Response to Member’s Motion To Advance Inclusive Low-Carbon Transition by Ms Grace Fu, Minister for Sustainability and the Environment

Speech By Ms Grace Fu, Minister For Sustainability and the Environment, on Member’s Motion To Advance Towards an Inclusive Low-Carbon Society, on 12 January 2022

1 Mr Deputy Speaker, I thank Members for tabling today’s Motion. This Motion draws attention to the importance of developing Singapore’s green economy and ensuring an inclusive transition towards a low-carbon society. On behalf of my colleagues at MSE and across the Government, allow me to express our deep appreciation for the- many good and fresh perspectives and constructive suggestions that Members have put forth, especially by the young PAP.

2 A year ago, this House passed a Motion declaring climate change a global emergency, and a threat to mankind. The latest science has given even stronger evidence on the urgency for action. According to the Intergovernmental Panel on Climate Change (IPCC) report¹ published last August, human influence has unequivocally warmed the climate. Without strong and sustained reductions in greenhouse gas emissions, global temperature rise will exceed 2°C within this century, increasing the intensity and propensity of extreme weather events such as floods, droughts and wildfires, and accelerating biodiversity loss in every part of the world. Some of these harsh realities are already being felt today, as seen by recent record-breaking floods in Southeast Asia, prolonged drought in South America, and high temperatures and raging wildfires in North America, followed by extraordinary snowfall. As a small, low-lying island in the tropics, Singapore is particularly vulnerable to sea level rise. Climate change is an existential threat to us.

3 One year on, our efforts to accelerate climate action and embrace sustainable development have grown stronger. Since the Singapore Green Plan 2030 was launched last February, agencies have made considerable headway. In the coming weeks, the five leading Ministries for the Green Plan will deliver updates on the progress of key initiatives, and share their outlook and focus areas for the year ahead.

THE GREEN TRANSITION IS GATHERING PACE

4 A similar ‘green awakening’ is rapidly spreading across the globe. At the start of 2020, there were only 18 countries with net zero aspirations. Today, the number has grown to 84, including the world’s five largest emitters, accounting for almost 90% of global emissions and over 90% of global GDP. Despite the ongoing COVID-19 pandemic, countries have sought to incorporate sustainability and climate action in their recovery plans, laying groundwork for the transition to a low-carbon future.

5 Last November, I had the privilege of leading the Singapore delegation at the 26th United Nations Climate Change Conference (COP26). As the first conference of such a scale and scope since the pandemic, COP26 was a landmark opportunity to rally the world around the climate action clarion call. World leaders, businesses and civil society organisations came out in full force, emphasising the need to raise our collective mitigation ambition significantly in this critical decade.

6 COP26 has laid a firm foundation and accelerated the momentum for global climate action. A substantive and balanced package of decisions, known as the Glasgow Climate Pact, was forged through hard-earned consensus and compromise. Parties agreed to revisit their 2030 climate pledges, or Nationally Determined Contributions (NDC) and communicate Long-term Low Emissions Development Strategies (LEDS) towards net zero emissions, to align with the Paris Agreement temperature goal. The Pact will scale up climate action and drive capacity-building efforts to keep a 1.5-degree climate change within reach. Singapore will do our part to meet our international obligations. We will review our policies and actions under the Green Plan, while managing our inherent constraints and trade-offs. We will also expand our options for reducing emissions through international partnerships, and in step with global advancements in low-carbon technologies. We will review our targets and raise our climate ambition, and as Professor Koh Lian Pin highlighted, ensure that our targets are backed by the right strategies, policies and actions.

7 As a responsible member of the international community, Singapore has been working hard to support a multilateral rules-based approach to address climate change. Singapore, together with Norway, co-facilitated negotiations that brought the Article 6 rulebook across the finishing line, after six years of protracted talks. Article 6, which governs market and non-market cooperative mechanisms towards emission reduction, was the sole outstanding issue under the Paris Agreement Work Programme. The agreement on Article 6 clears the path for the establishment of mechanisms that facilitate the transfer of emission reductions, or carbon credits, between countries to meet their climate targets, while ensuring high standards of environmental integrity. For countries with limited domestic abatement potential such as Singapore, these mechanisms will present new pathways to raise ambition, as Ms Poh Li San mentioned.

