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How Blockchain Plays a Role in Singapore’s Climate Change Efforts

Over the next decade, a carbon tax will play an important role in Singapore’s efforts to control climate change.

As it stands, companies emit at least 25,000 tonnes of greenhouse gases (GHGs) per year as regulated under the Carbon Pricing Act. Introduced in 2019, this requires them to submit an annual emissions report and pay a tax of S$5 per tonne of GHG emissions.

The tax rate will increase exponentially after 2023. It will be set at S$25 per ton in 2024 and 2025, S$45 in the next two years and up to S$80 in 2030. This is in line with the goal of making Singapore a net zero-emission country by 2050.

Increasing tax rates can have a significant impact on the cost of doing business. To help control this, the revised carbon tax framework will include subsidies that promote decarbonisation. Notably, businesses will be able to use international carbon credits to offset up to 5% of their taxable emissions.

Carbon credits are awarded by climate action projects aimed at reducing greenhouse gas emissions. Each credit is equivalent to one ton of emissions removed from the atmosphere. Companies can buy carbon credits to effectively combat the emissions they generate.

Barriers to trading carbon credits

Traditionally, the carbon credit market has faced a number of problems, including a lack of accessibility and transparency. They involve a number of middlemen responsible for verifying credits and facilitating trade.

Orchlon Enkhtsetseg, founder of Singapore-based climate technology startup URECA, explains: “The current system in place today for verifying and trading carbon credits is often inefficient, distributed and , bureaucratic and expensive.

Orchlon Enkhtsetseg, founder of URECA
Orchlon Enkhtsetseg, founder of URECA / Image Credits: URECA

This process requires pre-verification, certification and annual monitoring which will involve high cost and long time barriers. There is also a lack of liquidity, which is essential for efficient trading.

– Orchlon Enkhtsetseg, founder of URECA

This makes it difficult to participate, not only for businesses that buy carbon credits but also for those that produce them.

“Small renewable manufacturers are often intimidated by the sheer amount of paperwork, and therefore cannot even begin the process of trying to figure out if they qualify for the credits,” says Enkhtsetseg. carbon or not,” said Enkhtsetseg.

Carbon credits on blockchain

Using blockchain technology, URECA is making the market for carbon credits more accessible to all. Processes such as credit verification are being automated, allowing for cheaper and more efficient transactions.

Blockchain technology addresses some of the key shortcomings associated with the carbon credit market. These include improved transparency on the origin of credits, total chain of custody, decentralized registration and transparency as well as the ability to scale the market through the use of smart contracts. .

– Orchlon Enkhtsetseg, founder of URECA

With the help of URECA’s proprietary technology, households can generate revenue by installing solar panels and using them to issue carbon credits.

“Renewable energy produced by solar panels is verified at source and then validated through URECA’s machine learning validation and verification system.”

The renewable energy produced by these solar panels is automatically recorded as a blockchain-based certificate. “With this certificate, small renewable producers can sell their carbon credits directly on URECA’s decentralized exchange.”

Mongolian URECA
A solar panel set up for nomadic herders in Mongolia / Image credit: URECA

Currently, URECA is deploying its technology in Mongolia, in an effort to control pollution and promote renewable energy.

“Mongolia has an extremely harsh winter climate and people keep warm by burning wood and unrefined coal, making Ulaanbaatar one of the most polluted cities in the world,” Enkhtsetseg explains. prefer.

By switching to renewable energy, households can prevent 20 tons of coal from being burned annually. In addition, they can gain monetary benefits from the sale of carbon credits.

Over time, URECA also plans to expand to other Asian countries. Singapore is an important location for the company to facilitate this endeavor.

“The Singapore government has taken the lead in mobilizing resources and implementing policies to combat climate change. That is why we have chosen Singapore as our global headquarters.”

Singapore as a carbon trading hub

AirCarbon and MetaVerse Green Exchange (MVGX) are two other Singapore-based companies that operate their own blockchain-based carbon exchanges.

Launched in 2019, AirCarbon Exchange is the first exchange of its kind. Today, it provides global access to a wide range of carbon credits securitized in the form of tokens. Along with that, the platform has also offset its own emissions using carbon credits, making it the world’s first carbon negative trading platform.

carbon credit blockchain aircarbon
Screenshot of AirCarbon Exchange’s online platform

Currently, AirCarbon Exchange’s customers are mainly companies and accredited investors. This may change in the future, thanks to improved market access. “It is likely that many retail investors will be interested in adding carbon credits as part of their portfolios,” the company said.

MVGX is also strengthening Singapore’s carbon market through its proprietary tokens, providing a full view of the carbon footprint disclosure for both buyers and sellers.

mvgx
Image credit: MVGX

Already at the forefront of climate action, Singapore is well positioned to leverage its role as an important financial and commercial hub to bolster its proposition as a carbon trading destination. Blockchain-based innovations, such as the MVGX Carbon Neutral Token can help strengthen Singapore’s carbon market, as the country seeks to fulfill its sustainability obligations as part of its Green Plan 2030.

– Dr. Bo Bai, Co-Founder of MVGX

In early July, the Monetary Authority of Singapore CEO Ravi Menon spoke about Singapore facilitating the development of a voluntary carbon service ecosystem.

He cites AirCarbon Exchange and MVGX as examples among the 70 organizations currently providing carbon services in the country. It is home to the highest concentration of service providers anywhere in Southeast Asia.

For many years, Singapore has maintained a progressive stance on the development of blockchain technology. The carbon credit exchange is one of the most promising use cases – solving a real world problem – to emerge to date.

Featured image credit: URECA

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