The Case for an Independent Blue Carbon Exchange, Built to Fund the Loss and Damage Fund

I believe the Loss and Damage Fund, established to help developing countries adapt to climate change, has failed on its terms, and I believe an independent, investment-grade compliance carbon exchange is the most credible instrument available to fund it properly.  Here, I make that case, and contend that the Loss and Damage Fund is the explicit strategic endpoint of everything that follows, not an implicit byproduct of building better market infrastructure.

Part One: The Loss and Damage Fund Has Failed

The Loss and Damage Fund closed COP28 with pledges just over US$600 million, a sum that was smaller than the cost of building the Dubai Expo City venue hosting the conference.  By September 2024, pledges reached US$702 million from 23 contributors.  The UN itself estimates actual need at US$300 billion a year by 2030, rising to US$500 billion by 2050.  The gap between pledge and requirement is 400 to 1.

The pattern has only worsened since.  The United States rescinded US$4 billion in Green Climate Fund pledges in February 2025, the first country ever to formally withdraw a commitment already made.  The United Kingdom halved its pledge in spring 2026.  A planned pledging event at COP30 for the Least Developed Countries Fund and Special Climate Change Fund was cancelled outright in November 2025, for lack of contributor interest.  The World Bank dropped its 45 per cent climate co-benefits target in June 2026, the very month it had already exceeded that target at 48 per cent, under pressure from the United States, Russia, and Saudi Arabia.

I believe public, pledge-based climate finance is structurally unreliable, because it depends on donor governments whose domestic politics can reverse a commitment at any point, with no penalty for doing so.

Part Two: A Secondary Market Solves the Reliability Problem a Pledge Cannot

Article 6’s rulebook, finalised at COP29 in November 2024, and the Paris Agreement Crediting Mechanism, operational following COP30 in November 2025, give carbon credits legal infrastructure to trade as a transferable financial asset rather than a voluntary gesture.  The EU Emissions Trading System has already proven this model at scale, cutting covered emissions 51 per cent since 2005 while raising over €265 billion in revenue, funded entirely by market participants pricing their carbon output, with no pledging conference and no government able to walk the commitment back.

I believe a market-priced instrument, once built properly, does not depend on the next election cycle in Washington, London, or anywhere else.  This is the structural advantage a secondary carbon market holds over every pledge-based mechanism, and it is the reason I am proposing this exchange as a Loss and Damage funding vehicle, not as a Singapore commercial opportunity.

Part Three: The Verification Process is Broken

Verra, the dominant voluntary registry, lets project developers hire and pay their auditors directly.  Science magazine’s editorial board stated, “Auditors are unlikely to stay in business if they disapprove credits at the high rates that research suggests would be appropriate today.”  Carbon Market Watch found 21 of 33 accredited auditors active in 2024 had signed off on at least one of 95 projects later found to have overstated their climate benefit.  Transparency International US described the resulting arrangement as “students designing their assignments and grading their papers.”

PACM’s first issuance, a Myanmar cookstove project approved in February 2026, was subsequently found to have been approved for roughly seven times more credits than its actual emission reductions likely warranted.  It operated through institutions controlled by Myanmar’s military junta, in conflict-affected regions, with verifiers unable even to conduct site visits due to security concerns.  SK Telecom, the buyer relying on these credits, has itself publicly acknowledged the claimed reductions cannot be verified.

I believe this is no longer a niche technical criticism.  It is a documented, publicised failure spanning both the dominant voluntary registry and the UN’s flagship compliance mechanism, and it gives institutional buyers a concrete, citable reason to seek a genuinely independent alternative.

Part Four: The Structural Fix

Whoever verifies a credit’s emission reduction claim must have no financial relationship with the project developer seeking that credit approved.  A verification architecture paid by the exchange, by an independent buyer-side consortium, or through a standing endowment rather than per-project developer fees removes the incentive that is the root cause of the Verra pattern.