8 At COP26, we also supported various global partnerships and initiatives aimed at raising global climate action. Singapore became the first country in Asia to join the Powering Past Coal Alliance to progressively phase out the use of unabated coal in our electricity mix by 2050. We endorsed the Glasgow Leaders’ Declaration on Forests and Land Use to affirm our collective commitment to sustainable land use. We joined various other voluntary coalitions, pledging to reduce global methane emissions², green government operations³, and cultivate climate-smart agriculture⁴. Our membership in these coalitions will facilitate the sharing of best practices and collaboration with like-minded countries.

9 Singapore will continue playing a constructive role to sustain the momentum for global climate action, and support fellow small states and developing countries to build capacity and achieve the Sustainable Development Goals.

10 Corporates are playing a critical role in driving the global transition. They are increasingly focused on Environmental, Social and Governance (ESG) issues, striving to do well and do good at the same time. With greater demand from investors, activists and consumers, more businesses are paying attention to their triple bottom lines of Profit, People and the Planet, as Mr Edward Chia noted. The Glasgow Financial Alliance for Net Zero (GFANZ) has gathered more than 450 financial institutions with assets in excess of US$130 trillion, in the common pursuit of aligning their investment portfolios with credible net zero pathways. More than 5,000 companies worldwide have now joined the UN Race To Zero campaign, pledging to take immediate action towards achieving net zero by mid-century, publish clear action plans, and submit regular progress reports. Among them are Singapore companies such as City Developments Limited (CDL), Olam International, Singtel, and the Singapore Exchange (SGX). Greater private sector involvement will be a multiplier, bolstering our collective response.

11 Civil society and community organisations also play an instrumental role. As advocates, they raise awareness on the importance of climate action, and organise ground-up initiatives to rally the community for climate action and environmental sustainability. At COP26, I was glad to meet Singaporean representatives from a diverse range of backgrounds – academia, youth groups, businesses, NGOs. Like Mr Louis Ng, I was inspired by their passion and aspirations for a greener Singapore, and the various projects and platforms they have mounted to make a difference. As Ms Hany Soh said, many residents also take pride in championing sustainability initiatives through the Action for Green Towns initiative.

ENGENDERING AN EFFECTIVE AND INCLUSIVE LOW-CARBON TRANSITION

12 Mr Deputy Speaker, the low-carbon transition is well underway. Going green is no longer an option, but a strategic transition we must undertake to thrive in a carbon- and resource-constrained future. The transition will have far-ranging implications on every facet of society, including our lifestyles and livelihoods. This Motion is therefore timely, as we are building the necessary foundations for Singapore’s transition to a low-carbon society. The Government has every intent, as this Motion states, to partner the private sector, civil society, and the community in turning our collective goals in the Green Plan into reality.

13 If we work together and make the right choices, the low-carbon transition can yield significant opportunities and rewards. It is in Singapore’s interest to secure an early foothold in emerging growth areas so as to reap valuable dividends and future-proof our economy. As Mr Liang Eng Hwa mentioned, the latent economic opportunities in Southeast Asia are immense, if the region maximises its potential to export innovative products and expand its green service offerings. Ms Rachel Ong also described vivid examples of innovation opportunities created by the global sustainability wave, which our youths and workers can participate in.

14 As with all transitions, there will invariably be disruptions and trade-offs. The Minister for Trade and Industry Mr Gan Kim Yong and several Members spoke about some of the structural challenges for large emitters in the hard-to-abate sectors, such as the petrochemical and electricity generation industries. Some businesses and households may have to brace themselves for temporary cost increases. Transition costs could also manifest in intangible ways, such as the inconveniences from changing our habits and the way we live, work and play.

