Singapore has set long term emissions targets and enhanced their 2030 target under the Paris Agreement to set a value for the emissions peak.
Emissions are set to peak at 65 Mt CO2-e by 2030
The long-term target is to cut absolute emissions by 50%, to 33 Mt CO2-e by 2050
This target will be challenging and will be met through a series of programs to promote low carbon development (efficiency, renewables, hydrogen, carbon capture) and through participating in international programs
Businesses should take time to understand the targets, what they mean for core policy such as the carbon tax and how they can incorporate this into strategic decisions - there may also be opportunities presented from this revised national strategy
The budget speech from 18 February discussed that Singapore would be updating its commitment under the Paris Agreement this year. Whilst this update was expected during 2020 (in preparation for COP26 in December), the fact that the new targets were announced last Friday during the Committee of Supply speeches came a little sooner than expected. The updated commitment does represent a relatively large increase in ambition from the first commitment under the Paris Agreement. The updated commitment also represents a challenge for Singapore given its relative size and capacity for deep decarbonisation. There may be room however to further increase ambition, particularly as the world rapidly advances clean technology.
Under the Paris Agreement, countries make commitments known as Nationally Determined Contributions (NDCs). These NDCs represent the amount of decarbonisation that a country is willing to achieve, given the balance between economic growth, the development path of that country and the need to decarbonise. NDCs are often expressed as a percentage reduction in absolute emissions or intensity by some future time, from a chosen base year or from a business as usual estimate. Countries tend to express their NDCs in different ways which does make them a little difficult to compare directly, though comparisons can, and are, made. The UN Emissions Gap report pulls together the commitments that have been made via NDCs and compares them to what is required to reach the goals of the Paris Agreement. Singapore's first NDC from COP21 (2015) was a 36% reduction in emissions intensity by 2030, based on 2005 levels - as well as peaking emissions in 2030. engeco has estimated the emissions intensity in 2005 to be 0.176 kg CO2-e/$ GDP (SGD) - a 36% reduction in this value is 0.123 kg CO2-e/$GDP. Assuming a CAGR (compound annual growth rate) of 2.75% for GDP, we estimated the peak emissions, in 2030, to be 65.7 Mt CO2-e/a.
It is a requirement in the Paris Agreement that countries communicate their national targets every five years, with a view of increasing ambition over time. Since the first NDCs were in 2015, 2020 is the year in which all nations have to communicate their plans with regard to their second NDCs. After this point, the first global stocktake will take place in 2023. This process, outlined in Article 14 of the Paris Agreement, assesses the progress to the Paris Agreement goals and how countries are doing with respect to the overall target - which is to keep temperatures to "well below 2 degrees C by 2100". There is a reasonable likelihood that increases in NDC ambition by many countries is modest in 2020 and that after the global stocktake, larger increases in ambition may be required for the 2025 updates. Prior to the September 2019 Climate Action Summit, 75 countries announced that they would be enhancing their mitigation and adaptation plans and a further 37 countries would be updating their NDCs with new information. This represents 53% of emissions. Of the other 47%, 71 countries lacked clarity on what they were doing with 2020 NDC updates and 14 countries (representing 26% of global emissions) had no plan to revise NDCs.
As of Friday, Singapore can join the ranks of those countries who are enhancing their mitigation and adaptation plans. The announcement consists of two key parts. The first is the enhancement of the 2030 target - which will be to peak emissions in 2030 (this already existed) at 65 Mt CO2-e/a. It is the numerical target that constitutes the enhancement in this case, though this does match the expected emissions in 2030 as calculated by engeco back in 2018. The second part of the enhanced NDC is the announcement of a long term target to reduce absolute emissions by 50% to 33 Mt CO2-e/a by 2050, with a view to achieving net zero emissions as soon as viable within the second half of the century.
Extrapolating the decarbonisation line from 2050 to zero emissions arrives at around 2070 for decarbonisation of the country to net-zero emissions.
