Why carbon credits matter

In Asia, the climate is warming nearly twice as fast as the global average. For countries like the Philippines and Singapore, the consequences are neither abstract nor distant. We are already seeing the impact today with stronger typhoons, harsher heatwaves, and steadily rising sea levels. Climate change is no longer only an environmental crisis but also a test of economic resilience, food security, and national survival. It is the defining challenge of our generation, one that demands international cooperation more than ever.

Carbon credits can be an important part of the solution, but only if they are designed and governed with integrity. At the core, carbon credits channel investment into mitigation projects that reduce or remove greenhouse gas emissions. Poorly managed, they can be dismissed as “greenwashing.” Done well, they can unlock resources for protecting forests and coastal areas, expanding renewable energy, or accelerating the retirement of coal plants. In short, credits can move capital into climate action that would not otherwise occur.

Many countries and entities are looking to purchase carbon credits as part of their strategy to meet climate targets. Even with the most ambitious decarbonization plans, it may not be possible to eliminate all emissions. High-quality, high-integrity carbon credits can address those gaps, representing real, additional, measurable, and permanent emissions reductions that are independently verified, while adhering to strict social and environmental safeguards.

Rich in biodiversity and renewable energy sources, the Philippines has great mitigation potential and is uniquely positioned to be a major player in the global carbon market. The government has already begun laying the groundwork. The Department of Environment and Natural Resources is developing the Philippine Carbon Regulations to anchor credits in verifiable, science-based actions. Other initiatives include the Philippine Greenhouse Gas Inventory Management System, to improve monitoring and transparency, and the 5 Million Trees Project by 2028, to restore forest ecosystems. The Department of Energy is finalizing a carbon credit policy for the energy sector this year, which will facilitate international partnerships, including with Singapore. Lawmakers are advancing key measures to strengthen the country’s decarbonization framework. The low carbon economy investment bill will require large emitters to develop decarbonization plans and invest in sustainable practices. Complementing this, the carbon rights bill aims to clarify the ownership of carbon benefits, which will build confidence among investors and communities alike.

The carbon credits space is where the partnership between Singapore and the Philippines shines. As a global green finance hub, Singapore works with like-minded countries to shape a credible global carbon market. Bilateral relations with the Philippines are strong and multifaceted, with climate cooperation emerging as a key area of strategic collaboration. In August 2024, both sides signed a memorandum of understanding on carbon credits cooperation under Article 6 of the Paris Agreement. We are now working toward a legally binding implementation agreement that will set the framework for generating and transferring high-integrity carbon credits. This will unlock additional mitigation potential in the Philippines, while supporting sustainable development, promoting investments, creating green jobs, uplifting local communities, and advancing both countries’ climate goals. Singapore has also signed implementation agreements with nine other countries, including Vietnam and Thailand.

Singapore companies have shown strong and growing interest in the Philippine carbon market, with some already embarking on innovative projects with local partners. One such initiative is the use of carbon credits to finance the early retirement of coal-fired power plants in the Philippines. This is a first-of-its-kind project which, if deployed at scale, could catalyze a significant new decarbonization pathway for Southeast Asia.

Building on this momentum, the Singapore Embassy in Manila, together with the Makati Business Club and the Philippines-Singapore Business Council, will host a High-Level Forum on Carbon Credits on Oct. 2. The forum will gather policymakers, investors and experts to take stock of progress and chart a path for deeper and more effective collaboration.

As climate-vulnerable countries, the Philippines and Singapore understand the urgency of accelerating mitigation. Our collaboration on carbon markets is a step in the right direction, one that will contribute to Asean’s broader sustainability agenda and create a safer, more prosperous future for generations to come.

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Constance See is the ambassador of the Republic of Singapore to the Republic of the Philippines.

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Business Matters is a project of the Makati Business Club. MBC and the Philippines-Singapore Business Council are organizing the High-Level Forum on Carbon Credits: Strengthening Philippine-Singapore Collaboration for Climate Action on Oct. 2.