15 Yet we must press on, for inaction will cost us even more dearly. Without prompt and effective mitigation, the detrimental effects of climate change will be exacerbated. The IPCC reports that global mean sea level rise could reach up to 1 metre by 2100, if the world pursues a high emissions scenario pathway⁵. While the direct impacts may be clear, the indirect costs, while less immediately apparent can be even more significant, as Professor Euston Quah⁶ and Tan Jun Rui have argued in a recent Straits Times article. For example, floods can claim lives and damage infrastructure, but also displace local communities, raise food prices, and disrupt critical supply chains. With the accelerated global shift towards a low-carbon future, businesses which do not adjust face the risk of shrinking demand, stranded assets, and becoming obsolete. A recent study⁷ by Standard Chartered Bank showed that 8 in 10 multinationals plan to work exclusively with suppliers that are aligned with their low-carbon transition plans by 2025. It is therefore in the best interests of businesses, the economy, and the nation at large to make this crucial transition.

16 Mr Deputy Speaker, the transition to a low-carbon society will not be straightforward or a quick fix. To engender an effective and inclusive transition, we have our work cut out.

17 Mr Gan has spoken about the concrete steps we are taking to capture green growth opportunities, transform businesses and industries, and equip our workers.

18 Allow me to elaborate on a few other key areas raised by Members - raising carbon pricing; leveraging carbon markets; and strengthening corporate accountability.

RAISING CARBON PRICING

19 First, carbon pricing. I note that members from both sides of the aisle have spoken insupport of carbon tax and for higher carbon tax. We have heard a wide spectrum of views and proposals in this debate. Many Members, such as Mr Louis Ng, have spoken on the need for an appropriate carbon pricing policy that drives emissions reduction effectively, while others such as Mr Liang Eng Hwa, and Ms Foo Mee Har have argued for the need to preserve our competitiveness, given the weakness of a post-COVID economy. This speaks to the complex and difficult considerations that influence our approach to carbon pricing. Let me explain our considerations.

20 The carbon tax is central to our climate mitigation strategy, and complements our suite of abatement efforts across all sectors. By pricing the cost of CO2 emissions, the carbon tax enhances the business case to implement energy efficiency improvements and other emission reduction solutions. These shifts in decisions are vital to ensuring the long-term viability of business investments and activities in a carbon-constrained world. Indeed, we observe that carbon-tax liable companies have accelerated the implementation of decarbonisation projects. The impact of a carbon price goes beyond current industries – it also ensures that Singapore attracts the right kinds of future investments that are aligned with our low-carbon vision.

21 We agree with Members that over time, a stronger price signal is needed to steer our economy towards a low-carbon future. This will tilt the scales further in favour of more innovative low-carbon technologies, driving companies to take bolder steps towards decarbonisation. This will also keep Singapore’s carbon tax trajectory in line with the broader international momentum on climate action and support the review of our climate targets.

22 As many Members have noted, the carbon tax should provide a broad-based pricing signal across the economy. That is indeed the approach we have taken, as SM Teo Chee Hean explained at last year’s motion on climate change. Our carbon tax covers about 80 per cent of our total emissions. If we include the excise duties on vehicular fuel, more than 90 per cent of our emissions are subject to a carbon price. This coverage is one of the highest in the world. But we must also balance the need to extend coverage against the potential administrative costs on businesses. Hence, we have taken the practical approach of setting the existing carbon tax threshold at 25,000 tonnes, which ensures that the carbon tax is applied at key nodes and then flows through to the rest of the economy. This reduces the administrative load on small emitters, especially SMEs, to measure, report and verify their emissions. We will however continue to encourage small emitters to track their carbon footprint on a voluntary basis, and indeed a growing number has begun to do so.

