What role does EDB Singapore play in the wider state economy?
The Singapore Economic Development Board is a government agency under the Ministry of Trade and Industry, and our key responsibility is to enhance Singapore's position as a global center for business, innovation and talent. For 61 years, we have supported the economic development of the country, making it easy for multinational companies to set up their hubs and manufacturing facilities here. Finally, our role is to oversee the manufacturing and tradable services sector, which collectively accounts for over 30% of Singapore's GDP.
How has the business environment in Singapore changed since you took over the Board in 2021?
In 2021, the economy was more depressed and connectivity was severely curtailed due to the pandemic, but as soon as the country reopened there was a flurry of activities. However, the supply chain disruptions and the new geopolitical tensions led to a reorientation of supply throughout Asia and the world. New measures like near-shoring, reshoring, and diversification of supply sources have greatly benefited South East Asian countries. Climate action has become a more salient economic topic and there has been a greater emphasis by governments and big corporations on making this a cornerstone for business sustainability. The pandemic and the war in Ukraine have created a renewed importance for the development of low-carbon and renewable energy sources; and compared to 2018, most, if not all, of the multinationals in Singapore have committed to some sort of net zero targets. The interest in green investments has significantly increased, with a special emphasis on low-carbon hydrogen, carbon capture, utilization and storage, circular economy, agritech, low-carbon mobility, and renewable energy projects.
South East Asia's green economy is set to grow to around $1 trillion by 2030 and some 60% of the region's project financing is managed through Singapore. What makes the city-state so crucial to the green transition in the region?
Given Singapore’s context as a small, low-lying island with an open economy, we are very vulnerable to the impact of climate change, which means that we are invested in finding innovative solutions that can help mitigate the effects of climate change, even though we only produce about 0,1% of global emissions. With a rapidly growing population, South East Asia's energy needs are soaring, thus ASEAN aims to increase the proportion of renewable energy to 23% by 2025. Offshore wind and solar assets still have plenty of room to grow, and considering that some South East Asian countries lie on the Pacific Ring of Fire, geothermal energy is also a potentially valuable source. In this context, Singapore's renewable ambitions become a catalyst for the entire region mainly because we are more alternative energy constrained. We are looking to import roughly 4GW of low-carbon electricity by 2035, which will account for around 30% of our national energy needs. Singapore's ambition is to become a sought-after carbon services location where investors can find a source of green and blended finance, accounting services, and exchanges for carbon credits.
What are Singapore's ambitions on the green hydrogen and sustainable aviation fuel fronts?
Singapore is an aviation hub, so, together with green hydrogen, sustainable aviation fuels (SAF) are a central point of interest in our national strategy.
Neste, the Finnish leading producer of sustainable fuels, made a €1,6 billion investment to expand its production capacity in Singapore. With this expansion, Neste’s plant became the world’s largest producer of SAF that uses feedstock such as used cooking oil. Currently, our main energy source in Singapore is liquefied natural gas and a limited amount of solar power, but in the future, we plan to make low-carbon hydrogen an important part of the supply for the grid. If the cost of electrolyzing, transportation and storage reaches an economically viable point, and safety concerns are addressed, green hydrogen could possibly supply up to half of Singapore's power needs by 2050. All these efforts are backed up by government funding of S$129 million through Phase 2 of the Low-Carbon Energy Research program, which supports climate technology development in green hydrogen, and carbon capture for blue hydrogen.
Singapore is the first country in the region to introduce a carbon tax. What was the reasoning behind this decision, and how will it shape the market?
Achieving the net zero target by 2050 entails reducing emissions to about 60 million tons by 2030. One of the key requirements to turn this goal into reality is policy alignment, and that can only be created by pricing carbon to set incentives that would push the market to engage in low-carbon or decarbonization projects. The carbon tax in Singapore is currently priced at S$5 per ton of GHG emissions, and we have legislated it to rise to a level between S$50 and S$80 by 2030. This tax is set to cover about 80% of Singapore's emissions, and we expect that over the years, similar carbon prices will emerge in most parts of Asia.
To further encourage the transformation of manufacturing operations in Singapore, in 2021 we launched the Sustainable Jurong Island plan with the goal to increase the output of bio-based fuels and chemicals, and to enable sustainable production and reduce carbon emissions. Due to a stronger emphasis on carbon emission reduction targets, carbon taxes will become increasingly important all over the world, and suppliers of goods will have to meet requirements to export to developed countries. It will be either this, or they will have to meet carbon boarder adjustment mechanism measures that will also increase the cost of carbon intensive activities.
Where does EDB wish to see the future of Singapore in the context of the energy transition?
Thanks to its position in a region endowed with many natural carbon sinks, Singapore is an excellent hub for carbon services. South East Asia accounts for 20-25% of global nature-based solutions supply, with over five million hectares of mangrove forests and seagrass meadows. Considering this generous pool of opportunities, South East Asia is the perfect geography for companies to explore decarbonization options. For a country that never had many advantages, Singapore has always had to find creative ways to keep up the pace with other nations, and in this climate challenge context, having constraints is a great source of innovation.
