Orang-utans are critically endangered. Some 90 per cent of their habitat, south-east Asian rainforests, have been lost to palm oil plantations and other human uses. Plans for a new global carbon exchange in Singapore by the end of the year may be just what the great apes need.
The Singapore Exchange, state investment firm Temasek and lenders Standard Chartered and DBS are set to launch a market where carbon offset credits can be traded. The credits will generate investment in nature conservancy projects.
The joint venture, Climate Impact X, plans to use satellites, artificial intelligence and an independent advisory council to make sure these efforts are well managed.
There is demand. While an increasing number of companies globally are targeting net-zero emissions, they are being hampered by financial and technological constraints. Many of the most polluting industries, including energy and agriculture, operate on low margins. That creates demand for the simpler option of buying carbon offsets.
Singapore is a good location for a carbon credit exchange. Neighbouring Malaysia and Indonesia are big producers of fossil fuels. They also produce more than 85 per cent of the world’s palm oil. To grow palm trees businesses burn rainforests, unleashing carbon dioxide and, by destroying their habitat, endangering species such as orang-utans, elephants and rhinos.
Rainforest destruction is a major source of greenhouse gases, creating about 15 per cent of the world’s emissions. Indonesia’s deforestation alone accounts for up to 8 per cent of the total.
Singapore handles as much as 35 per cent of all commodities trading in Asia, which means it is home to plenty of local capital and expertise. While that is an advantage it also illustrates the city state’s reliance on the sector. The oil industry accounts for 5 per cent of GDP, and still more when related industries such as chemicals and financial services are included. Singapore is home to the world’s largest bunkering port and key refineries. Its refining and petrochemicals sector account for about three-quarters of its industrial sector emissions.
There are some risks to the scheme. Companies can and do use offsets in order to meet targets without investing in greener operations. Scope for cheating in the provision of offsets is high. But attempts to date to curb deforestation in the region have been a miserable failure. Creating financial incentives and an easier trading environment to do so can only be good news for orang-utans.