23 We agree with Mr Derrick Goh and Ms Foo Mee Har on the need to support companies along their decarbonisation journey with revenue from the carbon tax. In fact, for the first five years, we are prepared to spend more than what we collect, to incentivise the adoption of energy-efficient processes and other worthwhile abatement projects, such as through the enhanced Resource Efficiency Grant for Energy (REG(E)) and Energy Efficiency Fund (E2F). Some of the carbon tax revenue is also used to manage the impact of the carbon tax on households.

24 Under the Research, Innovation and Enterprise (RIE) 2025 plan, we have channelled additional funds towards the research, development and demonstration of low-carbon technologies, such as hydrogen and carbon capture, utilisation and storage (CCUS) through initiatives such as the Low-Carbon Energy Research Funding Initiative.

25 More broadly, we have also increased investments in the urban solutions and sustainability research domain to help us better understand the impact of climate change on Singapore, and develop novel solutions for sustainability, such as protecting our coastlines, finding cheaper ways of reducing emissions, and keeping our homes and offices cool.

26 Over the past months, the Government has consulted businesses and engaged the public on the need for and the potential impact of a higher carbon tax, as part of our review of the post-2023 carbon tax level and trajectory. The Minister for Finance will announce the outcome of our review at Budget 2022.

LEVERAGING CARBON MARKETS

27 Second, leveraging carbon markets to raise our climate ambition, and to give our low-carbon transition an added boost.

28 Companies, especially those in hard-to-abate sectors, are keenly exploring market-based mechanisms where carbon credits are traded. Some may tap on voluntary markets to offset their carbon footprint out of their own volition, while others participate in compliance markets to meet their regulatory mandate imposed by the jurisdictions they operate in. For these companies, the ability to tap on carbon credits from emission reduction projects elsewhere provides a complementary pathway to deliver greater abatement in the near term, while longer-term fixes, such as changes to business models or production processes, are being developed.

29 Likewise, nations are looking to carbon markets, empowered by Article 6 of the Paris Agreement, to raise climate ambition. We agree with Mr Gan Thiam Poh that domestic abatement should remain our priority, and continue to take bold steps to decarbonise, including advanced low carbon technologies like hydrogen and carbon capture, utilisation and storage (CCUS). However, there is significant uncertainty associated with these options at the moment, given that their commercial success hinges on factors such as technological maturity and transboundary cooperation, which are not entirely within our control. Access to well-functioning carbon markets therefore serves as a complementary option in our toolkit to meet our climate commitments, especially in the event that domestic abatement options do not materialise.

30 Mr Saktiandi Supaat spoke about doing more to build confidence in carbon markets. Indeed, for a long time, carbon markets have been held back by concerns of environmental integrity, exacerbated by a fragmentation in rules and standards and a proliferation of low-quality carbon credits that did not represent real, measurable, and additional emissions reductions. To address this trust deficit, we must first establish robust rules and clear guidelines centred on environmental integrity, ensuring that the generation of carbon credits from emissions reductions projects achieves the desired outcomes of reducing overall global emissions. This is why we agreed to co-facilitate discussions on Article 6 – to provide a common rules-based, global framework, and a foundation to safeguard environmental integrity and avoid double-counting.

31 Concurrently, we are actively participating in various international platforms to promote greater environmental integrity and forge partnerships in carbon markets. For example, Singapore recently joined the Voluntary Carbon Markets Integrity Initiative (VCMI) as part of their Country Contact Group (CCG). The CCG seeks to align voluntary carbon markets with international architecture, such as the Paris Agreement, and set out pathways for use of voluntary carbon credits to enhance global ambition. Singapore also supports the Taskforce on Scaling Voluntary Carbon Markets (TSVCM), a private sector-led initiative working to shape and develop rules and standards for the trading of high-quality credits in voluntary carbon markets.

STRENGTHENING CORPORATE ACCOUNTABILITY

32 Third, strengthening measures to advance sustainability accounting and procurement practices among our companies. Greening the economy we have today is the first step to growing the green economy of tomorrow.

