Inside Rwanda’s carbon credit deal with Singapore, Kuwait

The cooperation agreements that Rwanda signed with Singapore and Kuwait to collaborate on carbon credits aligned with article 6 of the Paris Agreement are expected to support the three parties in achieving their climate action targets by 2030, The New Times understands. Article 6 of the Paris Agreement governs the carbon market. This was announced during the launch of Rwanda’s Carbon Market Framework, held on the sidelines of the 2023 United Nations Climate Change Conference – COP28 – in Dubai, UAE. ALSO READ: Carbon market governance: Rwanda inks deals with Singapore, Kuwait A carbon market is a trading system in which carbon credits are sold and bought. Companies or individuals can use such markets to compensate for their greenhouse gas emissions by purchasing carbon credits from entities that remove or reduce greenhouse gas emissions – with carbon dioxide (CO2) being the point of reference – according to the United Nations Development Programme (UNDP). One tradable carbon credit equals one tonne of carbon dioxide or the equivalent amount of a different greenhouse gas reduced, sequestered (absorbed), or avoided. When a credit is used to reduce, sequester, or avoid emissions, it becomes an offset and is no longer tradable. Regarding the benefits of the cooperation agreement mentioned above, the Director General of the Rwanda Environment Management Authority (REMA), Juliet Kabera, told The New Times that it includes setting out the modalities for the trading of carbon credits generated from green projects and helping Rwanda to achieve the goal of reducing 38 per cent of greenhouse gas emissions by 2030. Also, for Rwanda to be a developed, climate-resilient, and low-carbon economy by 2050. Others include helping the transfer of carbon credits/Internationally Transferred Mitigation Outcomes (ITMOs) and encouraging businesses and industries to adopt cleaner practices and invest in sustainable technologies. Kabera said Rwanda expects to sell 7.5 million tonnes of carbon dioxide equivalent (MtCO2e) – carbon credits – estimating that they could generate $337 million (approx. Rwf420 billion). Elaborating on that, Kabera said the price of carbon credits/ITMOs will be subject to negotiations between two parties, and depending also on the updated price on the market. Again, she indicated, that the price determinant will depend on the nature of the project, citing afforestation and reforestation, e-mobility, and energy efficiency, among others. Given that the minimum price is $30, Rwanda will expect to get $45 per carbon credit (one tonne of carbon dioxide equivalent), hence $337 million from 7.5 million tonnes of carbon dioxide equivalent. ALSO READ: Carbon market: A look at Rwanda’s probable prices Article 6 of the Paris Agreement allows countries to voluntarily cooperate to achieve emission reduction targets set out in their Nationally Determined Contributions (NDCs) – countries’ climate action plans to cut emissions and adapt to climate change impact. This means that, under Article 6, a country (or countries) will be able to transfer carbon credits earned from the reduction of greenhouse gas (GHG) emissions to support one or more countries meet climate targets. The article creates the basis for trading in GHG emission reductions (or “mitigation outcomes”) across countries. ALSO READ: Rwanda’s carbon market framework launch, more events at COP28 Main provisions of cooperation between Rwanda and Kuwait Specifically, Kabera pointed out, the agreement with Kuwait seeks to establish the legal framework for the transfers of mitigation outcomes for use towards Nationally Determined Contribution (NDC) achievement, or for mitigation purposes other than the achievement of the NDC, and to provide the framework for commercial agreements between the acquiring entity and the entity authorised to transfer. Also, it is intended to operationalise cooperation under Article 6.2 of the Paris Agreement through the recognition of Internationally Transferred Mitigation Outcomes (ITMOs) achieved from mitigation activities in Rwanda as a transferor to the Government [of Kuwait] as a receiver, adhering to the principles of avoidance of double counting, of environmental integrity, of transparency and sustainable development. Main provisions of cooperation agreement between Rwanda and Singapore The implementation agreement is intended to express the understanding and intentions of the participants to collaborate on carbon credits within the framework of Article 6 of the Paris Agreement, as well as to set out a bilateral framework for the authorisation and transfer of ITMOs under which mitigation activities can be implemented. Another provision is to establish the modalities and procedures for authorising mitigation activities under the Implementation Agreement, for verification of the achieved mitigation outcomes as well as for the creation, authorisation, and transfer of ITMOs (carbon credits). According to a press release issued by the Ministry of Trade and Industry of Singapore on December 2, under the Memorandum of Understanding (MOU), Singapore and Rwanda will work towards a legally binding Implementation Agreement that sets out a bilateral framework for the international transfer of correspondingly adjusted carbon credits. The implementation agreement will include the criteria and processes for trading carbon credits under Article 6 of the Paris Agreement. When completed, carbon tax liable companies in Singapore will be able to purchase carbon credits from eligible projects to offset up to 5 per cent of their taxable emissions. Singapore and Rwanda will work together to identify potential Article 6- compliant mitigation activities, such as energy efficiency and waste management projects, which can support both countries to achieve their respective NDCs. ALSO READ: Understanding funds sources for Rwanda’s $11 billion climate plan Under Rwanda’s updated NDC, the government commits itself to reduce greenhouse gas emissions by 38 per cent. To deliver on such a target, it pledged to raise $11 billion ($5.7 billion for mitigation and $5.3 billion for adaptation measures) for full implementation of the NDC (by 2030).

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Inside Rwanda’s carbon credit deal with Singapore, Kuwait