• Published on 29 September 2023
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MAS explores financing for energy, aviation and maritime decarbonisation

The Monetary Authority of Singapore’s (MAS) Sustainable Finance Advisory Panel (SFAP) met on 26 September and discussed possible financing mechanisms to accelerate the phase-out of coal-fired power plants in Asia and support decarbonisation of the hard-to-abate aviation and maritime transport sectors.

The SFAP also discussed how private capital could be better mobilised to finance the region’s climate adaptation needs. The decarbonisation of the energy, aviation and maritime transport sectors is critical for the region’s transition to net zero.

The key takeaways from the SFAP discussion include:

• A whole-of-ecosystem approach is critical to accelerate coal transition. SFAP members emphasised the urgency of managed phase-out of coal-fired power plants, which must take place alongside the development of clean energy sources, in Asia’s energy transition. A comprehensive approach that provides credibility for early phase-out projects and innovative financing structures, regulatory clarity on financed emissions, and appropriate policy reforms, will be needed to scale coal transition.

• Accelerating the adoption of sustainable aviation and marine fuels is key to the decarbonisation of the aviation and maritime transport sectors. SFAP members underlined the importance of establishing the long-term business case for these low carbon solutions. Potential levers to lower the costs of these fuels include demand aggregation, securing a reliable and adequate supply of feedstock needed to produce these fuels, and supportive government policies to encourage adoption.

• Public-private collaboration needed to tackle decarbonisation. Multi-stakeholder collaborative platforms would be useful to identify opportunities in financing sectoral transition, foster synergy between government policies and industry actions, and design innovative financing solutions. SFAP members noted the critical role of governments and regulators in solving market failure situations, such as in undertaking detailed analysis of risks and benefits of emerging decarbonisation technologies, and providing initial financing for critical supply chain infrastructure.

On climate adaptation, the meeting noted that less than 10% of global climate finance is currently being channelled to adaptation efforts, with most of it financed by the public sector. Noting that global warming is already causing more severe droughts, heat waves, and other climate-related disasters, SFAP members discussed possible solutions to scale up private financing for the region’s climate adaptation efforts. These include resilience-linked instruments and parametric insurance products which enable early intervention and quick responses to climate catastrophes. SFAP members also discussed ways to address the underpricing of physical climate risks, including strengthening the global climate risk data architecture.

The SFAP was established in 2022 to guide MAS on its strategies and initiatives to build a credible and vibrant sustainable finance ecosystem.

Re-disseminated by The Asian Banker