33 We agree with Mr Don Wee that sustainability reporting and auditing is a critical aspect of good corporate governance in a low-carbon world. SGX has published in December 2021 its roadmap for mandatory climate-related financial disclosures for listed entities, starting with listed entities in industries that are most exposed to climate risks. MAS will be consulting the industry on mandatory climate-related financial disclosures for financial institutions. The Government will consider global developments and the experience of mandating disclosures for these entities before deciding on the approach for other entities. We are heartened by the recent acceleration in progress towards a global sustainability standard, founded on the Task Force on Climate-related Financial Disclosures (TCFD) framework. With the creation of the International Sustainability Standards Board (ISSB), there will be a new global standard setter to guide corporate reporting in the sustainability space. As reporting standards evolve, we encourage all companies to begin building capabilities in sustainability reporting and auditing, and as Mr Henry Kwek said, to understand the key nuances that apply to their sectors and in the international markets they operate in.

34 As a major buyer of goods and services, the Government is catalysing the change. Under the GreenGov.SG initiative of the Green Plan, the public sector has introduced procurement measures to encourage our service providers and suppliers to be more sustainable. For example, public agencies will purchase products that meet high resource-efficiency or sustainability standards. The Government will also consider suppliers’ sustainability-related policies and practices when evaluating tenders. We will continue to explore ways to push the boundary on sustainability.

35 As individual consumers, our choices can make a difference. By voting with our wallets, we can nudge companies to green their products and supply chains. A recent SEC Newgate report has found that the top ESG concern of Singaporeans is whether or not companies are taking responsibility for their supply chain (81%), which confirms the point made by Ms He Ting Ru on ensuring that supply chains sustainability is respected. Also, ahead of other indicators such as giving back to nature and the communities (78%), and reporting the positive environmental impact they deliver (57%). We agree with Ms Nadia Samdin and AP Jamus Lim that greater recognition of businesses that embrace sustainable practices will allow ordinary consumers and other business customers to make more informed purchasing decisions. Minister Gan elaborated on our efforts to develop standards and accreditation to help companies assess and demonstrate their sustainability credentials. Other home-grown efforts include the Singapore Green Labelling Scheme, administered by the Singapore Environment Council, which conducts a holistic assessment of businesses’ sustainability efforts and certifies environmentally-preferred products that meet eco-standards.

CONCLUSION

36 Mr Deputy Speaker, let me conclude. Over the course of our short history, Singapore has been confronted with multiple inflection points that compelled us to rethink and reshape the way forward. We find ourselves at yet another turning point. While the low-carbon transition may seem daunting, it can open up a brighter and greener future for Singapore and generations of Singaporeans. As Members have rightly noted, it is essential that the fruits from this low-carbon transition can be enjoyed by all. As we put in place the right policy enablers, we must adopt an inclusive approach each step of the way, by consulting widely and providing support to those that need a hand. The thoughtful insights and recommendations shared in this House today have been most encouraging. We will study each idea carefully and incorporate suitable suggestions into our policies and plans. Just like we have always tackled challenges squarely as a nation, we will continue to apply the same determination to the low-carbon transition, turning adversity, crises, and challenges into opportunity. We will build on our strengths, and continue to advance Singapore’s competitive position by supporting global climate action as a trusted interlocutor at multilateral fora, such as the UNFCCC, ICAO, IMO, and the World Bank; advancing research, pioneering innovative solutions, and building new norms and standards for the green economy; promoting green finance, digitalisation, and low-carbon innovation, which are key enablers for the green transition; and investing in our people to thrive in the green economy. Under the Green Plan, the Government will continue our efforts to spur whole-of-society action, and catalyse partnerships across the people, public and private sectors for sustainability. With all parties working hand-in-hand to create new growth sectors, we can forge a better future for Singapore.

37 On this note, I support the motion, and call on the whole of nation – corporates, civil society and the community – to join us as we embark on this exciting transition. Thank you.