The National Climate Change Secretariat presents some key levers in which decarbonisation will be achieved. Firstly, industry, the economy and society will be transformed. This will involve a number of items that have largely been announced including increasing energy efficiency in industry, households and buildings, increased penetration of solar power to 2 GW by 2030, investment in low carbon technology and the support packages for cleaner vehicles, increased use of public transport and increasing walk-cycle-ride journeys. The second area is in the area of advanced low-carbon technology such as carbon capture, utilisation and storage and low/zero carbon hydrogen import. Finally, there will be a focus on international collaboration both regionally and farther afield exploring international climate action. Interestingly, both regional power grids and "market-based mechanisms" are mentioned as part of international collaboration. Regional power grids was a big topic of conversation at the Future Energy Asia conference in Bangkok this year with plans by EGAT in Thailand to export hydropower from Laos PDR through Thailand into Malaysia and Singapore.
The central mechanism for decarbonisation for Singapore remains as the carbon tax, with Singapore reaffirming plans to increase the price to $10-$15/t CO2-e (from the current $5/t CO2-e) by 2030.
The revised targets will be challenging to achieve, particularly as the potential for deep decarbonisation within Singapore remains limited due to the country's size and relative disadvantage with respect to natural resources. Material decarbonisation efforts such as carbon capture, utilisation and storage and widespread use of hydrogen remain expensive currently and will require a much higher explicit carbon price or strong Government support (an indirect form of carbon pricing) to achieve a positive business case. Current cost estimates for carbon capture and storage require a carbon price in excess of $120/t CO2-e to achieve a CCS project net present value of $0. Hydrogen from electrolysis and renewable energy is more expensive again, requiring over $200/t CO2-e to displace natural gas and current LNG prices.
Import of renewable energy from outside of Singapore either from the ASEAN region or from Australia, as put forward by the Sun Cable project will also require significant investment - particularly to firm those energy sources in the case of intermittent sources. Given these limitations, there may well be some reliance on offsets to help achieve the goals. It is expected that the offset market will be tight in coming years however as the aviation industry, and many players in the fossil fuel industry, have expressed a desire to utilise offsets to achieve net-zero ambitions. This suggests that the price of offsets is likely to increase in future. As always with offset programs, significant care must be taken to ensure offsets purchased represent additional emissions reductions and are verified.
Many decarbonisation pathways show that net-zero emissions will need to be achieved globally some time between 2050 and 2070, with negative emissions required after that point to achieve the goals of the Paris Agreement. The later that peaking of emissions occurs and the later that net-zero is achieved, the more expensive it will be to meet the Paris Agreement goals. Large scale negative emissions technology such as direct air capture or bio-energy with CCS remains very expensive and is not yet proven at scale. Forestry projects, avoided deforestation and regenerative agriculture remain the most cost effective method for drawdown of CO2 emissions but there isn't an infinite capacity for implementation of this sort of negative emissions technology. With decarbonisation, it is the developed world that has the greatest capacity for rapid decarbonisation and has historically been the source of emissions globally. Developed nations should be targeting 2050 for net-zero emissions to give the world a reasonable chance of achieving the goals of the Paris Agreement. This will then provide some time for developing nations to also achieve net-zero emissions and for finance and technology flows to those nations.
Whilst it remains commendable that the Singapore Government is enhancing its NDC and setting a long-term target, there may be scope to increase the target further in coming years. Achieving net-zero emissions (and then negative emissions) as close to 2050 as possible is critical to achieving a temperature increase of well below 2 degrees by 2100. Noting of course that Singapore is materially exposed to physical risks of climate change due to both being a low lying island state and being located near to the equator and already having higher average temperatures than many countries. Singapore has an opportunity to lead by example, particularly as it will have to do everything it can to encourage the world's largest emitters to set strong long-term emissions reduction goals.
From a business point of view, companies need to understand what this level of decarbonisation means to them and what a Paris aligned scenario looks like to the country and therefore what impact future policy rachets may have on them. For example, developing an understanding of what price the carbon tax will need to be to support not only this current long term target but one of net-zero emissions around 2050 - and to also understand what the offset market will look like in those conditions. Businesses should, as a minimum, be looking to these long-term targets as a guide to what decarbonisation they themselves will have to undertake and using that information to set targets for future emissions.