Bhutan and Singapore are in the process of finalizing key administrative procedures essential for operationalizing the agreement on carbon trading framework, following the signing of the Singapore-Bhutan Implementation on February 28, 2025. The agreement sets the stage for Bhutan’s formal entry into the international carbon markets, though official carbon trading credit is yet to commence.
According to the Department of Environment and Climate Change (DECC), Ministry of Energy and Natural Resources (MoENR), technical teams from both the country are finalizing administrative procedures essential for operationalizing the agreement, including forms and templates to guide projects applicants, covering application processes, authorization, and the transfer of mitigation outcomes (ITMOs).
An official from the DECC said that efforts are also underway to develop fee structures, methodologies, and arrangement for joint committee meetings between the two countries to ensure smooth implementation of the agreement.
While the agreement is in place, Bhutan has not yet begun taking carbon trading credits. “The first call for applications is expected after the first joint committee meeting, which is scheduled to take place tentatively between September and October 2025,” the official said, adding that the ministry is also conducting a mitigation potential across various sectors. “This assessment will provide estimates of the quantity and volume of carbon credits that can be generated and sold through the initiation of sector-specific projects,” the official said.
The official also shared that currently, the Department of Forests and Park Services (DoFPS) is also working on the High Forest Cover, Low Deforestation (HFLD) initiative under ART-TREES (Architecture for REDD+ Transactions – The REDD+ Environmental Excellence Standard). “Through HFLD, Bhutan is targeting the issuance of approximately 1.1 million credits for the period 2020–2024.”
At the Climate Investment Forum held in Singapore earlier this year, the Royal Government of Bhutan outlined nine broad positive lists of eligible projects for participation. Hydropower from renewable energy and initiatives in the forestry sector were highlighted as priority areas.
The official said that while the pricing of these credits is yet to be determined, the country has already begun receiving offers from potential carbon traders. Further, he informed that discussions are also underway with other countries in Asia and Europe to expand trading opportunities beyond Singapore.
Meanwhile, the agreement signed with Singapore is significant, as it is the first bilateral collaboration under Article 6.2 agreement concluded after the adaptation of the Article 6 rulebook in Baku. Article 6.2 of the Paris Agreement enables direct carbon credit trading between the two countries. Bhutan became one of the first ten countries worldwide to implement Article 6, while Singapore is the first country to purchase credits under framework.
Moreover, with Singapore emerging as an important global hub for carbon trading, the partnership will allow the two countries to develop projects with sustainable development benefits and support towards raising environmental ambition through mitigation.
In addition, the agreement also paves the way for cooperation between Bhutan and Singapore in implementing high-integrity carbon credit transactions that align with the goals of the Paris Agreement and Bhutan’s commitment to maintaining carbon neutrality.
Bhutan’s forests absorb about 6.8 million tonnes of carbon dioxide equivalent annually, against emissions of 2.2 million tonnes, leaving the country with a net carbon sink of 4.6 million tonnes. This surplus creates a unique opportunity for Bhutan to generate revenue from carbon trading while maintaining carbon neutrality.
For Singapore, the agreement supports its third Nationally Determined Contribution (NDC), which aims to cap emissions at 60 million metric tonnes of carbon dioxide equivalent by 2030, and achieve net-zero by 2050.
Article 6 facilitates the creation of carbon trading markets, allowing high-emission countries to offset their pollution by purchasing carbon credits from countries with lower emissions. This system provides an opportunity for Bhutan to earn revenue for climate finance and development without increasing its national debt.
Under the Paris Agreement, five percent of proceeds from carbon credit sales go to the Global Adaptation Fund, which finances adaptation projects in vulnerable regions. As Bhutan graduated from the list of least developed country, it is required to contribute finance to support adaptation projects in the vulnerable areas.
Meanwhile, to further promote investment, the World Bank recently hosted an investor roundtable on the Bhutan Climate Fund. Around 30 stakeholders, including investors, carbon traders, and project developers, attended the session to explore opportunities and build partnerships.
Under the agreement, Bhutan and Singapore both agreed to work closely on the development and transfer of carbon credits that meet stringent international standards. The cooperation will contribute to Bhutan’s long-term sustainability goals while enabling Singapore to fulfill its climate commitments through high-quality carbon credit investments.
Nidup Lhamo from Thimphu
