Five Facts to Know: Climate Impact X: Singapore's New Carbon Exchange

Voluntary carbon markets could play a role in achieving net-zero emissions, yet they have long been beset with integrity and pricing issues. Quality concerns have affected land use, land use change and forestry (LULUCF) and have also avoided deforestation carbon credits (REDD+). A new carbon trading platform in Singapore, known as Climate Impact X (CIX), could help corporates achieve their net-zero targets by complementing their own decarbonization efforts with nature-based high quality carbon credits.

Here are five facts to know about the Singapore carbon exchange:

1. Climate Impact X aims at becoming the main carbon asset trading platform in APAC

The voluntary carbon markets are currently estimated at USD 2 billion and are forecast to grow five-fold by 2030. CIX aims to become a world-class carbon exchange in order to capture a substantial market share of this rising global demand for high-quality carbon credits. Despite criticisms of voluntary carbon markets for exaggerated claims of emissions reduction or avoidance, these markets may constitute an important additional tool in businesses’ ability to reach net zero beyond their own decarbonization efforts. CIX’s ambition is to attract sufficient trade volume to become a carbon credit price setter in the voluntary carbon market in APAC and possibly beyond. On CIX’s first day of operation, participants exchanged emissions reductions equivalent to 12,000 tons.

2. CIX has reputable backers, allowing it to deploy two digital platforms

CIX was established as a joint venture among Singapore Exchange, public investor Temasek, and two financial institutions DBS and Standard Chartered. Currently, CIX is operating via two platforms:

• A “Carbon Exchange,” which allows for the trading of large volumes of carbon credits. This platform caters to large-scale buyers, including multinational corporations and institutional investors, looking to pool high volumes of carbon credits across multiple projects. The exchange has already attracted trades from Chevron, Vitol, Standard Chartered and China’s CICC.
• A “Project Marketplace,” which is built for custom purchases, allows buyers to buy carbon credits directly from specific projects. This platform is well-suited for small and midsize enterprises (SMEs) looking to address specific sustainability challenges.

3. CIX's success will depend on ensuring the integrity of traded assets

The acceptance of voluntary carbon credits in the pursuit of Paris-Agreement compatible decarbonization efforts, rests on both market integrity and asset quality. Key to these efforts is adopting stringent monitoring, reporting, and evaluation criteria. To that end, CIX is advised by an international advisory council and has committed to:

• Consider asset contribution to climate mitigation, biodiversity, and social impacts using established international standards like Verra (VCS).
• Deploy its own screening and monitoring process, including via satellite monitoring.
• Banning, phasing out, and/or reducing the production, consumption, and use of chemicals and polymers of concern
• Assess project governance and inputs from independent ratings groups (like Sylvera).

4. CIX mainly trades nature-based assets but is likely to be opportunistic

Currently, CIX’s traded asset categories have focused on nature-based assets, currently listing 34 single nature-based projects that have been verified by Verra and curated from around the world. Examples include:

• Forestry projects to contribute additional forest cover and efforts to reduce emissions from deforestation and forest degradation (REDD+ projects).
• Blue carbon projects that protect coastal and marine ecosystems, particularly through the revitalization of mangroves

CIX is also likely to develop trading beyond nature-based assets. Clean cookstove projects, for example, which provide alternatives to open-fire cooking, reduce emissions by halting environmental degradation and may also be included in the future.

5. Price transparency will provide comfort to counterparties

CIX utilizes Nasdaq’s Marketplace Services Platform to improve price transparency through a seamless trade matching process. It therefore allows buyers to easily buy and retire verified carbon credits. This technology can give buyers insight into the diverse attributes that influence an asset’s price. It will also match buyers and sellers based on unique requirements, ensuring buyers procure credits that meet their needs.