DBS Bank (DBS), Singapore Exchange (SGX), Standard Chartered and Temasek have launched a joint venture to develop a carbon exchange and marketplace. The exchange, named Climate Impact X (CIX), aims to be a global exchange and marketplace for high-quality carbon credits. CIX will leverage satellite monitoring, machine learning and blockchain technology to enhance the transparency, integrity and quality of carbon credits that deliver tangible and lasting environmental impact.
Global efforts to address climate change have driven demand for solutions to help corporates effectively reduce their carbon emissions. However, today’s low-carbon technologies, including current renewable energy solutions, are unlikely to be enough in the near term. Research from BCG shows that such technologies may only reduce two-thirds of global emissions, which is insufficient to achieve the goal under the 2015 Paris Climate Agreement to limit global warming, preferably to 1.5oC. High-quality carbon credits can provide a practical solution to bridge this gap, especially in the near term, and play an essential role in a holistic climate mitigation strategy.
“Climate Impact X will provide a solution for corporates to address unavoidable carbon emissions in the near term and propel the development of new carbon credit projects worldwide,” Mikkel Larsen, interim CEO of Climate Impact X and chief sustainability officer at DBS, said. “With an initial focus on Natural Climate Solutions, the carbon credits will also create the impetus to address another grave risk of biodiversity loss and help serve local communities. CIX will build on collective action by global governments, corporates and individuals to achieve a net-zero economy.”
According to driven by corporate climate commitments, global demand for high-quality carbon credits in the voluntary carbon market is estimated to increase at least fifteenfold by 2030, up to 1.5 to 2 gigatons of carbon dioxide (GtCO2) annually McKinsey. Despite this forecast, there are still challenges to address in today’s market. For example, trust among investors and buyers may still be limited by a lack of transparency over the risks and effectiveness of carbon projects. As a result, suppliers may face challenges in developing new carbon reduction projects, resulting in liquidity issues.
“By facilitating a well-functioning marketplace with strong impact and risk data, CIX will enable efficient price discovery and catalyse the development of new projects,” Larsen added.
CIX will offer distinct platforms and products that cater to the needs of different buyers and sellers of carbon credits. These include the Exchange and the Project Marketplace, which are expected to be launched by the end of 2021. The Exchange will facilitate the sale of large-scale, high-quality carbon credits through standardised contracts, catering primarily to multinational corporations (MNCs) and institutional investors. In addition, the Project Marketplace will cater to a broader spectrum of corporates seeking to participate in the voluntary carbon market, offering them a curated selection of NCS projects that can help meet their sustainability objectives. Each project on the Project Marketplace will be supported by transparent environmental impact, risk, and pricing data.
Initially, CIX will focus on helping to catalyse the market for NCS, which involve the protection and restoration of natural ecosystems such as forests, wetlands, and mangroves. NCS are cost-effective and provide significant benefits by supporting biodiversity and generating income for local communities. Asia houses a third of the global supply potential and is, therefore, one of the largest suppliers of NCS globally. CIX will feature carbon credits from various high-quality NCS projects around the globe on its platforms. It is also in conversations with global rating agencies to provide independent ratings to these projects.
In addition, CIX will be guided by an International Advisory Council, an independent expert body comprising non-governmental organisations, leading corporates and project developers, and academics and thought leaders. CIX will also work with an ecosystem of global partners and international working groups, including the Taskforce on Scaling Voluntary Carbon Markets (TSVCM) and the Natural Climate Solutions Alliance, to align leading standards for quality and integrity.
“It is becoming increasingly apparent that the world requires a carbon market of the highest international standards,” Piyush Gupta, chief executive officer, DBS, said. “As a leading global financial and trading hub, supported by strong regulatory frameworks, Singapore is well placed to lead such sustainability efforts. To catalyse the development of new carbon credit projects, there is a need for more high-quality carbon credits and the active cross border trading of such credits to drive global price transparency. We look forward to galvanising change by gathering like-minded industry leaders to a centralised world-class platform, scaling the global voluntary carbon market, and expediting the transition to a low-carbon economy.”