The following are notes of the presentation delivered at AlterCOP29, on the 14th November 2024. These are my opinions, as President of Red Sycamore.
Regulators are setting minimum standards for sustainability reporting and disclosures to introduce more transparency and accountability on climate issues. One of the discussions is the legal responsibilities of Chief Sustainability Officers (CSOs). Some companies are pushing for the appointment of people with legal backgrounds. Others, including myself, are pushing for CSOs to have an accounting background, because this is not primarily about legal compliance, but financial compliance.
Countries are developing green taxonomies to standardise what qualifies as a green or sustainable investment. The ASEAN Taxonomy Version 2 was released in June 2023, to provide a science-based framework to classify sustainable activities. It includes four environmental objectives: mitigation of climate change risks, adaptation to climate change, protection of healthy ecosystems and biodiversity, and promotion of resource resilience and a transition to a circular economy. The ASEAN Capital Markets Forum (ACMF) has released a roadmap for sustainable capital markets, focusing on strengthening infrastructure and improving access to financial products. This roadmap aims to promote sustainable finance and support the region’s transition to a low-carbon economy.
The ASEAN Taxonomy aims to ensure interoperability with other widely used international taxonomies, such as the EU Taxonomy and the Green Bond Principles. Indonesia, Malaysia, The Philippines, Thailand and Vietnam are developing national taxonomies to align with the ASEAN Taxonomy. Here, in Singapore, we have introduced a carbon tax and are developing its taxonomy to support sustainable finance and decarbonisation efforts.
Issuance of green bonds has increased, with a cumulative value of over US$4 trillion since 2018. Sustainability-linked bonds have gained traction, as they link financial performance to sustainability targets. Despite a drop in net inflows from US$161 billion in 2022 to US$63 billion in 2023, sustainable funds continue to attract significant investments. Environmental, Social, and Governance (ESG) funds are becoming more popular. Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs) provide funding and support for sustainable projects. These institutions help to implement policies that promote sustainable finance. The sustainable finance market in SEA is still relatively small, which indicates significant potential for growth. Several countries in the region are considering or implementing carbon pricing mechanisms to incentivise emission reductions.
Discussions at COP29 are focused on establishing a new climate finance goal to replace the previous commitment of US$100 billion annually by 2020. Developing countries, including those in SEA, are advocating for a higher annual commitment of at least US$1.3 trillion from wealthy nations to support climate action. Singapore has pledged up to US$500 million to support Asia’s decarbonisation and climate resilience through the Financing Asia’s Transition Partnership (FAST-P). They aim to raise US$5 billion with international partners to make climate action less financially risky. That is extremely ambitious.
The Economic Development Board (EDB) has launched a new grant to support carbon project developers and finance activities that can generate high-quality carbon credits aligned with Article 6 of the Paris Agreement. This grant aims to spur the development of more carbon projects in the region.
Several countries in Southeast Asia are considering or implementing carbon pricing mechanisms to incentivise emission reductions. Singapore introduced its carbon tax on 01st January 2019, under the Carbon Pricing Act (CPA). The initial tax rate was set at S$5 per tonne of CO2 equivalent (tCO2e) for the first five years (2019-2023) to provide a transition period for businesses to adjust. To support its net zero target, the carbon tax will be raised to S$25/tCO2e in 2025, S$45/tCO2e in 2026 and 2027, and is expected to reach S$50-80/tCO2e by 2030. The carbon tax applies to all industrial facilities with annual direct greenhouse gas (GHG) emissions of at least 25,000 tonnes of CO2 equivalent (tCO2e). This covers about 80% of Singapore's total GHG emissions from around 50 facilities in sectors such as manufacturing, power, waste, and water.
From this year, companies can use high-quality international carbon credits (ICCs) to offset up to 5% of their taxable emissions. These credits must comply with rules under Article 6 of the Paris Agreement and meet seven principles to demonstrate high environmental integrity. A transition framework has been introduced to support emissions-intensive trade-exposed (EITE) companies as they work to reduce emissions and invest in cleaner technologies, while managing the near-term impact on business competitiveness.
Malaysia is considering implementing a carbon tax, with discussions ongoing about the appropriate rate and coverage. Indonesia has introduced a carbon tax on coal, with the revenue intended to fund renewable energy projects and reduce emissions. The Philippines has implemented a carbon pricing mechanism through its Renewable Energy Act, which includes incentives for renewable energy projects. No Southeast Asian (SEA) countries have implemented a national Emissions Trading System (ETS) similar to the European Union ETS.
The global carbon credit framework is a system designed to reduce greenhouse gas emissions by allowing countries and companies to trade carbon credits. Article 6 enables countries to pursue voluntary cooperation to reach their climate targets. It allows for the trading of carbon credits between countries, helping to finance climate action in developing nations. Credits traded under Article 6 come with corresponding adjustments to ensure that emissions reductions are not counted twice. The Core Carbon Principles (CCPs) set rigorous thresholds on disclosure and sustainable development, ensuring that carbon credits meet high-integrity standards. These principles serve as a global benchmark for high-quality carbon credits. The supervisory body for Article 6.4 has established standards for how international carbon crediting projects will work. This includes a dynamic mechanism to update these standards as needed. This framework is expected to direct resources to the developing world and help save up to US$250 billion a year when implementing climate plans.
The Monetary Authority of Singapore (MAS) introduced a concept called transition credits to help accelerate the phase-out of coal-fired power plants in Asia. Transition credits are a new class of high-integrity carbon credits generated from the emissions reduced through the early retirement of coal-fired power plants (CFPPs) and their replacement with cleaner energy sources. These credits aim to provide financial incentives for asset owners to retire coal plants earlier than their operational lifetimes, serving as a complementary financing instrument to bridge the economic gap for early coal plant retirements. The Asian Development Bank, the International Energy Agency, and the World Wide Fund for Nature (WWF) Singapore are also involved. According to the International Energy Agency (IEA), Southeast Asia will need an estimated US$12 billion in concessional finance by the early 2030s to support the accelerated uptake of clean energy technologies.
