By Sim Ting, Adrian Ang and Tay Yong Seng
The world is not on track to maintain global warming at 1.5 oC above pre-industrial levels. Climate finance needs to scale by a magnitude of at least five-fold annually, as quickly as possible, to avoid the worst impacts of climate change.
As the world strives to meet ambitious targets under the Paris Agreement, the role of carbon markets, especially the voluntary carbon market, has emerged as a significant catalyst for potential investments in climate action.
Carbon markets can help bridge the financing gap for both technology-based and nature-based climate solutions. However, the growth and potential of the carbon markets are tethered closely to the clarity and robustness of their governing frameworks and standards, including the underlying legal framework. Without legal clarity, carbon markets (taken as a whole) face fragmentation, inefficiency, and diminished trust among participants, undercutting their strength as a tool for driving climate action.
In this paper, we aim to raise awareness of how clarity as to the legal character of voluntary carbon credits can enable the scaling of the voluntary carbon market and climate finance. We explore some of the underlying legal principles and recent case law applicable in Singapore. In light of these, we argue that clarity on the legal characterisation of voluntary carbon credits is not only desirable but necessary.
Acknowledgments
This report titled “The Legal Character of Voluntary Carbon Credits: A Way Forward” is jointly produced by GenZero and Allen & Gledhill LLP.
The authors are grateful to Danielle Yeow, Adjunct Senior Research Fellow and Lead for Climate Change Law and Policy at the Centre for International Law, and Joyce Lai, Executive Director, Group Legal and Compliance, DBS Bank, for providing their input on this report.
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