The grant, available until 31 October 2028, aims to ease upfront cost barriers for banks, insurers and asset managers developing carbon market capabilities.
Carbon markets are critical to the global net-zero transition by directing private capital into emissions reduction projects, said MAS in a statement on 27 October. Yet growth has been constrained by weak demand, limited high-quality supply, and underdeveloped market infrastructure.
MAS said the new funding would help financial institutions build expertise, structure transactions and underwrite risk mitigation products – key components for scaling high-integrity carbon trading.
The grant will co-fund manpower, professional services and transaction-related costs for activities such as carbon credit project financing, fund structuring and insurance underwriting, according to Singapore’s central bank and the financial regulator.
It will also support companies purchasing carbon insurance from Singapore-based brokers and insurers. Funding, which covers 50 per cent of eligible expenses, is capped at S$1.2 million (US$924,000) over three years for capability-building activities and S$500,000 (US$385,000) for qualifying transactions.
The new grant “builds the foundation for sustained financial sector involvement in carbon markets,” positioning Singapore as a key player in financing the global low-carbon transition, MAS added.
Singapore has been at the forefront of signing bilateral agreements for carbon trading under the Paris Agreement, which allows countries to help each other meet their climate targets through carbon markets. It has signed implmentation agreements with 10 countries and memoranda of understanding with another 14.
Recently, the Integrity Council for Voluntary Carbon Markets, which has standards for high-integrity carbon credit projects, opened its first physical office in Singapore, focused on the Asia Pacific region.
The city-state introduced Southeast Asia’s first carbon tax in 2019, which is set to rise from S$25 (US$20) per tonne of emissions in 2024 to as much as S$80 (US$62) by 2030, according to the National Climate Change Secretariat. Under the scheme, companies can use approved international carbon credits to offset up to 5 per cent of their taxable emissions.
MAS has also been active in developing carbon market infrastructure, co-authoring a paper with McKinsey & Company on “transition credits” – instruments linked to the early retirement of coal plants – and forming the TRACTION coalition in 2023 to address system-wide barriers.
