Stemming deforestation in Southeast Asia – a region which loses 1.2 per cent of its forests each year and is poised to lose three quarters of its original forests by the end of this century – is “not costly” compared to other emissions mitigation measures, said Singapore’s inaugural climate action ambassador Ravi Menon.
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The former central bank chief, who was speaking at the Unlocking capital for sustainability event held in Singapore, estimated that pricing carbon at just US$20 per tonne could halve the region’s rate of deforestation, which is among the highest in the world.
“We need to stop deforestation in Asia,” he said, while stating the need to phase out coal and build reliable grid infrastructure as the region’s two other priorities as it “works towards decoupling economic growth from emissions”.
“It is in Asia that the battle against climate change will be won or lost,” said Menon. The world therefore has a vested interest to help the region chart a transition pathway contextualised to its own unique challenges, he stressed.
Menon, in his former capacity as the head of Singapore’s central bank, had previously stated that pricing carbon at US$100 per tonne would render blended finance and carbon credits to lower the cost of capital for financing emerging Asia’s transition unnecessary.
So far, Singapore is the only country in Southeast Asia with a carbon tax, which was raised to S$25 (US$19.30) per tonne earlier this year, though Reuters reported in June that up to 76 per cent of rebates is being offered to refiners in the near term. But Thailand is soon expected to join the city-state in putting a levy on carbon emissions, starting with a 200 baht (US$5.60) per tonne on oil products come 2025.
While coal-fired power plants continue to contribute to the bulk of Asia’s emissions, at about 7.6 billion tonnes of carbon emissions each year, forest clearance in Southeast Asia alone – mostly driven by agricultural expansion and infrastructure development – emits over 400 million tonnes of carbon dioxide annually.
“But forest conservation is not just about cost, it is also about integrity, The methodologies for measuring, reporting and verifying actual carbon abatement in many conservation projects may not be accurate,” said Menon, adding that this has led to an overclaiming of deforestation reduction in some projects.
“We need to set out standards to ensure the integrity of forest conservation projects,” he said.
Criticisms of carbon offsets have mainly been targeted at forest conservation projects, which issue credits based on claims of avoided emissions, but are prone to over-crediting. This risks increasing global emissions, if companies use offsets that fail to deliver on the reductions they promise to neutralise their carbon emitting activities.
In 2022, Singapore launched a S$15 million (US$11.5 million) five-year research project, known as the Carbon Market Integrity Research and Development Programme, to develop internationally-recognised methodologies for the measurement, reporting and verification of nature-based projects unique to Southeast Asia, like mangroves and peatlands – two ecosystems which Menon emphasised the need to restore, since they store over twice the amount of carbon that tropical rainforests do.
In July, Malaysia’s natural resources minister also mooted an Asean standard for carbon projects, though he did not elaborate on how it might work alongside existing international frameworks.
Singapore has been piloting a novel class of carbon credits called “transition credits” for the phase out of coal, which Menon, in his opening speech, said must be done progressively and in an inclusive manner, taking into consideration that Asia’s energy needs are still expanding and that more than 5.3 million people in the region are employed across the value chain.
Last December, two Philippine coal plants were chosen to test the new concept.
The city-state is currently consulting the industry governance body Integrity Council of Voluntary Carbon Markets (ICVCM) to ensure that these credits – which are generated from emissions reductions when a coal plant is retired early and replaced with clean energy sources – meet the Core Carbon Principles and Article 6 integrity requirements, said Menon.
Article 6 refers to a section in the Paris Agreement which lays out the rules for countries to meet their national climate targets through trading carbon credits.
Updates to come at COP29
With at least US$815 billion of shortfall in annual investments to meet Asia’s climate and adaptation needs, blended finance has often been mooted as a strategic way to use public and philanthropic capital to attract more private capital for decarbonisation projects.
At last year’s COP28 climate summit, Singapore launched a blended finance platform called Financing Asia’s Transition Partnership (FAST-P), which aims to mobilise US$5 billion through pooling concessional capital, which can accept below market rates of financial return, from the republic and other global partners.
Since then, finance institutions and philanthropies have expressed support to contribute concessional capital, which forms the basis for Singapore to reach out to banks and institutional investors to bring in commercial capital, said Menon.
Representing the Monetary Authority of Singapore last year, Menon had announced two thematic funds under FAST-P, including a green investments partnership with the state investor Temasek, New York-based philanthropic organisation Allied Climate Partners and the World Bank’s International Finance Corporation, as well as an energy transition-focused fund with the Asian Development Bank and the Global Energy Alliance for People and Planet.
The third investment theme was meant to be cover clean technologies that are emerging like hydrogen and carbon capture, utilisation and storage.
But Menon revealed on Thursday that the third theme, which has been renamed to “industry transformation”, will focus on hard-to-abate sectors like aviation, shipping, steel and cement, in addition to nascent low-carbon fuels such as hydrogen and ammonia.
More details about the three programmes, contributing partners for each theme and asset managers who will manage the respective funds will come at COP29 later this year, together with the amount of capital mobilised to-date, said Menon.
The annual Unlocking capital for sustainability forum is organised by media and business intelligence organisation Eco-Business, in partnership with United Nations Environmental Programme Finance Initiative (UNEP FI).
“When we gather at conferences like these, we celebrate the little successes and advances that we make, and I think that’s important. But the only key performance indicator that matters is what’s happening to the overall temperatures and greenhouse gas emissions,” said Menon.
“Globally, greenhouse gas emissions are still on the rise. We have not even bent the curve yet, let alone dropped it down to anywhere close to net zero. Emissions today are about 40 per cent higher than they were 20 years ago.”
Given the current trajectory of emissions growth, Menon said in his speech that “we must prepare for a climate-impaired world”. If the world wants to avert the worst impacts of climate change, the timeline for an effective transition needs to be “set not by politics or economics, but by nature,” he added.
Asia, in particular, will need clear standards on what constitutes a credible sectoral decarbonisation pathway to enable that “greening the brown will eventually lead to green, and is not greenwashing in disguise,” said Menon.
