Joint Paper Launched to Enhance Legal Clarity for Voluntary Carbon Credits in Singapore

GenZero, a Temasek-owned investment platform company focused on accelerating decarbonisation, has launched a legal paper jointly authored with leading law firm in Singapore, Allen & Gledhill LLP.

Titled “The Legal Character of Voluntary Carbon Credits: A Way Forward”, the paper examines the importance of clarifying the legal characterisation of voluntary carbon credits (VCCs) and offers a possible characterisation of VCCs as intangible property in Singapore. It also calls for action by governments to articulate a position.

The paper shares views that VCCs may be characterised as “intangible property”. This is not only supportable by existing legal principles in Singapore, but is also beneficial as it provides market participants with a sound commercial basis to transact and manage risk, especially in the context of:

  • Buying and Selling VCCs: Which will enable market participants to confidently claim title to VCCs which they purchase.
  • VCCs as Collateral for a Loan: Which will provide certainty to financial institutions on how they can take VCCs as collateral that can be enforceable.
  • Trusts, Property, and Insolvency: Which will give clarity to the priority of claims over VCCs in the event of the owner becoming insolvent. The ability to create trusts over VCCs will also enable project development and create a more liquid carbon market.

 Further, the paper highlights the pathfinder role that Singapore can play in articulating a position as there is a strong tendency for the ecosystem to converge around jurisdictions where there is a relatively high degree of clarity.

“Gaps within the voluntary carbon market limit the ability for market participants to fully leverage carbon markets and unlock its potential for carbon finance. We believe that legal clarity on VCCs will be welcomed by all in the carbon ecosystem, from the financial institutions and investors to the corporates and end-users. Together, we hope that this paper will help galvanise action and cement Singapore’s leadership as a carbon hub that is at the forefront of scaling carbon markets,” said Sim Ting, General Counsel at GenZero.