Budget 2022: New net zero emissions target a bold move that will create jobs

Singapore has decided to move decisively and fast-forward its ambition to achieve net-zero emissions by or around mid-century in a bid to sharpen its competitive edge and capture growth opportunities in the green transition.

In his Budget speech on Friday (Feb 18), Finance Minister Lawrence Wong said Singapore is on track to achieving its 2030 target.

While the country is disadvantaged given its lack of natural renewable energy sources, green technologies have been improving rapidly and alternative low carbon solutions and hydrogen are starting to look more plausible.

"We will therefore raise our ambition to achieve net zero emissions by or around mid-century," Wong said. Previously, the goal was to achieve net zero emissions as soon as it was viable in the second half of the century.

To achieve the new net-zero ambition, Singapore will raise the current carbon tax of S$5 per tonne to S$25 per tonne in 2024-2025, and S$45 per tonne in 2026-2027, with a view to reaching S$50 to S$80 per tonne by 2030.

From 2024, businesses will be allowed to use high-quality international carbon credits to offset up to 5 per cent of their taxable emissions in lieu of paying carbon tax. As for households, the government will provide support such as additional "u-save" rebates to help cushion higher utility bills.

The coming decade would see a greening of traditional sectors of the economy such as aviation, energy, and tourism.

"At the same time, emerging green sectors like green finance and carbon services will grow in prominence. Millions of new green jobs will be created around the world and demand for talent with green skills will increase," said Wong.

By moving quickly, Singapore will be able to build on its competitive advantages and capture new opportunities.

"We can become the go-to location in Asia for expertise in carbon services and the trusted regional marketplace for carbon credits. As a key node for international air and sea transport networks, we can become a frontrunner in the development of sustainable aviation and marine fuels," he said.

Green finance is one of the fastest growing segments in the financial services sector. Singapore accounts for close to half of the Asean green bond and loan market.

"We aim to do more so that banks and financial institutions will use Singapore as a base to develop their capabilities and to develop innovative green financial solutions to service their customers all over Asia and the world," Wong said.

Singapore aims to issue up to $35 billion of green bonds by 2030 to fund public sector green infrastructure projects. This is up from the S$19 billion of green bonds announced in last year's Budget. It will include bonds issued by the government and statutory boards. The government will also publish a Singapore green bond framework and issue an inaugural green bond data this year.

Apart from green financing, Singapore also aims to be at the forefront of green technologies, where new innovations are developed, scaled up and eventually exported to the rest of the world.

Wong said Singapore intends to "work hard to grab the first mover advantage and develop new engines of growth in the green economy".

As part of its green plan, which will see the phasing out of internal combustion engine vehicles by 2014, Singapore will further accelerate electric vehicle (EV) adoption by building more charging points. The infrastructure upgrades will be funded by green bonds. EV's market share was 4 per cent in 2021, compared to 0.2 per cent in 2020.

Singapore's green plan was widely lauded by industry observers.

Irene Tai, Partner, Tax at PwC Singapore said: "This is a calibrated but a very bold move by the Singapore government, particularly amidst the challenging economic environment.

"This demonstrates Singapore's seriousness about its commitment to the Paris Agreement and signals Singapore's intention to become a green economic hub. We look forward to seeing the carbon tax revenues be reinvested to support companies' efforts to achieve their low carbon transition ambitions."

Fang Eu-Lin, ESG Leader at PwC Singapore, said the plans to issue up to S$35 billion in green bonds by 2030 will help to create jobs across the value chain, from sustainable finance, sustainable infrastructure and assets, ESG professionals, and further direct capital towards green projects to combat climate change.

"It gives further certainty to the transitions that are going to have to take place, for example, infrastructure for EVs and phasing out of internal combustion engine vehicles," she said.

However, to be in the forefront of a green finance hub, it will require an ecosystem including green projects, demand from investors and the expertise, from designing the right jobs to skills to carry these ambitions, Fang said.

Source: The Business Times © SPH Media Limited. Permission required for reproduction.