With 2050 as a destination, Singapore’s plans to cut emissions will meet their first checkpoint at the turn of the decade. Major climate milestones are congregating around 2030, and Singapore is not far away from its “first exam”, says Fang Eu-Lin, sustainability and climate change leader at PwC Singapore.
Fang points to the 2030 Green Plan — a whole-of-nation initiative with targets ranging from solar energy to waste reduction — and Singapore’s emission target of 60 million tonnes of carbon dioxide equivalent (MtCO2e) by 2030.
“There will never be a perfect time to drive sustainable development,” adds Fang. “Meeting these milestones can help the city-state gain momentum and confidence in achieving net zero by 2050.”
Ahead of Singapore’s Budget 2023 announcement on Feb 14, PwC Singapore’s proposal includes stepping up blended green finance and climate-tech solutions.
Fang acknowledges “strong leadership” in sustainability by many large companies here. “In their next bound, it is timely to bring along other stakeholders across the ecosystem, such as suppliers, and potentially promising climate solution providers. Their success will be Singapore’s success too.”
At last year’s Budget, Finance Minister Lawrence Wong announced that Singapore’s government and statutory boards will issue up to $35 billion in green bonds by 2030 to fund public sector green infrastructure projects, such as charging points for electric vehicles (EVs).
See also: Singapore Budget 2023 wish list: EY
Schemes to catalyse green and sustainable finance in Singapore have been successful, says PwC Singapore in a Jan 31 press release. “To further expand this capability, making refinements to capital risk charge with respect to green and sustainable finance, or risk-sharing schemes can be of consideration as this will serve useful for both banks and borrowers, including small and medium-sized enterprises (SMEs).”
According to one PwC report, early-stage investments globally lack sufficient funding, particularly in carbon capture, utilisation and storage (CCUS), green hydrogen and food waste technology. “Further incentives for earlier stage investments or funding for such solutions can create value and impact where it matters most. Encouraging climate-tech breakthroughs will not only facilitate Singapore’s green ambition, it will also position Singapore as a sustainability innovation hub.”
As more businesses progress in their decarbonisation journey, PwC Singapore anticipates rising demand for resolving carbon trading disputes. “In view of this, Singapore has the potential to position itself as an ESG arbitration centre to resolve emerging environmental disputes,” says the tax practice.
Carbon Border Adjustment Mechanism
PwC Singapore points to the possible introduction of a Carbon Border Adjustment Mechanism (CBAM) in the European Union. First mooted in March 2022, the mechanism levies an import tax on products where the production was not subject to the same environmental standards as those in the importing country.
“In essence, this means that any product shipped from Singapore to countries which have a CBAM in place may be subject to additional import taxes if the production of such product cannot be proven to have undertaken the required environmental standards of the destination countries,” says PwC Singapore.
To avoid such additional import taxes, Singapore exporters would need to demonstrate that their production processes in Singapore meet the required environmental standards. This also extends to any imported materials incorporated into their products.
While the implementation timeline could run over a number of years, the possible implications for Singapore exporters “cannot be underestimated”, says PwC Singapore. “The Singapore government can start outlining its own ideas as to how Singapore’s exporters should be protected from the impact of CBAMs to be introduced in Europe or potentially in other countries which may follow the EU’s footsteps.”
To start preparing for a world in which CBAMs are common, PwC Singapore calls on the Singapore government to consider setting its own production standards based on environmental objectives and targets or implementing a CBAM for products imported into Singapore that do not meet such standards.
Change is a friend for Singapore, says Marcus Lam, executive chairman at PwC Singapore. “While global economies are bracing themselves for a less-than-ideal outlook, ongoing uncertainties have also presented Singapore with opportunities to play to its strength, especially its stability amid volatile times, and enhance its international standing as a reliable centre in Asia with abundant opportunities.”
Lam adds: “A timely update of policies that reward businesses’ alignment with Singapore’s growth outcomes and efficiently address new systemic risks can help Singapore businesses compete internationally.”
