Posted on 30 Jun 2022
Given the diversity within the ASEAN, the ASEAN Taxonomy Board, has decided on a multi-tiered approach with two main elements:
Plus Standard with metrics and thresholds to further qualify and benchmark eligible green activities and investments, in the key sectors. Implementation will depend on the activities and initiatives of the individual AMS. The 6 key sectors in focus are agriculture & land use, energy, transportation, manufacturing, construction and waste sectors
The ASEAN taxonomy will continue to evolve and take into consideration other taxonomies in the world.
Singapore’s Sustainability Efforts
In February 2022, the Government announced that carbon tax will rise to SGD 25 (USD 18) /tCO2e in 2024 and this will rise further to SGD 45 /tCO2e in 2026 and eventually to reach SGD 45 – 80 (USD 32 – 58) /tCO2e by 2030.
Companies are also allowed to use high quality international carbon credit to offset up to 5% of their taxable emissions from 2024.
To allow emissions-intensive trade exposed companies more time to adjust to a low carbon economy, a new framework will be released in 2023 ahead of the revised carbon tax framework in 2024.
In the meantime, the launch of Climate Impact X (CIX), a voluntary carbon exchange marketplace was announced on 16 March 2022. This Singapore based exchange is a joint venture comprising Singapore Exchange (SGX), DBS Group, Standard Chartered Bank and sovereign wealth fund Temasek.
Apart from the CIX, the global trading platform, AirCarbon Exchange, is also one of the few carbon exchanges operating in Singapore.
Being a leader in sustainability efforts in ASEAN, the Singapore progress is expected to provide benchmarks and examples for the development of climate change strategies in ASEAN.
Indonesia’s Sustainability Efforts
The implementation of the Indonesia Carbon Tax of USD 2.10 /tCO2e, originally announced in October 2021 has been delayed to July 2022 from April 2022, pending the completion of the roadmap and taking into account the balance between introducing the reforms and economic recovery given the recent global developments which includes inflation and Ukraine war. The tax will be levied on emissions by the coal power sector for a start.
In addition to that, Indonesia and Singapore have entered into a climate change partnership on 21 March 2022, that will result in the collaboration on carbon related projects. The Memorandum of Understanding will cover carbon pricing and markets, nature-based solutions and ecosystem-based approaches, clean technologies and solutions and green and blended finance.
Between April and August 2021, a voluntary and intensity-based pilot emissions trading system was introduced, to allow participants to trade carbon allowances and offset credits from renewable energy generation. 26 out of 84 coal-fired plants took part. From this exercise, Indonesia’s Energy Ministry set limits ranging from 0.918 t0 1.094 /tCO2e for the 32 coal power plants in Indonesia. Those who exceed the limits can purchase carbon credits from those that emit less than their emission caps or pay a carbon tax. This system will continue and be improved before transitioning towards the mandatory cap and trade ETS by 2024/2025.
The implementation of carbon tax and the ETS will eventually be expanded to cover all necessary sectors to allow the country to meet its climate change targets.
While there appears to be a possibility of cross border carbon trading, the details are not yet clear at this stage.
Thailand’s Sustainability Efforts
Thailand’s effort towards climate change impacts started with the establishment of the Thailand Greenhouse Gas Management Organisation (TGO) in 2007. TGO is an autonomous public organisation set up to manage and expedite the development and implementation of greenhouse gas reduction projects and support public, private and international organisation partnerships to promote the implementation of climate action.
Since then, the TGO has set up a Thailand Voluntary Emission Reduction (T-VER) program in 2013. The program was designed to promote and support voluntary participation and allows the sale of the verified emission reduction or carbon credit (TVER). For this, TGO has prescribed rules and procedures for project development, GHG emission reduction methodology, and certification of emission reduction credit.
In July 2021, TGO launched the Thailand Carbon Neutral Network in collaboration with the Federation of Thai Industries for the development of the national carbon trading platform in enabling Thailand to transition to a carbon-neutral society.
Further, in April 2022, TGO and Baker McKenzie Thailand has signed a Memorandum of Understanding to “collaborate on building an enabling legal environment with the aim to promote implementation of climate action in Thailand”. Baker McKenzie will support TGO on the development of a legal framework and mechanisms for an ETS, to facilitate implementation of TGO's mission to assist organizations in the move towards carbon neutrality and achieving net zero emissions.
Vietnam’s Sustainability Efforts
In November 2020, the Vietnamese government revised the law on Environmental Protection. The amendment legalises carbon pricing in the form of an ETS, for greenhouse gases. A carbon tax could also be developed under the overall framework provided by this law.
On 7 January 2020, the Vietnamese government issued a new decree on reduction of greenhouse gases. For the carbon market, the decree specifies that businesses will be given guidance on the scheme and undergo some pilot market operation, followed by the full operation of the ETS, to be formally launched in 2028.
From now to 2027, the government will focus on establishing regulations on management of carbon credits, GHG emission quota trading and operation of the carbon credit market. The government will also implement a pilot ETS and provide guidance to the industry. The pilot project will start from 2025 until the official start of the ETS in 2028.
Thereafter, the government will set out regulations on carbon trading between the domestic and global carbon credit markets.
These four countries have taken the lead on mitigating climate change impacts in ASEAN. However, other ASEAN countries are also in the midst of setting policies towards a sustainable future.
Implications to the ASEAN Steel Industry
ASEAN countries are doubling efforts to ensure they meet their climate change commitments made at the Paris Agreement and thereafter.
So far, apart from Singapore, the efforts are at a very broad policy making level. Even so, the message is clear, that if the efforts will continue and gain momentum once all the legal requirements are in place.
While the focus may be on high emissions sectors such as the energy sector, it is a matter of time before the focus is expanded to cover the other high emissions industries such as the cement and iron & steel industries.
Measurement, Reporting and Validation (MRV)
While not all ASEAN countries have not officially started the MRV of carbon emissions, it is a matter of time before that happens. So, all industry players should start looking at how the MRV processes and details are specified in your respective countries.
Carbon Tax
While only Singapore and Indonesia are implementing carbon tax, it will not be surprising that other countries will follow suit. Industry players along the steel value chain should start preparing for this and should factor this in the cost of doing business in the sustainability era.
However, carbon tax has serious implications to countries as well as businesses, in the following ways
Carbon taxes make investments in the country less attractive and allowing carbon leakage, especially if imported goods do not have to comply with local carbon regulations and taxes.
As such, it is important for Authorities to:
Green & Sustainable Technologies & Products
The ASEAN Steel Industry, similar to the Global Steel Industry, has evolved for many years and has adapted to many changes in history and has continued to provide value in the development of nations. The steel industry will continue to pursue green and sustainable technologies as well as green steel products to adapt to the latest development and requirements of the market and to mitigate its own emissions. More on these in another article to be published in the near future.
Government, Steel Industry & Stakeholders Partnership
However, the current challenges from climate change and action policies are larger than what the industry can handle by itself.
The Worldsteel Association (WSA) has highlighted the need for a partnership among governments, steel industry and other stakeholders to collaborate in the effort to overcome these challenges to transform the industry. Governments should create frameworks that:
Get Vaccinated. Get Your Booster.
Keep Your Distance. Wear Your Mask.
Stay Healthy. Stay Safe.
(Yes, I know. Global borders are re-opening, with fewer restrictions. But the pandemic is not over and we need to stay safe,
for a little while longer)
Source:SEAISI
