The Singapore–Laos agreement shows that the credibility of carbon markets depends not only on creating credits, but on ensuring they are measurable, traceable and counted only once. As these markets grow, dispute management will become part of that trust architecture.
In carbon markets, is the hardest part producing the credit, or making sure that the one tonne of reduction it represents actually stays one tonne?
That was the question that stood out to me as I read the agreement Singapore and Laos signed on 4 September under Article 6 of the Paris Agreement.
This is Singapore's twelfth Implementation Agreement of this kind. Laos joins this framework following Bhutan, Chile, Ghana, Mongolia, Paraguay, Papua New Guinea, Peru, Rwanda, Thailand, the Philippines and Vietnam.
But what makes the agreement interesting isn't the number so much as how the system itself is built.
Is One Tonne Really One Tonne?
One of the questions that has long been debated when it comes to the credibility of carbon markets is double counting.
Put simply, a project carried out in Laos reduces emissions by one tonne, and the carbon credit generated by that reduction is transferred to Singapore. If the same reduction is used toward both Laos's and Singapore's climate targets, the system can appear to record two tonnes of progress when only one tonne of reduction actually took place in the atmosphere.
This is where the importance of the “corresponding adjustment” mechanism under Article 6 of the Paris Agreement becomes clear. It establishes an accounting system that prevents an internationally transferred reduction from being counted toward both countries' climate targets at once.
It can sound technical. But this is precisely what the trust placed in carbon markets rests on: the same environmental benefit not being claimed twice.
Why Do Five Percent and Two Percent Matter?
Two more figures in the Laos agreement caught my attention.
Five percent of the revenue generated from authorised carbon credits will go directly toward Laos's climate adaptation efforts. In addition, two percent of the credits will be cancelled at first issuance and cannot be used for any other purpose.
At first glance, these figures look small.
But these provisions show that carbon markets aren't built solely around the question of “who gets how many credits.” The credibility of the emissions reduction, the host country's adaptation capacity, and a genuine net decrease in global emissions are all built into the same structure.
Why Is Singapore Signing Twelve Separate Agreements?
I think this is one of the aspects of the story that deserves more attention.
Rather than sourcing carbon credits from a single country, Singapore is building a system through bilateral agreements spread across Asia, Africa and Latin America.
Within this system, legally binding frameworks are established between countries, setting out which criteria projects must meet to be authorised, how credits will be monitored, and how transfers will be accounted for.
In other words, as the market develops, its governance infrastructure is being built alongside it.
This distinction matters. Because the value of a carbon credit doesn't depend only on the emissions reduction actually happening. That reduction also has to be measurable, verifiable, traceable, and demonstrably not reused elsewhere.
So What Happens When the System Doesn't Work?
This is where my interest, from a dispute resolution perspective, begins.
As these agreements are implemented, a large number of relationships will need to be managed at the same time: states, project developers, verification bodies, investors, credit buyers and different national authorities.
And naturally, questions will arise.
What happens if an eligibility dispute over a project emerges later on? If parties disagree over the calculated emissions reduction, whose data prevails? If a credit turns out to have been wrongly authorised, or used for a different purpose, who is responsible? How are existing projects affected when regulations change?
These aren't theoretical questions. As the carbon market grows, so do new rights, obligations and long-term relationships carrying real economic value.
For this reason, there's an area I think shouldn't be left out of the governance design of carbon markets: dispute management.
Including an arbitration clause to be invoked once a dispute arises is certainly possible. But in a system this technical, one that continuously generates data and whose conditions can change, thinking only about how the final dispute will be adjudicated may not be enough.
How data discrepancies will be handled, which experts will step in when technical disagreements arise, when parties will return to negotiation, which issues can be addressed through facilitation or mediation, and at what stage a binding decision becomes necessary, these are all things that can be defined while the system itself is still being built.
Seen this way, what I take away from the Singapore-Laos agreement goes well beyond carbon markets:
If we want to build a trustworthy market, we need to design not only how the rules will work, but also what we will do when they don't, from the very start.
One of the real tests of the new carbon market taking shape under Article 6 of the Paris Agreement will, I think, begin right here.