Navigating the post-COP28 landscape for global decarbonisation

Sharad Somani, Partner, Head of KPMG ESG, KPMG in Singapore

The 2023 United Nations Climate Change Conference (COP28) was a watershed moment in global climate action. Nearly 200 nations committed to ambitious targets, including tripling renewable energy capacity and doubling energy efficiency by 2030. The spotlight shone on blended finance as a strategic tool for sustainable development, and a phased withdrawal from fossil fuels signalled a new era of decarbonisation.

However, the COP28 declaration raises three critical areas that need sharper focus: realignment, retirement, and reinforcement.

Firstly, the realignment of the energy value chain is essential. Doubling energy efficiency and tripling renewable energy capacity to 11 terawatts within this decade will require an unprecedented global commitment. This is not just about transitioning away from fossil fuels, but also embracing low-emission technologies, including nuclear energy. This will require extensive collaboration, sector-based approaches, capability development, and replicable use-case models, particularly across hard-to-abate sectors like the industrial and real estate sectors. While challenging, this shift presents significant opportunities, especially in Southeast Asia where tripling renewable energy capacity from 100 gigawatts (GW) to 300GW by 2030 will create vast demand for financing, technology, and supply chains.

Secondly, retiring coal power plants and reducing methane emissions demands innovative solutions. The Methane emission pledge of over US$1billion and the Oil and Gas Decarbonisation Charter are steps in the right direction, but more needs to be done. In South-east Asia, with over 80GW of coal-fired power capacity, transitioning away from fossil fuels will require a balance between environmental imperatives and economic realities.

Thirdly, reinforcement through policy measures and innovative financing is crucial. As we move towards net-zero, championing technological solutions, innovative use cases, and R&D in low carbon alternatives will be key.

COP28 set ambitious targets, putting the spotlight on key issues like transitioning away from fossil fuel usage, biodiversity conservation, sustainable finance, carbon markets, and indigenous rights. While these goals are globally significant, they pose unique challenges for Singapore and South-east Asia.

The urgency to transition away from fossil fuels is clear, but the process must be just, orderly, and equitable to avoid economic disruption. The challenge for South-east Asia lies in balancing rapid decarbonisation with maintaining economic growth, generating employment opportunities while also safeguarding livelihoods tied to the fossil fuel ecosystem.

Biodiversity's role in climate mitigation gained unprecedented recognition at COP28. Businesses now face increased pressure for environmental stewardship. The challenge here is to transform this pressure into proactive corporate responsibility, fostering a culture of accountability that extends beyond compliance.

Carbon markets hold promise for climate change mitigation, but scaling these markets is a complex task. Here, Singapore's developing taxonomy for sustainable and transition finance could play a pivotal role, providing a common language for sustainability and guiding investors towards environmentally aligned decisions.

Last, respecting indigenous rights and practices is crucial. These communities often exemplify sustainable resource use, and their wisdom could inform broader conservation strategies. Ensuring their rights are recognised in all COP28-related decisions requires ongoing commitment.

As we strive to limit global warming to 1.5 degrees Celsius, the roadmap to 2030 underscores the urgency of sector-wide decarbonisation and systemic transformation. This shift marks the dawn of a sustainable era, and Singapore can lead this change.

Singapore's commitment to sustainable and transition finance is pivotal. A three-pronged strategy encompassing credibility, incentives, and partnerships will be key to an effective transition plan.

Firstly, credibility can be established through robust reporting frameworks, consistent taxonomies, and sector-specific transformation roadmaps. Secondly, financial incentives such as Singapore's FAST-P scheme, the loss and damage fund, and the Transition Credits Coalition (Traction), can catalyse positive change. Finally, partnerships are vital. By aligning the agendas of public, private, and philanthropic institutions, we can build a strong finance reserve for the low-carbon future.

Singapore has the potential to set a regional and global example by reaffirming domestic climate commitments and testing new technologies across various sectors. This isn't just a climate imperative but an opportunity to reshape our economy. Decarbonisation could become a significant economic pillar within the next few decades. A solid foundation has been laid already which will help crystallise the pathway to low carbon and eventually a net-zero future.