Ghana and Singapore have signed an agreement that will enable companies looking to offset part of their carbon tax liability to purchase carbon credits from projects based in Ghana.

Companies in Singapore can purchase carbon credits to offset up to 5% of their taxable emissions, provided that the carbon projects they invest in meet Singapore’s eligibility criteria.

The carbon tax in 2024 has increased to $25 per tonne of carbon dioxide (CO2) emissions, up from $5 per tonne previously. By 2030, the tax will eventually reach $50 to $80 per tonne of CO2 emissions.

Singapore’s National Climate Change Secretariat, Ministry of Trade and Industry, and Ministry of Sustainability and the Environment said the collaboration between Singapore and Ghana will advance climate ambitions for both countries and channel financing towards climate mitigation efforts.

The carbon credit projects authorised under the agreement will seek to promote sustainable development and generate benefits for Ghana’s local communities, such as the creation of jobs, access to clean water, improved energy security, and reduction of environmental pollution.

Under the agreement, carbon credit project developers will be required to make a contribution equivalent to 5% of the share of proceeds from authorised carbon credits towards climate adaptation in Ghana, which helps Ghana to prepare and adjust to the impact of climate change.

The project developers will also be required to cancel 2% of authorised carbon credits at first issuance, to contribute to the mitigation of global greenhouse gas emissions.

The bilateral agreement comes as Temasek-backed investment platform GenZero has already been investing in a forest restoration project in the Kwahu region of Ghana.

The project, which is a collaboration with Singapore-based AJA Climate Solutions, will involve replanting degraded forest reserves, including growing cocoa trees sustainably in shaded farms to shield these plantations from potentially damaging climate impact such as floods, heat stress and pests.

The verification of carbon credits from the Ghana project will then begin in 2028.