Singapore's central bank invited consultation on the thresholds and criteria for financing the early phaseout of coal-fired power plants as the nation seeks to set standards to limit global warming.
The Monetary Authority of Singapore (MAS) launched a public consultation on the matter June 28 as part of the proposed Singapore-Asia Taxonomy. The suggested criteria state that coal-fired power plants should be phased out by 2040 and that their total operating duration must not exceed 25 years, the central bank said in a press statement.
This is the last of four consultations arranged by the Green Finance Industry Taskforce, convened by the MAS. Once it concludes, the Singapore-Asia Taxonomy, which helps Singapore-based financial institutions to identify activities that can be considered green or transitioning toward green, will be finalized and launched for use, the release said.
Catch-22 situation
"Coal helps to power Asia's growth, with coal accounting for nearly 60% of power and electricity generation in APAC. But it also contributes to 30% of Asia's emissions," Indranee Rajah, Singapore's second minister for finance and national development, said in a June 28 speech at the International Capital Markets Association.
The urgency of a net-zero future, which means cutting greenhouse gas emissions to as close as zero as possible, is more evident as global temperatures rise. Heatwaves have swept across Asia, resulting in crop failures and lives lost in countries including India and Thailand, Rajah said.
The net-zero transition needs more than $9 trillion of annual investment globally, of which only $5.7 trillion is being invested, according to estimates in a January report from consulting firm McKinsey & Co. Clean energy financing for developing nations must triple to $2.8 trillion by 2030 for the world to reach net-zero emissions by 2050, the International Energy Agency and the International Finance Corporation said in a joint report released in June.
Green finance
Green bond issuance in Asia-Pacific will likely accelerate in the next few months. China issued $13.67 billion of aligned green bonds in the first three months of the year.
Singapore's new framework will give guidance on phasing out coal-fired power plants while avoiding the loss of energy security or livelihoods for communities that depend on coal, Rajah said. "Leveraging transition finance to accelerate the early phaseout of coal-fired power plants in a managed, credible way allows us to move forward with practical ambition," Rajah said.
The guidelines also include criteria such as ensuring power plants have positive fair economic value and demonstrate emissions savings. They must be replaced by clean energy that is at least equivalent to the phased-out electricity capacity. Owners must commit to no new development of coal-fired power plants and a transition plan to a 1.5 degrees Centigrade pathway, a set of actions that limit global warming to 1.5°C above pre-industrial levels.
The MAS has also proposed a code of conduct for providers of environmental, social and governance ratings and data products. It would establish minimum industry standards of transparency in methodologies and data sources, governance and management of conflicts of interest. The MAS will monitor the implementation of the industry code.
