Concerted effort needed on climate action in 2018

SINGAPORE'S declaration of 2018 as the "Year of Climate Action", backed by plans to soon implement a carbon price, has served to demonstrate the country's determination to lead by example. Furthermore, as Asean chair in 2018, Singapore has a key opportunity to forge a path towards universal access to affordable and sustainable energy across the region.

Countries across South-east Asia are wrestling with the challenge of powering their growing economies. Power generation in Asean more than doubled between 2000 and 2015, and according to recent studies by the International Energy Agency (IEA), energy demand in the region is expected to grow by 80 per cent between 2015 and 2040. Electricity demand is expected to triple over the same period.

Coal still looms large in the region's energy supply. Asean countries have plans to add a further 114GW of coal-fired power generation in the coming decade, which is almost nine times the current capacity of Singapore's electricity grid.

In the past, policymakers have understandably turned to coal as the cheapest option for powering their economies. But changing economics and a new understanding of the sustainable future we need to accelerate mean that coal's attraction is quickly fading.

First, the cost of renewable energy sources, in particular wind and solar, is in rapid decline. To give one example, the cost of solar power around the world in 2017 was 50 per cent lower than in 2014 and 2015. From India to Mexico, renewables are now cheaper than coal. And while price parity has not yet been reached in some Asean countries such as Indonesia and Vietnam, it's a question of when, not if, this tipping point will be reached. It would be an expensive irony if this new economic reality were ignored, leaving significant new investments in old technologies susceptible to "stranded asset" write-offs way before their productive life is fulfilled.

Second, the public's demands for clean air to breathe and a safer environment free from the catastrophic and costly impact of runaway climate change are forcing governments to reassess the wisdom of locking in fossil fuel-based energy infrastructure. This is what I call the "social licence" for coal, and it is quickly coming to an end in countries right across the globe.

The stakes of the low-carbon transition could not be higher. A recent study by the Asian Development Bank estimated that the economic impact of climate change could reduce the region's GDP by a massive 11 per cent by 2100.

World Bank president Jim Yong Kim put it in starker terms, explaining that "if the entire region implements the coal-based plans right now, I think we are finished".

It is no exaggeration to say that the political and business decisions taken in the next two years on the region's energy pathway will settle whether those - and millions of people's - worst fears come to pass, or whether we leave the door open to forge a cleaner, more prosperous and safer future.

Fortunately, Singapore is attuned to this urgent turning point. Its "Year of Climate Action", backed by concrete steps in the domestic policy sphere, is the kind of leadership the region needs.

But there is also a hard business logic behind the country's climate drive.

As we learnt from the IEA report launched during the Singapore International Energy Week last October, there will need to be about US$3 trillion invested in South-east Asia's energy infrastructure between now and 2040.

In addition to the billions saved if we avoid the worst impact of climate change, the shift to renewable energy is also a major business opportunity from which Singapore, with its innovative clean energy players, is well positioned to benefit.

Singapore's finance sector has a major role in this effort. But, unlike the government, major banks based in Singapore are heavily invested in a coal-driven future. For example, a recent analysis highlighted that OCBC, UOB and DBS have together poured over US$2.2 billion into coal deals since 2012. And as a matter of urgent concern, DBS's sustainability commitments, released in January, failed to rule out funding for seven major coal-fired power stations it reportedly has in its sights to finance this year in Indonesia and Vietnam.

Singapore's "Year of Climate Action" is a step in the right direction, but its world-leading financiers and asset managers need to follow suit. There is no time to waste.