Govt to continue green budgeting, set aside money for climate action: Ministry of Finance

SINGAPORE – The Government will continue to take a green budgeting approach and ensure that it sets aside finances for climate mitigation and adaptation, said the Ministry of Finance (MOF) on Jan 23.

In total, it expects to commit over $10 billion in fiscal spending for projects such as the management of climate-related risks in the decade up to financial year 2030, under the Singapore Green Plan.

MOF detailed its plans to ensure that funds are set aside to secure a resilient future for Singapore, in a paper that outlined the Government’s green budgeting approach.

“Green budgeting takes into account sustainability considerations in the management of our public finances and supports our commitment to climate action,” MOF said.

Minister in the Prime Minister’s Office and Second Minister for Finance Indranee Rajah said: “The Government has been adopting green budgeting practices to systematically incorporate environmental sustainability considerations in our financial policies while making sure that we are prudent and effective in our spending.

“We are putting resources behind our ambitious plans and ensuring that our decisions continue to drive our efforts towards net zero.”

Singapore has

committed to achieve net-zero emissions by 2050

. Initiatives that tap the green budget include Tuas Nexus, which is expected to be the world’s first fully energy self-sufficient greenfield facility that integrates water treatment and solid waste management. The facility is estimated to cost about $6 billion.

The building of more cycling paths is also expected to cost about $1 billion, MOF said in its paper.

The ministry estimates that it has spent more than $2 billion on green initiatives in the 2021 to 2024 financial years.

To fund long-term green expenditure beyond 2030, the Government has also introduced measures such as a carbon tax to help fund decarbonisation efforts and support the transition to a green economy, MOF added.

The Government can also borrow money through green bonds to finance nationally significant green infrastructure projects. This will help to spread the costs across generations that will directly benefit from these projects.

As at January 2025, the Government has issued $9.2 billion of green bonds to finance the expansion of the electric MRT network, MOF noted.

Money has also been set aside for coastal protection measures to

protect Singapore against rising sea levels

. These are estimated to cost more than $100 billion over the next 100 years, and MOF said it has put an initial $5 billion into this fund.

The ministry has also put $5 billion into a fund to invest in critical infrastructure needed for energy transition, such as undersea cables to import low-carbon electricity and new hydrogen terminals and pipelines.

Regarding state investors, the Government expects them to take into account the impact of climate change on their investments, said MOF. It noted that GIC, the Monetary Authority of Singapore and investment firm Temasek have integrated sustainability considerations into their investment processes, although the Government does not direct their individual investment decisions or prescribe specific sustainability outcomes.

MOF said in its paper: “Climate change has significant interactions with public finances. Governments around the world need to facilitate the carbon transition and adapt nimbly to the effects of climate change, which require significant investments and fiscal resources.

“At the same time, climate change can cause severe disruptions to human and economic activities, but also holds the promise of creating new economic opportunities. These, in turn, affect public finances.”

It noted that governments face the problem of balancing three things: the pace of decarbonisation, the impact on economic competitiveness, and ensuring fiscal sustainability.

“There is a need to balance these trade-offs while allocating finite resources to competing priorities,” MOF said, adding that this problem is made worse by technological uncertainty and the high costs of decarbonisation pathways.

Hence, it said, it is important, now more than ever, for governments to incorporate sustainability considerations in the management of public finances. This ensures that budgets are aligned with national climate and sustainability strategies.

“Finance serves as a crucial lever to support governments’ climate goals, and enable a whole-of-society transformation to achieve optimal sustainability outcomes. If done well, climate mitigation and adaptation can create economic and social benefits,” MOF said.

On Jan 23, MOF also released its refreshed Singapore Green Bond Framework.

First published in 2022, the framework lays out the requirements around sovereign green bonds issued to finance green public sector projects. It ensures that the public sector upholds a high level of green standards in line with best practices in the industry.

“The addition of these science-based and robust thresholds ensures that the projects financed by public sector green bonds under the framework will contribute substantially to Singapore’s climate ambition,” MOF said.

The framework governs factors such as what the proceeds from the green bonds will be used for, what sort of projects will be funded, how the proceeds from the green bonds are tracked, and how the whole process is reported to investors.

The Singapore Government has planned to issue up to $35 billion in public sector green bonds by 2030 to support the growth of the sustainable finance market here.

These issuances will also help to attract green capital and investors, and anchor Singapore as a green finance hub in Asia, MOF said.