Reducing carbon emissions not only healthy for planet, but can also fuel economic growth: SM Teo

SINGAPORE - Transitioning away from fossil fuels is crucial not only for the health of the planet, but also for economic growth and prosperity of the people, Senior Minister Teo Chee Hean told Parliament on Feb 28.

For these reasons, countries, including Singapore, must press on to take climate action even though it is natural for them to ask why they should continue to do so when others are not, he said.

SM Teo, who is also Coordinating Minister for National Security and chairman of the Inter-Ministerial Committee on Climate Change, was responding to a question from Dr Lim Wee Kiak (Sembawang GRC) on how political headwinds in the world will affect Singapore’s climate goals.

There will also be questions on whether their efforts will result in any meaningful change without the participation of bigger players, noted SM Teo.

The US – the world’s largest greenhouse gas emitter after China – is pulling out of the Paris Agreement for the second time. This prompted other countries, like Argentina and Indonesia, to question the wisdom of maintaining their climate commitments.

But SM Teo said: “Climate change is no longer a future threat; it is already here with us.” Climate impacts are already being felt around the world, from widespread heatwaves to severe storms.

So, “the timeline to respond and adapt is being set not by us mere humans, but by nature”.

“Countries and businesses which lag behind will be forced to act eventually. The longer they wait, the sharper and more disruptive a transition they will have to make,” he said during the debate on the Prime Minister’s Office’s budget.

Pointing to economics being one of the drivers of climate mitigation, SM Teo said: “Green technology has advanced dramatically in the last two decades. Several of these technologies are now mature and mainstream, and make economic sense – they are not just cleaner but lower cost.”

The average cost of solar energy is now 50 per cent lower than that of fossil fuels.

“This explains why two-thirds of global energy investment in 2024 went to clean energy technologies and infrastructure,” said SM Teo.

“Despite political perturbations, there is now much greater momentum for decarbonisation than just a decade ago.

“Most of the world’s advanced economies have been investing in decarbonisation and steadily reducing emissions. They recognise that the green transition is an increasingly important driver of growth, and therefore crucial not just to the health of the globe, but also to the prosperity of their people,” he added.

A few MPs asked how businesses here will be supported through the green transition, and what costs and opportunities they will come across.

SM Teo pointed out that the Republic’s

recently released 2035 climate targets

generate demand for new green investments and give Singapore-based companies an edge in developing new low-carbon solutions.

By 2035, Singapore aims to reduce its emissions to between 45 million tonnes and 50 million tonnes, down from the 60 million tonnes it expects to emit in 2030. This puts the country on a linear trajectory to reach net-zero emissions in 2050, which means emissions are expected to decline steadily over time.

While the targets are ambitious, it also signals the country’s resolve to help the economy stay competitive in a low-carbon world, added SM Teo.

“Businesses and economies that remain emissions-intensive relative to their competitors will become less attractive. So, while there are costs in decarbonisation now, it is an investment in long-term survival and growth for our companies and also for Singapore’s economy,” he said.

SM Teo urged businesses to capture new markets in the green transition, as the demand for low-carbon goods and services will increase. Highlighting offshore wind as a potential area, he added that the global offshore wind market is expected to grow to US$126 billion (S$170 billion) per year by 2030.

He noted how Singapore companies in the oil and gas sector have been pivoting towards providing critical products and services across the offshore wind value chain.

SM Teo cited local company Cyan Renewables, which has grown since 2022 to become one of the largest offshore wind vessel owners globally, supporting clients across the Asia-Pacific and Europe.

Singapore has also been making strides with domestic solar energy.

Its solar energy capacity reached the 1.5 gigawatt-peak target by end-2024, a year ahead of schedule. Updating the House, SM Teo said this puts the country on track to achieve at least 2 gigawatt-peak of solar deployment by 2030, which can meet about 3 per cent of the country’s projected electricity demand. 

While solar remains the country’s most viable renewable energy source, the Republic is still largely disadvantaged in renewable resources.

Hence, setting the 2035 target at a range of between 45 million and 50 million tonnes “reflects the practical reality that our pace of decarbonisation depends heavily on technological developments and international collaboration”, explained SM Teo.

On working with other countries, he also announced that Bhutan became the third country that Singapore can eventually buy carbon credits from, with a bilateral pact on carbon trading finalised on the morning of Feb 28.

This marks Singapore’s first carbon-trading pact with a carbon-negative country, as Bhutan is one of a few countries that absorb more greenhouse gases than they emit.

Since late 2023, Singapore

has completed such agreements

– formally called an implementation agreement – with Papua New Guinea and Ghana.

Buying carbon credits means that Singapore does not have to rely solely on cutting emissions domestically, but can offset its carbon footprint by investing in carbon projects elsewhere.

However, the Republic is expected to use these credits as a form of last resort, to shave off the residual emissions to meet its climate targets in 2035, and reach net zero in 2050.

Overall, Singapore is collaborating with more than 20 countries on carbon markets, most of which are at the initial stage. Countries it has signed an initial memorandum of understanding with include Malaysia, Colombia and Sri Lanka.

Other forms of international collaboration that Singapore is pushing for include importing green electricity from its neighbours to cover about a third of its electricity needs by 2035, and exploring cross-border carbon capture and storage.

The 2035 target also recognises that Singapore needs some flexibility to manage the impact of decarbonisation on households and businesses, while aligning with the pace of transition in the rest of the world, said SM Teo.

“We are neither climate zealots nor climate sceptics; we are climate realists. We cannot be sure what other countries will or will not do. But we will secure Singapore’s future – by doing our part to reduce emissions (and) by partnering our households and businesses in the transition,” he said.