Mangrove and seagrass carbon sequestration suits this model in a way human, developer-paid auditors structurally cannot match.  Satellite-based remote sensing can measure canopy coverage, biomass density, and sequestration rate directly, independent of any relationship between verifier and developer, and independent of the security access constraints that left Myanmar’s verifiers unable to confirm anything in person.  I believe applying AI-based MRV to blue carbon specifically converts a verification method that failed catastrophically in cookstove methodology into one resistant to the same failure mode, because the underlying claim is measurable from orbit rather than dependent on a developer’s self-reported survey data.

Part Five: The Legislation and Compliance Architecture Required

Internationally, Article 6.2’s corresponding adjustment mechanism prevents double counting, requiring the host government to formally record the transfer in its national emissions inventory.  A Letter of Authorisation must be issued by the host state and verified by the relevant carbon standard before any credit can trade internationally.  CORSIA’s compliance phases already require this authorisation as a precondition for airline offset eligibility.  AI-based MRV for blue carbon would need to satisfy the Article 6.4 Supervisory Body’s methodological standards, currently scoped narrowly to methane flaring and nitrous oxide abatement, meaning a formal new methodology submission and approval process precedes any blue carbon-specific AI verification protocol gaining recognition under the compliance-grade international framework.

Domestically, I believe Singapore’s regulatory architecture already provides usable scaffolding.  The Variable Capital Companies Act 2018 allows a fungible carbon credit exchange to be structured with segregated sub-funds, ring-fencing different project pools, vintages, or geographic sources, administered by the Accounting and Corporate Regulatory Authority with anti-money laundering oversight from MAS.  A verification layer built independently of the credit issuer would need to satisfy MAS’s capital markets licensing framework under the Securities and Futures Act if it intends to offer credit-linked derivatives or structured products.  Any blue carbon project sourcing credits from Southeast Asian coastal states would need bilateral Article 6 authorisation agreements negotiated with each host government individually, since PACM and Article 6.2 operate project by project and country by country, not through a single blanket regional approval.

Part Six: Singapore’s Existing Position

As of June 2026, Singapore has signed Article 6 Implementation Agreements with eleven countries: Papua New Guinea, Ghana, Bhutan, Chile, Peru, Rwanda, Paraguay, Thailand, Vietnam, Mongolia, and the Philippines.  In September 2025, Singapore contracted 2.175 million tonnes of nature-based carbon credits from projects in Ghana, Peru, and Paraguay.  On 6^th July 2026, Singapore signed a major bilateral agreement on carbon credit collaboration with Indonesia, witnessed by Indonesian President Prabowo Subianto and Singapore Prime Minister Lawrence Wong Shyun Tsai, establishing a corresponding adjustment framework for cross-border trading.

Singapore’s commissioned study by the Economic Development Board and Enterprise Singapore estimates the carbon services and trading hub ambition could generate US$1.8 to US$5.6 billion in gross value added.  That study assumed Singapore’s continued positioning as the region’s default hub, an assumption now contestable as Indonesia, Vietnam, and Malaysia each build their domestic registries and exchanges.  I believe the task ahead is not building new bilateral relationships from scratch, largely complete, but building the interoperability layer that keeps Singapore central as these national systems mature, through active participation in the ASEAN Common Carbon Framework the ASEAN Alliance on Carbon Markets is already developing.

My Conclusion

A market-priced, independently verified compliance carbon exchange, built specifically for blue carbon and verified through AI-based remote sensing rather than developer-paid human auditors, is not merely a better carbon market.  It is, I believe, the most credible mechanism currently available to close the gap between the US$300 billion a year developing countries need and the US$700 million the pledge-based Loss and Damage Fund has managed to raise.  Singapore already holds the treaty architecture, the regulatory scaffolding, and a documented lead in bilateral Article 6 agreements to build this.  What it does not yet have is the independent verification layer, and I believe that is the single piece of infrastructure Singapore should now be directed toward building.

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Terence Nunis | Executive Chairman, Equinox Zenith & Red Sycamore | Author, The 1% Playbook: The Billionaire Cheat Code