The Copenhagen Accord called on Annex I countries to make their climate change pledges, and on Annex II countries to identify their nationally appropriate mitigation actions by 31 January 2010.
In this edition of the Asia Pacific climate change policy series we examine the regulatory framework and climate change investment opportunities in Singapore, a non-Annex 1 country to the Copenhagen Accord.
Key points on Singapore:
- is working towards a target of cutting its 2020 business as
usual emission levels by between seven and 11 per cent
- current energy mix is some 80 per cent gas, with less than two
per cent being renewable energy sources
- is positioning itself to become a regional hub for carbon
players and clean tech developers.
Copenhagen Accord commitments
Singapore's non-binding Copenhagen Accord commitments include "mitigation measures leading to a reduction of greenhouse gas emissions by 16 per cent below business-as-usual levels in 2020, contingent on a legally binding global agreement in which all countries implement their commitments in good faith."
The government of Singapore announced on 11 January 2010 that, due to the lack of a binding global agreement, it will work towards a target of cutting its 2020 business as usual emission levels by between seven and 11 per cent. Singapore's government maintains that when a global agreement on climate change is reached it will implement additional measures to achieve the full 16 per cent reduction.
Singapore's Chief Negotiator for Climate Change, in his letter to the Executive Secretary of the UNFCCC dated 28 January 2010, reiterated Singapore's support for the Copenhagen Accord, noting that the Accord "does not create legal obligations but nonetheless contains important elements that can facilitate ... negotiations".
The main contribution to Singapore's greenhouse gas emissions is carbon dioxide (CO2) from the use of energy. Singapore is a city-state with limited natural resources.
Singapore's National Climate Change Strategy (NCCS) notes that:
"Due to its geographical constraints, large-scale adoption of alternative energy beyond oil and gas is unlikely. We lack the natural endowments to tap hydropower or geothermal energy. For wind, based on current technology, there is limited scope due to our low wind speeds as well. The forms of renewable energy that will be more applicable to Singapore besides waste-to-energy would thus include solar energy and biofuels. However these sources of renewable energy are not yet cost-competitive with conventional fossil fuels. Hence, we are reliant on fossil fuels to meet our energy needs at present."
The NCCS confirms that energy efficiency is therefore Singapore's key strategy to reduce its CO2 emissions.
Singapore has not yet introduced any market-based mechanisms, whether voluntary or compliance driven, to make renewable energy investment more cost-competitive with fossil fuels. Indeed, renewable energy represents less than two per cent of Singapore's energy mix. Investment opportunities generally arise in the energy efficiency sphere, both supply and demand side efficiency, from direct government assistance through funding (grant schemes) and partnership in projects.
The Grant for Energy Efficient Technologies program, rolled out by the Singaporean government in late 2008, is aimed at encouraging owners and operators of industrial facilities to invest in energy efficient equipment or technologies. The grants are limited to a maximum of S$2 million and are for up to 50 per cent of the cost of the project (the qualifying cost), which includes costs of manpower, materials and professional services. The grants must be paid back over time; calculated using the total project costs divided by estimated annual energy cost savings.
The Design for Efficiency Scheme, targeted at large consumers of electricity, aims to integrate energy and resource efficiency into the design stage of manufacturing and industrial projects. The scheme grants up to 80 per cent of consultancy and associated costs, up to a limit of S$600,000, where that consultancy is aimed at energy efficient design of the facility.
The use of energy efficient and clean technologies is incentivised in Singapore through an array of further measures: many of them on the demand side, and many not creating large-scale investment opportunities. These include the Clean Energy Research Programme and various initiatives created under Singapore's Sustainability Blueprint attracting clean energy manufacturing and services companies to set up their operations in Singapore and encouraging research and development in clean energy technologies.
In order to promote investment and participation in local CDM projects (including Programmes of Activities) the Singaporean government has implemented the Clean Development Mechanism Documentation Grant. Under the scheme government funding may be provided for up to 50 per cent of the cost of engaging a carbon consultant to develop a new methodology and Project Design Document (PDD) and up to 30 per cent of the cost of engaging a carbon consultant to develop a PDD that uses an existing approved methodology. The maximum amount of funding to any CDM project is capped at S$100,000. In order to qualify, the CDM project developer must be registered in Singapore and the proposed CDM project must be located in Singapore. Further, the contract between the CDM project developer and the carbon consultancy for the development of the CDM project design document and/or methodology must not have been signed and the project must have not yet begun.
Singapore has one registered CDM project (a thermal energy recovery project), one in the process of registration with the CDM Executive Board (a sewage dehydration and incineration project) and four projects seeking validation with DOEs (including wood, food waste and sewage biomass power generation projects as well as a natural gas project). A programme of activities (POA) in relation to energy efficiency in chiller plants in non-residential buildings across Singapore is also in the process of being developed by Singapore-based company Climate Resources Exchange and Standard Bank.
A recent Report of the Economic Strategies Committee, released in February 2010, outlines medium and long-term energy policy considerations for Singapore to meet its development goals. The Report recommends that Singapore diversify its energy sources (by, in the medium-term, exploring coal and energy imports and, in the long-term, exploring the nuclear option), invest early in critical energy infrastructure (including in Intelligent Energy Systems and infrastructure), promote energy efficiency (in residential and commercial buildings and homes) and price energy to reflect real costs and constraints (thus internalising environmental and carbon costs in energy prices). It also outlines, as one of five development thrusts for Singapore's economy, a plan to make it a "location to pioneer, test-bed and export 'future ready' green urban solutions to be achieved by leveraging Singapore's "own needs and track record as a well-planned city to pioneer and export urban and green solutions". Core areas of focus will be:
- urban mobility/smart transportation
- energy efficiency and management
- renewable energy
- water and waste management.
Singapore's energy mix currently relies heavily on gas (some 80 per cent of its energy). A need for energy security will see Singapore gain more of its energy from coal, from imports of energy and also from renewable sources. It is clear, however, that the real emissions reducing investment opportunities on the ground (driven by policy) are in energy efficiency and research and development test-bedding.
Singapore is positioning itself to become a regional hub for carbon players and clean tech developers, linking into its wider development plans as an international finance centre and trading hub for the Asia Pacific region. It is setting up a mercantile exchange (the SMX), which is due to start trading later this year, and plans to eventually count carbon products amongst SMX's commodities basket. It is not fully clear how much demand there will be while the majority of countries in the Asia Pacific region remain non-Annex 1 and without compliance obligations, but with regional players such as China, India, Korea & Japan showing signs of moving towards domestic emissions trading schemes the potential is clear. However, in the meantime trading of VERs and CERs in Asia Pacific rather than European time zones may become an attractive business opportunity.
Norton Rose Group has one of the leading and best resourced legal practices across Asia Pacific and have acted and advised on a number of carbon investment projects in the region. With our in-depth understanding of the carbon markets and legislative regimes in these countries, we are well placed to assist our clients maximise the investment opportunities associated with the inter-linkages throughout the jurisdictions.
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