The voluntary carbon market (VCM) stands as one of the most dynamic arenas in the global effort to combat climate change, with its potential for growth and impact becoming increasingly evident. Industry data reveals that the VCM traded nearly 111 million tons CO2e of carbon credits in 2023. These volumes highlight significant investments by major companies in carbon compensation initiatives and reflect how organisations are integrating these credits into their net zero strategies.
In this report, we explore the characteristics of the VCM market, focusing on the developments in Southeast Asia, market challenges, key players, project types, and attributes of different credits. Our analysis also highlights critical considerations for organisations looking to participate in the VCM, emphasising the need for a strategic, well-planned approach to navigate this complex and rapidly evolving landscape.
Carbon market trends in Singapore ^
Under the Singapore Carbon Pricing Act, Singapore government has implemented carbon tax since 1 January 2019. From 2024 onwards, carbon tax liable facilities in Singapore will be allowed to use high quality international carbon credits to compensate up to five percent of their taxable emissions.
To facilitate this, Singapore has signed implementation agreements (IAs) with a couple of countries. These partnerships aim to ease collaboration on carbon projects and collectively advance global climate action towards the Paris agreement and Article 6.
Singapore has also signed agreements with organisations including Verra and Gold Standard to enable Singapore’s carbon tax liable facilities to utilise carbon credits issued by these organisations to fulfill portions of carbon tax obligation on carbon credits.
Singapore has made progress in the carbon exchange space since 2021, with developments aimed at enhancing the VCM. Efforts have included offering services such standardised spot contracts and facilitating the trading of millions of tonnes of carbon credits. Furthermore, plans have been announced for Singapore to develop a carbon futures contract, enabling more efficient risk management and price discovery mechanisms within the VCM.
Download the full report for carbon market trends of other Southeast Asian countries.
Integrating carbon credits integrity into a sustainability strategy
Integrity in the carbon market is critical concern in today's landscape. Challenges across the market value chain underscore the need for proper due diligence. One major risk is "over crediting," where credits may not reflect to actual emissions reductions, exposing buyers to accusations of greenwashing. To mitigate these reputational risks, it is important to implement rigorous processes that ensure purchased credits align with verifiable reductions.
Efforts to strengthen integrity are already underway, with initiatives such as Singapore’s push for greater transparency in carbon markets. As newer standards evolve, such platforms offer a unified source of credibility, which is vital for increasing market participation. For stakeholders, it is imperative to adhere to both international and domestic regulations, meticulously screen project methodologies, and align with internal policies.
Download the full report to uncover more insights, carbon market trends and key considerations.
How we can help
KPMG, as a global professional services firm, is uniquely positioned to assist clients in navigating and engaging with carbon markets. Our extensive global presence and cross-functional approach enable us to identify high-integrity reduction opportunities and manage the complexities of international transactions effectively. We have earned the trust of some of the world's largest clients by designing robust strategies for their carbon market engagements.
Furthermore, KPMG teams collaborate globally with non-governmental organisations, governments, and other stakeholders to advocate for the development of rules and standards. KPMG’s advocacy ensures that transparency and integrity within carbon markets continue to evolve, facilitating efficient market and participation for all stakeholders.
^ From Ministry of Sustainability and the Environment, 2024 (https://www.mse.gov.sg/resource-room/category/2024-05-27-press-release-singapore-signs-implementation-agreement-ghana-carbon-credits). Copyright 2024 Ministry of Sustainability and the Environment.
