The Monetary Authority of Singapore’s (MAS) Sustainable Finance Advisory Panel (SFAP) met on Sept 26 and discussed possible financing mechanisms to accelerate the phase-out of coal-fired power plants in Asia and support decarbonisation of the hard-to-abate aviation and maritime transport sectors.
The SFAP also discussed how private capital could be better mobilised to finance the region’s climate adaptation needs, says MAS in a Sept 28 release.
The SFAP was established in 2022 to guide MAS on its strategies and initiatives to build a credible and vibrant sustainable finance ecosystem.
Its members include Ahmed M. Saeed, CEO of Allied Climate Partners; Celine Herweijer, chief sustainability officer (CSO) of HSBC; Jane Ambachtsheer, global head of sustainability at BNP Paribas Asset Management; Marisa Drew, CSO of Standard Chartered Bank; and Stephen Howard, vice-chairman, sustainability at Temasek Holdings, among others.
Following the SFAP discussion, MAS says a “whole-of-ecosystem approach” is critical to accelerate coal transition.
SFAP members emphasised the urgency of managed phase-out of coal-fired power plants, which must take place alongside the development of clean energy sources, in Asia’s energy transition.
A comprehensive approach that provides credibility for early phase-out projects and innovative financing structures, regulatory clarity on financed emissions and appropriate policy reforms, will be needed to scale coal transition.
In addition, accelerating the adoption of sustainable aviation and marine fuels is key to the decarbonisation of the aviation and maritime transport sectors, says MAS.
SFAP members underlined the importance of establishing the long-term business case for these low-carbon solutions. Potential levers to lower the costs of these fuels include demand aggregation, securing a reliable and adequate supply of feedstock needed to produce these fuels and supportive government policies to encourage adoption.
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Finally, public-private collaboration is needed to tackle decarbonisation, says MAS.
Multi-stakeholder collaborative platforms would be useful to identify opportunities in financing sectoral transition, foster synergy between government policies and industry actions and design innovative financing solutions, adds the financial regulator.
SFAP members noted the critical role of governments and regulators in solving market failure situations, such as in undertaking detailed analysis of risks and benefits of emerging decarbonisation.
On climate adaptation, the meeting noted that less than 10% of global climate finance is currently being channelled to adaptation efforts, with most of it financed by the public sector.
In turn, SFAP members discussed possible solutions to scale up private financing for the region’s climate adaptation efforts. These include “resilience-linked instruments” and “parametric insurance products”, which enable early intervention and quick responses to climate catastrophes.
SFAP members also discussed ways to address the underpricing of physical climate risks, including strengthening the global climate risk data architecture.
MAS also released a working paper on Sept 26, which proposes that “transition credits” could be sold to incentivise owners of coal-fired power plants to retire their assets early and replace them with renewable energy.
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The joint paper with McKinsey & Company posits that credits generated from the early retirement of a coal-fired power plant and its replacement with a cleaner energy source demonstrates irreversible action to reduce emissions at source. Hence, transition credits could be classified as high-quality credits that are unique from existing avoidance credits.
There are more than 2,000 coal-fired power plants in Asia, which are less than 15 years old on average. They emit about 7.2 gigatons of carbon dioxide (CO2) annually, or about 20% of the world’s annual energy-related CO2 emissions.
In the absence of mandatory managed phase-out requirements, stakeholders of CFPPs have “little motivation” to shorten their existing power purchase agreements, says MAS.
