International Carbon Credits and the 5 per cent carbon tax offset

What an International Carbon Credit is

A carbon credit represents one tonne of carbon dioxide equivalent that was reduced or removed somewhere else - a reforestation project, a cleaner cookstove programme, a landfill gas capture scheme. International Carbon Credits (ICCs) are credits that Singapore has decided are good enough to accept against its carbon tax.

The allowance is capped at 5 per cent of taxable emissions, effective 1 January 2024. The remaining 95 per cent must be paid in cash. The cap is what keeps the tax a tax: it cannot be neutralised by buying credits.

The eligibility criteria

Singapore's published table of "ICC Eligibility Criteria and Definitions" has eight rows: compliance with Article 6 of the Paris Agreement, plus seven environmental-integrity principles. Read them as one set of eight requirements, all of which must be met.

Article 6 compliance (including the vintage window). The certified emissions reductions or removals must have occurred between 1 January 2021 and 31 December 2030. Older credits do not qualify.

The seven integrity principles are that the credit must be:

1. Not double-counted - the same reduction must not be claimed more than once contrary to the Paris Agreement. This is made operational through a corresponding adjustment: the host country formally adds the transferred tonne back to its own national emissions total so that only Singapore claims it.
2. Additional - the reduction must go beyond what the host country's own laws already require, and beyond what would have happened anyway.
3. Real - based on a realistic, defensible and conservative estimate of business-as-usual emissions.
4. Quantified and verified - calculated conservatively and transparently, and verified by an accredited independent third party.
5. Permanent - not reversible, or with measures in place to monitor, mitigate and compensate for the risk of reversal (a forest that burns down later, for example).
6. No net harm - the project must not breach applicable laws, regulatory requirements or international obligations.
7. No leakage - the project must not cause a material increase in emissions somewhere else, or must have mitigation measures if it does.

The criteria are prescribed in the Carbon Pricing (Carbon Tax and Carbon Credits Registry) (Amendment) Regulations 2023. Cite the Regulations rather than a press release date.

Extra safeguards for particular project types

Published separately, these narrow eligibility further:

• Renewable energy: only credits from offshore wind, waste-to-energy, energy-storage-linked systems, or projects in least developed countries and specified lower-middle-income countries.
• Fraction of non-renewable biomass (fNRB), used in cookstove projects: values must come from the MoFuSS model or the latest UNFCCC default values in the fNRB methodological tool. Where several requirements apply, the most conservative value governs.
• Nature-based solutions and forestry: projects must use nested baselines or sit within a jurisdictional programme; must not use a baseline incorporating a High Forest-Low Deforestation incentive factor; and must have independent reversal monitoring, periodic reassessment of additionality, and a market-leakage validity assessment.

These are the areas where the voluntary carbon market has had its worst integrity failures, which is why Singapore wrote extra rules for them.

How a facility actually uses the allowance

• The facility submits a Notice of Intent to use ICCs to NEA. For emissions year 2024, the Notice of ICC Use window ran from 1 July 2024 to 30 June 2025.
• Unused ICC offset entitlement from 2025 may be carried into 2026, adjusted for the tax rate step-up by the formula (A - B) x (S$25 / S$45), rounded down.
• NEA maintains an International Carbon Credits Registry under the Carbon Pricing Act, and opens and closes registry accounts for registered persons.
• NEA publishes an International Carbon Credits Guidance Document covering sourcing, surrender and registry handling. The current version is v1.2, dated 8 July 2026, at https://www.nea.gov.sg/docs/default-source/carbon-credits/icc-guidance-document-v1-2_8jul2026.pdf . NEA's carbon tax overview sits at https://www.nea.gov.sg/our-services/climate-change-energy-efficiency/climate-change/carbon-tax .
• On 31 October 2025 NEA appointed Carbon Rating Service Providers to support environmental integrity assessments - the practical gatekeeping layer between the criteria and an actual surrender.

A realistic caveat

Market commentary consistently reports that the supply of credits meeting both Singapore's criteria and host-country authorisation remains tight, which has limited take-up of the 5 per cent allowance in its early years. Treat the allowance as a genuine but constrained option, not as an easy substitute for abatement.