful role in catalysing the development of the voluntary carbon market as a financial and services hub, and through our investments in decarbonisation projects globally.”

The key place of Singapore in the carbon market is highlighted by the city state’s role as a hub for carbon trading. At least 120 carbon-trading firms and other service providers are based in Singapore.

Singaporean carbon exchange Climate Impact X – a joint venture established by several financial institutions – launched a platform for spot trading in carbon credits in June 2023. This allows carbon credits to be bought and sold by traders, in a somewhat similar way to how stocks and shares are traded in financial marketplaces. Singapore is also home to AirCarbon Exchange, a trading platform that originally focused on the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) and has since expanded as a digital exchange for multiple environmental instruments.

Focus on nature

Singapore-based investors are particularly keen to explore opportunities in Africa for nature-based projects. “Africa is a very, very important continent for us to focus on,” says Ling Min Hoon, investment director at Singapore-based carbon investment firm GenZero. She adds that the opportunity to contribute positive community impacts through investing in carbon projects in Africa is “very compelling,” with carbon projects potentially able to offer a supplementary source of income to agricultural communities.

For example, GenZero has invested in an agro-forestry project being developed by Singaporean-based AJA Climate Solutions in Ghana, which aims to restore 100,000 ha of degraded land through planting native trees alongside cocoa crops.

The aim is to help farmers diversify their incomes by harvesting fruits from the trees as well as the cocoa, at the same time as increasing carbon sequestration.

The Article 6 deal between Ghana and Singapore is a “powerful tool,” Hoon says, to stimulate demand from Singaporean companies that could use credits from Ghana to offset their carbon tax liabilities. The Singaporean government itself issued a tender for nature-based carbon credits last year, as it seeks to purchase credits to meet its national-level carbon reduction goals.

Hoon adds, however, that the Article 6 deal is far from the only reason for choosing to invest in a project in Ghana. Equally important is the availability of local skills and project developers. In fact, GenZero has also invested in projects in African countries – such as South Africa – that do not yet have Article 6 agreements with Singapore. An Article 6 agreement, Hoon summarises, is “nice to have, but it’s definitely not a prerequisite”.

“We see ourselves as an international, global investor, where we are investing into both the voluntary as well as the compliance markets,” she says. “As long as we’re getting good demand signals either from the voluntary or compliance markets, I think we can be very open minded as an investor.”

Overall, the continued demand for nature-based carbon projects means that GenZero is eager to deepen its presence in Africa still further. “We have a lot of interest to continue exploring other projects, either within the existing countries that we are already invested into, or additional countries within the continent,” says Hoon.