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MAS uses COP28 to push transition finance
Regulator launches Singapore-Asia Taxonomy framework, Transition Credits Coalition
Tom King 5 Dec 2023
MAS managing director Ravi Menon
MAS managing director Ravi Menon

In his speech at the COP28 Singapore Pavilion in Dubai, the Monetary Authority of Singapore (MAS)’s managing director Ravi Menon laid out Singapore’s blueprint to muster capital for Asia’s energy transition.

Menon announced the launch of two pilot projects – the Singapore-Asia Taxonomy framework for sustainable finance, and the Transition Credits Coalition (TRACTION) that will test the use of high-integrity transition credits in transactions for the early retirement of coal-fired power plants (CFPPs).

Transition credits are high-integrity carbon credits generated from the emissions reduced through retiring a CFPP early and replacing this with clean energy sources. They serve as a complementary financing instrument to reduce the economic gap for the early retirement of CFPPs.

Speaking during his address Menon says a whole-of-system approach is needed to develop transition credits into a viable market solution and that the TRACTION coalition – comprising members and knowledge partners from carbon credit services, energy financing, project development, risk management and non-governmental organizations  – will identify system-wide barriers and develop solutions for transition credits to be used as a credible financing instrument.

Pilot projects

To be considered high integrity, these credits must be aligned with globally recognized standards, such as the Core Carbon Principles (CCPs) set out by the Integrity Council of Voluntary Carbon Market (ICVCM), and other Article 6 integrity requirements, as mandated by the United Nations Framework Convention on Climate Change.

The MAS, Menon notes, will further explore ways for transition credits to align with the CCPs, in consultation with the ICVCM.

Meanwhile, the regulator has announced two pilot projects to explore and test the practicality of different approaches in integrating high-integrity transition credits in the early retirement of CFPPs.

The pilot projects are in collaboration with ACEN Corporation and Coal-to-Clean Credit Initiative to accelerate the retirement of the South Luzon Thermal Energy Corporation coal plant in the Philippines, and with the Asian Development Bank, which is advising the Philippine government over the retirement of a coal plant in Mindanao under its energy transition mechanism.

Taxonomy with emerging Asian values

On the Singapore-Asia Taxonomy system launch Menon points out that the MAS move is the first taxonomy globally that pioneers the concept of a transition category.

This, he highlights, is in recognition of the need to properly frame a transition for Asia, a region in which a gradual shift towards a net-zero economy is taking place along with economic development, population growth and rising energy demands.

“The Singapore-Asia Taxonomy is a significant milestone for several reasons,” Menon explains. “First, it is the first taxonomy globally that sets out credible definitions for transition activities. In most cases, we cannot go directly from brown to green. We need to go through a transition phase, but we need to make sure this transition is credible.

“Second, this taxonomy has extensive coverage. It covers sectors making up 90% of the region’s greenhouse gas emissions. It will serve as a guide to allocate capital into green and transition activities for the region.

“Third, this taxonomy is industry-led. It draws extensively on the experience of financial institutions and real economy players engaged in transition activities in the region. It has gone through four rounds of public consultations.”

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