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Greening After Glasgow: How should the Private Sector Respond?

14 Dec Greening After Glasgow: How should the Private Sector Respond?

The COP26 climate meeting has renewed hope and ambition by bringing together world leaders from across the globe, shining a spotlight on the climate crisis, and serving as a catalyst for governments, businesses, and individuals to take concrete climate action. But the hard work must continue after the meeting. ASEAN countries are increasingly impacted by climate disasters, and they will also increasingly be impacted by global developments such as the push for national carbon pricing, as well as proposed carbon border adjustments. This gives rise to an opportunity for ASEAN countries and corporates to collaborate, to capture green economy opportunities and align the region with global climate efforts. The private sector is key to these efforts. How can companies respond to the developments from COP26, and drive the transition to net-zero?

On Monday, 29 November 2021, the Singapore Institute of International Affairs (SIIA) held the webinar on “Greening After Glasgow: How should the Private Sector Respond?”. The webinar was co-organised with the Ministry of Trade and Industry. During the webinar, the SIIA also released its special report, “Greening the Road Ahead: Building a Collective ASEAN Climate Community”. The development of the report and the webinar were supported by the Hinrich Foundation and OCBC Bank. Mr. Alvin Tan, Minister of State, Ministry of Culture, Community & Youth and Ministry of Trade & Industry, delivered the keynote address and participated in a dialogue session moderated by Associate Professor Simon Tay, Chairman, SIIA.

The webinar included a panel discussion moderated by Associate Professor Tay on how the private sector can move forward post COP26, featuring views from Mr. Andrei Marcu, Executive Director, European Roundtable on Climate Change and Sustainable Transition (ERCST), Mr. Benedict Chia, Director (Strategic Issues), National Climate Change Secretariat, Strategy Group, Prime Minister’s Office, Mr. Steven Bartholomeusz, Head of Public Affairs, APAC, Neste, and Mr. Stephen Olson, Senior Research Fellow, Hinrich Foundation.

Ms. Meixi Gan, Deputy Director (Sustainability), SIIA, presented the key findings of the SIIA’s special report. The report provides a case for increased cooperation among the ASEAN member states, and encourages them to synergise efforts and collectively work towards building a “climate community” to advance action. It begins with an overview of the current state of ASEAN efforts on climate action and finds that there is considerable room for more coordinated efforts to speed up and scale up benefits. The report is available for download on the SIIA website.

COP26 Outcomes and Next Steps

During his keynote, Mr. Tan discussed the importance of international and ASEAN cooperation, and the role of the private sector in tackling the climate crisis. He emphasised the need to continue to strengthen frameworks to encourage collaboration and generate mutually beneficial solutions. Mr. Tan also said that there were tremendous opportunities in the green economy for ASEAN that could be captured through strengthened regional cooperation on climate change. Some of the key growth areas include the carbon services ecosystem and the development of low-carbon solutions.

Mr. Tan also commented on the outcome of COP26, noting that the Glasgow Climate Pact highlighted the success of a multilateral approach and was a step in the right direction. COP26 emphasised the urgency to tackle the climate crisis, and Parties committed to accelerating the momentum of climate action. A key outcome was the conclusion of Article 6 negotiations, which provided a stronger foundation for international cooperation on carbon trading. In addition to domestic plans that were announced ahead of COP26, such as the Green Plan 2030, Singapore also joined the Powering Past Coal Alliance and signed the Glasgow Leaders’ Declaration on Forests and Land Use, and the Global Methane Pledge.

During the panel discussion, Mr. Chia from the NCCS also commented on COP26, highlighting its significance in ensuring that global climate action would continue on a pathway to limit the global temperature increase to 1.5 degrees Celsius. Strong and robust temperature goals provided a strong incentive for carbon pricing, and for countries to come together to activate their markets to keep the temperature rise within the target. Mr. Tan noted that carbon pricing was one way to drive cost-efficient emissions reduction and played a key role in Singapore’s mitigation strategy. If ASEAN could enhance our cooperation on carbon prices, there would be a more consistent price signal to companies in the region. This could in turn catalyse investments into low-carbon and sustainability solutions.

Besides carbon pricing, Mr. Tan also spoke about the need to explore alternative drivers of emissions reductions. Bilateral agreements, such as Singapore’s Green Economy Agreement with Australia, would play an important role in facilitating trade and investments. To continue promoting multilateral regional policy development, such agreements could help establish rules and standards in aspects such as carbon trading related services and low-carbon solutions, and create taxonomies to alleviate bottlenecks in green financing.

Role of Private Sector in Decarbonisation

Mr. Olson from the Hinrich Foundation said that governments did not have the means to meet sustainability objectives on their own, and foreign investment would be central to sustainability efforts moving forward. Countries should engage in sustainable beneficial trade in a way that not only generates balanced economic growth but also strengthens social capital and environmental stewardship. Companies in general had risen to the challenge of increasing pressure to adhere to higher ESG standards. Therefore, to meet sustainability expectations, it was essential for countries to put policies in place to continue attracting foreign direct investment (FDI).

Mr. Tan also addressed the role of FDI in his remarks.  Singapore had seen sizeable FDI including green businesses such as agri-food tech. Besides companies setting up headquarters in Singapore, financial institutions were also building a market for green goods and services. Singapore must build this ecosystem and remain open to new businesses and their investments, in order to continue developing its green economy.

Mr. Bartholomeusz from Neste commented that while the public sector outlined guiding policy and regulations, it was the private sector which had a significant role of speeding up the transition towards a low-carbon economy. This could be done through developing low-emissions transport by investing in clean fuel technologies and speeding up the electrification of vehicles. Aside from reducing domestic transport emissions, there was also an opportunity to scale up efforts to reduce international transport emissions through the use of sustainable aviation fuels.

Global Developments Impacting ASEAN – EU’s Carbon Border Adjustment Mechanism (CBAM)

Mr. Marcu from the ERCST discussed the EU’s proposal on a carbon border adjustment to reduce carbon leakage from trade. He noted that while the CBAM was meant to serve as an incentive for countries outside the EU to take climate action, there were various issues that needed to be addressed for its successful implementation. For example, the calculation of carbon content was a complex issue, and it might be difficult to account for the price of policies and measures that different countries had in place.

Mr. Marcu opined that the ambiguity of the CBAM did not bode well for regional and international cooperation, which was a central part of our collective ability to address the panoply of climate challenges. The CBAM could be perceived as disguised “green protectionism”, potentially undermining confidence in the international trade system. It remained to be seen how the CBAM would be received in ASEAN, and how the region would respond as more details on its implementation became available.

Conclusion

Coming out of COP26, there is a sense of both optimism and renewed urgency in tackling climate change. While many new initiatives have been put forth to advance collective global climate action, it is crucial for countries and public and private sector actors to work together to take concrete steps to implement the goals. We would need to continue strengthening international frameworks to encourage collaboration and generate win-win solutions. As ASEAN countries will increasingly be impacted by global developments such as proposed carbon border adjustments, the ASEAN community must work together to capture green economy opportunities and align the region with global climate efforts. Carbon pricing is just one of these many opportunities for collaboration. The private sector also plays an important role in the transition to net-zero, where it could help catalyse decarbonisation at scale and support countries in raising their climate ambition through carbon services and low-carbon solutions. Concerted effort by both the public and private sectors must be made to keep the Paris Agreement goal alive.